P&G Japan: The SK-II Globalization Project
When looking at the archetype of P&G it can be seen that it is an Multi Centred MNE. Which consists of a set of entrepreneurial subsidiaries abroad which are key to knowledge-based FSA development. National responsiveness is the foundation of the international strategy. The non-location bound FSAs that hold these firms together are minimal: common financial governance and the identity and specific business interest of the founders or main owners.
Later on a transformation can be seen. P&G tends to be a combination of a Multi Centred MNE with an international projector. This because an international projector is built upon a tradition of transferring its proprietary knowledge
development in the home country to foreign subsidiaries, which are essentially clones of the home operations. Knowledge based
FSA’s developed in the home country are transferred to subsidiaries in host countries (via projection). Walter Lingle said: we must tailer our products to meet consumer demand in each nation. But we must create local country subsidiaries whose structure, policies and practices are as exact a replica of the US Procter & Gamble organization as it is possible to create. This lead to 2 problems: * The cost of running all the local product development labs and manufacturing plants was limiting profits. * The ferocious autonomy of national subsidiaries was preventing the global rollout of new products and technology improvements.
When relating this to the theory, Walter Kuemmerle has shown that many MNE’s are changing their strategic approach to R&D. in particular international projectors are decentralizing their R&D. In this case of P&G it can also be seen that the R&D departments are located in the individual locations to adapt more to the specific needs of the region, and to act faster. So instead of keeping all their R&D activities in their home country, they are building international networks in which foreign R&D laboratories fulfil specific roles within the firm.
Two variables for determining the impact of regional integration on subsidiary role dynamics: 1. Extent of regional unification
(refers to the overlap among the markets served by national subsidiaries) 2. Commodification of upstream/downstream subsidiary competencies
(reflects the extent to which subsidiaries have similar strengths).
The success of Japan can be seen due to the recognition of the distinctive needs and habits of the very demanding Japanese consumer. Such as the taste of the customers, this because they are very loyal and are willing to spend much on their appearance/skincare. Furthermore adaptation to the Japanese distribution system. (after realizing that its 3000 wholesalers were providing little promotional support for its products, the company resorted to aggressive discounting that triggered several years of distributor disengagement and competitive price wars).
The most dramatic change to P&G’s structure, processes, and culture in the company’s history. It would bring 13% to 15% annual earnings growth and would result in $900mln in annual savings starting in 2004. Implementation would be painful, in the first five years, it called for the closing of 10 plants and the loss of 15.000 jobs, 13% of the worldwide workforce. The cost was estimated at 1.9 billion. Jager concluded that P&G’s sluggish 2% annual volume growth and its loss of global market share was due to a culture he saw as slow, conformist, and risk averse. Too much time was wasted on non-value-added work. Stretch, innovation and speed. To signal the importance of risk taking and speed, jager gave a green light to the leadership Innovation team to implement a global rollout of two radically new products: Dryel, a home dry-cleaning kit; and Swiffer, an electrostatically charged dust mop. He reinforced this culture for risk taking by major changes to...
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