Proctor & Gamble Japan (A) Case Solution
The two companies did not reduce their prices, and in order to grab more market share; P&G introduced severe price cuts, which further led towards a declined operational and financial performance, as it can be seen through declining sales over a 10 years’ period of fiscal year 1873 to fiscal year 1884 (See Appendix 2). In the fiscal year 1983, the P&G’s worldwide performance was much better than Kao and Lion. The company generated the net income of $866 million as compared to $21.713 million net income of Kao and $11.316 million of Lion’s net income (See Appendix 3). The Japanese manufacturers were not geographically dispersed like P&G, but they enjoyed more profitability in the Japanese market as compared to P&G.
The distribution structure of the Japanese market was highly complex and fragmented. In distribution, the whole sellers played a crucial role in the physical movement of the products, which was completely reverse to the US consumer goods’ market. In the United States, Proctor & Gamble owned its distribution channels, and the product directly moved from the manufactures to the direct consumers, which lowered the cost of the manufactures. Moreover, in response to the aggressive marketing and downsized prices P&G; the Japanese market leader came up with their new product offerings. Kao launched Wonderful in order to compete with Cheer, thereby gaining a market share of 9.1% in 1978. Similarly, Lion launched Top detergent with its enzyme cleaning agents and grabbed the market share of 19.3% within 18 months, after the introduction of its new product.
After detailed financial as well as the qualitative analysis; it has been recommended to P&G to not exit from the Japanese market as it has a strong brand reputation and has made huge investments in the market as well.The company is proficient with its market strategies and it has a strong ability to grab the market share. Rather than making an exit; the company should rebuild its position in the market.
The company should focus majorly on the Research & Development, in order to develop a product portfolio, which best fits to the needs of the Japanese Consumer Products Market. The company should not follow the business practices based on the United States’ market, and should rather adapt the company’s environment with the Japanese demographic, language, cultural and social factors.
Moreover, Proctor & Gamble must not downsize their prices, as the consumers’ mindsets are different in the Japanese market and low prices of consumer goods are considered to be of low quality products in Japan. The company should follow a hybrid strategy, whereby it should differentiate itself from other competitors and should also implementing a low cost factor for grabbing the market share in reviving its business in Japan. Lastly, the company should make investments in implementing a vertical integration model, which would enable the company to own its suppliers and the distribution system, as distribution in Japan is very complex. The company has its global presence, so rebuilding its performance would be a possible solution to keep up with its outstanding history........................
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