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Proctor & Gamble Japan (A) Case Solution & Answer

Proctor & Gamble Japan (A) Case Solution

Introduction

Proctor & Gamble has remained a market leader in the United States with its 39 product categories. The company enjoys a strong brand position and a good reputation among its customers. The expansion into different geographical countries enabled the company to achieve a tremendous growth. The Japanese market with a larger population and per capital income also became a potential market opportunity, which led to an initial investment of $2 billion by Proctor & Gamble, for making an entry into the Japanese market in 1972, after the capital liberalization policy of the Japanese Government.

Despite adopting aggressive marketing and pricing strategies and achieving a breakeven point; the company accumulated a 10 years’ operating loss of $250 million and the annual sales of $120 million.Despite of the company’s reported net losses for 10 years, the company is recommended to rebuild its position in the Japanese market by diverting its major investments towards the new products’ development by thoroughly investigating the markets’ needs through Research & Development.

Analysis & Support

Japanese market proved to be a good marketing opportunity for P&G, as it became the second largest market of the consumers’ goods after the United States. The comparative profile of the Japanese market is available in Appendix 1, which shows that after the United States; Japanese market had the greater population, Gross National Product per capita and the per capital income. However, the demographics of the population were quite different as compared to the Western world. The Japanese market is different in language, heritage, culture, consumer mindset and the business practices.

In order to identify the key reasons behind P&G’s cumulative losses and its deteriorated financial performance despite of it being an industrial giant, an analysisis conducted to search the possible reasons. First of all, P&G did not adapt its marketing, product promotion and pricing strategies according to the consumers’ mindsets. The Japanese customers had a different mindset, with major category based on housewives. The housewives were uncompromising over the product quality, reliability and comfortability. Even when it comes to pricing, low priced products were considered as poor quality products. P&G did not study the market properly and it followed its US business practices in the Japanese market, which led to lower product preferences and lower trust by the customers, which ultimately led the company towards having a declined market share and an incompetent financial performance.

Moreover, the Japanese market had two large consumer products’ sellers: Kao and Lion, who understood the market needs and preferences very well.Kao and Lion both were the market leaders with high market shares. Kao maintained its competitive position by focusing its investment on the Research & Developmental cost for identifying the products that best suited the demands of such market segments. Contrastingly, Proctor & Gamble mainly focused on aggressive promotional and pricing strategies. Apart from this, Kao had its own distribution channels and it followed a vertical integration system by taking an ownership of the major raw material suppliers…………………….

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