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Case 5. Shiseido Company, Ltd.: Facing Global Competition




INTRODUCTION Shiseido was founded by Yushin Fukuhara as Japan’s first Western-style pharmacy in 1872, and has shifted its focus back and forth between cosmetics and pharmaceuticals since 1915. Its strength in both areas has enabled it to weather the Great Earthquake of 1923 and World War II. It leads the cosmetic industry technologically, and has offered Japan many “firsts’’ in products. It introduced Japan to its first toothpaste in 1888. In 1902, Shiseido introduced Japan’s first soda fountain/drugstore. Three years later, it established the chain store system, which became the backbone of the firm and the standard distribution system for the industry. Shiseido began international expansion in 1957 and is currently represented by 17 subsidiaries and more than 8,700 outlets in 69 countries. Offshore production accounts for about 50 percent of its global sales, which amounted to 64.9 billion yen in fiscal 1997. In 1987, Yoshiharu Fukuhara, grandson of the founder, took over as president. The same year, Shiseido announced a 6 percent decrease in sales and a write-off in inventory worth $239 million; net income fell 34 percent to $72 million. The company also abolished separate sales volume budgeting for sales companies and retail outlets, which had been faulted for the tendency of salesmen to push sales to retailers in order to meet in-house quotas. The 1998 product mix consisted of cosmetics (74% of sales), fine toiletries (16%), and other businesses (10%). With the implementation of the “Global No.1’’ long-term vision, Shiseido identified three goals: technological excellence, diversified operations, and customer satisfaction. It continued to streamline domestic cosmetics lines to reduce inventory, eliminating products with a…...

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