Shiseido Case Study Report

CASE STUDY REPORT INTERNATIONAL MARKETING

SHISEIDO

Shiseido is a Japanese cosmetics producer, market leader in its home country and one of the top ten players in the industry worldwide. Founded 1872 by Arinobu Fukuhara, Shiseido is also known for being the oldest cosmetics company in the world.

COMPANY FACTS

Net sales (consolidated): $ 7,024 billion Number of employees: 28,810 SHISEIDO group: 89 companies 29 domestic 57 overseas

STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS

Apart from being market leader in Japan, Shiseido is putting a lot of effort into research and development. Other important points are the strong focus on customer relationship management and environmental protection. But even though R&D is a cornerstone of Shiseido’s corporate philosophy, only 5% of the invented products are patented. This makes the company very vulnerable to competition. Another negative point is the limited other number of points of sale, thus making it hard to reach , customers. But there are also opportunities for Shiseido in the future. First of all, introducing the men’s cosmetics line opened the door to a new market with high potential. Second, forming strategic alliances, especially with foreign companies, can also lead the way to new markets (the same happened in the past when Shiseido formed alliances with Johnson & Johnson or Coca Cola Cola). Searching for new market chances is important because of various threats like for example the increasing competition in existing markets or the shift in consumer needs away from complex, high-class products, to class cheaper self-selection products.

3 affiliated companies

SALES (%)

15,9 Japan 14,5 62,3 Americas Europe 7,3 Asia/Pacific

MEN – A POTENTIAL TARGET GROUP?

In the last years the attitude of men towards their physical appearance and cosmetic products has highly changed: Nowadays, men are more aware of their appearance and are therefore willing to spend money on products that in the past were reserved for women (e.g. face scrubs, eye creams or hair styling products). Proof for that are the rise of a grooming culture, metrosexualism and a 17% growth in skin care and cosmetics sales for men.

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MARKET SHARE WORLDWIDE COMPANY Procter & Gamble L’Oréal Unilever Colgate-Palmolive Colgate Avon Products Esteé Lauder Cosmetics Beiersdorf Johnson & Johnson Shiseido Kao

CASE STUDY REPORT INTERNATIONAL MARKETING

Possible men’s products range from moisturizers, manicure- and spa-treatments to shaving foams and after-shave. Even though men feel more comfortable about using cosmetic products nowadays, they have to be marketed different from the women’s products: As an example should POS be separated for men and women. Especially in Japan, where the masculinity-factor of the culture is very high, men would feel uncomfortable to shop for cosmetics in a “shop for women”. Another example is the difference in need of explanation. Where women normally know a lot about cosmetic products, men are often not aware of how to use them and therefore need more service and instruction. The right way of communication would be the use of testimonials, like in Japan, where one of Tokyo’s most popular young actors, Satoshi Tsumabuki, was chosen to appear in TV commercials.

Second of all are cosmetic products very age-dependent. Therefore it seems logical to use that approach. However, there are also disadvantages: Other important factors may vary within the age groups. Just because two people having the same age doesn’t have to result in the same behavior. Educational or geographical differences (e.g. city / countryside) can mess up the age-defined target groups. Also the needs may differ within the age-groups. For example contains the age-group IV all customers aged 35 to 54. But a 35 year old woman or men most likely has different needs in cosmetics than a 54 year old. These disadvantages of Shiseido’s present way of market segmentation suggest adjusting the used method.

FACING GLOBAL COMPETITION

With a successful product and brand strategy Shiseido is already well positioned against global competition. With a diversified product portfolio and high as well as lower priced brands, the company can target their customers very specifically. Also the established system of beauty counseling has proven itself as a competitive advantage and should therefore be expanded (e.g. by providing exclusive services such as beauty seminars). Furthermore should the network of strategic alliances be expanded. In the highly saturated market of cosmetics, alliances with companies outside of the industry (as already happened in the past with e.g. Coca Cola) could turn out to be very valuable. Such alliances could provide Shiseido with opportunities to enter new markets or to develop new products for niche markets. However, there are issues that need to be improved: Product development is still very centralized in Japan. To face cultural differences better, product development needs to become more decentralized. A major flaw of Shiseido’s strategy is that still only a very small number of developed products are patented. This amount should be expanded to protect valuable new products from competition.

DISTRIBUTION NETWORK ANALYSIS

Shiseido’s traditional distribution way is selling in chain stores exclusively selling Shiseido products. Other possible ways of distribution could be department stores and supermarkets. But both of these channels have disadvantages: Supermarkets are no alternative, since Shiseido’s strategy focuses on high-class products and therefore high prices. Selling such products in supermarkets could ruin the product image. On the other hand would the expensive products hardly fit into a supermarket’s product-mix. Department stores however could be an alternative, but only if they fit the exclusive image of Shiseido. Here it would an option to use a shop-in-shop concept in prestigious department stores.

TARGET GROUP CLASSIFICATION BY AGE – ADVANTAGE OR DISADVANTAGE?

There are two major advantages for using an age-based segmentation: Using socio-demographic criteria (such as age) for market segmentation is a highly effective and easy way to define target groups.