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Rebuilding in Double Time

By: Karen A. Newman
Posted: September 5, 2008
Shinzo Maeda

Shiseido President Shinzo Maeda

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Shiseido began exporting products to China in 1981, and the business has expanded rapidly. Sales growth exceeded 30% for the fiscal year ended March 2006. However, the retail environment has been changing significantly as major global competitors strengthen their operations in China, according to Maeda. “In order to thoroughly enhance Shiseido’s presence in the current Chinese market and achieve further growth in this challenging situation, we must promote a clear, forward-looking brand- and sales channel-specific strategy,” said Maeda. “We will work this in the current fiscal year ending March 2007 by launching products and promotions that meet customer needs in each sales channel.”

In department stores, Shiseido plan’s to further raise the value of the Aupres brand, which has become the top seller in Chinese department stores that carry it, by introducing a line with higher value than the existing selection and ramping-up in-store promotions. Aupres was developed to meet the specific needs of Chinese women, and is still sold exclusively in China. Looking beyond China, Shiseido is not alone in working to develop the next frontiers for the industry. It has sold products in Russia through a distributor since 1999, and is seeing steady growth there. Shiseido has been in India since 2001, also through a distributor, and reports small but steady sales growth.

Spreading Resolve

To address the plan’s third strategy, Maeda promoted cost structure reforms to improve profitability. He was able to regain profitability in the toiletries business by concentrating management resources and efficiently deploying expenses in the three cleansing areas: shampoo/conditioners, body soap and facial cleansers.

The current fiscal year ending March 31, 2007, is the second year of the three-year plan, and results this year are critical to the plan’s success. Securing the growth levels of the last fiscal year will require acceleration of reforms and the steady implementation of action plans, said Maeda, and priorities include reforming domestic marketing activities, accelerating expansion of the China business and aggressive expansion into growth markets. “We will also take our fundamental restructuring initiatives one step further through measures such as withdrawing from underperforming business and brands and lines and drastically reducing fixed costs,” he said. A little more than one year into the three-year plan, Maeda is hitting the numbers, and other ideas are catching on. “My resolve to break down and rebuild the company structure, if necessary, has spread,” said Maeda.