1] As Paolo DeCesare, what factors do you need to consider before deciding what to

recommend in your SK-II presentation to the global leadership team (GLT)? What kind of
analysis will you need to do in preparing for that meeting?
As Paolo De Cesare, the factors need to consider before deciding what to recommend in the SK-
II presentation to the global leadership team (GLT) are:
1) This is P&G’s first-ever proposal to expand a Japanese brand worldwide. Other countries have
a different culture than that of consumers in Japan which is why this is a big risk.
2) P&G’s global organization is in the midst of a 2005 restructuring program; it can be
disruptive.
3) Local general managers’ resisted emergence of new products because of the negative impact
on local profit.
4) Lafley’s POV was that most of the advertising budget should be spent on two products-
MaxFactor Color and SK-II; SK-II had such a high margin.
5) De Cesare’s POV was there is a great opportunity for SK-II to break into the $9 billion
worldwide prestige skin care market.
6) Jager’s POV was that a major product development technology center was needed for
demanding Japanese consumers; this would also support product development throughout Asia
and other parts of the world.
7) Ram’s POV was SK-II should be introduced into Chinese department stores as Oil of Olay
moves into “second-tier stores”; also predicted China to be the 2nd largest market in the world
for prestige beauty products.

1) How would the cultural and organizational changes of O2005 affect SK-II in becoming a
global brand?
2) The analysis should be based on the business model of SK-II and it shall be very important to
understand if the business model of SK-II aligns with the cultural and organizational changes of
O2005.
3) Which countries are most attractive?
It is significant to find out the global skin care market global prestige skin care market to find out
the potential markets in other countries.
4) Which entry strategies should be implemented?
The entry strategies in terms of Marketing Mix, timing strategy, investment decisions, strengths,
weaknesses, opportunities and threats must be understood to position the product in new global
market.

2] Does SK-II have the potential to become a global brand within Proctor & Gamble’s
worldwide operations? Why or why not?
Following are the pros and cons of the global potential of SK-II:

To become: Not to
High margin SK-II not really PG portfolio like
Secret ingredient - Pitera No brand awareness outside JP
 Good brand image in JP and success in Taiwan Difficult to communicate the product value in
and Hong Kong western society
Worldwide market is 9bill
In-store service
High quality product
Keeping all the Pros and Cons it can be realized that SK-II have the potential to become a global
brand within Proctor & Gamble’s worldwide operations

3. Which of the three market options should Paolo DeCesare recommend to the GLT?
What benefits do you expect to gain? What risks do you see?

The options recommended by Paolo DeCesare were as follows:

A] Introducing the brand to mainland China. The beauty care management team for Greater
China was interested in SK – II’s triumph in Taiwan and Korea.
B] Introducing SK – II into the large western market.
C] Restructure the brand positioning strategy in proven market of Japan.

Activity Risks
Benefits
Option A Introducin 1Previously P&G had problem with 1 P&G is relatively new company in
g the its brand Olay in China just after mainland China. So they are
brand to launching. But they have recovered relatively less knowledgeable about
mainland from that crisis by adding service Chinese culture. 2 All major
China component to the product competitors from the world are
formulation. They staffed their present in Chinese market.
outlets or showrooms with beauty 3 The third is risk about market
consultants. This learning can be readiness. The customer is not
applied to penetrate in Chinese accustomed with the process of
market. applying this product. They usually
2The major benefit of entering into and traditionally applied one step
Chinese market is its popularity. It skin care process and only recently
is predicted to become second they had switched to three step
largest market in the world. And cleansing and moisturizer in
especially their target segment - process. So, the success of a six to
prestige beauty segment- seven step skin care product is on a
is growing at 30% to 40 % a year. toss.
4 Chinese local laundry products
are very low in price.
4 Another risk is about well known
existence of counterfeit products.
The market is flooded with
counterfeited prestige skin care
solutions. The bureaucracy attached
to the import and registration
process is also lengthy. The import

Option B Introducin 1 The target market for the product
g SK – II is sophisticated beauty conscious
into the group of people. Europe has a large
large number of customers belonging to
western this group.
market 2 The probable consumer group are
already habituated with six to eight
step skin care solutions.
Option C Restructur 1 Japanese women are the most
e the sophisticated users of brand
brand products and they are world's
positionin leading consumers of SK - II care
g strategy solutions. The total market for
in proven sophisticated beauty conscious is
market of even greater than US laundry
Japan market. Japanese technologists
have deep insight about their
consumers. So they could design
the product which is most suitable
for the domestic market.
2 The cost of market expansion is
always more than the cost of
product diversification or
development of new product. The
basic product can be presented with
some more value addition, by
adding anti-ageing and anti-
whitening products. In Japan
technologists and marketers are
working jointly to boost the
accuracy and credibility of their skin
diagnosis.
duty is about 35% to 40%. So they
have to squeeze their profit to a
significant level.
1 The market is overcrowded here.
The main concern is to create
visibility in this market.
2 Creating the brand awareness in
European market is relatively costly
as the cost of television and print
medium is high. And as it is a
product targeted to sophisticated
beauty conscious group of people,
mass distribution outlet will not help
the brand.
3 Typical distribution channels
cannot deploy in this case.
1 Form the past few years the
growth rate in Japan for SK II is not
very high. The product’s brand re-
positioning may not gain enough
attraction from its target
consumers.
2 Most of P&G’s product are of
“stack it high, sell it cheap” nature.
This particular product in Japan is
very costly priced at $ 50 compared
to $ 7 for Olay Facial cloth in the
United States. This pricing strategy
of SK- II does not goes in line with
other products of P&G.
 3 The product has a small share in a
rich market. Product innovation and
superior service can accelerated the
growth in market share.

4. How should he implement your recommended option? What are implications for P&G’s
new post-O2005 organization? What support and/or resistance do you expect? How will
you manage it?
Implementation of the recommended option:
To implement Market development option in mainland China P&G should take the following
steps:
There are many low priced products in Chinese market and also fear of counterfeited products.
So they have to build a strong brand identity in China. They should convey their brand
positioning strategy clearly to the target consumer segment – the sophisticated beauty conscious
group of people.
P&G also has to educate their customer base to apply this six to eight step skin care solution.
The import duty for this product is about 35% to 40%. So they have to squeeze their profit to a
significant level. But they should take advantage of the inexpensive beauty consultants. Thus
their administrative expenses could be minimized for Chinese operation. Banking on this
advantage they can still make the product profitable.

To implement Market development option in large western market P&G should take the
following steps:
To be successful in large western market, P&G has to differentiate its product distribution
channel from their other product.
P&G should also include beauty consultant’s analysis and advice to their service offering.

To implement Market penetration option in J P&G should take the following steps:
To justify their high price they have to boost the accuracy and credibility of their skin diagnosis.
P&G should work on methods which will increase the loyalty of their Japanese customer.

Implications for P&G’s new post-O2005 organization:

According to the Chief Operating Officer, Mr. Jager, the implementation of O2005 will enhance
annual growth 13 % to 15 % which will result in $900 million annual savings starting from 2004.
But to implement this, they have some implication in the following areas:
Implication in change of culture:
He wanted to change their work culture by reducing the employee’s non-value adding work. So,
Mr. Jager wanted an organizational reform.
Implication in change of process:
Mr. Jager wanted to change the traditional systems and processes. He increased the performance
based pay component. He also extended the reach of stock option from senior management to all
employees to motivate them.
He also stretched on integrated business planning process where all operating plans could be
reviewed and sanctioned together.
Implication in change of structure:
The most drastic change is to shift the primary profit responsibility to seven global business units
from four regional organizations. They also started to standardize their manufacturing process,
brand portfolios and co-ordinating marketing activities.
Resistances and Support of the Proposed Change in Organizational Structure:
The fact says that implementation of O2005 was causing a good deal of organizational disruption
and management distraction. The cause is the focus of profit making has been shifted from local
arena to global. Now making of budget is global responsibility, but European managers often did
not understand the competitive and trade differences across markets. So P&G has to standardize
and centralize their policies and practices out of their head office.
The maximum resistance for the proposed change came from a huge number of efficient local
managers left the company.
Managing the Change:
There are many elements which should to be worked out to make the change successful, which
are listed as follows:
Speed: The change should be implemented globally at a rapid speed and it requires aggressive
plan and executives to implement the same. The new structure and work has to be designed
across all global operations, assignments of people finalized and communicated and the new
organizations started up on schedule.
 Employee Communication: Obviously the key to successful transformation is employee buy
in. Proactive two way communication is the key to achieve that. The top management of the
organization has to meet a good number of employees across all levels, functions and countries
to seek feedback and provide clarifications on O2005.
 Follow the Global Strategy: An important element should be to give the great degree of
standardization to the local management to align their own design with global strategy. This will
give a feeling of independence to the local management while the global standard will also be
met.