P&g International Business-Level Strategy

Overall strategy of the of the organization

Given this product's success in Japan for 1999 ($150 million in sales), P&G is considering expanding its SK-II into a global brand. When doing this, management has to consider how the Japanese market compares to the other markets being proposed (China and Europe) as part of their international expansion. They should also do a thorough analysis of each of the markets being considered for this product, and an analysis of their competitors' firm wide international strategy. Because the Japanese market is very different from these other markets, the same level of success cannot be guaranteed. This includes the distribution channel and the supporting industries, e.g., TV advertising is relatively cheaper in Japan than in Europe.

Models and Theories

P&G's International Business-Level Strategy.

Porter's model suggests that international business-level strategies are usually grounded in one or more of these home-country factors (1, p. 274). Based on Porters model, the firm's strategy, structure, rivalry and demand conditions seem to be significant for P&G's international business-level strategy.

Firm strategy, structure, and rivalry: SK-II is the result of the combined ingenuity of P&G's most talented technologists from its worldwide labs, as well as the specific expertise from a Japanese group. This combination worked well because it reflected the best of P&G's consolidated R&D while catering specifically to the needs of the Japanese market (2, p. 8). Being a global company headquartered in the U.S. makes it easier for P&G to bring its global talent to its home-country so that it can improve its R&D capabilities and thus have a competitive advantage. Having a pre-existing global structure may also make it easier to adapt this product to the needs of those other countries where P&G does business. When considering expanding the SK-II market, this competitive advantage should be considered.

Demand conditions. The initial product opportunity for SK-II came about from U.S / global demand for an improved facial cleansing product (2, p. 8). That spawned the creation of SK-II as well as other products developed to meet these needs. Because SK-II was developed in response to the demand conditions in Japan, it became a highly regarded cosmetics product and survived the ferocious competition in the Japanese market; thus proving to be a competitive advantage. Furthermore, having a certain amount of understanding of the emerging Asian economic powers, P&G realized that fashionable people in countries like Korea, Taiwan, Hong Kong, etc., closely follow the fashion trends in Japan. Therefore, by entering the Japanese market and securing a substantial level of market share, P&G could have also created further competitive advantage for entering those emerging Asian markets. This strategy may even prove true in the case of entering the Chinese market. However, one may argue that China is a poorer country, but the populations in Hong Kong, Taiwan and Singapore are basically ethnically Chinese. Therefore, their habits should be much closer than that between Japanese and Chinese. Hence, with the successful entry into the Hong Kong market, Taiwan markets can be used as a direct test of the level to which Chinese women will accept the demanding procedures of SK II (2, p.6).

P&G's International Corporate-Level Strategy

International Corporate-level strategy can be classified into three different types: multidomestic, global, or transnational (1, p. 277). November, 1999 was an interesting point of time for P&G because the firm's corporate level strategy appears to be shifting from a multidomestic strategy to a transnational, or perhaps global, strategy. This is being done through the O2005 initiative, and explains some of the struggles P&G may face trying to expand the SK-II product globally.

As discussed in the case analysis, P&G was "in the midst of a bold but disruptive Organization 2005 restructuring program. As GBU's took over profit responsibility historically held by P&G's country-based organizations, management was still trying to negotiate their new working relationships." (2, p. 1) This quote explains P&G's international corporate level strategy, both where it was, and where it's trying to go. A tell tale sign of a multidomestic corporate level strategy was for P&G to have profit responsibility held by their country-based organizations. A multidomestic strategy has strategic and operating decisions decentralized to each country to allow products to be tailored to each local market (1, p. 277). The opposite is true for a global corporate strategy. Under an international global corporate strategy, products are standardized across all markets and economies of scale are emphasized (1, p. 280). This was the direction P&G was headed in when GBU's took over profit responsibility. In fact, this structure is very similar to a 'worldwide product divisional structure' which supports the use of a global strategy (1, p. 280).

However, during the SK-II development through the expansion proposal, P&G's international corporate strategy appears to be a transnational strategy, which combines aspects of the two aforementioned strategies. This is done in order to emphasize both local responsiveness and global integration and coordination. This is true with the SK II project. When the SK-II product was first created it was done so on a global level to meet a global demand. The product was then localized for the Japanese market. For instance, separate marketing teams were used in the U.S. and in Japan to develop this product for each market (2, p. 8). By first creating one product to meet global demand rather than regional demand, P&G was able to achieve economies of scale and efficiencies by having one R&D team working on a product that would meet many regions needs. However, P&G then allowed each region some flexibility in how they marketed, priced, and distributed this product. This was a big reason for SK-II's success in Japan.

It is apparent that P&G has adopted a transnational strategy. In line with the characteristics of that strategy, P&G is considering expanding a product proven to be successful in a demanding (Japanese) market in to other markets. By doing so, P&G will need to rely on aspects of a global strategy that uses a standardized product for the global market such that the competitive advantages in the home-country (Japan) can be leveraged out globally, thus achieving economies of scale. P&G will also need to rely on aspects of a multidomestic strategy