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Sk ii presentation

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MARK243 - HKUST

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Sk ii presentation

  1. 2. 1. History 2. P&G's goal for SK-II in China 3. Challenges . *Discussion* . 4. P&G’s entry strategy 5. Scandal 6. Initial Response . *Discussion* . 7. Recovery
  2. 4. P&G – Procter & Gamble Co. <ul><li>Founded in 1837 </li></ul><ul><li>Small shop selling candles  Multinational Corporation </li></ul><ul><li>More than 300 products </li></ul><ul><li>Over 40 brands (e.g. Crest, Oral-B, Tide) </li></ul><ul><li>In 140 countries </li></ul><ul><li>3 categories: Household Care, Health & Well-Being, Beauty & Grooming </li></ul><ul><li>First stepped into Chinese market in 1988 </li></ul>
  3. 5. SK-II Background <ul><li>Launched in Japan in 1980 </li></ul><ul><li>Originally a cream product under Max Factor </li></ul><ul><li>Famous Japanese cosmetic brand </li></ul><ul><li>Compared with Shiseido: </li></ul><ul><ul><li>Greater market share in Japan </li></ul></ul><ul><ul><li>Much less in the world </li></ul></ul>
  4. 8. Globalization of SK-II <ul><li>Make SK-II a global brand </li></ul><ul><ul><li>Starts from Hong Kong and Taiwan </li></ul></ul><ul><li>Huge Success: </li></ul><ul><ul><li>In 1999, 45% of SK-II total sales </li></ul></ul><ul><ul><li>In 2005, SK-II ranked the top in Hong Kong’s skin-care market and the second in Taiwan </li></ul></ul><ul><ul><li>Gained confidence for Mainland China </li></ul></ul>
  5. 9. SK-II in China <ul><li>Entered in 1999 </li></ul><ul><li>China – huge potential market </li></ul><ul><ul><li>Chinese women spend US$100/month on beauty & cosmetics </li></ul></ul><ul><li>Target market: affluent consumers in more wealthy cities (e.g. Beijing, Shanghai) </li></ul><ul><li>Goal: Maintain Olay as mass market product; Introduce SK-II as premium brand </li></ul>
  6. 11. Organization 2005 (O2005) <ul><li>Organizational disruption and management distraction </li></ul><ul><li>Profit responsibility shifted to Global Business Units </li></ul><ul><li>Caused complexity in working relationships and responsibilities </li></ul>
  7. 12. Before Organization 2005
  8. 13. After Organization 2005
  9. 14. Chinese Market Challenges <ul><li>Targeting high income groups with niche products: conflict with company’s goal </li></ul><ul><li>Counterfeits and cheaper versions of SKII by local companies </li></ul><ul><li>Low Average Income in China: $2,400USD/year </li></ul>
  10. 15. Competitors in China
  11. 16. <ul><li>How should P&G effectively enter the Chinese market? What are some characteristics to consider? </li></ul><ul><li>How can P&G make sure SK II sales won’t heavily cannibalize Olay sales? </li></ul>
  12. 18. P&G’s Entry Strategy <ul><li>O2005 benefited entry </li></ul><ul><li>Company culture </li></ul><ul><ul><li>Conservative & slow to modern & fast moving </li></ul></ul><ul><li>I.T. </li></ul><ul><ul><li>Improve marketing efficiency, product development and supply chain management </li></ul></ul><ul><ul><li>Decentralize IT department </li></ul></ul><ul><li>Improved communication within company (intranet: WorkSmart) </li></ul>
  13. 19. Execution <ul><li>Hired local beauty counselors </li></ul><ul><ul><li>Educate consumers </li></ul></ul><ul><li>Understand the market </li></ul><ul><ul><li>Favor and welcome western products </li></ul></ul><ul><ul><li>Western celebrity to represent SK-II </li></ul></ul><ul><ul><li>Preferred whiter skin and less wrinkles </li></ul></ul><ul><ul><li>Later used Asian celebrity endorsers </li></ul></ul><ul><li>Product with new formulas </li></ul><ul><li>New technology for skin care </li></ul><ul><li>Counter design </li></ul>
  14. 20. http://www.youtube.com/watch?v=K4_aRXhZhZk&feature=related Example of Chinese celebrity endorser for SK-II
  15. 21. Beauty Counselor’s selling process:
  16. 23. The Scandal <ul><li>Mid-Sept 2006: Guangdong Center for Inspection and Quarantine </li></ul><ul><ul><li>- chromium and neodymium </li></ul></ul><ul><li>Angry Chinese consumers </li></ul><ul><ul><li>refund, returned products </li></ul></ul><ul><ul><li>sued celebrity endorsers </li></ul></ul><ul><ul><li>Boycotts </li></ul></ul><ul><ul><li>Violence </li></ul></ul>
  17. 25. Inappropriate response <ul><li>Stopped selling all products </li></ul><ul><li>Was “unavailable” to discuss product quality </li></ul><ul><li>Refused to admit products were toxic </li></ul><ul><li>Poor management of refunds </li></ul><ul><ul><li>Long lines </li></ul></ul><ul><ul><li>Delayed cash refund </li></ul></ul><ul><ul><li>Waiver </li></ul></ul>
  18. 26. <ul><li>What lesson can be learnt from the scandal? How could P&G better handle the scandal? </li></ul><ul><li>How can P&G repair the SK II brand image in China? What marketing techniques would be involved? (4 P’s) </li></ul>
  19. 28. Later response and current status <ul><li>Re-tested products with individual dermatologists </li></ul><ul><li>October 2006: Ministry of Health in China said P&G products were safe </li></ul><ul><li>3 stage recovery process: remove misperceptions, brand recovery, and brand rejuvenation </li></ul><ul><li>Total sales increased by 89% after process </li></ul><ul><li>Prestigious image restored </li></ul>

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