P&G Japan The SK-II Globalization Project Case Analysis Current Business AffairsP&G Japan: The SK-II Globalization ProjectCase AnalysisCurrent Business Affairs Presented by: Syed Fawad Hussain Submitted to:Captain Munawwar Ahmad PNJune 03, 2011OVERVIEWThis case examines P&G and whether or not they have the ability and means to make their SK II product a global brand. In this case we examine P&G need for a new global strategy and their ability to develop SK-II into a worldwide beauty product. Ultimately we will see the P&G needs to expand their hold in the Japanese market while becoming more familiar with the needs of potential markets. The key players in the case study was Paolo de Cesar, the president of max factor Japan, the hub of P&Gs fast growing cosmetics business in Asia, and previously in charge of the companys European skin care business. Yet, as he readily acknowledged that there was significant risks in P&Gs first ever proposal to expand Japanese brand into new markets worldwide. Another key player was Alan Lafley, head of P&Gs beauty care GBU to which de casare reported. In the end it was his organization and his budget that would support such a global expansion. Lafley would need strong evidence of the transferability of a brand in a culture, where the consumers, distribution channels, and competitors were vastly different. Another constraint was that the P&Gs global organization is in the midst of a 2005 restructuring program and it can be disruptive. Throughout its early expansion, the company adhered to set of principles set down by Watlter Lingle, the first VP of overseas operations. In 1986, the seven divisions in P&Gs domestic U.S. organization were broken into 26 categories, each with its own product development, product supply and sales and marketing capabilities. The company also replaced its international division with four regional entities each assuming primary responsibility for profitability. Up to the mid 1980s, P&G Japan had been a minor contributor to P&G international growth. 12 years after entering the Japan market, P&Gs board reviewed the accumulated losses of $200m and eroding sales base decreasing from 44 billion yuan to 26 billion yuan in 1984. But CEO at that time convinced the board that Japan was strategically important. There were certain causes of failure in Japan and that was the company had not recognized the distinctive needs and habits of the very demanding Japanese consumer. The company had not respected the innovative capability of the Japanese companies like kao and lion who turned it to be among the worlds toughest competitors. The company had not adapted to the complex Japanese distribution system. In 1996, Durk Jager the chief operating officer said that the development of new products as the key of P&G future growth. He also increased the budget for R&D by 12% while cutting marketing expenditures by 9%. Implementation would be painful, he warned in the first five years it called for closing of 10 plants, and the loss of 15000 jobs- 13% of the worldwide workforce. Jager said that any organizational change would have to be built on a cultural revolution. He changed the P&G culture from slow, conformist and risk averse to stretch, innovation and speed. Reinforcing the new culture were some major changes to P&Gs traditional systems and processes. Performance based component of compensation so that for example, the variability of a vice president annual day package increased from a traditional range of 20%. And to motivate people, he extended the reach of the stock option plan from senior management to virtually all employees. Going forward jager argued for an integrated business planning process where all budget elements of the operating plan could be reviewed and approved together. The most drastic change introduced in O2005, primary profit responsibility shifted from P&Gs four regional organizations to seven global business units (GBU). GBU were also charged with the task of increasing efficiency by standardizing manufacturing process, simplifying brand portfolios and coordinating marketing activities. The restructuring also aimed to eliminate bureaucracy and increase accountability. Furthermore, numerous committee responsibilities were transferred to individuals. Japanese women were among the most sophisticated users of beauty products in the world and on a per capita basis, they were the worlds leading consumers of these products. With such a small share of such a rich market, de cesare felt that a strategy of product innovation and superior in-store service had the potential to accelerate a growth rate that had slowed to 5% per annum over the past three years. De cesare was extremely excited about SK-II potential for growth in its home market. One loyal SK-II customer in Japan already spends about $1000 a year on the brand. Even if you were a reg