Harvard Case - Making China Beautiful: Shiseido and the China Market
"Making China Beautiful: Shiseido and the China Market" Harvard business case study is written by Geoffrey G. Jones, Akiko Kanno, Masako Egawa. It deals with the challenges in the field of Strategy. The case study is 28 page(s) long and it was first published on : Oct 14, 2004
At Fern Fort University, we recommend Shiseido adopt a multi-pronged approach to solidify its position in the Chinese market, focusing on innovation, digital transformation, and strategic partnerships to achieve sustainable growth. This strategy leverages Shiseido's core competencies in product development, brand management, and marketing, while adapting to the unique dynamics of the Chinese market.
2. Background
Shiseido, a Japanese cosmetics giant, faces a pivotal moment in its China strategy. The company has enjoyed success in the market, but faces increasing competition from both domestic and international players. The case study highlights the challenges of navigating a rapidly evolving market characterized by disruptive innovation, digitalization, and a growing demand for personalized experiences.
The main protagonists of the case study are Shiseido's management team, tasked with charting a course for the company's future in China. They must grapple with the challenges of market segmentation, pricing strategy, and distribution channels in a complex and dynamic market environment.
3. Analysis of the Case Study
To analyze Shiseido's situation, we employ several frameworks:
- Porter's Five Forces: The Chinese cosmetics market is characterized by intense competitive rivalry with numerous local and international players. Bargaining power of buyers is high due to access to information and diverse options. Threat of new entrants is moderate, while threat of substitutes is low. Bargaining power of suppliers is moderate, with some raw materials sourced from specific regions.
- SWOT Analysis: Shiseido possesses strengths in brand recognition, product quality, and innovation. However, it faces weaknesses in adapting to local preferences and digital marketing expertise. Opportunities lie in growing middle class, rising demand for premium products, and e-commerce expansion. Threats include intense competition, changing consumer preferences, and regulatory uncertainties.
- Value Chain Analysis: Shiseido's value chain needs optimization in China. Research & Development should focus on local consumer needs. Manufacturing processes can be streamlined through outsourcing and vertical integration. Marketing needs to be digitally driven with social media and influencer marketing. Distribution channels should be diversified, including online marketplaces and Omnichannel strategies.
4. Recommendations
To achieve sustainable growth in China, Shiseido should:
1. Embrace Digital Transformation:
- Invest in data analytics and AI: Develop a robust system for tracking consumer trends, preferences, and purchasing behavior. Utilize AI-powered tools for personalized product recommendations and targeted marketing campaigns.
- Enhance E-commerce Presence: Strengthen online presence through platforms like Tmall and JD.com. Invest in digital marketing strategies, including social media campaigns, influencer collaborations, and live streaming.
- Develop Mobile-First Strategy: Optimize website and app for mobile devices, catering to the mobile-first behavior of Chinese consumers.
2. Innovate and Adapt:
- Focus on Local Preferences: Develop products tailored to the specific needs and preferences of Chinese consumers. Conduct extensive market research to understand local beauty trends and ingredients.
- Leverage Innovation Centers: Establish innovation centers in China to collaborate with local talent and accelerate product development.
- Embrace Disruptive Innovation: Explore new technologies and business models, such as personalized skincare solutions, AI-powered beauty consultations, and subscription services.
3. Strategic Partnerships:
- Collaborate with Local Brands: Partner with established Chinese cosmetic brands to leverage their distribution networks and consumer insights.
- Strategic Alliances: Form strategic alliances with technology companies for data analytics, AI development, and digital marketing expertise.
- Government Relations: Build strong relationships with Chinese government agencies to navigate regulatory landscapes and access market opportunities.
4. Strengthen Brand Management:
- Enhance Brand Storytelling: Communicate Shiseido's values and heritage in a culturally relevant way, emphasizing its commitment to innovation, quality, and sustainability.
- Leverage Influencer Marketing: Partner with influential figures in the Chinese beauty community to build brand awareness and generate consumer trust.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Shiseido's strengths, weaknesses, opportunities, and threats in the Chinese market. They align with Shiseido's core competencies in product development, brand management, and marketing, while adapting to the unique dynamics of the Chinese market.
- Core Competencies and Mission: The recommendations leverage Shiseido's expertise in product development and brand management, while emphasizing innovation and adaptation to the Chinese market. This aligns with the company's mission to create beauty and well-being for people around the world.
- External Customers and Internal Clients: The recommendations focus on understanding and meeting the needs of Chinese consumers, while empowering employees with the necessary tools and resources to succeed.
- Competitors: By embracing digital transformation, innovation, and strategic partnerships, Shiseido can differentiate itself from competitors and gain a sustainable competitive advantage.
- Attractiveness: The recommendations are expected to drive significant business growth, market share expansion, and profitability in the long term.
6. Conclusion
Shiseido has the potential to achieve substantial success in the Chinese market by embracing a strategy of innovation, digital transformation, and strategic partnerships. By leveraging its core competencies and adapting to the unique dynamics of the Chinese market, Shiseido can solidify its position as a leading player in the global beauty industry.
7. Discussion
Alternative strategies include:
- Market penetration: Focusing solely on existing products and channels, which may not be sufficient to compete effectively.
- Product development: Developing new products without considering local preferences and market trends could lead to limited success.
- Mergers and acquisitions: While acquisitions could provide access to new markets and technologies, they carry significant risks and may not be the most effective strategy for Shiseido.
Risks and Key Assumptions:
- Competition: The Chinese cosmetics market is highly competitive, and Shiseido needs to be agile and innovative to stay ahead.
- Regulatory changes: Government regulations can impact the industry, requiring Shiseido to adapt its strategies accordingly.
- Consumer preferences: Chinese consumer preferences are constantly evolving, requiring Shiseido to stay abreast of trends and adapt its product offerings.
8. Next Steps
Shiseido should implement the following steps to execute its strategy:
- Short Term (1-2 years):
- Develop a comprehensive digital transformation strategy.
- Establish innovation centers in China.
- Partner with local brands and technology companies.
- Implement social media and influencer marketing campaigns.
- Medium Term (3-5 years):
- Launch new products tailored to Chinese consumer preferences.
- Expand online presence and distribution channels.
- Build strong relationships with government agencies.
- Long Term (5+ years):
- Continuously innovate and adapt to market trends.
- Develop a sustainable business model for the Chinese market.
- Become a leading player in the global beauty industry.
By taking these steps, Shiseido can capitalize on the immense potential of the Chinese market and achieve its strategic goals.
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Case Description
Describes the multinational growth of Shiseido, the world's fourth-largest cosmetics company, with a focus on its strategy in China since 1981. Explores the challenges facing firms in the globalization of a culturally specific industry such as cosmetics. The Japanese company displayed an early interest in international expansion, but its early investments were lost during World War II. Thereafter, it sought to build businesses in Europe and North America, but was challenged by market conditions quite different from those in Japan. Even within its home market, deregulation and the entry of foreign firms during the 1990s led to a significant loss in market share. Shiseido entered China in 1981 and built Aupres, a large cosmetics brand specifically aimed at Chinese women. Further growth followed, and in 2003, plans were announced to build a large network of voluntary chain stores. Highlights managerial challenges of growing the China business further in the face of increasing competition and provides a framework for discussing the challenges of prioritizing the allocation of resources in a global business.
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