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

2. Does SK-II have the potential to become a global brand within Procter & Gamble’s operations worldwide? Why or why not?

SK-II is an unusual gem because of the fact that it is hardly known outside the confines of Japanese market but still made the presence so significantly known that it adapted quickly in one of the beauty care global hubs. SK-II cannot be global brands due to many reasons. There are certain attributes that must be analyzed before making a decision with respect to SK-II’s global reach. Japan is an exceedingly difficult market to tap for any business due to its closely knit networking opportunities and the intricate requirements pertaining to various industries. Japanese women had by far the highest use of beauty care products in the world, which is why only in Japan the eight step ritual of facial cleansing is practiced.

Another challenge and also the reason why SK-II may not be considered a global brand is the fact that P&G is a player that handles it's product in terms of mass-marketing and lower priced strategies, so if it considers perpetuating SK-II as a global brand, it must also consider the impact of cost relative to mass marketing efforts that need to be done to compete against leading brands existing in the global markets such as Estee Lauder, Clinique, Lancôme, etc. Additionally, the strategy of portraying it as a lower-end product as according to Ram is utilized then it would severely hurt the brand image created in the minds of Japanese women.

3. Which of the three market options should Paolo recommend to the GLT? What benefits do you expect to gain? What risks do you see?

De Cesare is offered three options with respect to further strategic directions of SK-II. Firstly, the expansion of SK-II in main land China; secondly, introduction of SK-II in the large European market; thirdly, building on the brand success of SK-II in Japan.

Analyzing the options in contrast provides the conclusion of building on the brand success of SK-II in Japan as opposed to expansion in Europe or mainland China. However, as depicted by the Global SK-II cost structure, it can be analyzed that the cost of products is lowest in Japan, whereby it is emphasized heavily.

Additionally, all of this must be reflected in sales figure with respect to beauty care products. As depicted by the Global Skin Care Market Size, $6,869 million is claimed by Japan, whereby, the two year growth rate is almost 28 percent. On the flip side, the combined sales of Western Europe were $8,736, whilst that of China was $1,022. Such drastic results in terms of market size clearly show the amount of emphasis that should be laid on them considering the cut-throat competition present in these regions. SK-II is standing in a gold mine and looking elsewhere at this point would be preposterous.

The benefits that can be observed from emphasizing on current growth patterns includes an increase in profitability because one loyal customer in Japan spends around $1000 each year, which is greater than an average loyal customer spending on most P&G products all together. Additionally, Japan is increasing in popularity for its high end consumer market which creates a scenario of increasing growth in sales and brand loyalty in the future.

The risks that can be identified vary from excessive cost influx in the financial resources if strategic entrance in Europe or China is planned to excessive degradation of brand equity is positioned as a second-tier product. This influx may not be countered with a similar increase in sales. Additionally, there is also the risk of brand cannibalization with the presence of both Olay and SK-II.

4. How should he implement your recommended option? What are the implications for P&G’s new post-2005 organization? What support and/or resistance do you expect? How will you mange it?

The recommendation of increasing foothold within the home market of SK-II can be emphasized in various ways.

The Japanese market is an extremely subtle market whereby slight inferences can cause a whole lot of disturbances. It is not the intricacy of the market as much as it is the intricacy of the culture. Therefore, the cultural aspect should be understood in more detail and incorporated in the organizational behavior.

The movement into segments such as anti-aging and skin-whitening products can be added to the SK-II product range which would exploit internal strengths while utilizing less investment capital and cost influx.