This is a summary of the effects the O2005 restructuring had on the SK-II globalization project at P&G

1. Section N3: Group B P&G SK-II Globalization project
Organization 2005, (O2005) was a global restructuring initiative launched by P&G in 1999.
The primary aim of O2005 was to move P&G from multi-domestic corporate strategy to a
global one in order to drive global growth. The company’s existing strategy involved local
R&D centres in each country, which had resulted in increased R&D costs and an autonomous
regional structure that impeded global roll-out of innovative products and transfer of
competitive advantage across regions. Through O2005, P&G centralised its R&D process,
created standard product platforms, simplified brand portfolios, centralized marketing
activities through seven (7) global business units, and implemented uniform global strategies
in local markets through regional market development organizations (MDOs) allowing for
local customization. The reorganization eliminated hurdles when launching new products
across geographies and encouraged risk-taking, innovation and speed since the regional firms
no longer had profit responsibility. The central product development structure allowed P&G
to reduce its R&D costs and take advantages of economies of scale.
P&G was in the midst of implementing O2005 when the SK-II globalization project began. In
addition to the benefits listed above, O2005 supported the SK-II initiative through its global
focus, processes and structure supporting fast roll out and transfer of technology. However,
the product line of SK-II belonged to a premium segment in beauty care requiring fashion
linked and promotion driven sales models (e.g. service-linked promotions), which didn’t fit
well with P&G’s “stack-it high, sell it cheap” strategy. The premium product of SK-II also
needed high regional specific customization and marketing efforts, which were not supported
by O2005. The restructuring also brought lot of disruptive structural change, which slowed
SK-II’s globalization as its managers and leaders took time to adjust to the new roles. Many
local managers left the company and just as many global managers were brand new to their
roles Overall, O2005 did not balance the globalization and national differentiation required to
effectively transfer SK-II to other countries.