The Success of Sk-II
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The Success of SK-II
SK-II, the product itself, was already a successful product. Based on Jagers belief in growth through innovation, urging businesses to invest in new products and technologies, with guidance and support from Lafley, Max Factor Japan rebuilt its beauty-counselor channels and heavily invested in its advertisement. The company set clear targeting groups and position in the market, and developed new products which fulfilled Japanese customers needs. Soon, SK-II established several strong differentiation advantages in the tough competing Japanese market. By differentiating from their competitors, they develop innovative products, such as SK-II Foaming Massage Cloth. More importantly, they promote their products, with a premium price, at nice luxury counter at department store with beauty counselors, which turned out to be a very successful marketing strategy. The success of SK-II derives from the unprecedented business and marketing strategy, highly differentiated themselves from their competitors.
Besides the differentiated marketing strategy from its competitors, the company deeply looked into the consumer behaviors, the reason of creating SK-II Foaming Massage Cloth. Since Japanese women already had a five- or six-step cleansing routine, instead of developing a product covers multi-steps, they promoted the SK-II Foaming Massage Cloth, which added another step into the cleansing process. Japanese women were fond of this product and start purchasing other SK-II products for facial cleansing and caring.
SK-II successfully placed itself in the upper expensive beauty brands and away from the lower cheaper basic facial products. This successful business strategy in Japan could be successful as well in markets where market environments and consumer behaviors are similar to Japan, such as Hong Kong, Taiwan, and South Korea.
However, this strategy is not the best strategy for other markets. For instance, Chinese consumers tend to not have that many steps in the process of facial cleansing or skin care. Therefore, Chinese women might not realize the benefit and value of SK-II Foaming Massage Cloth. The strategy of focusing on multi-step facial cleansing would be failure in China because of different consumers needs. In addition, in the Chinese market, where huge gap separates the rich and poor, the customer group is divided into two distinct groups. SK-II, at a premium price, successfully found a place for itself in the Japanese market. However, in China, the upper rich consumers might tend to purchase even more expensive and luxury beauty products and on the other hand, lower middle class consumer would just purchase cheap basic facial products.
O2005 impede worldwide growth of SK-II
On a conceptual strategic level, O2005 supports all brands and products expanding to international markets. However, the actual effectiveness and efficiency after implementing O2005 could be questioned. O2005 would change the whole cooperate structure of P&G. Not only Max Factor Japan and SK-II, every branch and brand under P&G would experience a major change in their business structure. This rollout of O2005 could possibly create communication problems and confusions among executives and enhance the possibility of disorder and failure. However, the O2005 would perfectly solve the main problem P&G were facing, national silos, when every country branch focuses on its own business.
The O2005 would transform P&G from a region-orientated structure to a product-orientated structure. The By launching the O2005, P&G would significantly increase efficiency of product development. The O2005 reduced bureaucracy and layers of hierarchy within P&G and allowed every branch from different countries to work on the development of the same project. By setting up GBU, P&G could standardize the development and manufacturing process and every branch or country could build and coordinate its product and marketing strategy based on its specific needs. A product-based structure would work more efficient than a region-n-based structure for a large organization like P&G.
Although the implementation of O2005 would advance the effectiveness of product research and development for many brands and products of P&G, the O2005 might held back the product development for SK-II. The O2005 highly supports and improve the development for products in categories such as Baby Care and Health Care but not in Beauty Care where customer needs highly differed by regions.
The idea of establishing Beauty Care GBU, to wisely use all available resources of the organization and to be in charge of the innovation and development of all beauty products, appears to an ineffective solution when the demand for every region is different. Yet, according to Exhibit 8 from the case, the process of developing a product for a very local market appears to be inefficient. As they found out in their market research, women from different regions tend to have very different habits in facial skin care, such as number of steps in facial cleansing. Although Beauty Care GBU perhaps has a large team of researchers and developers with latest technologies, it still seems to be an inefficient and unnecessary process to send the results of consumer research from every country to the GLT of Beauty Care GBU, later identify an unmet worldwide consumer need, and then assemble a R&D team to develop a core product concept as the core concept for developing products in every local market.
Based on different income levels, habits, climates, and other factors, every local market has its very own unique group of customers. The GLT of Beauty Care GBU used a great amount time and identified the worldwide need for “soft, moisturized clean-feeling skin,” which this basic idea was already identified by each local market researchers when doing local market research. Instead of taking the time combining information and developing a concept together, which later would still be used differently by different local markets, the cooperation could set up R&D teams focus on developing products for a specific similar group of markets, If SK-II goes international, R&D teams would become necessitate in every specific market. With limited resources, it would be more difficult to develop a great product, but they could implement the strategy in the mid-1990s which Japanese technologists worked with people from R&D labs in Cincinnati and the UK to develop long-lasting lipsticks.
The implementation of O2005 would complicate and slowdown can the process of product development. More importantly, just the GBU is hard to fulfill different customer needs in every different market. The needs