P&G Japan: The SK-II Globalization Project Harvard Case Solution & Analysis

P&G Japan: The SK-II Globalization Project

Introduction:

Paolo de Cesare, President of Max Factor Japan has to decide about the global expansion of a product SK-II. The product is known to be very popular in terms of matching its price with its quality and became one of the fast growing brands in China and in other countries of the world as well. The company introduces SK-II in Taiwan and Hong Kong and received a positive feedback from these two countries. After the evaluation, the company found three alternatives for SK-II. Firstly, P&G can develop the brand into the Chinese market. Second alternative is to expand the product in the European market and third would be an expansion in its home market Japan. Analysis that has been done below shows that China would be a better option for P&G for the expansion of SK-II worldwide.

Problem Identification:

Japanese market is relatively small as compared to the other markets in the western world therefore; P&G faced difficulty to develop its brand internationally. The company faced loss of over $200 million by staying only in Japan and the losses increased continuously. In addition, the company's operating margin was also negative. Same pattern was followed in sales and the sales dropped from $44 billion to $26 billion in a period of five years. After analyzing the situation, the management of the company was worried about the future growth and started wondering if they should stay continue to operate in Japan or not.

Pros and Cons of Expanding SK-II into China and Europe:

Paolo identified several pros and cons of expanding SK-II in China and Europe as a brand has to face certain risks and benefits as well. The company was successful in Japan but this did not guarantee success in China and Europe as well. In China, large number of companies in Skin Care and Beauty are trying to enter the market. Growth rate for the premium products is high which attracted new entrants to enter in the Chinese market. In addition, the rivalry in the skin care market is low despite of the fact that there are a large number of new entrants in the market. In China, there are so many global brands already present therefore; threat for substitute is high. Another risk associated with the expansion of SK-II in Chinese market is a risk of counterfeiting.

Europe, on the other hand, is full of popular brands like LancĂ´me, Dior, L'Oreal, and Estee Lauder. Political issues like regulation by the European Government would make it difficult for P&G to enter in the European market and this resulted in low threat of new entrants. Further, threat of rivalry and substitutes are high because of the global brands. Customers in Europe are found to be loyal with the brands therefore; bargaining power of buyers is also high.............

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The next change in the international strategy P & G and the structure, which led to the organization in 2005, the reorganization, which puts the emphasis on strategic product innovation rather than geographic expansion and the shift of power from the local subsidiary of global business management. In the context of these changes Durk Jager, P & G new CEO, Paolo de Cesare is transferred to Japan, where he takes on just turned around the business of beauty care. In the familiar Max Factor portfolio he inherits is SK-II, a fast-growing, highly profitable products for skin care, developed in Japan. Priced at more than $ 100 a bottle, it is not a typical P & G product, but its successful introduction in Taiwan and Hong Kong, De Cesare think the brand has a global potential. When closed, it calls into question whether he should accept the offer of the global beauty business unit to enter the mainland China and / or Europe. "Hide
by Christopher A. Bartlett Source: HBS Premier Case Collection 24 pages. Publication Date: March 24, 2003. Prod. #: 303003-PDF-ENG

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