Case Study P&G Sk-Ii Product in Japan and East Asia

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P&G Japan SK-II Case Study
Up to 1984, P&G’s Japanese operation was a failure due to the following reasons: 1. P&G did not take the time to determine the local needs based on the culture and common practices amongst the Japanese people. The product development was based on Western markets and it was assumed that it would streamline itself to other areas of the world. An example cited in this case study was the use of tap water for laundry washes without implementing a range of temperatures. The P&G detergent “Cheer” did not do well as it was based on different temperatures. 2. Stagnation in innovation is a failure for almost any business. With technology always moving forward at a fast rate, it is
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P&G will need to keep up with technology and continue with new developments if they want to remain a leader in the prestige market in Japan. In terms of short term profitability, the Japanese market is unmatched. Cesare has forecasted an earnings growth potential of 200% in 6 or 7 years based off a $150 million sales level. However, the focus should be on the Chinese market based on the long term potential for growth and profitability. All the other major market players are already present in the market so P&G don’t want to fall too behind with their competitors. Although China has a relatively small subset of their population that can afford the expensive SK-II product, it also has the highest growth rate of skin care use at an astounding 28%. With China’s economy and GDP growing at a fast rate, the potential for more able consumers of the 1.2 billion residents is seemingly limitless. Following is the breakdown of the pro’s and con’s of entering each market.

China | | Pro’s | Con’s | * Prestige beauty segment growing at 30-40% per year * Relatively high level of facial cleansing product use in upper income tier * Cheap labor and marketing costs which will improve profit margins * Already have a presence in the market with Olay products and can implement the current market knowledge * Expected $10-15 mill sales in 3 years * Highest growth rate of sckin care market globally at 28% * 1.2 billion
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