Kao Corporation Case Study
Case ReportKao Corporation SummaryThe infant diaper industry in Japan like most of FMCG (Fast Moving Consumer Goods) industry, is always fiercely competitive, when full-scale commercialization of a new product was delayed, competitors has more time to develop and launch similar products, it is always need to be quick thinking about marketing strategy, 4P (product/price/place/promotion), in order to secure the market share. And Kao Corporation is in this kind of situation too.Industry structureFrom 1977, since P&G ‘s introduction, Pampers was the only nationally marketed disposable diaper and owned 90% of market which sized 17.5 billion yen. In 1970’s due to traditional culture and restriction from education and social value, it was a guilt as a reason to use disposable diapers. In 1981, another competitor Uni-Charm use “Moony” as brand name to start to enter the market, which focuses on supermarket as main target market, so basically P&G/Uni-charm/Kao Corporation shares the market.Then, till 1983, Uni-charm have another brand mamy-poko based on low-price market make a differentiation in the market, who announced 5 diapers a day equals a cup of coffee, the cost per pc is 25% cheaper than other brand. Since the market is small, but the total market grew from 1977 17.5 billion Yen to 46 billion yen in 1984. By that time, Uni-Charm shared 50% of the market, Kao’s Merries 32% and P&G has dropped from 90% to 8%). Until 1985, the penetration of the potential market was still small, households that were exclusively using disposable diapers accounted for only 15% of all potential diaper usage occasions.
Industry competitive forcesBargaining Power of Supplier (medium to high)For diaper, actually it was combined from top-sheet polymer(include non-woven fabric )/absorbent paper material and back sheet polymer, the absorbent material is composed of two essential elements, a hydrophilic, or water-loving, polymer and a fibrous material such as wood pulp. The top-sheet & back-sheet are polymer, which is made of fine particles of an acrylic acid derivative, such as sodium acrylate, potassium acrylate, or an alkyl acrylate. In Asia, people prefer to have really white and clean diapers, so the wood pulp need to use new wood, in japan can’t afford that much of wood pulp, so it usually need to be imported, however since the demand for diaper increased, the cost per pc can be decreased (quantity based)As for non-woven fabric and polymer for top/back sheet, non-woven fabric was typically made from Polypropylene, in Japan in early 1980 are all manufacture by locally, so if you have more orders can have better quote, so and for top/back sheet ,it was from supplied from Japan’s own petrochemical Industry, so in Kao corporation, they have good bargain power since the whole diaper industry is growing. Conclusion : Wood pulp is hard to bargain since its imported (high).Polymer (top/back sheet)/Non-woven fabric are local purchased, easy to bargain and cost down (low).Reference: