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P&G Japan: The SK-II

Globalization Project

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Presented by
Syed Fawad Hussain
MBA (Marketing)
Bahria University Islamabad

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Paolo de Ceasare
President of Max Factor
Japan, the hub of P&G’s
fast-growing cosmetics
business in Asia.

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Alan Lafley
Head of P&G’s beauty care
GBU

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Major Constraints

 Consumers, distribution channels and

competitors were vastly different.
 P&G’s global organization is in the midst of a
2005 restructuring program.

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Local Adaptivenss Meets Cross-
Market Integration

“We must tailor our products to meet consumer

demands in each nation, but we must create local
country subsidiaries whose structure, policies and
practices are as exact a replica of the U.S Proctor &
Gamble organization as it is possible to create”
Walter Lingle
VP overseas operaitons

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Birth of Global
Management
 7 divisions in P&G’s domestic U.S.
organization were broken down into 26
categories.
 Replacement of International division with 4
regional entities:
 North America
 Europe
 Latin America
 Asia

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P&G Japan: Difficult childhood,
Struggling Adolescence
 12 years after entering the market, the
accumulated loss was $200m.
 Sales were decreased.

Causes of failure
 distinctive needs and habits of consumer.
 innovative capability of the competitors.
 complex Japanese distribution system.

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Organization 2005: Blueprint for
Global Growth
 1996-Jager COO: Development of new
products as the key to P&G future growth.
 Increased the budget for R&D.
 Closing of 10 plants and loss of 15000
worldwide workforce.

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Changing the culture

“ Great ideas come from conflict and

dissatisfaction with the status quo”, he said “
I’d like an organization where there are rebels”.
Durk Jager

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Changing the process

 Performance based component of

compensation increased from traditional
range of 20% to 80%.
 Extended the reach of stock options to
virtually all employees.
 Integrated business planning process
reviewed and approved together.

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Changing the structure

 Primary profit responsibility shifted from P&G’s

four regional organizations to seven GBU.
 Increasing efficiency by
 standardizing manufacturing process
 simplifying brand portfolios
 coordinating marketing activities

 Eliminate bureaucracy and increase

accountability.
 Committee responsibilities were transferred to
individuals.
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Industry environmental
analysis: Porter’s Five force
Model
JAPAN CHINA EUROPE
Threat of new Low High Low
entrants

Bargaining power of Low Low Low

suppliers

Bargaining power of High Low High

buy

Threat of substitute High High High

products

Intensity of rivalry High Low High

among competitors
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The SK-II Decision: A global
brand
Japanese Opportunity
 Japanese women were among the most
sophisticated users.
 Product innovation and superior in-store
service.
 Loyal SK-II consumer in Japan spends $1000 a
year.

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The SK-II Decision: A global
brand
The Chinese Puzzle
 Relatively new company
 Second largest market in the world
 Major competitors are present
 Target prestige segment is growing 30%-40% a
year.
 Chinese consumers were oblivious about SK-II

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The SK-II Decision: A global
brand
European market
 Large and sophisticated group of beauty-
conscious consumers.
 Crowded field of high-profile and well
respected competitors.

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The SK-II Decision: A global
brand
PROS
 High margin product.
 High quality product.
 SK-II clear, unperfumed liquid makes it distinctly
different.
 Superior product technology and in-store service.
 Japanese innovation with lipfinity.
 Good brand image in Japan.
 $9 bn worldwide prestige skin care market.

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The SK-II Decision: A global
brand
CONS
 SK-II not in line with P&G portfolio.
 Little brand awareness outside japan.
 Difficulties translating product value in
western society.

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Recommendations

 P&G should consider rolling out the SK-II product

line to the international market.
 Decision should be based on current resources
and capabilities.
 P&G should continue to concentrate its efforts in
Japan to further penetrate and grow its share.
 Paolo and its managers must understand the
forces that shape competition in the external
environment.

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