Shiseido Company
Few, if any, knew that a time would come when all of a sudden, all nations would close their borders from international travelers to access their country because of the fear that the incoming visitors would come in with a deadly virus. Indeed Coronavirus pandemic, officially referred to as Covid-19, was a breaking point for most leaders worldwide. The business leaderships were not spared and the most adversely affected was the beauty industry, especially those that depended on traditional brick-and-mortar retail outlets. Not many businesses were aware of the Omnichannel opportunities available that could have been applied to salvage the situation. However, all is not lost as this project will highlight some essential tips and tricks that modern-day businesses can use to ensure they not only remain afloat but are conquering new markets. In this analysis, special attention will be paid to one beauty and luxury goods company that had experienced a lot of success but whose resilience was tested during the covid-19 (Hosoda 2021). The organization is known as Shiseido. A raft of solutions will then be proposed that, if applied, can be very useful in increasing the organization’s profitability to pull it out of the doldrums.
Shiseido is a Japanese company that mainly deals in cosmetics and skincare brands. The origin of the name is traced from passage 1 of Ching, which praises the virtues of the earth as the ultimate origin of everything good to imply how rich the world is. The organization’s aim is in line with the Confucius school of thought that seeks to create harmony in the body, soul, and mind (Shiseido Company Ltd. 2021). It is the oldest cosmetics organization in the world and the fourth biggest in the whole world. The organization was founded on 19th October 1872 at Ginza region, Tokyo, Japan, by a gentleman known as Mr. Arinobu Fukuhara has acquired more than 30 other skincare brands, some as subsidiaries wholly owned by it. The organization is currently headed by Mr. Masahiko Uotani, working as the president and chief executive officer. The current headquarters of the organization is at Chuo City in Tokyo, Japan. In its financial report of 2018, the company generated revenue amounting to 1. 098 trillion JPY (Japanese Yen). As at the time this essay is written, one U.S. dollar is equal to 105. 440 Japanese yen). The total number of employees is approximately 33 356. The subsidiaries that work with the company include Dolce & Gabbana, Nars Cosmetics, Shiseido Americas Corporation Limited, Taiwan Shiseido Corporations Limited, Beute Prestige International, Laura Mercier, Shiseido U. K Company Limited, Shiseido Europe, and Bare Escentuals Minerals Incorporation.
Despite being a luxury goods company, its products span all sectors of the economy to serve the low-end class, value class, middle class, and luxurious goods segments. The organization prides itself on the made in Japan label with its factories spread across Japan, including Otawara located at Tochigi Prefecture. Its most popular products include Shiseido White, Shiseido FITIT Integrate Liquid Eyeliner Black, Lucent Multi-bright Night Cream, Shiseido Clarifying Cleansing Foam, Shiseido Luminizing Satin Face Color – PK 304 Carnation, Shiseido White Lucent, and Microtargeting Spot Corrector.
The products made by Shiseido are 90 % natural and are free from synthetic colorants, silicones, or parabens but are blended with fragrances derived from trees.
Problem opportunities / challenge identification / dilemma
The business must increase its market share. There is a general myth that the market is big enough for all of us. Indeed the market could be significant, but the business must play its part in attracting and retaining new customers and not be comfortable with dealing with the traditional customers alone because as days progress, the cost of living is rising, there is inflation, and the pandemic has caused a need for change.
To increase its market share, it may involve itself in aggressive campaigns to eat into the competitor’s market share. The main competitors against Shiseido include Yatsen Holdings, Coty, Estee Lauder, Kanebo cosmetics, Kose, Kao corporations, Onion Global, and Cle de Peau Beaute.
Brand positioning
To be successful, Shiseido has consistently branded itself as a premium luxury skincare and beauty brands company operating and serving a large clientele base mainly in the Asian nations, European nations, and the United States of America. The organization should continue to focus on improving brand awareness by producing quality products, promoting beauty, and participating in corporate social responsibility.
Financial analysis
The Shiseido recorded s stock price of Japanese Yen 7 385 (JPY). In the past 52 weeks, Shiseido has recorded an increase from 56. 00 to 79. 55. The trading volume was 21 899. The latest trade is 62. 00 shows a change of 0. 00 (0. 00 %) change. The market capitalization was 26 352 million, while the dividend yield in 0—56%.
State of the Union address
The state of the union address made by President Donald Trump was an important decision to some quarters while business premises such as Shiseido was affected. Shiseido has not had it easy considering the trade wars that were going on between the United States of America and China.
Leading facts and events of the core study: Case Analysis
The impact of covid-19 on the Shiseido Company has been unfavorable. In 2020, Shiseido capital analysts had projected the organization would make losses. In the same period, it launched that the dividend payment would be lower because of the ravaging effects the Covid-19 pandemic was having in the cosmetics industry. The projections were advised by the fact that the restrictions put in place by local and international governments were going to affect the final consumer’s decisions on whether to continue spending on expensive creams (Wetherille 2020). The stay-at-home directive also influenced the decision on whether to put on expensive makeup when at home since most consumers of beauty products put on makeup to look good for themselves and be seen by others. The covid-19 pandemic also led to many employees being laid off.
In January of 2021, Shiseido decided to sell its brands of lower prices, such as shampoo brands and cheap skin care products, for one and a half billion dollars ($ 1. 5 Billion) to CVC capital is a private equity capital firm. $ 1. 5 Billion is equal to 160 billion Japanese yen.
Since the current consumers are more enlightened, they pay much attention to their involvement in corporate social responsibility activities. The modern consumer is likely to purchase from an organization that actively incorporates social activities rather than one that does not.
Research and analysis of the situation
Therefore, the management should provide deliberate research, analysis, and sharing of information with all concerned stakeholders in record time to enable them to be aware of what the organization is doing so that they do not remain in the dark (Yokota 2021). In an organization with stakeholders, the stakeholders’ opinions are critical, just like public participation in government-run projects because the government belongs to the people.
Fig 1: Past financial results
| 31-Dec-20 | 31-Dec-19 | 31-Dec-18 | 31-Dec-17 | 31-Dec-16 | |
| Revenue | 920,888.00 | 1,131,547.00 | 1,094,825.00 | 1,005,062.00 | 850,306.00 |
| Total Revenue | 920,888.00 | 1,131,547.00 | 1,094,825.00 | 1,005,062.00 | 850,306.00 |
| Cost of Revenue, Total | 238,401.00 | 254,844.00 | 231,928.00 | 231,327.00 | 207,553.00 |
| Gross Profit | 682,487.00 | 876,703.00 | 862,897.00 | 773,735.00 | 642,753.00 |
| Selling/General/Admin. Expenses, Total | 640,531.00 | 731,174.00 | 725,415.00 | 669,068.00 | 587,708.00 |
| Research & Development | 26,992.00 | 31,697.00 | 29,130.00 | 24,230.00 | 18,264.00 |
| Unusual Expense (Income) | 18,546.00 | 3,617.00 | 9,122.00 | 78,902.00 | 4,785.00 |
| Other Operating Expenses, Total | 1 | 1 | 2 | 1 | 1 |
| Total Operating Expense | 924,471.00 | 1,021,333.00 | 995,597.00 | 1,003,527.00 | 818,311.00 |
| Operating Income | -3,583.00 | 110,214.00 | 99,228.00 | 1,535.00 | 31,995.00 |
| Interest Inc.(Exp.),Net-Non-Op., Total | -3,315.00 | -2,477.00 | 1,088.00 | 1,662.00 | -129 |
| Gain (Loss) on Sale of Assets | 6,051.00 | -1,029.00 | 1,203.00 | 35,985.00 | 17,074.00 |
| Other, Net | -1,193.00 | 670 | 2,791.00 | -627 | 926 |
| Net Income Before Taxes | -2,040.00 | 107,378.00 | 104,310.00 | 38,555.00 | 49,866.00 |
| Provision for Income Taxes | 7,079.00 | 30,076.00 | 39,405.00 | 13,200.00 | 15,941.00 |
Formulation of solutions/answers
It was a catch 2022 situation because of the need to put on cream while at home or even why to purchase luxurious creams. But despite all that has happened, there is a great future ahead for the cosmetics industry (Teraoka and Kawai 2020). Many people are getting vaccinated, and very soon, the global air travels will be opened fully while formerly sacked employees will be recalled to meet the demand. Investors will be smiling at the bank because the dividend payments will resume with double portions.
It was strategically sourcing for raw materials.
When the conditions of doing business are affected, it is time to find solutions. Solutions provide a lifeline for a company to prevent it from sinking. A stitch in time saves nine. The company should seek to do business with sustainable suppliers of raw materials who provide the best price possible. The price should be competitive to ensure the constant supply of affordable products to the final consumers (Umemura and Slater 2017). The security apparatus at Shiseido should ensure that the quality of the raw materials is par excellence before they enter the factory. Quality is critical, and it can make customers keep coming back. Affordability is another crucial factor. The raw materials should not be priced so high to make the products unaffordable to the final consumers. When the consumers realize the prices are high and a competitor provides a relatively lower price, they may be tempted to jump ship. Sometimes they may jump ship just once to taste the product and find the alternative product to be cheaper and of higher quality than Shiseido.
Reducing the negative impact of taxation on profitability
The taxation policy contributed negatively towards the sharp decline in the net profit of Shiseido. It is, therefore, necessary to engage actively with the government and the association of manufacturers to consider options of lowering the taxes. Punitive tax measures can adversely affect business growth and development (Reuters 2021). A mutually agreeable tax agreement should be decided since the business belongs to the people. The company and the government are like conjoined twins because they pay taxes to enable the government to run its operations.
Pragmatic approach
The number one alternative is strategic sourcing which may be achieved by establishing solid binding supplier and buyer relationships, insourcing, outsourcing, near-sourcing, joint ventures, mergers, and strategic acquisitions. However, tactical sourcing should be available for short-term transactional advantages as long as they are ethical and approved by all relevant stakeholders (Staff 2021). Shiseido may use Porter’s 5 (new entrants, suppliers, substitute products, and customers to know the organization’s competitive advantages and realign according to the findings. Many alternatives are available for Shiseido to survive in the health care and beauty industry. The main threats are evidence judging from the report available in the investor report of 2019/2020, which included a stable source of raw materials. The costs of raw materials may have adverse effects on profitability. As any well-performing organization, Shiseido would need to provide a competitive price to the suppliers who are also required to achieve the best results. The strategic alternatives applied should be competitive enough to enable the business to remain afloat, expand its reach and provide the best. When suppliers are paid promptly, they are happy. The organization may apply outsourcing for other services, but this may lead to industrial tension unless there is a communication that the outsourcing company should absorb the staff.
According to Teraoka and Kawai (2020), with its low operating profit, the company was forced to lay off more than 8000 staff to stay at home to cut its expenditure and ensure it meets the social distance regulation implemented by the government to contain the virus. The business experiences a drop in customers’ shopping behavior. Customers were wearing less makeup and investing in protective masks and disinfectants. Because of less shopping, Japanese firms anticipated a net loss of 30 billion yen in 2020, worse than a previous forecast loss of 22 billion yen (Staff, 2021).
One solution that can be applied to replace the 8000 employees is through the organization adopting the technology of drones to supply their customers with the finished products. Therefore, digital marketing, such as emails and content marketing, appears to be the most effective technique for reaching customers in their homes (Ragavan, 2021). With schools suspended and some work closed, most people spend a significant amount of time on social media and television.
Transformation to digital marketing has been in place for Shiseido for approximately four years, but still, the firm faced significant challenges when this pandemic landed. According to Leroy Chua, the regional director of digital marketing for APAC (except China, Japan, and Hong Kong), the firm intends to invest in more aggressive e-commerce marketing (Ragavan, 2021). However, the company faces significant difficulties in implementing this change, especially the staff’s reluctance to embrace this change and adapt to the transformation pace.
Sustainability is a big challenge in the fashion and beauty industry, especially for organizations such as Shiseido. These techniques had been applied in Zara incorporation and Shiseido, among others, mainly due to the reduction of suitable raw materials to managing the new situation. The leading international business contentious issues, which primarily touched on trade wars, taxation, tariffs, trade barriers, non-tariff barriers, and privacy and security, have been ironed out.
Distribution outlets
Shiseido Company distributes its products through selected departmental stores as well as through drug stores or pharmacies. The organization should then aim at increasing the number of its distribution outlets to include online positioning through Facebook, Twitter, reedit, Instagram, and linked in, among others. There should be a well-planned and coordinated communication between the internal supervisors, project manager, product development manager, information technology manager, security manager, logistics manager, public relations, auditor general, operations manager, finance manager, marketing manager, and human resources manager, among others to ensure challenges are faced through a united front.
Discussion and selection of solutions/answers
The reduction experienced in global air travel barred Shiseido from enjoying duty-free sales in foreign jurisdictions. It led to a loss of 22 billion yen which is approximately two hundred and nine million United States Dollars ($209 million).
The demand for Shiseido products does not necessarily need to reduce because Shiseido is not only a beauty skin care product but can also be defined as a healthcare product meant for human wellness.
Volunteer pay cut
The voluntary pay cut is when the employees accept less than the regular pay by a certain percentage. It is a deliberate step taken to sustain the business’s fortunes when it is dwindling. The chief executive officer has agreed to take the pay cut. All other employees should follow suit.
Email marketing
The organization should continue to conduct email marketing to their customers by constantly sending educational and how-to guides. Constant communication to consumers is critical, and content is king.
Website and E-commerce
The choice of the best solution should consider the pros and cons. The answer should be cost-effective and sustainable to the organization. For instance, in the distribution and outlets, the organization should adopt the e-commerce method of selling (Good and Abuelil 2020). E-commerce involves setting up online shops such as Shopify, Alibaba, and Amazon, among others, and apply them to attract a broad customer audience.
Use of drone technologies
Use organizations may choose to deploy drones to supply beauty products to the customer’s doorsteps using drones. Any techno-savvy organizations worldwide are already using drones to provide their consumers with the goods they need.
Social media management
Shiseido should activate its social media channels to increase its online presence. The use of social media channels such as What sap business, We Chat, Weibo, Facebook, Reddit, Pinterest, YouTube, Instagram, Twitter, Linked In, among others, is significant. Social media channels play an essential role in supplementing the available e-commerce and website stores. When these channels are available, they increase the organization’s rankings in search engine optimization (S. E. O). The social media channels should be manned by active personnel who respond almost immediately to customer queries.
Additional stores
The Covid-19 pandemic has taught many businesses to open as many stores as possible closer to the market. It reached appoint when most countries closed their borders from external visitors and goods. For a long time, goods in transit were stuck at the airport, seaport, and other stores because the workforce to inspect them was forced to stay at home to reduce the spread of the infection. Unlike other jobs that can be done remotely, port inspection has to be done physically so that a country does not risk letting illegal goods or terrorist weapons into its territory.
Conclusion
The Japanese are respected globally for their creativity and innovativeness. If these can be applied, then no doubt the organization which began as a western-style pharmacy will remain competitive into the future. Moreover, the brand should not be limited to department stores; it is recommended to strengthen its presence through continued cultivation across several channels. Thus, the firm will build its in-store shares and cultivate well-established brands, including UNO and Za.
Bibliography
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Hosoda, M., 2021. Telework amidst the COVID-19 pandemic: effects on work style reform in Japan. Corporate Governance: The International Journal of Business in Society.
Reuters 2021. Shiseido Company Limited (ADR). Retrieved from: https://www.reuters.com/companies/SSDOY.PK. Accessed on 01-09-2021.
Shiseido Company Ltd. 2021. ABOUT US | Shiseido group website. Corp.shiseido.com. https://corp.shiseido.com/en/company/
Staff. R., 2021. Japan’s Shiseido is in talks to sell lower-priced brands to CVC. Reuters. https://www.reuters.com/article/us-shiseido-deal-idUSKBN29R01O
Takeshita, S., Lee, S.H., Williams, C., and You, J.J., 2021. Crisis, rigidity and nonliberal governance in Japan: the cases of Mitsubishi Motors and Kanebo. Continuity & Resilience Review.
Teraoka. A, and Kawai.Y. 2020. Shiseido tells 8,000 workers to stay home. Nikkie Asia. https://asia.nikkei.com/Spotlight/Coronavirus/Shiseido-tells-8-000-workers-to-stay-home
Umemura, M. and Slater, S., 2017. I am reaching for global in the Japanese cosmetics industry, 1951 to 2015: the case of Shiseido. Business History, 59(6), pp.877-903.
Wetherill, K. 2020. The Japanese beauty company withdrew its guidance for the fiscal year but said it was too early to publish amended forecasts. https://wwd.com/business-news/financial/shiseido-q1-net-profit-plummets-nearly-96-percent-pandemic-1203632085/
Yokota. T, 2021. 2020 Results (January-December) and 2021 outlook. https://corp.shiseido.com/en/ir/pdf/ir20210209_767.pdf