STUDY CASE

Procter & Gamble in Japan

INTERNATIONAL BUSINESS - A

Group 1 :

Serafin Danika 1706982090

Gloria Luna Nio 1706057461
Rahmadia Kushardiani 1706057556
Rananda Rizki Ibrahim 1706056710
Millenny 1706057524
Favian Raffi 1706981711
Hanifa Putri 1606910582
QUESTION :
1. How would you characterize P&G’s product development and marketing strategy toward
Japan in the 1970s and 1980s? What were the advantages of this strategy? What were the
drawbacks?
2. How would you characterize the strategy since the early 1990s? What are the advantages
of this strategy? What are the potential drawbacks?
3. Which strategy has been more successful? Why?
4. What changes do you think P&G has had to make in its organization and company culture
to implement this strategic shift?
5. What does P&G’s experience teach us about the argument that consumer tastes and
preferences across nations are converging and global markets are becoming more
homogenous?

ANSWER :
1. Procter and Gamble or P&G is one of the largest consumer products company in the
world. Nevertheless, its success in the global market did not happen in a short period
of time. The company began their international expansion since the end of the World
War II, while still implementing product development and marketing strategies based
on the United States. However, during the period of 1970s, this strategy is shown to
be unsuccessful in Japan. They did not consider that cultural differences in another
country would affect the type of product they should sell to other countries outside of
the U.S.A. This strategy is also known as the ‘global strategy’ which implements low
local responsiveness and high global integration.
The advantage of this strategy is that it would cost P&G a much cheaper expense on
the R&D division since the need of only a slight effort to come up with new product
development. It would also mean that the company would have a standardized
product worldwide. In the beginning, P&G managed to succeed shown by their
introduction to disposable diapers in Japan which commanded 80% of the market
share immediately.
Over time, the strategy did not work well and they were losing $40 million of revenue
per year, hence the major drawback of this strategy is that it would not last in the long
run. They developed and produced the same product worldwide expecting that it
 would be suitable for the whole market. Yet, it is important for P&G to do product
differentiation in various markets that they’re trying to gain. Moreover, P&G should
also do penetrate their market in Japan to achieve a higher return in their sales.
2. For the last decade, P & G has been delegating more responsibility for new product
development and marketing to its major subsidiaries like in Japan and Europe. P&G is
more responsive to local differences in consumer tastes and preferences and more
willing to admit that good new products can be developed outside the US. Between
major subsidiaries, there are needed to transfer the learning of knowledge to do
business more efficient and effective. Because of these, P&G can be characterized as
a transnational company.
The advantages of this strategy are P&G could gain more market share, increase the
demand so that P&G could reducing the cost of production. By knowing what actually
consumers wanted in Japan the company can develop and launched more precisely
and suitable products. This can lead to making a higher profit and strengthening P&G
position in Japan.
However although P&G has been successfully doing business in Japan with its
strategy, there are still some risks that might company face off. ​First, there is the
problem that P&G lack expertise outside its own country. That means that the
company will need to retrain current staff, add new staff, or perhaps partner with a
local company. All of these require significant investments, and yet P&G may still be
at a disadvantage with respect to established competitors in Japan. Next, in operating
transnationally, P&G open itself to legal and political risks. For example, Japan may
have standard practices that are illegal in your home country or vice versa. P&G also
may encounter political risks that can affect their business. Another major issue is that
P&G will be operating under multiple different tax and accounting regimes,
something that adds cost and complexity to the business. When operating abroad
P&G also need to deal with the currency risk.

3. The transnational strategy has been more successful for P&G. By responding to local
needs and characteristics, P&G could gain more market share, increase the demand so
that P&G could reducing the cost of production. Those all lead to P&G’s strong
 position in Japanese market. The second strategy is proven to be better not only
because of the gain in revenue but also in the product development itself.
Although potential drawbacks still exist within this strategy, this is still the better one
that P&G can do in order to foster growth in the business.

4. Shifting from global to transnational strategy requires different organization and

company culture. Firstly, interdependence, performance ambiguity, and cost of
control is increased from high to very high. Secondly, vertical differentiation becomes
fully decentralized while horizontal differentiation changes from worldwide product
divisions to an informal matrix. Need for coordination changes from high to very
high. In transnational strategy, the need for coordination and performance ambiguity
also increased. Aside from that, the company’s focus also changes. From realizing
location and economics curve, the focus shifts to become realizing location,
economics curve, be locally responsive, and do global learning altogether. However,
in both strategies, strong company culture is heavily needed.

5. Consumer tastes and preferences vary across nations. P&G emphasized the needs of
various customers and wants to invade international markets by applying a
localization strategy like their many products in various countries. As we know, the
internet has become the biggest factor that makes tastes and preferences evolve and
global markets are becoming more homogeneous. But other factors such as cultural
differences, economic development between countries, and different trend, still exist.
The influence of tradition is the most fundamental aspect of cultural differences.
Although some cultural integration has taken place between the advanced industrial
nations of North America and Western Europe, common tastes and expectations are
still a long way away. Just like Indonesia, we still have religion as our biggest
influence. With Islam’s rules, of course, firms that want to enter] or introduce new
products should consider religion factor which prohibits some kind of product. In
addition, a country's economic development also affects consumer behaviour.
Industries in highly developed countries tend to build in their goods quality attributes.
Although customers in less developed countries do not need these additional
attributes, more simple goods are preferred. P&G's strategy to enter the global market
has therefore taught us how to establish the brand and use the right marketing strategy
in various countries from the US to Asia and around the world.