Nokia Case

SK II

With SK II, P&G has a highly successful product in the premium skin-care market in Japan and a few minor markets such as Taiwan and Hong Kong. This success and the slowing growth of its home market Japan have led P&G to consider whether it was reasonable to roll out SK II internationally to either the United Kingdom or China or to enhance its product range in the Japanese home market. In this essay, I would like to determine whether P&G should go ahead with its Japanese SK II product line, and if so, where it should go next with SK II and why.

Premium skin care market in Japan is $1.8bn. SK II’s annual sales amount to $150m, a market share of approximately 8%. If P&G was able to double its sales, as expected, over the next decade, it could improve market attractiveness and add volume to the market, increasing its market share to almost 13%, with sales of $300m and an operating income of $33m. Since SK II is very well known and recognized in Japan and customers are very loyal, spending up to $1.000 p.a., there would be no need for further differentiation from other brands. This means that no large investment is necessary and financial risks are minimized. P&G can gain further knowledge and a long term competitive advantage through the development of BIS. Once this is done, marketing and administrative expenses (67% of total costs) are likely to decrease, giving P&G the opportunity to enjoy long run economies of scale. Finally, if P&G does not roll out SK II, but stays in its home market, it does not face any risks from cultural distance.

The premium skin care market in the United Kingdom has a total volume of $450m and a two-year growth of 17%. After four years, when SK II is expected to break even and with sales of $10m, its market share would be neglectable. Although we do not know what annual growth rate SK II can expect, this would not add volume to the market or improve attractiveness of the market, because it is highly...