#79 Foreign Cosmetics in Japan
A while ago, a student of mine (yes, I’m also a professor at a business school), has written an interesting term paper. The general topic was – of course – failure in international business, and the student who was working for a US-based mid-sized cosmetics company decided to focus on cosmetics in Japan. The outcome was not surprising, but still highly interesting. Highlighting three foreign companies’ (Avon, Mary Kay, Boots) failed attempts at entry into the Japanese market, there seemed to be recurring patterns. Avon’s Japanese adventure started as early as 1969. For a number of years, Avon struggled as it failed to understand the Japanese consumers – the product portfolio was too Western, the low price strategy didn’t appeal to the market, and Avon’s distribution strategy that relied on the ‘Avon Lady’ was a complete cultural mismatch. Avon eventually worked out all the kinks, but in 2010 decided to exit the Japanese market by selling its business to a TPG, a private equity firm, as there were questions about future competitiveness. In one interview, the head of Avon’s Japanese operations, Terrence Moorehead, also characterized decision-making behavior in Japan as rather cumbersome. Mary Kay entered Japan in 1994 only to pull out again seven years later. Products had to be reformulated due to legal and cultural restrictions, but more importantly for Mary Kay, the entire company’s mission didn’t align well with the Japanese environment. Boots Cosmetics is of course a bit different from Avon and Mary Kay as it is a chain of drugstores and not just a cosmetics manufacturer. Having said that, 40 % of their revenue comes from the sale of cosmetics, mostly their own brands. In all fairness, Boots tried to be intelligent about bridging the huge differences that set Japan apart from other markets where they had been successful before. However, their choice of a joint venture partner – Mitsubishi – may have been less than ideal. Mitsubishi had access to capital and was well respected in Japan, but didn’t have experience in the drug store retail or in the cosmetics business. Mitsubishi’s might may also have lured Boot into a type of entry that was ‘too much, too fast’. Japan is often considered one of the most advanced markets in Japan – a fact that often lets foreign companies underestimate the difficulties associated with it.
November 2, 2011 @ 8:25 pm
It is very important when companies decide to go into a different country that they understand the magnitude into which they are entering into. For many companies they see the population as a whole and do not consider that they have to reach to different target markets. Businesses need to address that they plan on diving into a different culture which often pertains to a different way of life (values, norms, attitude, beliefs, etc.) as well as what they consider important to other cultures. These different types of cultural differences could really affect organizations and the ability to enter into a foreign market. One point is that individualism characterizes the Western cultures whereas collectivism characterizes Japanese cultures.
It is shown that, “Avon struggled as it failed to understand the Japanese consumers- the product portfolio was too Western, the low price strategy didn’t appeal to the market, and Avon’s distribution strategy that relied on the “Avon Lady” was a complete cultural mismatch,” (blog). This Western strategy was not a fit for the Japanese culture and consumers. In Japan it takes a lot longer to make decisions and it cannot take place over night whereas Western cultures want decisions right away which could affect an overall business decision. This expresses a true clash of high-context culture (Japan) with low-context culture (United States).
For Boots, they formed a joint-venture with Mitsubishi- but what big mistake that took place is that Mitsubishi had no previous experience in the drugstore industry which one decision could alter the consumer’s taste and affect business overall. They had a bright idea of going into business with another company but if the company doesn’t understand that specific market than it could fail fast.
This situation is kind of like the case study I studied in my class, “Wal-Mart’s German Misadventure,” by Subhadra K, under the direction of Dutta S, ICMR Center for Management Research (ICMR). Wal-Mart entered into this foreign market thinking that “their way, one way” was going to be the best way to do business, the Ten-Foot Rule would apply to all customers and employees, or even the low-wage workers would satisfy everyone. These were problems that Wal-Mart did not bother to look at considering they are entering a different culture and way of doing business.
Yes, Japan is a big market and foreign companies do underestimate the difficulties with entering that market. They should really do their homework and analyze the similarities and differences of the two cultures. They should point out what they plan to do, who they plan to attract, and what their goals are. These three companies, Avon, Mary Kay, and Boots should have taking Hofstede’s cultural framework and really detailed the two cultures because they would find that Japanese characterized by collectivism, high power distance, high uncertainty avoidance, high-context culture whereas Western cultures favor individualism, low power distance, low uncertainty avoidance, low-context culture, etc. Just like the Wal-Mart case, foreign cosmetics in another country could fail if the company doesn’t plan to do their research and modify their business strategy towards that specific culture and not “one way.” Communication amongst the cultures could be start and planning building that relationship, “Guanxi” prior to failing.
November 12, 2011 @ 10:09 pm
This situation is a classic case of what not to do when entering a foreign market. A company cannot go into an international market thinking that the way they do business will work in the new market or that their way of doing business is the only way. They must do their homework prior to entering the market to ensure they understand its culture, beliefs, values, etc. It does not appear that Avon, Mary Kay and Boots did enough homework to clearly understand the Japanese market. For example, in Avon’s case, the company could have taken a look at Hofstede’s cultural dimensions to understand the differences between Avon’s western culture and the Japanese culture. The company would have discovered that Japan is quite opposite to the United States on every dimension.
For example, the United States tends to be more of an individualistic society in relation to people’s orientation to other people. We tend to be very hierarchical with individuals making the decisions. In Japan, the culture is known to be a collectivism culture that puts a strong emphasis on loyalty and respect for members of the group. Further, the United States tends to have a low power distance, while Japan is a high power distance country. Japan’s high power distance indicates that its people accept an unequal distribution of power and that the people understand and accept their place in the system. This is very different from the United States where power is shared and well dispersed throughout organizations. One other dimension that clearly had an impact on Avon’s success was the dimension around Long-Term Orientation. Japan tends to be a culture that values long-standing traditions, while the United States is traditional looking forward. Avon’s desire to break into the market with a Western approach would have clashed greatly with the long-term orientation of Japan. If any of these companies took time to understand and leverage the differences between countries, the outcomes could have been much different.
November 21, 2011 @ 8:17 am
Before entering into foreign market, companies need to research and understand the target customers and their culture and environment and strategically plan their course of actions in order to be successful in the foreign market . In this example, these companies did not succeed in Japan because they did not understand the differences between the Japanese culture and the Western culture; therefore, their strategies did not align with the Japanese cultures and the people way of thinking. These companies failed to understand that their way of doing business will not work in Japan. For example, Avon’s executive complained that “decision-making behavior in Japan as rather cumbersome”, this is because Japan is a collectivistic culture where decisions are made as a group so the decision making process will take longer compared to the US because we are a very individualistic society where one person makes the decision. It is also important to point out the Japanese do not like uncertainty whereas the US is very low in uncertainty avoidance. Japanese customers like certainty and want to purchase brand names products because they know what to expect. It is important for companies that wish to succeed in Japanese market to have good name recognition. This is Avon’s mistake when it still relies on “Avon Lady” to do its selling and distribution because there is no evidence of prestige or product reputation to convince the Japanese customers to buy their products. Not to mention Japan is a culture with very high masculinity; customers are spenders and they like luxury goods that are expensive and innovative so they do not want Avon’s low price products because to them these products would be inferior.
December 28, 2011 @ 3:19 pm
In my opinion the last sentence of the blog post sums up the problems foreign countries have with the Japanese market pretty good. Most companies seem to think that the fact that the Japanese market is very advanced equals that the needs of Japanese customers are the same as the needs of European or US customers.
If these companies would have done their “homework”, as the other commentators call it, they would have realized that although the Japanese market may seem very western there are still huge differences in some industries due to culture. I think especially the field of cosmetics is very demanding in every market, as cosmetic products tend to be high-involvement products and decision making tends to be influenced by a lot of factors, one of them being culture. Therefore I totally agree with the other commentators that research should be done before entering the Japanese market. One possibility would be to compare the Hofstede factors of the home country and the Japanese market.
Selling perfumes in Japan for example can be very different to selling perfumes in other markets. One very important reason might be the fact that a lot of Japanese people live in big cities like Tokyo where space is very scarce and where people live together on very small room. Wearing a strong and heavy perfume would be considered as impolite as it would “disturb” other people, which are kind of forced to stand close to one another e.g. in the underground. Additionally the history of perfumes should not be forgotten: In the past it only women working in bars were wearing perfumes. Although this might have changed in the last few decades, such traditions should be considered when introducing perfumy products and cosmetic products overall to the Japanese market.
December 31, 2011 @ 10:57 am
This example clearly points out that although Japan is a very modern country regarding the technical standard big cities, the behavior and attitudes of its inhabitants is completely different than it is in Western countries.
All companies mentioned in this blog post made some fundamental mistakes. They did not analyze the needs and requirements of the Japanese culture and therefore, they did not recognize that Japan is much higher on collectivism and uncertainty avoidance than Western countries are. Avon for example, ran a very low price strategy, because they might thought that low prices will attract people all around the world. But in Japan, there is a high percentage of uncertainty avoidance. As a result, many people in Japan are searching for high quality products and as high prices are often an indicator for good quality, I think competitive pricing cannot attract most people in Japan.
Moreover, I really liked Thomas’ statement regarding perfumes. In Japan people behave very collectivistic and do not want to bother those around them. Therefore, some cosmetic products will not work in Japan. Perfume is something very individualistic, in Japan people probably don’t want to get others’ attention by using a specific fragrance. And also regarding other cosmetic products such as bright red lipsticks and colored nail polishes I think this collectivistic behavior could be a barrier. People in collectivistic cultures don’t want to be different than those around them. So, the Western cosmetic product strategies including a huge range of variations in every category will not work in Japan. I think the only way Western companies could be successful in the Japanese market is to adapt their whole product strategy to the Japanese cultural requirements. They should launch high quality products with a neutral smell and discreet colors and they should focus on a natural look. Moreover, they should communicate that the products will not harm the skin, because Japanese people focus on the safety aspect.
December 1, 2012 @ 7:30 pm
For entering a new market companies need to be well informed about power distance, individualism, masculinity and uncertainty avoidance in the country they want to enter. These four points give main information about cultural aspects in the country and help to understand peoples´ behavior and customers buying decisions.
Firstly, the power distance shows the hierarchical situation in a country. As the power distance between Japan and US is not so different, this was not the problem of the US-cosmetic company.
The second important point is the individualism. This is the degree of interdependence a society maintains among its members. Japan is very collectivistic country, US is much more individualistic. In collectivistic countries the group has a major influence on the purchase decision – the group decides what good products are and sets the norm for its members. This means that opinion leaders must be convinced about a new product, to pass on their meaning about the products, so other members of the group will also buy it. It might not be possible just to put a new product on the Japanese market, companies should first try to persuade opinion leaders and important people within the different groups which then will convince others to buy the product. This point must also be considered when making advertise campaigns in Japan.
The third point influencing the buying decision is the high masculine culture in Japan. They want to show their success in spending lots of money in expensive, prestige products. They don´t care much about the functionality of the product, as long as it transfers access and achievement. So another problem could be, that the US company´s brand is not that famous and does not present success. The cosmetic products should present expensiveness and prestige. So if there is a completely new product introduced in the Japanese market, even if the product is sold for a high price, no-one would by it, because of the unknown brand it does not really transfer access.
Another important point is the uncertainty avoidance in Japan. Japan is one of the most uncertainty avoiding countries on earth. They prepare themselves for any uncertain situation. Their life is highly ritualized, so it is very difficult to make them buying a „strange“ product, which brand they don´t know exactly. Neither they are very experimental. New products show a high risk for them, because they have no experience with it, so they prefer to stick to an old, well established product. They are loyal to their brands.
In conclusion, all points mentioned before, had a great impact on the failure of the US cosmetic company in the Japanese market.
January 6, 2013 @ 5:06 pm
When entering foreign markets, companies should have a close look on cultural and domestic behaviours. My conclusion of this blog post is a missing market research of the mentioned companies Avon, Mary Kay and Boots. The too western product portfolio, the low price strategy and the false distribution strategy which were a complete cultural mismatch, are clear indices on too less analysis on the consumers wants and needs.
In order to analyse this post in a more deeper way I will comply with the dimensions of Hofstede. These dimensions are set up by Power Distance, Masculinity, Individualism and Uncertainty Avoidance.
Despite the fact that power distance difference between the USA and Japan regarding is just 14 it can be stated that this is not the main reason why these companies failed by launching their cosmetics on the japanese market. Power Distance describes on which extent the less powerful members of insitutions and organisations within a country expect and accept that power is distrubuted unequally.
Furthermore the gap between the USA and Japan regarding the dimension masculinity is big. This could be easily explained with the brand Louis Vuitton. LV’s main market is Japan, although all people there are not rich, but they still want to afford this bags because its a very masculine country. This means, that goods which are very luxury and increase the reputation of a person are accpected and will in further consequence be bought by the consumers. To come back to this blog post, the low price strategy could have irritated and prevented the japanese people to buy them. In order to overcome such problems with masculinity opinion leaders, press releases or fairs could be used.
The third dimension is individualism. In my opinion, the biggest reason why these companies failed is grounded here, because of the huge difference of the USA and Japan. In collectivistic countries like Japan trends are more or less decided by the group. This means that products with its companies fail which are not aligned on the foreign market – like the 3 companies did. Also here could opinion leaders, press releases or fairs could be used to overcome these problems.
The last dimension is uncertainty avoidance which is very high in Japan. On the other hand the UA is ranked in the middle in the USA. Regarding these company failures this means, that the customers in Japan stick to the products they are used to, innovations or other products are not welcome.
In order to launch a product successfully in foreign countries all these dimensions should be considered closely and in further consequence methods or activities should be settled to overcome the obvious cultural problems.
March 4, 2013 @ 5:53 pm
The sheer size of the Japanese market has a powerful attraction for foreign investors, but the peculiarities of the Japanese society make it very hard to become permanently successful on the island nation. On looking at the 4P’s of marketing or by conducting a PEST-analysis it becomes immediately clear that societal factors pose the biggest challenges for a company’s market entry, particularly for western companies catering to the needs of consumers. Very often the failure on the Japanese market surprises large, international corporations that enjoy success elsewhere.
It seems that these companies underestimate the role of cultural issues, which heavily influence local tastes, habits and behaviors. Although Japan is a highly developed nation that shows many economic similarities with western nations, there is also no doubt that the gap between western and the Japanese cultures is enormous as a look on Geert Hofstede’s cultural dimensions illustrates. Western companies are primarily driven by the stock markets to meet the expectations of financial analysts, which results in very short-term thinking and actions. Japanese people on the other hand prefer to take a long-term approach and the associated behavior tends to clash with the impatience of western executives as illustrated by the Avon example. Decision-making in Japan takes considerable time due to the involvement of every hierarchical layer and this cultural trait often causes westerners to despair.
Apart from managerial differences there is a significantly different consumer behavior to consider. It’s no big surprise that Avon’s multi-level marketing strategy doesn’t work in Japan. Western people are long used to this type of direct selling and many at some time have attended a Tupperware party. Japanese cities are crowded and have high costs of living, so people can afford small flats only. While the Japanese culture emphasizes politeness for the society to function, Japanese people are very private and strangers aren’t normally invited into a flat. Avon’s system thus had to fail under these circumstances, even with Japanese women acting as sales agents. Avon presumably could have done much better by deviating from its customary sales mode and adapting it to ensure higher compatibility with local customs. Better still if they had formed a partnership with a Japanese company that would’ve been not only able to deal with cultural issues, but which also sported a good image. It’s hard for western companies to adjust the marketing mix to appeal to Japanese preferences, so finding a local partner might not be a bad idea after all. Boots recognized the danger of the cultural gap and thus decided to team up with the local partner Mitsubishi, but obviously neglected to focus on business issues. Mitsubishi might have been respected in Japan, but it didn’t have the right kind of experience to dabble in the cosmetics business. Avon, Mary Kay and Boots faced serious trouble on entering the Japanese markets and this doesn’t even take the presence of strong and well-entrenched local competitors such as Shiseido into account. It’s hard to compete with competitors on their home turf, especially when they are highly successful.
Western companies experienced similar problems in other Asian countries such as South Korea, where Wal-Mart was forced to withdraw due to a lack of success. Wal-Mart basically made the same mistake as Avon or Mary Kay by trying to transplant their successful business model into a completely different environment. The Wal-Mart example shows that it is the sum of small details that eventually keeps customers away from the stores. South Koreans aren’t particularly price sensitive nor do they like to buy large quantities of goods, so Wal-Mart’s primary business model didn’t help here. Instead the consumers preferred to have a real shopping experience in comfortably furnished stores with outstanding customer service and Wal-Mart missed to realize this. The problems all of these companies have on entering a market in a foreign culture once again demonstrate the validity of the proverb attributed to Peter Drucker: “Culture eats strategy for breakfast”.
November 12, 2013 @ 3:47 pm
Hi there,
I know that this is an older post, but in my opinion the results of this study are a good example to demonstrate how important it is then and now, to consider cultural differences or constraints when entering new (foreign) markets. Although the post is nearly 2 years old, the topic of “cultural differences“ is still very important for the company’s success in global markets and emphasizes the importance of beeing “as global (standardized) as possible and local (customized) as necessary“ considering different cultural values.
Nowadays the first step of companies that are planning to initiate business activities in foreign markets, is to carry out specific market research about the “new“ market. But in my opinion in connection with this first step appears the first failure – because a lot of the companies just focus the wrong objects and as a consequense implement an unsuccessful marketing strategy – such as Avon or Mary Kay. They just try to find out specific information about their key competitors, governmental regulations, local infrastructure and customer needs etc. But one of the most important things to be considered is the cultural aspect. The different cultural values are important influential factors for an international marketing strategy and in this case I would like to point to the study of Hofstede.
Hofstede tries to describe cultural differences using 5 bipolar dimensions (http://geert-hofstede.com/dimensions.html).The position of a country on the dimensions allows to make some forecasts on the way their management process operate. If we take a look at Japan through the lens of Hofstede’s model, we can get a good overview of the deep drivers of Japanese culture:
1. Power Distance (54):
Japan is a mildly hierarchical society, where everybody is born equal and anyone become anything if he works hard enough.
2. Individualism vs. Collectivism (46):
In Japan people have a strong sense of shame for losing face and a good mix of collectivistic and individualistic characteristics. Japanese are concerned with temselves, but also feel they belong to larger in-groups
3. Masculinity vs. Femininity (95)
Japan is one of the most masculine societies in the world, but you don’t see competitive individual behaviors due to their collectivism. But it exists a severe competition between groups, e.g. employees are most motivated when they are fighting in a winning team against their competitors. What you also see as an expression of masculinity in Japan is the drive for excellence and perfection.
4. Uncertainty Avoidance (92)
Japan is one of the most uncertainty avoiding countries. Japanese learned to prepare themselves for any uncertain situation. Their life is highly ritualized and they have a lot of ceremonies. But due to this high uncertainty avoidance changes are very difficult to realize, because managers ask for all the detailed facts before taking any decisions.
5. Longterm vs. Shortterm Orientation (80)
Japan is a really long term oriented society which means that Japanese see their life as a very short moment in a long history. They do their best in their life time and that is all what they can do.
Based on this cultural knowledge and the findings of the market research the company have to adapt, as much as necessary, all its marketing mix elements (price, product, place, promotion, personnell etc.) to the foreign customer requirements and especially to the foreign values.
I could imagine that the three failed cosmetic brands haven’t considered these cultural aspects and just tried to enter the Japenese markets with a standardized marketing strategy.
November 18, 2013 @ 12:50 pm
I think that Tamara Gosh already did a very good job pointing out that one of the main issues here was not focusing enough on Hofstede’s cultural differences in order to analyze the Japanese market structure efficiently. And I strongly agree with her that this would have been a better approach instead of „only“ analyzing key competitors or governmental regulations. Specially keeping in mind that, as the article points out, Japan is a very specific and difficult market with complex cultural structures to enter.
Reflecting the content of the article and Tamara’s concerns, I want to focus on how Hofstede’s cultural dimensions could have been applied to the described market entry attempts.
The cultural dimensions which apply to Japan have already been described. So the question which remains is: What does that mean for a company entering this market? I’ll try to illustrate how I would use this information:
1. Power Distance in Japan
Concerning Japan’s power distance index, which has a value of 54, it can be assumed that power is distributed less than equally but not completely unequal. In other words, it’s somewhat in the middle. From a US cosmetic company’s point of view, this can mean two things: First, management structures and decision making processes within joint venture companies may be slightly different than what they are used to in the US. The United States scores a 40 on the cultural scale. So it is safe to assume, that Japanese employees will have a higher tolerance and expectation of unequally distributed power in their working environment. Second, this may also have an impact on customer demands and expectations. For instance, Japan’s higher power distance index could lead to different usage of cosmetic products. Furthermore, cosmetics products or different colors could be used to indicate power between people. These are topics which have to be analyzed within a market research before establishing a new product line.
2. Individualism vs. Collectivism
As Tamara already indicated, Japan’s mid-field individualism index of 46 lead to their people being concerned with themselves while also feeling the necessity to belong to larger groups. As a United States based cosmetic company, which is used to highly individualistic customers, this understanding brings up new issues which have to be addressed. For instance, instead of as much choice for the customer as possible, foreign cosmetic companies could try to adapt their communication in order to create a set of „trend colors“, which may be used by testimonials. This solution would still provide variation for the customer to choose, while knowing that they go with a product which is accepted by their „group“.
3. Masculinity vs. Femininity
With a value as high as 95, Japan’s culture as highly masculine driven. This indicates that women as well as men have their clear defined roles in society which need to be considered. This fact leads to the understanding that people using cosmetic products probably have clear defined presets on how to use them. This presets should be analyzed before attempting to penetrate the new market in order to check if the persistent product line is easy to be adapted or not.
4. Uncertainty Avoidance
Again, Japan reaches one of the highest values on this scale (92). This should be an alarming sign for any company trying to establish itself in this market because it indicates that it is very difficult for Japanese people to accept new products. Their life is very structure and anything that’s new represents a risk on the first sight. This has to be kept in mind by foreign companies in order to avoid rushing in to fast with new and unknown products.
5. Longterm vs. Short-term orientation.
Living in a very longterm oriented culture, Japanese may have a distinct perception of cosmetic products. The importance of such products and the problems they solve may be valued more or less important than in western cultures.
In my opinion, Hofstede’s cultural dimensions represent a very good tool for marketers to get an insight on the possible issues which could show up during a market penetration process. However, it is not to be used like a „cooking receipt“. All this indexes can indicate and lead to very different outcomes depending on the concerned product and company. But they do indeed represent a very good „checklist“ for factors which should be considered in every international marketing strategy.
November 26, 2013 @ 6:58 pm
This blog post exemplifies expansions of three cosmetic companies which have not been quite successful. Even if there is no further description of the activities undertaken, one can assume that the companies mentioned have not fully adapted their Marketing Mix to that particular area. Although adaptation is very time-consuming and requires a lot of planning and also market research, it is certain that you will be more successful than pursuing a strategy that is suited for the Western market. One cannot assume that the marketing strategy which is pursued in the US (like Avon & Mary Kay) and the UK (Boots) can be passed on to a completely different market like Japan. If you look at the 5 dimensions of Hofstede, as already describe in the two postings above, it is quite obvious why the market entry of these companies did not go well. These cultures are so distinctive that it will need thorough adaptation of the strategy to the Asian market. Japan is ranked very high in the Uncertainty Avoidance which correlates to Product Uncertainty. So when a new product/ brand is introduced, consumers are faced with some level of uncertainty. The problem here is also that new brands offer fewer opportunities to decrease the level of PU because little information is available. Culture influences consumer behavior and due to the fact already mentioned before (Japan has a high level of UA) those cosmetic companies should have been a lot more sensitive concerning the Japanese market.
Furthermore, I believe that the health and beauty chain Boots chose the wrong partner for the joint venture. Mitsubishi is a car manufacturer which, of course, is well-known and is able to dispose sufficient financial means, but I does not relate in any kind to the drug store or beauty business. Boots should have entered the market through partnerships with department stores and locating its products within existing retail space. Having learned from that kind of mistakes Boots has already adopted this strategy, e.g. in Thailand or in the US. Boots decided to piggyback its products into new markets on the back of existing retailers like CVS and now also Target in the United States.
July 9, 2017 @ 9:40 am
It is of high importance to do intensive market research before entering a foreign market, especially one that differs significantly from the home market – this case is a clear example that this part should never be underestimated. Even though Japan is considered to be one of the easier markets in Asia showing more similarities, there are still many aspects to be considered before taking such a huge step in investing. Looking closely at Hofstede’s dimensions of culture (which show substantial differences!) would have been a first vital step to take. Furthermore, the different buying behavior of Japanese is well-known and it is indispensable to take it into account and adapt the business models according to it in order to be successful in this promising market.
September 29, 2017 @ 12:37 am
I chose this blog because I wanted to research if any other cosmetic companies have tried to enter Japan since this blog was posted five years ago. Because of my experience with trying to market pharmaceuticals into Japan, I know the Japanese regulations make it very difficult to sell your product. According to the International Pharmaceutical Regulatory Harmonization Strategy (2015), the regulation requires you to conduct clinical studies in Japan which is much higher than any other country because of the low number hospitals. Japan also requires foreign manufacturers to have in-country representation. This is a deterrent to any pharma or cosmetic company to move into Japan unless they see value in their population.
With all the deterrents, why would a cosmetic company want to enter into the Japanese market? According to Patsarpron (2017), Japan is the second largest cosmetic market and is growing every year. Japan’s cosmetics exports surpassed the value of imports for the first time in 2016 (Patsarpron). So why enter a market that has several experience and successful cosmetic companies like Shiseido, NARS, Nippon and Daigaku Honyaku Center? Is it greed? Are they wanting to expand into the second largest cosmetic market for the sales? No matter how you do it, you need to conduct your research and understand the culture in Japan.
Working for a large biopharmaceutical company, we know the increased sales we could attain by marketing in Japan. We looked at the regulation and the customs which shows that Japan prefers to purchase from Japanese companies which brought us to the decision of a joint-venture with an established Japanese pharmaceutical company. So, why did the cosmetic company Boots not succeed since their choice of a joint venture partner was also with a large Japanese company? “They had no experience in the drug store retail or the cosmetics business.” (Apfethaler, Blog #79)
Let’s look at Laura Mercier and ReVive, these are two US Brands that have been very successful. They are both owned by Gurwitch Products, LLC and pulled in $175 million in annual net sales. Instead of moving into Japan, they sold their brands for an estimated $260 million in 2016 to Shiseido Co. Is this the way you need to be successful in Japan, let a Japanese company purchase your company? Only time will tell but in March, 2017 Shiseido announced an appointment of a new general manager of Laura Mercier to develop and execute the overall strategy in the U.S. and abroad. (Bloomberg.com, 2017). I guess we will just wait and see if Laura Mercier is successful in Japan since it is owned by a Japanese cosmetic company.
References:
Bloomberg.com (2017) Shiseido Americas Corporation Announces Management Changes at Laura Mercier, Effective March 1, 2017. Retrieved from https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=1001890
Ministry of Health, Labour and Welfare (2015) International Pharmaceutical Regulatory Harmonization Strategy; Regulatory Science Initiative.
Patsarapron, R. (2017) Japanese Cosmetic Rankings First Half 2017: Skincare Essentials. Retrieved from https://jw-webmagazine.com/japanese-cosmetic-ranking-first-half-2017-skincare-essentials-19a99c0be2e9
Yui, M & McCombs, D. (2016) Shiseido to Buy Gurwitch, Adding U.S. Cosmetics Brands. Retrieved from https://www.bloomberg.com/news/articles/2016-06-03/japan-s-shiseido-to-buy-gurwitch-adding-u-s-beauty-brands