Procter & Gamble Japan Case study Globalization was not built in a day 2017 April 6 Procter & Gamble Japan Case study Globalization was not built in a day 1. Introduction 1.1 Research topic and objectives - B. 1.2 Reason to choose the case company - T. 2. Case analysis 2.1 Introduction of the case company - T. 2.2 Problems the company should solve in foreign market -A 2.3 International strategies the company employed - A. 2.4 Success or failure factors in the foreign market -A 3. Conclusion 3.1 Summary of the case analysis - A. 3.2 Managerial implications Procter & Gamble Japan Case study | 2017-04-06 -L 1 1. Introduction 1.1 Research topic and objectives 1 With the demolition of ideological barriers and the rapid development of technology, nations are increasingly becoming globalized. Still, several factors including culture are considered significant in doing business overseas. Especially the cultural backgrounds highly affect the sales in the foreign market. There are studies that show the strong relationships between cultural factors and business results. 2 For instance, cultural goods, unless the cultural barriers are reduced, are not consumed easily and are accepted when they become more familiar. This paper aims to understand the related factors in doing foreign business by studying the case of P&G. More specific objectives are as follows. -To prove that cultural misunderstanding lead multinational companies to failure -To find out the pretext of the failure other than cultural backgrounds 1.2 Reason to choose the case company P&G is a good example that a multinational conglomerate can fail in market overseas. P&G, multinational conglomerate established in 1837, is a typical company that succeed in many foreign nations. Although P&G triumphed over 20 markets all around the world, they tasted bitterness of defeat in Japanese market till 1980. market, could fail in a single foreign market. From the failure of business expansion in Japan, we can find out the hardships in doing business abroad. This case well suits in confirming our assumption that ‘multinational conglomerates fail due to misunderstanding the local system’.3 Lee Kun-Pyo, D 2000, Relationship between usability and subjective preference: cross-cultural study between Korea and Japan, viewed 23 March 2017, 2 Jaeok Park, D 2015, Cultural Barriers in International Trade and the Protection and Promotion of Culture, viewed 23 March 2017, 1 3 Procter & Gamble Japan Case study | 2017-04-06 It is quite interesting that a company, competitive and well experienced in entering global 2 2. Case analysis 2.1 Case Introduction – History of P&G Japan P & G is a global company that has bases in 75 countries and sells products in more than 180 countries. In the early 20th century, Procter & Gamble continued to grow. P & G began building factories overseas because factories in Cincinnati were unable to cope with increasing demand for production. As technology evolves, candles are no longer being used. Instead, P&G specialized in a wide range of cleaning agents, personal care and hygienic products. In 1972, P&G entered into a joint venture with a Japanese company called Nippon Sunhome to enter the Japanese market. Nippon Sunhome was itself a recently formed joint venture owned by two small Japanese chemical companies. In total, they only had about a ten percent share of the detergent market. At that time, the Japanese market has→had a large market share for two companies, Kao and Lion. Kao is a company with a history of more than 100 years, and has→had a strong competitive advantage in their products such as toilet paper, soap, laundry soap, and cosmetics Lion, the second largest market share→manufacturer, also started its business in 1891 and had a high market share in soaps, toothpaste and laundry soap. Since The Japanese market was conservative and traditional and the local brands was strong , in order to reduce the risk，P&G used the strategy that entered into Japanese market by forming a Procter & Gamble Japan Case study | 2017-04-06 joint venture through taking a 50% stock of Nippon Sunhome which has been defeated 3 by Kao and Lion. In 1973, P&G purchased Nippon Sunhome company and started manufacturing and sale business in Japan. Around 1980, Japan was suffering from bubble economy and the products like Cheers and Bonus were unsuitable for Japan’s market since most of Jpanese family did laundry with soap rather than washing powder. The problem of misunderstanding Japanese life style and economic development has given a big blow to P&G company. Also, the competition with traditional local company and culture has challenged P&G’s international business of Japan. 2.2 Strategies used by P&G in the Japanese Market (Reference needed) P & G's Japanese joint venture partners have provided local manager, production facilities and sales organizations that helps penetrating the distribution network in Japan. At first, P & G decided to sell the Cheers (powdered laundry soap)and Bonus(liquid laundry soap) and Camay soap, which have been successful in entering the European and South American markets in the past. P & G conducted a massive advertising campaign for Cheers in Japan through a Japanese branch of an advertising company in the United States. The ad was an advertising program developed in the United States that emphasizes that Cheers is a good washable product in both hot and cold water. The advertisement emphasized the brand name of the product itself, such as Bonus and Cheers, rather than emphasizing the name of the company, P & G, as it is in the United States. In contrast to P & G's advertisement strategy, Lion and Kao have advertised their products that emphasize their own company names, Kao and Lion. P & G also skipped wholesalers and attempted irect promotional activities for retailers in the same way as they did in the United States P&G Procter & Gamble Company does not become any kind of products and trademarks, and according to market segmentation (shampoo, skin care, oral and other major categories). Each of brands are the center of each part of operations, it can become more flexible in business operation and conducive P&G to the expansion of business. Also, it can company, and fail and the brilliant consumer would remember their brand name and never repurchase. Since the P&G has various brands even one brands failed in the market it will not influenced much to P&G. 2.3 Problem P&G faced in Japanese market (Reference needed) Facing Samurai’s criticism, but it seems OK P & G's advertising and distribution strategy faced strong resistance more than expected in Japan. Japanese competitors and newspapers have accused multinational companies like P & G of taking the Japanese market with great capital. By doing aggressive marketing policies like large-scale discount sales and dominating distributional Procter & Gamble Japan Case study | 2017-04-06 diverse the risk of business if the company only own brand or product? if the product fail the 4 channel ignored Japanese traditional business ethics. This accusation had severely damaged P & G's operations in the Japanese market. However, as a result of this aggressive market entry, P & G succeeded in significantly increasing the market share of Cheers in six years. The market share of P & G's Cheers brand was only about 1.9% in the early stage of market entry, and after six years later, it increased up to 22% in 1977. 2.3.1 Samurai Strikes Back (Japanese companies & publicities are bullying P&G) Kao was especially strong in Research & Development and producing excellent laundry soaps, cosmetics, and health supplements. Also, Kao has→had a strong distribution network that could cover 65% of the entire Japanese retailer. In the late 1970s, Kao and Lion launched a product called Wonderful, similar to P & G's products, and started an aggressive counter-offensive operation in response to P & G's price discount. Lion also began to erode P & G's market by creating a brand called Top. While P & G's Cheers laundry soaps containing phosphorus, Kao’s and Lion’s laundry soap were using enzymes, a new detergent that did not includes phosphorus. At that time, studies had shown that care of laundry soap containing phosphorus can be harmful to health. herefore, Japanese companies products using the enzyme, it dilute the excellence of P & G's product quality and lose public trust of P & G as a company with outstanding technology. P & G did not anticipate such a competitive response. Procter & Gamble Japan Case study | 2017-04-06 2.3.2 Turning point: changes in president & launch new product 5 (Incomplete!! Most main part because P&G is now counterattacking!) P&G International changed president from gurganus to Edwin L. Artzt. By changing Structural, financial and organizational changes, the new management organization has no debts and the resignation of the executives of the partner companies has made the organization simpler. The position of the manufacturing and personnel department was taken over by the Japanese. (reference from Rise of tide : Lessons from 165 years, $$page) This part should include New Cheer & Alien (Brand of detergent) launch Sued from Kao and Lion due to P&G’s unfair trading Ichidai Hayaku’s five code Adhering to these principles, P&G stepping back to process improvement and new cleaner “Aerials” Kao Chairman "P & G has learned how to make products that Japanese consumers want. I can not help but admire their ability to produce products that suit the Japanese taste. " 3.1 Managerial implication First of all, P&G gets competitive position in Japan by satisfying the need of the fastidious consumers. Even though P&G had seen explosive growth in West, “Japan’s specific language, culture, heritage and business pervaded the consumer mindset and the structure of the consumer goods industry, rendering it radically different from the West (Harvard Business School 1992, p. 3)”. Japan’s picky consumers had high yardsticks for judging the quality of the products. Consumers got furious as they found some faults in their products. Advertising also supposed to reflect the delicate emotion and nuances of the culture of Japan. Sometimes customers felt bad and unpleasant watching a series of advertisement made by the Western perspectives. Next, P&G plant itself in Southeast Asia. During Japan market advance, it founded its unified headquarters and technology center in Osaka Rokko islands to support for a selection of projects carried out in Japan and Asia countries around it, implying P&G regards Japan as a strategically important target. Third, P&G cultivates trained and skilled managers through Japan business. Edwin L. Artzt, the head of P&G International and John G. Smale, president and chief executive officer Additionally, “Durk Jager, called “bull in a china shop” and described as hard-noses but people-oriented by his subordinates, (Harvard Business School 1992, p 10)”, turned things around. He developed core marketing strategies named 'Ichi-Dai Hayaku’ contributed hugely to recover operating losses and skyrocket its growth rate. Last but not least, pioneering in Japan consumer market was the fruit of innovation. Between 1985~1988, P&G Japan launched numerous new products and brands. By the mid to late 1990, it expanded its product lines and offered 10 differentiated and distinctive selections in annual average. Due to changes in manufacturing and operating process, it achieved less cost and the leap of its technology. For instance, P&G Pampers is the thinnest and most absorbent diaper in the world, which is born with several of innovative trials in Japan. P&G Procter & Gamble Japan Case study | 2017-04-06 in P&G Japan, played an important role in achievement and retrenchment in Japan. 6 also revolutionized its distribution channel by establishing electronic communication network with its wholesalers and offering 24/7 delivery services. 3.2 Summary of the case analysis - In late 1960, Japan became the second largest consumer packaged goods market in the world, next to United State and Japan government watered down foreign investment regulation. At that time, “P&G entered Japan with a “great fanfare of trumpets”. Riding on successes in Europe, Canada and South America, Japan was P&G’s last major developedmarket entry (Harvard Business School, 1992, p 6)”. Without enough studying or revising its products, P&G just sold its all-temperature detergent Cheer and Pampers designed for West and practiced Western-style advertising campaign via the promotional agency of the American immigrants. The result was miserable. With strong competitor Kao and Lion’s defense and lacking knowledge of business practices and Japan’s highly fragmented distribution and retail system, “in 1983 P&G had swallowed 10 years of operating losses, accumulating to more than $250 million, on declining annual sales of $120 million. (Harvard Business School, 1992, p 1)” In order to cover up its failure, P&G recruits qualified managers such as John G. smale and Durk Jager and made new rules of wholesale and retail system of Japan. In addition, P&G revised their marketing strategies which did not consider Japan’s societal and cultural backgrounds that were totally varying with Western’s. Finally, earlier in 21th century, P&G Japan revitalized from its slump in Procter & Gamble Japan Case study | 2017-04-06 sales and strengthened its position as established corporation in Japan. 7 Assignment 1 : Case Study o Due date: Submission: Thursday, 6 April 2017 Printed copy in the class time & electronic file via email Value: Length: 20% 2,200 words + 10% Task description & requirements Case Study Choose an international company case and research the chosen case carefully. Discuss the success/failure_factors of the company from an international strategic management perspective. The assignment should include the following contents: Cover page (present the assignment title, student number, name and word count) Table of contents include.. Abstract (less than 200 words) 1. Introduction 1.1 Research topic and objectives 1.2 Reason to choose the case company 2. Case Analysis 2.1 Introduction of the case company 2.2 Problems the case company should solve in the foreign market 2.3 International strategies the case company employed in the foreign market 2.4 Success or Failure factors in the foreign market 3. Conclusion ups 3.1 Summary of the case analysis STP. 3.2 Managerial implications References) $. Appendix (if applicable) case company should solve in the foreign market terecty? 7. certaia speaffes Swot. up ( Targety 1. It is a group assignment. ot 2. A minimum of 15 references are required for this assignment. 3. References and appendix (if applicable) should not be included in the word count. 4. If plagiarism, O marks will be given. 5. The penalty for late submission of assignments is a deduction of 10% of the maximum mark for the assignment per day. Cortical Vnews papers & send the ppi file repot ereday before prendere doce) Presentrum differeely sare rel dlaks but Assessment Criteria Student: ID: Unit title: International Business Grade/Mark: /20 Assessment criteria 1. Depth & breadth of knowledge demonstrated Sophisticated/exemplary All relevant concepts etc clearly explained Competent/sound Main concepts etc covered Marginal A number of important concepts etc overlooked or insufficiently described Clear fail Majority of key concepts not addressed or misunderstood Evidence of wide reading & independent research Range of resources used with discrimination Little/no evidence of use of resources Limited use of quality resources 2. Quality of thinking in evidence 2.1 Integration of Well integrated argument relevant ideas to support to support conclusions Conclusions generally supported Answer lacking a sound evidence base answer All theory applied with precision Most theory applied proficiently 2.2. Application of theory to solve problems/issues 2.3 Use of examples &/or experience 2.4 Depth of analysis &/or evaluation Some aspects of the answer lacking a sound evidence base Some important theory not applied (appropriately) Minimal examples used to effect Overlooks a number of important factors &/or inter-relationships Effectively uses a range of illuminating examples Identifies the significance of all relevant factors Examples generally used to effect Identifies most factors & their significance Most important theory not applied (appropriately) Few examples used effectively Most factors and their inter-relationships overlooked To varying depth, evaluates core evidence, experience, practice Shallow evaluation of evidence, experience, practice Little attempt to evaluate evidence, experience, practice Critically & comprehensively evaluates evidence, experiences, practice 3. Quality of communication 3.1 Logical structure & Organisational methods organisation effectively used to facilitate understanding Organisation ineffective Generally organised to facilitate understanding No meaningful organisation Aspects unclear/illogical Clear & coherent flow of ideas In the main clear & logical Generally illogical & unclear 3.2 Clarity & succinctness of writing Crystal clear, precise & appropriate In the main clear & appropriate Frequently unclear &/or inappropriate Generally unclear &/or inappropriate Numerous technical Technically, deficient to the point of distraction errors Technicatly errorefree Technically, mostly error-free 4. Conformance to formatting guidelines and referencing standards 4.1 Referencing Faultless application of Referencing style Referencing style applied with few errors Inconsistent referencing style Incorrect referencing style Sources acknowledged professionally Sources poorly acknowledged Sources in the main acknowledged professionally In the main requirements followed Significant lapses in appropriately acknowledging sources Significantly deviates from requirements 4.2 Formatting Follows all requirements Requirements largely ignored