P&g Japan: Sk-Ii Globalization
P&g Japan: Sk-Ii Globalization
In the highly competitive Japanese skin-care market, P&GЎ¦s new SK-II product has proven its success as a premium and prestige offering. P&G has gained significant knowledge transfers from SK-II development and further, has successfully tapped the fickle Japanese market and has devloped a loyal user-base in Taiwan and Hong Kong. With its phenomenal success, it is only logical that P&G consider rolling-out the SK-II product-line to the international market. However, while there is significant worldwide growth potential within the $9 billion prestige skin-care industry, based on recent organizational changes, new corporate priorities, and thorough market assessment, P&G must base its decision on current resources and capabilities to effectively maintain profitability. In analyzing the three options of Chinese expansion, European roll-out, and further growth of Japanese market, P&G should continue to concentrate its efforts in Japan to further penetrate and grow its share (only 3% of a $10 billion beauty market).
There are a number of factors under consideration when analyzing and weighing business opportunities for each of the three markets. In the first stage of this analysis we reviewed each regional market to size respective target consumer, weighed barriers to entry, and determine each marketЎ¦s stage of growth in addition to potential. Second, we studied the markets to determine whether successful entry would be permitted due to current constraints/limitations and further, whether it made business sense for the new P&G global strategy (fit). Finally, a competitive landscape assessment of each regionЎ¦s skin-care market allowed us to understand the viable success of SK-II within its peer product offering space.
Chinese Expansion: China is predicted to become the second largest beauty product market in the world, with the prestige cosmetics segment growing at 30 to 40% per year. With few competitors serving this segment, potential growth within this target market (the sophisticated and wealthy urbanites), is extremely promising. However, while an attractive prospect, a major drawback with launching the SK-II product line in China is that the overriding P&G strategy for this region is to reach ChinaЎ¦s enormous population with Ў§everyday, basic productsЎЁ, and not focus resources and efforts towards niche product-lines that are specifically targeted at a small and elite group of consumers. A challenge for all consumer product companies expanding product-lines into different countries is to make sure that its offerings not only have demand, but that the products fit with the countrys culture. In the case of SK-II, the product-line may be too sophisticated for the common consumer (mass-market). The four-to-six step application process with retail price of 20-to-30X more expensive than local products (already lower than neighboring countries) are misaligned with both the product-line and P&GЎ¦s regional strategy. Furthermore, import duties of 35% to 40% represent tremendous barriers to entry and significantly detract from profitability.
European Roll-out: Unlike the Chinese market, Europe has a large target group of beauty-conscious consumers that already have experience using specialized skin care products, specifically with multi-step application processes. As such, introducing the new SK-II skin product, which requires a six-to-eight step method, would require less product education than in China. However, this mature and seemingly saturated European market has a solid representation of world recognized and well established industry leaders such as Lancome, Clinique, Estee Lauder, and P&GЎ¦s Oil of Olay. Penetrating (or even scratching) this market could prove an insurmountable and expensive task, especially starting from nil brand awareness. Consumers in this market have many brands of which they are loyal, in addition to proven
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