Date post: | 30-Jun-2015 |
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Business |
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1. History 2. P&G's goal for SK-II in China 3. Challenges .
*Discussion*.
4. P&G’s entry strategy5. Scandal 6. Initial Response .
*Discussion*.
7. Recovery
P&G – Procter & Gamble Co.• Founded in 1837• Small shop selling candles
Multinational Corporation• More than 300 products• Over 40 brands (e.g. Crest, Oral-B,
Tide)• In 140 countries• 3 categories: Household Care,
Health & Well-Being, Beauty & Grooming
• First stepped into Chinese market in 1988
SK-II Background
• Launched in Japan in 1980• Originally a cream product
under Max FactorFamous Japanese cosmetic
brand• Compared with Shiseido:
- Greater market share in Japan- Much less in the world
Globalization of SK-II
• Make SK-II a global brand• Starts from Hong Kong and
Taiwan• Huge Success:- In 1999, 45% of SK-II total sales- In 2005, SK-II ranked the top in
Hong Kong’s skin-care market and the second in Taiwan
• Gained confidence for Mainland China
SK-II in China
• Entered in 1999• China – huge potential market
- Chinese women spend US$100/month on beauty & cosmetics
• Target market: affluent consumers in more wealthy cities (e.g. Beijing, Shanghai)
• Goal: Maintain Olay as mass market product; Introduce SK-II as premium brand
Organization 2005 (O2005)
• Organizational disruption and management distraction
• Profit responsibility shifted to Global Business Units
• Caused complexity in working relationships and responsibilities
Before Organization 2005
After Organization 2005
Chinese Market Challenges
• Targeting high income groups with niche products: conflict with company’s goal
• Counterfeits and cheaper versions of SKII by local companies
• Low Average Income in China: $2,400USD/year
Competitors in China
1) How should P&G effectively enter the Chinese market? What are some characteristics to consider?
2) How can P&G make sure SK II sales won’t heavily cannibalize Olay sales?
P&G’s Entry Strategy• O2005 benefited entry• Company culture
– Conservative & slow to modern & fast moving
• I.T.– Improve marketing
efficiency, product development and supply chain management
– Decentralize IT department• Improved communication
within company (intranet: WorkSmart)
Execution• Hired local beauty counselors
– Educate consumers• Understand the market
– Favor and welcome western products
– Western celebrity to represent SK-II
– Preferred whiter skin and less wrinkles
– Later used Asian celebrity endorsers
• Product with new formulas• New technology for skin care• Counter design
http://www.youtube.com/watch?v=K4_aRXhZhZk&feature=related
Example of Chinese celebrity endorser for SK-II
Beauty Counselor’s selling process:
The Scandal
• Mid-Sept 2006: Guangdong Center for Inspection and Quarantine- chromium and neodymium
• Angry Chinese consumers- refund, returned products- sued celebrity endorsers - Boycotts- Violence
Inappropriate response
• Stopped selling all products• Was “unavailable” to discuss
product quality• Refused to admit products
were toxic• Poor management of refunds
- Long lines- Delayed cash refund- Waiver
1) What lesson can be learnt from the scandal? How could P&G better handle the scandal?
2) How can P&G repair the SK II brand image in China? What marketing techniques would be involved? (4 P’s)
Later response and current status
• Re-tested products with individual dermatologists• October 2006: Ministry of Health in China said P&G products were safe • 3 stage recovery process: remove misperceptions, brand recovery, and
brand rejuvenation• Total sales increased by 89% after process• Prestigious image restored