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CASE STUDY REPORT INTERNATIONAL MARKETING

SHISEIDO

Shiseido is a Japanese cosmetics producer, market leader in its home country and one of the
top ten players in the industry worldwide. Founded 1872 by Arinobu Fukuhara , Shiseido is
also known for being the oldest cosmetics company in the world.

COMPANY FACTS

Net sales (consolidated): $ 7,024 billion Number of employees: 28,810 SHISEIDO group: 89
companies 29 domestic 57 overseas

STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS

Apart from being market leader in Japan, Shiseido is putting a lot of effort into research and
development. Other important points are the strong focus on customer relationship
management and environmental protection. But even though R&D is a cornerstone of
Shiseido¶s corporate philosophy, only 5% of the invented products are patented. This makes
the company very vulnerable to competition. Another negative point is the limited other
number of points of sale, thus making it hard to reach , customers. But there are also
opportunities for Shiseido in the future. First of all, introducing the men¶s cosmetics line
opened the door to a new market with high potential. Second, forming strategic alliances,
especially with foreign companies, can also lead the way to new markets (the same happened
in the past when Shiseido formed alliances with Johnson & Johnson or Coca Cola Cola).
Searching for new market chances is important because of various threats like for example
the increasing competition in existing markets or the shift in consumer needs away from
complex, high-class products, to class cheaper self-selection products.

3 affiliated companies

SALES (%)

15,9 Japan 14,5 62,3 Americas Europe 7,3 Asia/Pacific

MEN ± A POTENTIAL TARGET GROUP?

In the last years the attitude of men towards their physical appearance and cosmetic products
has highly changed: Nowadays, men are more aware of their appearance and are therefore
willing to spend money on products that in the past were reserved for women (e.g. face
scrubs, eye creams or hair styling products). Proof for that are the rise of a grooming culture,
metrosexualism and a 17% growth in skin care and cosmetics sales for men.

# 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

MARKET SHARE WORLDWIDE COMPANY Procter & Gamble L¶Oréal Unilever

Colgate-Palmolive Colgate Avon Products Esteé Lauder Cosmetics Beiersdorf Johnson &
Johnson Shiseido Kao
CASE STUDY REPORT INTERNATIONAL MARKETING

Possible men¶s products range from moisturizers, manicure- and spa-treatments to shaving
foams and after-shave. Even though men feel more comfortable about using cosmetic
products nowadays, they have to be marketed different from the women¶s products: As an
example should POS be separated for men and women. Especially in Japan, where the
masculinity-factor of the culture is very high, men would feel uncomfortable to shop for
cosmetics in a ³shop for women´. Another example is the difference in need of explanation.
Where women normally know a lot about cosmetic products, men are often not aware of how
to use them and therefore need more service and instruction. The right way of communication
would be the use of testimonials, like in Japan, where one of Tokyo¶s most popular young
actors, Satoshi Tsumabuki, was chosen to appear in TV commercials.

Second of all are cosmetic products very age-dependent. Therefore it seems logical to use
that approach. However, there are also disadvantages: Other important factors may vary
within the age groups. Just because two people having the same age doesn¶t have to result in
the same behavior. Educational or geographical differences (e.g. city / countryside) can mess
up the age-defined target groups. Also the needs may differ within the age-groups. For
example contains the age-group IV all customers aged 35 to 54. But a 35 year old woman or
men most likely has different needs in cosmetics than a 54 year old. These disadvantages of
Shiseido¶s present way of market segmentation suggest adjusting the used method.

FACING GLOBAL COMPETITION

With a successful product and brand strategy Shiseido is already well positioned against
global competition. With a diversified product portfolio and high as well as lower priced
brands, the company can target their customers very specifically. Also the established system
of beauty counseling has proven itself as a competitive advantage and should therefore be
expanded (e.g. by providing exclusive services such as beauty seminars). Furthermore should
the network of strategic alliances be expanded. In the highly saturated market of cosmetics,
alliances with companies outside of the industry (as already happened in the past with e.g.
Coca Cola) could turn out to be very valuable. Such alliances could provide Shiseido with
opportunities to enter new markets or to develop new products for niche markets. However,
there are issues that need to be improved: Product development is still very centralized in
Japan. To face cultural differences better, product development needs to become more
decentralized. A major flaw of Shiseido¶s strategy is that still only a very small number of
developed products are patented. This amount should be expanded to protect valuable new
products from competition.

DISTRIBUTION NETWORK ANALYSIS

Shiseido¶s traditional distribution way is selling in chain stores exclusively selling Shiseido
products. Other possible ways of distribution could be department stores and supermarkets.
But both of these channels have disadvantages: Supermarkets are no alternative, since
Shiseido¶s strategy focuses on high-class products and therefore high prices. Selling such
products in supermarkets could ruin the product image. On the other hand would the
expensive products hardly fit into a supermarket¶s product-mix. Department stores however
could be an alternative, but only if they fit the exclusive image of Shiseido. Here it would an
option to use a shop-in-shop concept in prestigious department stores.
TARGET GROUP CLASSIFICATION BY AGE ± ADVANTAGE OR DISADVANTAGE?

There are two major advantages for using an age-based segmentation: Using socio-
demographic criteria (such as age) for market segmentation is a highly effective and easy way
to define target groups.