Kao Case

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Industry Analysis

• 46 billion yen in 184.

• Expectation of 00 billion yen within 10 years.

• Two local and one international player in the market.

• Pampers (P&G) was the monopolist between 177 and 180.

• Kao entered in 180 and Uni-Charm entered in 181.

• Negative consumer behavior towards diapers.

• Low penetration and excess capacity.

• Consumer preferences changing rapidly.

• Few market penetration but high expectation.

• Cultural and social entry barriers.

Buying Behavior of Japanese Consumers

People are living mostly in rural areas and in small houses. Mothers are housewives. Cultural and psychological factors negatively affect mothers buying decision of disposable diapers and impede market penetration. Mothers tend to use the cloth diapers that were hand sewn and had worn previously helped cement the bond between themselves and their children. They want to spend as much time as possible with doing something about their children. That's way they feel guilty about using disposable diapers because they reduce their work load. Limited use of disposable diapers as possible is preferred. Besides they believe that the child has to feel some discomfort to be able to complete its mental development.

Many generations of the same family live together. Mothers-in-law have great affect on raising their grandchildren. They are more conservative.

Fathers do not have much idea about raising children and they do not support disposable diaper usage. The people are mostly believers who are conservative, conventional and traditional and strivers who are uncertain, insecure, approval seeking and resource constrained. Mothers who are mostly housewife watch TV an average of 5 hours a day.

Competition

Kao Company

Strengths

• Product development focused

• Globalization and overseas operation aimed

• Strong brand image on Japan market

• Strong IMS system

• High sales per employee

• High inventory turnover ratio

• Early computerization

• Less hierarchical management structure

• Efficient distribution system through Hanshas. This provides dealing with a relatively small number of people and creating a win-win type of relationship between them. By this way Kao can create a sustainable growth and long term agreements.

• Vertically integrated system provides flexibility.

Weaknesses

• Lack of global experience

• Marketing executives are mostly Japanese men who haven't got enough information on children rearing.

• Limited market research and product quality tests. For this reason they couldn't understand that Merries are less absorbent than the other two brands till P&G launches the new Pampers.

Uni-Charm

• Has the highest market share in Japan.

• Brand discrimination with inferior and superior products

• Good packaging

• Distributes through supermarkets that have enough space to store sufficient amounts of diapers.

P&G

• International company with strong financial possibilities.

• Confident and aggressive player

• Huge advertising budget

• Introduced its first disposable diaper in Japan in 177. This Pampers are not suitable for small Japanese children and they leaked. Besides they used large cardboard box packaging which are often destroyed in small shelves had a bad product image. P&G also had distribution problems. Relatively small field sales force was unable to call frequently on the wholesalers or on the 5.000 largest retailers. Because of all these reasons P&G couldn't has the market share as it is expected.

• Innovative

Key Issues for Kao Corporation

How to…

• Defend market share in the short term?

• Sustain compatibility in the long term?

• Launch new and strong product?

• Increase penetration?

• Be a global market player?

From 177 to 180, Pampers was the only nationally marketed disposable diaper in Japan and had a very high market share with %0. However after the local players entered the market P&G's market share eventually dropped to %8 in three years. The disposable diaper industry is a growing market in Japan. Japanese consumers are late adopters but when they adopt they have a high sense of quality. That's why Kao has to care very much about quality while serving it with a reasonable price.

Strategy Alternatives

• Heavy advertisement campaign to affect mothers-in-law and husbands.

• Low priced version of Merries in the short term while developing an improved product for the long run.

• Different package size alternatives to cover different needs.

• Regular customer satisfaction surveys to ensure customers' wholehearted satisfaction.

• Effective marketing research on the newly launched product

• Investing for a joint venture to be a global player

• Recruiting more creative marketing managers. These can be chosen among the Japanese women to provide better understanding.

• A new promotion activity should be held with the new product. This activity can be distributing promotional sample boxes of 5-6 diapers each.

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