Key Issues: Whether SK-II, a prestige skin care line from Japan, should become a global P&G brand? If so, which markets were the most important to enter now? And how should this be implemented in P&G’s newly reorganized global operations?
The success of SK-II in Japan is mostly because the implementation of O2005 plan, which changed P&G’s culture, processes and structure. The COO Jager believed that P&G’s future growth would depend on its ability to develop new products (R&D technology) and roll them out rapidly worldwide. Additionally, the superior in-store services as well as success localized marketing strategy together made SK-II a successful brand in Japan.
Below is a table of pros and cons of the 2 potential globalization opportunities that P&G SK-II currently facing:
Area | Cons | Pros |
Mainland China | - may distract P&G’s overall strategy of becoming a mainstream Chinese company
- hard to educate Chinese customers to move from a three-step skin care process to at least a four-to six-step regimen
- high import duties of 35% - 40% on products
| - as the 2nd largest market in the world, the prestige beauty segement is growing at 30% to 40% annually
- great purchasing power in the hand of wealthy Chinese in the 1st – tier cities
|
Large Western | - high competition, the market is already crowded
| - huge market potential like fine-fragrance business
|
SWOT Analysis – External & Internal Environment and Strategic Options
External Internal | Strengths (S) - Innovations, R&D tech.
- Superior in-store services
- Good organizational mgmt. policy
- High profit margin
| Weakness (W) - Organization restructuring, unbalanced decision-making power
- Insufficient R&D exp. may bring huge loss
|
Opportunities (O) - Great potential in China market
- Increasing demand from home Japan in prestige skin care market
| - Go globalization, enter mainland China 1st tier cities market
- Continuously innovate new products and provide superior in-store services
| - Research the market and customer preference to improve the efficiency of R&D expense
- To ensure the organization’s O2005 implemented efficiently
|
Threat (T) - Well-respected competitors in large Western market
- Domestic competition from Shiseido
| - Domestically, keep innovate new products for local Japanese and increase market share
- Avoid direct compete in France or Germany markets, but enter the U.K. market
| - Innovate new product to compete with Western and Japan competitors
- Increase product variety for greater market share
- Develop new segment or related product to increase customer loyalty
|
Recommendations
Simply put, we recommend P&G continuously implement O2005 plan, and enter mainland China’s first-tier cities as the first step of globalization for SK-II. As well as SK-II keeps innovate new product, it should also enter the U.K. market for its globalization strategy.
