Table of Contents

1.0 Introduction....................................................................................................................1
2.0 Background of Organization..........................................................................................2
3.0 Situational Analysis.......................................................................................................4
3.1 General Environment Analysis..................................................................................4
3.2 Industry Condition (Porter's Five Forces Analysis)...................................................7
3.3 SWOT Analysis.........................................................................................................9
3.4 Value Chain Analysis...............................................................................................10
4.0 Strategic Options for the Organization........................................................................12
5.0 Key Selection Criteria..................................................................................................15
6.0 Recommendations........................................................................................................18
7.0 Conclusion...................................................................................................................20
8.0 Reference.....................................................................................................................21

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1.0 Introduction

Shiseido Company is a Japanese multinational personal care company. It consists

of different kinds of products which are hair care, skin care, fragrance and cosmetics
products. It was founded in year 1872 and it is also one of the oldest cosmetics company
in the world. Shiseido Company is the 4th largest cosmetics firm in the world and the
largest cosmetics company in Japan. It had owned numerous different brands and
subsidiaries worldwide and its main competitor is SK-II.

Vision

Shiseido Company has a vision called the Vision 2020 which they want to
become a company needed and supported by the consumers and society worldwide.
There is 5 different vision which Shiseido want to achieve which are become a company
overflowing with youthful power, a company inspiring to, and admired by younger
generation, a company always much talked about, a company that is full of energy for
growth, and a company driven forth by diverse cultures. Shiseidos net sales for year
2020 is over 1 trillion and operating income for year 2020 is over 100 billion.

Mission

Shiseido Company has 3 different missions. First, Shiseido Company cultivate

relationship with people. They are honor to meet and cultivate relationship with the entire
society, which including their customers, suppliers, and business partners. Employees in
Shiseido Company, they interact with each other, accepting each others differences and
engaging in mutual learning. Next, Shiseido Company appreciate genuine and
meaningful value. Following temporary facts or superficial beauty does not mean
creating values. Creating value means discovering universal values on our won. Once the
value is created, the value can be passed to the next generation and continue improving.
Lastly, Shiseido inspire a life of beauty and culture. Every woman has a basic desire to be
more beautiful. Beauty can encourage woman to be confidence and at the same time it
also give them the enjoyment of the life.

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2.0 Background of Organization

Arinobu Fukuhara, the founder of Shiseido Company, had opened Japans first
Western-style pharmacy in the Ginza district of Tokyo when Shiseido was first founded.
He applied his knowledge learned from western country to a new business model which
previously unseen in Japan and he established Japans first system of separating
pharmacy and clinics. The name Shiseido was come from a passage in the Chinese
Confucian classic Yi Jing. The general meaning is How wonderful is the virtue of the
earth, from which all things are born!

Shiseido Company reoriented itself from pharmaceuticals to cosmetics. It spun off

its cosmetics department as a separate business. The cosmetics shop was opened on the
first floor of a three-story brick building. The others two floors were occupied by
laboratories dedicated to product safety and quality and conducting product improvement
and development, as well as a design department to handle the companys graphic and
other design activities.

In year 1927, Shiseido Co., Ltd. was launched and the chain stores of Shiseido
which handling the cosmetics spread through the country. The company also became a
source of beauty-related knowledge, but also spreading all the information about the
latest lifestyle fashions and options both nationwide and internationally. Shiseido first
took its products to the world beyond Japan on year 1957. It started collaboration with
Taiwan first, then began establishing its business overseas sales companies one after
another.

During year 1977, Shiseido Company hosted the 6 Paris fashion show. The
purpose for this show is to highlight the work of upcoming new French designers. It is
also a way of using fashion to offer new value to the society. Shiseido Company formally
set down its Corporate Ideals during year 1989. They thinking of bringing beauty and
health together in one industry by expanding the business of beautifying consumers
lifestyles based on the approach unifying health and beauty.

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 Year 1997 was marked as the 100th anniversary of Shiseidos product,
Eudermines entry into the cosmetics industry. It is going toward a greater globalization
company. Shiseido Company earned the ISO 14001 certification in year 2000. It was for
all of its overseas and domestic manufacturing plants, an acknowledgement of Shiseidos
ability to carry on the systematic environmental management.

As for the product that manufacture by Shiseido Company, Shiseidos product can
be classified as diversify since they are not only focus on cosmetic products. The brands
or products that owned by Shiseido Company includes toothpaste, authentic cream, soap,
face powder, lipsticks, and etc. Fukuhara Sanitary Toothpaste is the Japans first
toothpaste introduced by Shiseido Company in year 1888. It was designed to eliminate
bad breath and dissolve tartar. Eudermine is another brand which is under the Shiseido
Company. Eudermine was first introduced during year 1897 and stepped into the world
of cosmetics. In year 1997, it was the Eudermine 100th anniversary. It was a symbol of
Shiseido has continuously developed on aesthetic beauty products. Next, Cold Cream is
the first authentic cream introduced by Shiseido to the Japans markets during year 1918.
This cream was added a formula of expensive ingredients to increase its effects on the
skins. In addition, De Luxe can be classified as one of the popular brand under the
Shiseido Company. De Luxe is the representative of Shiseido Company brand of top class
cosmetic products during that time, De Luxe, was borned in year 1932. It consisted of
five products, including vanishing cream, soap, face powder, lipstick and perfume.

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3.0 Situational Analysis

3.1 General Environment Analysis

General environment is referring to the external environment of an organization
and it have categorized into the seven environmental segments which are political/legal,
demographic, economic, sociocultural, technological, global and physical. Firms need
aware of and understand these segments to avoid the problems of uncertainty. We will use
the general environment analysis to analyze the Shiseido Company.

Firstly, we will talk about the political/legal environment of the Shiseido

Company. During World War II, the cosmetics industry in Japan are suffers lack of
workers and lack of resources. In 1990's, Shiseido was barred from acquisition in France
due to the French Government wants to protect their cosmetics industry. China was then
introduced the consumption tax which largely affected premium cosmetics. This is bound
to make these products costlier with little or no effect on the products made for the mass
market. China reduced the tariff barriers had caused all the foreign brands became the
leading cosmetic brand in China. Tiananmen Square protests and anti-Japanese attitude
from china due to their political history.

Next, we will discuss about the demographic environment. The demographic

among the countries are become larger and larger so that Shiseido can significantly
shaped the industry and driven the demand of the products. Shiseido Company produce
the products according to the age group of the population. The Shiseido Company
designed and launched a series of products that target the younger demographic. The new
Ibuki collection includes seven items and targets the young demographic aged between
25-35 years old who wants to maintain the health of their skin. This series of products can
help consumers to keep their young look at the optimal condition. The population of old
people has shown the upward rise in the Japan and there was an increase in the demand
for skin care products especially the anti-aging and anti-cellulite cosmetic products.
Women are more care and important their skin condition so they will buy the different

4
series of the products. Shiseido Company needs to design and develop the products
according to the demographic of population.

Moreover, we will discuss the economic environment. The China overtakes Japan
to become the second largest economy in 2010. Japan's nominal gross domestic product
(GDP) in 2010 was $ 5.4742 trillion which less than China's total of $ 5.8786 trillion.
China is growing rapidly and driving the global economy. By reflecting to the rise of
China, it is now the world's biggest auto market and the largest energy consumer. Experts
said the China could overtake the U.S. as the No.1 economy between 2020 and 2030 if its
current growth rates are keep constant for the next few years. The Japan's economics
minister, Kaoru Yosano, said: "The fact that China's economy is booming is welcome
news for Japan as a neighbour country. We are not engaging in economic activities to vie
for ranking but to enhance people's lives."

Furthermore, the socio cultural environment is about the society's attitudes, belief,
and cultural values. Different country have different attitudes, belief and cultural values.
Strong traditions and culture among the different member countries of the EU have been
cited as the key factor affecting the sales of cosmetics in the region (Euromonitor, 2007).
Nowadays, men are increasing their fashion conscious and important their appearance.
This trends will drive the demand of men cosmetic and men fragrances in cosmetic
industry. Another main trend is changing perception of consumers that increased
awareness and health conscious also will cause in reshaping the industry. The rising
demand of the natural and organic cosmetic products are due to these factors.

The technological environment plays a very important role in the success of a

company. The innovation and quality are the key to
success for an industry such as cosmetic industry. The
Shiseido Company hardly produce cosmetics in country
that have the poor technological advancement. Due to the
poor technological advancement, this will restrict the
quality and the safety of the cosmetics products. Many firms are heavily invested in new
technology that can help them to enhance the efficiency, improve competitive advantage

5
and turnaround times. The customers are now shifting to the multifunctional products and
these products will provide firm with the significant growth opportunities. Therefore, the
Shiseido Company use the multifaceted skin measurement technology more understand
the skin of customer and justify the effect of cosmetics products. Shiseido Company
introduce the latest technologies to measure skin surface forms from micro to macro
levels. The highly accurate skin micro-relief (texture) and pore analysis that analyzed
with the 3D data to know the skin surface forms. Shiseido company also use the special
camera technique for measuring the skin conditions that can capture images of various
skin condition. The Shiseido Company had used the advance technology to understand
the skin surface form and conditions in order to produce the multifunctional cosmetics
products to the customers.

Besides that, we will talk about the global environment of Shiseido Company.
Shiseido Company have the global network in Japan, China, USA and Europe. In the
Japan, Shiseido own the global innovation center, beauty creation center, cell-processing
& expansion center, Kuki factory and Osaka factory. In the China, Shiseido also have the
China innovation center and Liyuan Cosmetics Company. In the USA, Shiseido also have
America innovation center, Davlyn industries and Geneva factory. Whereas, the Europe
have Europe innovation center and Gien factory. The global brand Shiseido is available
located in 89 countries and regions including Japan and China. Manufacturing and
research and development are also operated internationally based on regional
characteristics.

Lastly, the physical environment also had a huge impact on the cosmetics industry
because it is relates to the environmental issues. There has been increase emphasis on
environmentally friendly activities such as recycling the used bottles, renewable fuels and
use of eco materials. Shiseido company aim to achieve the beautiful environment then
promoting the "Shiseido Earth Care Project" which it is an environmental project to all
employees worldwide of Shiseido Company. Since 1992, the Shiseido Company had
introduced the eco policy that is a set of guidelines about hoe environmental
consideration and protection in management decision. Shiseido Company is following the
three principles of conserving biodiversity (i.e., preserving the bounty of Earth), reducing

6
CO2 emissions, and reducing use of resources. The Shiseido Company intent to achieve a
sustainable society through these principles. In 2013, Shiseido Company consolidated
their thinking regarding "fresh water resources" as following presence. They will use the
healthy water circulation and water related culture practices of the local community.

3.2 Industry Condition (Porter's Five Forces Analysis)

The Porter's five forces analysis includes the elements of threat of new entry,
bargaining power of supplier, bargaining power of buyer, threat of substitute product and
rivalry among competitors.

Threat of new entry

There are high threat of new entry in the cosmetics industries. Due to the high threat of
new entry, it has leads to the low barriers to entry. Inversely, if the threat of new entry is
low, it will lead to the high barriers to entry. The barriers to entry is low in the cosmetics
industry due to the cosmetics companies operate monopolistic in nature in the market.
Monopolistic means there will have many cosmetics firms in the market. The barriers to
entry is highly related to the strict regulations regarding safety. The high barriers to entry
means the government are strictly regulated the cosmetics industry. The low barriers to
entry means new firms can easily enter the industry with the weak government regulated.
High differentiation of products are barriers to entry. The high brand visibility enjoyed by
leading operators such as Estee Lauder and Shiseido also pose entry barriers to new
operators. Another barriers to entry is the need for strong research and development
functions. The cosmetics industry need the proprietary product technology to deal with
the shifting consumer perceptions. Investing in research and development need invest
huge amount of amount so this is cost barriers.

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Bargaining power of supplier
The bargaining power of supplier in this industry is low because there is a large number
of suppliers available in the market and large supply of diverse products to the markets.
Besides that, the switching cost is relatively low. The inputs used in cosmetics industry is
well differentiated. The inputs have an impact on both differentiation and costs and there
are also substitute inputs. There are many cosmetics products have developed by both the
large and small scale of manufacturer. The supply is so huge that the consumers can
influence the market prices as opposed to the supplier.

Bargaining power of buyer

In the cosmetics industry, the bargaining power of buyer is high due to the advertisement
by company and well brand identities. The buyer will not stick to one product, as the new
products are introduces they will buy for it. The switching cost of the buyer is low so they
can buy other company's products. Since the products are undifferentiated or
standardized, the buyer have wide choice of the products so there is possible for buyer to
force manufacturer reduce the prices by buying products from their competitors.

Threat of substitute products

The threat of substitute of products is high especially for the mass products in the
cosmetics industry. Due to the low switching cost, the buyer can buy other substitutes
products that are cheaper and more quality. There are still have more products that can
substitutes by the Shiseido products if the products of Shiseido is expensive or low
quality. Keller (2003) said that "In order for market players to tackle the challenges of
threat of substitutes, they have to innovate the products which meets the need of their
target market segment."

Rivalry among competitors

There is high degree of rivalry among competitors and this is due to the high exit barriers
in cosmetics industry. High exit barriers prevent the competitors from leaving the

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industry. There are many competitors that compete with the Shiseido Company such as
Estee Lauder, Avon, Loreal Paris, Revlon and more. The factors that associated the high
degree of rivalry among competitors are high industry growth, low switching cost, and
diversity of competitors. The result of the many firms exist in this industry due to the
high degree of rivalry. So, the cosmetics market is highly concentrated.

3.3 SWOT Analysis

The SWOT analysis are strengths, weaknesses, opportunities and threats of the company.
Every different company have different strengths and weaknesses. So, we are using
SWOT analysis to analyze the Shiseido Company.

Strengths

Shiseido Company has high growth rate because the net sales of products has been
increased. Shiseido have multi-distribution channel such as departmental stores
specialty stores and voluntary chain stores. The Shiseido Company is highly diversified
and has expanded their interest in the pharmaceutical, salon, restaurant and fine
chemicals. This is a source of strength as it gives the company many avenues of revenue
and shields it from downturns in the cosmetics industry (Shiseido, 2005). Shiseido is a
strong brand among the countries. It is well established brand, high quality of products
and have a long history of success. It also strong focus on customer relationship
management and environmental protection.

Weaknesses

Shiseido Company had intensive the research and development, but only 5% of products
are patented. Recently, the Shiseido Company is suffered in declining sales and
profitability.

Opportunities

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 The Chinese market are rapidly expanding that present Shiseido with an opportunity to
increase its market shares. There are one potential opportunities for Shiseido that are
men's cosmetics. Because there are growing demand of the men's cosmetic and skin care
products. The other opportunities for the Shiseido is forming strategic alliances especially
with foreign companies that can lead the way to new market.

Threats

Strong competitors against foreign and local companies is a threat for the Shiseido
Company. This will increasing the competition in existing markets. Shiseido products that
can easy substitute by their competitor's products. The following threats that Shiseido
faced is counterfeit substitutes which do not adequately protect the firm against the patent
infringement.

3.4 Value Chain Analysis

Finance

Human Resource

Support
Functions
Management Information System

Customer
Value

Supply Follow-up
Marketing
Chain Operation Distribution Service
& Sales
Management

Value Chain 10
Activities
 The value chain analysis is a useful tools for the firms to understand its operations
that can create value or do not. There are many advantages of value chain analysis that
will lead company to competitive advantages and high profits level. Another advantage is
company can know and understand their cost position.
Value chain analysis consists of two parts that are support functions and value
chain activities. There are three support function in the Shiseido Company which are
finance, human resource and research and development. The finance department has
responsible in the area of accounting report, cash flow, operating income of the company
and cost of research and development. The human resources management is to manage
labor resources such as wages, employee benefits, safety and health of employees as well
as employment. Another function of human resource department in Shiseido Company is
to develop employees' career track. The employees' career track is to help trained and
support the development of employees' independent career. Shiseido Company had held
the career design seminar starting from 2011 to their employees. The management
information system is about the investment of new system, collection of information and
storage of information.
Whereas the value chain activities have five activities that are supply chain
management, operation, distribution, marketing & sales and follow up service. Supply
chain management will supply the raw materials to process the product. In the operation,
the product will through the environmental production process to become the finished
good. The Shiseido Company will using the minimal energy in the process for shampoo.
Shiseido Company also develop of low energy manufacturing process for skincare
emulsion. In the distribution, Shiseido Company will sharing distribution activities with
other companies and use small volume shipments for retailer as well as wholesaler. The
products will be promoting through marketing strategies such as new web marketing
strategy and new business model to attract new customer. Shiseido Company will have
follow up service such as consumer information center for consumer. The consumer

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information center have the consultant staff to help and answer the consumer's question
about the Shiseido products.

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4.0 Strategic Options for the Organization

As in a competitive market like cosmetics market, a company must able to

produce a product that meet or exceed the customer wants. In order to increase the market
share, a company product development and strategies must be able to target both broad
market and narrow market. Shiseido have to serve a broad market in order to seek their
capabilities to create value for customers on an industry wide basis and maintain the
competiveness of Shiseido. Beside than broad market, Shiseido will also have to serve
narrow market because this able to increase the product and brand benefits for Shiseido
and obtain more competitive advantages.

Cost Leadership

The first selection strategies that Shiseido should select from five generic
business-level strategies is cost leadership strategy. Cost leadership is an integrated set of
actions taken to produce goods with features that are acceptable to customers at the
lowest cost, relative to that of competitors with features that are acceptable to customers.
Even though Shiseido is currently using this strategic in market but cost leadership is still
a highly recommend strategy to be used in order to maintain Shiseido market share and
maintain competiveness with the competitors. Cost leadership strategy able to help
Shiseido maintain their product in a low cost because the product that created in cost
leadership are more to standardized products which with the close function and normally
will produce in huge quantity, this will lower the cost of research and development,
logistics cost, production cost and management cost.

Cost leadership is strategy that frequently use by many international company

because low production cost can helps company to compete with competitor in term of
pricing, increases the profit margin of the company and maintain competiveness in the
market. However, Shiseido should improve their cost saving actions. First, Shiseido
needs to tighten the controlling production costs and overhead, and build an efficient
scale facilities, this is important especially in poor technological advancement countries,
Shiseido will need to control the cost of technology investment in the particular countries,

13
set a facilities that suitable for production and at the same time maintain the quality and
safety of the products. Besides that, Shiseido also need to minimize the cost of sales,
research & development, and services. Shiseido owned a global innovation centre in
Japan, China, USA and Europe which operated internationally based on regional
characteristics, this huge model of research & development required massive amount of
investment. Therefore, Shiseido will have to control and monitor the expenses of research
& development in order to achieved cost saving.

Product Differentiation

The second strategy that is recommended for the Shiseido from the five generic
business-level strategies is differentiation strategy. Differentiation strategy is a set of
actions taken to produce goods with features that are acceptable to customers at the
acceptable cost that customers perceive as being different in ways that are important to
them. Differentiation strategy product are normally are none standardized products yet
the differentiation strategy products are also able to serve broad market. In a competitive
and rapid changes market like cosmetic products, Shiseido needs to seek to be different
from its competitors on as many dimensions as possible and there are few strengths of
Shiseido which can help them in achieving the product differentiation.

The first strength Shiseido have is the responsive customer service. As an

establish company like Shiseido which have multi-distribution channel such as
departmental stores, specialty stores and voluntary chain stores to analysis the
information and feedback from customers, Shiseido are able to understand the perceive
needs of the customer. The second strength Shiseido have is the technological leadership
and rapid product innovations. Shiseido have many research & development centre is
different type of products, this show that Shiseido have the ability to produce a new
product that are able to suit the need of consumer. For example, Shiseido able to
determine the male populations are starting to use cosmetic product and based on the
demographic analysis, female consumer have different needs in different age group and
in different countries. Shiseido are able to design a new product to suit the particular
group with these type of information because Shiseido have the resources and the
technology to do so. Innovation of Shiseido is very important in differentiation strategy

14
because it can increases the customers loyalty and toward Shiseido. If Shiseido are able
to become the first mover of a particular new product, the reputation of Shiseido will be
sustain and gain competitive advantages. Besides that, customer are willing to accept a
slight high price if the new product satisfies their perceived unique needs and reduce the
customer sensitivity to the price increases.

Focus Differentiation

The third strategy that recommend to Shiseido from the five generic business-
level strategies is focus differentiation strategy. Focus differentiation strategy is a set of
integrated set of actions taken to produce goods that serve the needs of a particular
competitive segment. Focus differentiation strategy is different than cost leadership and
differentiation strategy, instead of focusing in broad market focus differentiation strategy
focus in narrow market. With the advance technology and experience of Shiseido in the
market, for example, latest technologies to measure skin surface forms from micro to
macro levels. The highly accurate skin micro-relief (texture) and pore analysis that
analyzed with the 3D data to know the skin surface forms, special camera technique for
measuring the skin conditions that can capture images of various skin condition.

Shiseido is recommend to serve a different market than the mass market, Shiseido
should set up a specialist outlet which will have professional consultant to solve
particular problems from customers using Shiseido product and technology. The problem
may include hair scalp sensitive, hair loss, face sensitive, skin sensitive and etc. These
specialist outlet will specially design the solutions to solve the customers problems. Even
though these ideal specialist outlet serve only few customer, but Shiseido are able to gain
competitive advantages and consumer trust. Focus on the particular consumers are able to
help Shiseido to increase their experience in the problems of the customer and earn
above-average profits.

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5.0 Key Selection Criteria
3 Key Criteria Selection

In every organization, every proposed strategy has their pros and cons
which depends the management to choose the best based on the key
criteria. The three proposed business strategy are cost leadership,
differentiation and focus differentiation. As for Shiseido, the three main
key criteria selection of the proposed business strategy to be judge are
cost, timelines and risk. These key criteria are the factor that need to
be consider by the management in order to make the best decision
and align with their organization path.

Figure 1 Key Criteria Selection of Strategy

Cost

In terms of cost, it is highly related to the budget and financial

condition of the organization. Costing is one of the crucial key criteria
for the company as they need to forecast the availability of resource
and possibility to execute the business strategy. First, cost leadership
strategy estimated require low cost budget. The reason is cost
leadership is a production of goods with acceptable feature to

16
consumer at the lowest cost that enable consumer to buy at low price.
When the goods is at lowest cost, eventually the budget cost list will be
low as well which takes the execution of the strategy possible to be
made. Then, differentiation strategy will require company a high
amount of budget cost. One of the reason is company need to do mass
of research and development in order to survey the market needs and
wants. Besides, innovation and creativity is necessary to differentiate
variety of product to make the brand broaden its target market which
require Shiseido to do heaps of product testing in order to favour the
consumer. Lastly, focus differentiation strategy will require Shiseido a
large amount of cost to implement. Focus differentiation suggested
Shiseido to use advance technology to measure the consumer skin
surface forms which from micro to macro levels. This will secure the
needs and wants of the consumer which enable them to buy the exact
product they needs. Hence, focus differentiation will require a high
amount of cost in order to differentiate their product and enhance their
technology.

Timeline

Timeline is a process of plan that shows dates of different stages when

it should be executed. Timeline is one of the key criteria selection of
the strategy for Shiseido as it determine the operation of the
manufacturing product and the launching of the new product into the
market. As for cost leadership strategy, the timeline require will be
short because Shiseido will only need to low costly produce their
existing product and launch new product that similar with competitor
existing product. Therefore, cost leadership execution will be easier
and time saving for Shiseido to implement. Differentiation has a
moderate timeline as it require to innovate a new product in order to
create variety to serve a broaden target market. Besides,
differentiation of product would require massive of research and

17
development in order to survey broad consumer needs and wants.
Lastly, focus differentiation obligate a longer timeline compare with
cost leadership and differentiation strategy. In focus differentiation
strategy will need Shiseido to consistently customize a product
specifically a particular customer. This will require abundance of time
to solve the customer cosmetic problem and their desire product.
Hence, the production using focus differentiation strategy will take
time to proceed.

Risk

Risk is define as possibility of something unexpected happen that can

cause trouble to the company. Risk of a strategy is crucial as it
depends on the company management to take opportunity whether
they desire to take high risk with a high return or play safe with low
return. In cost leadership, the product launch is similar with the
competitor hence it is acceptable by the consumer and guarantee with
sales. However, the return of the sales is low because there are variety
brands of similar product in the market. Differentiation strategy would
be a moderate risk for Shiseido to implement as mass of research done
on consumer needs and wants therefore the new launch product has
higher percentage preference by consumer. However, trend is always
transform in quick pace whereby it has a moderate risk of launching
the differentiated product. Then, in focus differentiation it has a high
amount of risk as propose Shiseido will customise the product for
consumer special needs however, it will require them to pay a high
amount of price which not many consumer able to afford. Hence, it is
risky to implement the focus differentiation strategy but the return is
undeniable high.

As an overall key criteria summary, cost leadership strategy is

the safest and easy to implement but the return is low and not

18
innovative. Differentiation strategy is moderate and considerable to be
apply but it require high amount of cost. Last but not least, focus
differentiation strategy will take Shiseido to another level in the
cosmetic industry as it customize product under the consumer needs
and wants. However, it takes a very high amount of cost, long timeline
and very risky to be implement but it will bring enormous return to
Shiseido which in other word exile Shiseido in the cosmetic industry
make them the market leader.

Table 1 Summary of the Key Criteria Strategy Selection

Strategy/ Key
Cost Timelines Risk
Criteria
Cost Leadership Low Short Low
Differentiation High Moderate Moderate
Focus
Very High Long Very High
Differentiation

6.0 Recommendations

As we know, Shiseido Company is a multinational cosmetic company which is

well-known in Japan and other Europe countries. However, the brand name of Shiseido
as cosmetic brand in Malaysia is still less popular compare to other brand such as Loreal,
Revlon, Avon, and so on. In other to help Shiseido to expand their business and market
shares in Malaysia cosmetic industry, the first recommendation we suggest to Shiseido is
to strengthen their brand image to the consumers. After strengthen the unique brand
image of Shiseido, Shiseido will need to put some efforts in attracting more new
customers to purchase their products and also retain the existing customers to become the
companys loyal customers. In order to achieve that, Shiseido is recommended to
emphasize on how to use proper 4P marketing strategy to attract new customers and
retain existing customers.

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 Firstly, the brand name of Shiseido is seldom mentioned by the cosmetic
consumers in Malaysia local market due to less popularity of the brand. In order to
strengthen the image of Shiseido among the cosmetic consumers, Shiseido is suggested to
invite local popular artist to be their brand ambassador. The purpose of doing so is to help
Shiseido increase the brand popularity through the local artists and strengthen the healthy
brand image among the consumers. Besides that, it is also suggested to have a motto or
slogan when Shiseido is advertising their brands through the brand ambassadors. For
example, Your skin, our care, or Your beauty, our honour and etc. The use of the
slogan is to strengthen that Shiseido is a cosmetic brand which not only concern about
making profits and gaining more market shares, but the company is also care about the
consumers well-being by providing good quality and high standard products.

Next, after Shiseido is successfully building strong and healthy brand image
among the consumers, Shiseido will need to take some actions to increase their sales by
attracting more new or potential customers to purchase their products and also retaining
the existing customers and turn them into the companys loyal customers. In order to do
so, Shiseido is advises to use promotion to attract attention of both potential and existing
customers. It is because promotion is the most effective tools to attract the sight of
consumers. For example, Shiseido can held a promotion such as buy one free one for
limited customers; or held a lucky draw for the customers who spend specific amount on
purchasing the products of Shiseido; or even can held an event to invite the potential
customers to try the products of Shiseido before they purchase it. By doing so, it can
easily attract more customers to purchase from Shiseido and increase the popularity of
the brand.

In conclusion, actions is needed to take by Shiseido if they want to gain more

market share in Malaysia and become more well-known by local cosmetic users. Shiseido
needs to gain more market share in local cosmetics market before they want to challenge
the market position of other competitors such as Revlon, Avon, and etc.

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7.0 Conclusion

Shiseido Company is one of the global leading cosmetic organizations which had
millions of revenue every year from the cosmetic products they sold. There are several
reasons that leaded Shiseido to head towards success. Besides that, the general
environment analysis, Porters Five Forces Model, SWOT analysis, and Value Chain
Analysis that we had done at the beginning of the report also helps the consumers and
also Shiseido Company itself to know better about their current performance.

In the General Environment Analysis, the analysis based on the seven general
environment of Shiseido Company is being done. The seven general environment had
included political environment, technological environment, economical environment,
legal environment, sociocultural environment, demographic environment, and global
environment. Besides that, the Porters Five Forces Model of Shiseido is also being
discuss in the front part of the report. The five forces included bargaining power of
buyers, bargaining power of suppliers, threat of new entrants, degree of rivalry, and also
threat of substitute products. In SWOT analysis, the strength and weakness of Shiseido is
being listed out and the potential opportunities and threats that might face by Shiseido
were also being discussed.

Next, the 3 strategic options for Shiseido has included cost leadership, product
differentiation, and focus differentiation. After suggested the 3 strategic options that is
available for Shiseido, the key criteria of strategic selection is then discussed based on the
strategic options given early. The three keys criteria included time, risk, and cost. On the
other hand, recommendations has been suggested to Shiseido in order to help to improve
their performance. The first suggestion given to Shiseido is to strengthen their brand
image and brand name among the consumers through inviting local artists to become the
brand ambassadors. After strengthen the unique brand image of Shiseido, Shiseido will
need to put some efforts in attracting more new customers to purchase their products and
also retain the existing customers to become the companys loyal customers.

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8.0 Reference

1. Global Network of Shiseido Group. Retrieved from

http://www.shiseidogroup.com/rd/network.html

2. China overtakes Japan to be the second largest economy. (14 February 2011).
Retrieved from http://www.hurriyetdailynews.com/default.aspx?pageid=438&n=china-
overtakes-japan-to-be-the-second-largest-economy-2011-02-14

3. Shiseido moves in on younger market. (25 June 2013). Retrieved from

http://www.cosmeticsbusiness.com/news/article_page/Shiseido_moves_in_on_younger_
market/89404

4. Shiseido's strategies. (2014). Retrieved from

https://www.shiseidogroup.com/ir/library/annual/pdf/2014/anu_sec04.pdf

5. Shiseido strategies SWOT analysis. Retrieved from

http://www.swotanalysis24.com/swot-s/97969-swot-analysis-shiseido.html

6. Shiseido Marks Fiscal Year End with 12.4% Increase in Net Sales. (25 April 2014).
Retrieved from http://www.gcimagazine.com/business/marketers/financials/Shiseido-
Marks-Fiscal-Year-End-with-124-Increase-in-Net-Sales-256736931.html

7. Shiseido annual report 2013. Retrieved from

https://www.shiseidogroup.com/ir/library/annual/pdf/2013/anu00001.pdf

8. Cosmetics industry Porters Five forces analysis. Retrieved from

http://www.ukessays.com/essays/marketing/cosmetic-industry-porters-five-forces-
analysis-marketing-essay.php

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