Part II Fundamentals of Strategic Planning
10 Shiseido Marketing in China
10.7 Signifi cance of This Case Study and Suggested Questions
products, resulting in directions from the Chinese General Administration of Quality Supervision, Inspection and Quarantine (ASQIQ) to quarantine products imported from Japan (SK-II was originally a sub-brand of Japan’s Max Factor that was acquired by P products sold in China under this brand were thus imported from Japan). Finally, the Chinese government issued a statement that the chromium and neodymium detected in these products were originally in the products’ raw materi-als, posing no threat to the human body. Still, the damage was done on SK-II’s brand image. After the Chinese government’s directives were issued that September, there were incidents of refund-seeking consumers causing damage to certain stores, and the media calling P&G, which did not respond to requests for refunds, a
“Bàwáng,” or tyrant of the worst kind, which caused further problems.
This displays the necessity of heeding unforeseen risks caused by governments.
Quality inspections on imported cosmetics have recently become more stringent, and as a result, new product introductions into the Chinese market are said to be substantially behind schedule. The fault also lies with the complexity of permits and licensing systems. Counterfeit goods are also a source of trouble for manufacturers.
Shiseido has contracted with multiple law fi rms and to gather information regarding counterfeit products. After gaining suffi cient numbers, it contacts the appropriate bureaucrats and government agencies, thereby seizing counterfeit manufactured products.
Despite the Chinese market’s many issues, its scale as the world’s largest cos-metics market is also expanding rapidly. Shiseido perceives the Chinese market as a pillar of its overseas strategy and is in the process of securing itself as a global cos-metics manufacturer representing Asia, while confronting the risks posed by China.
Competing with western megabrands in the Chinese market can be perceived as a preliminary battle for business in other emerging nations, where much future growth in new cosmetics markets is expected.
10.7 Significance of This Case Study and Suggested
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However, P&G, Estée Lauder, Lancôme, and other powerful foreign brands have also entered the market, making competition more intense. SHC is increasing its product line and executing marketing strategies for each product level. Unlike the western cosmetic manufacturers, Shiseido has developed its own unique channel in the form of specialty shops and aims to reach a wide range of consumers. It is a business model developed in Japan that has been imported to China. Additionally, Shiseido has recently begun selling its products in drugstores and over the Internet, increasing its products’ reach and distribution channels.
Using this case study, the following questions can be considered to further deepen the understanding of global strategy.
• Compared with Europe and the US, what are the merits and demerits of Shiseido expanding its cosmetics business in China? From Japan’s perspective, is the gap between the Chinese and western markets, as described by the CAGE frame-work, larger than that between the cosmetics markets in China and Japan?
Open Access This chapter is distributed under the terms of the Creative Commons Attribution Noncommercial License, which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
• Describe the marketing strategy for one of Shiseido’s products in China. How are customers segmented and how does Shiseido view its target customers? Describe the four Ps (product, price, place, and promotion) of marketing as they apply to Shiseido in China.
• How do Shiseido’s marketing strategies differ from other large players in the Chinese market (L’oréal, P&G, etc.)? As competition becomes more intense in the Chinese market, should Shiseido continue down the same path?
• Shiseido aims to be a “global player representing Asia,” and seems to be follow-ing a strategy that differentiates itself from large western players. Lookfollow-ing into global market trends over the next 5–10 years, do you think this strategy of dif-ferentiation is appropriate?
References
Euromonitor International. (2011). World cosmetics & toiletries marketing directory 2011.
London: Euromonitor International.
Yano Research Institute. (2012). Chugoku Keshouhinshijou Ni Kan Suru Chousa Kekka. Tokyo:
Yano Research Institute (in Japanese) References
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K. Motohashi, Global Business Strategy, Springer Texts in Business and Economics, DOI 10.1007/978-4-431-55468-4_11
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11.1 Introduction
In order to enter into foreign markets with technical strength, it has become increas-ingly critical for Japanese companies to maximize the effectiveness of research and development. In addition to global western fi rms, companies in Korea, China, and other emerging nations are gaining strength. To maintain a superior position in rela-tion to these competitors, Japanese companies must develop products that are attrac-tive to customers in a timely fashion. For this purpose, research and development (R&D) will require the best personnel in a company and companies must deal with strategically crucial information. Furthermore, as a place to amass cutting-edge information, it is most effi cient to determine a base and concentrate the R&D efforts.
Accordingly, global fi rms with many foreign sales and production offi ces opt to keep R&D activities within their home countries.
Recently, however, globalization is occurring even within the R&D departments of Japanese companies. Till now, companies that had foreign R&D facilities typi-cally operated them inside advanced western nations; however, in recent times, companies have increasingly begun establishing R&D centers in emerging nations such as China. The primary battlegrounds for global businesses are transitioning from advanced nations like Japan, Europe, or the US to China, India, and other emerging nations. Thus, companies fi nd it effective to create local development centers to accurately capture consumer needs and expeditiously introduce new products into the market. In addition, most customers in emerging nations still do not have very high income levels; therefore, it is important to provide products with suffi cient features at low cost. To develop new products for these “good enough”
markets, companies must keep development costs under control by keeping R&D in markets with low wages.
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Companies conduct various activities to meet these objectives within their foreign R&D centers. In this chapter, we discuss management of foreign R&D by fi rst understanding Japanese corporate trends regarding foreign R&D. The Japanese corporations became globally active in a signifi cant way in 1985, around the time of the Plaza Accord, when the value of the yen began to climb. However, internation-alization of R&D is a relatively recent trend, beginning after the year 2000. Next, we introduce a theory of the internationalization of R&D activities in three points:
(1) Should R&D be conducted in foreign countries? (2) If so, what kind of R&D should be transferred to foreign countries? (3) Which countries are appropriate tar-gets for expansion? Finally, we discuss examples of reverse innovation, or the expansion of local innovation into global markets, the latest topic regarding R&D in emerging nations.
11.2 Foreign R&D Activities of Japanese Companies
The strengthening yen after the Plaza Accord of 1985 enabled an acceleration of expansion into foreign markets among Japanese companies. This expansion tempo-rarily diminished with the bursting of the economic bubble in the fi rst half of the 1990s and the impact of the 1997 Asian economic crisis; however, the long-term trend over the last 20-plus years has been toward corporate globalization. R&D internationalization has also gathered steam since 2000 (Fig. 11.1 ). Out of a total of 22,864 foreign facilities, 667 are designated for R&D activities, representing a little
Fig. 11.1 Number of foreign subsidiaries and R&D facilities by year of establishment ( Source : Toyo Keizai Shinhousha 2011 )