Executive Summary
Kao Corporation has a presence in the market for more than 100 years now (Kao Corporation, 2015). It has a strong portfolio marked with different and innovative products in almost all categories. The firm’s business ranges from home care products to chemical business products. In this report, we are going to study its product lineup of health care products. The specific focus of the report would be the diapers market. Baby diapers merries is a brand of Kao holding a large share of the Japanese market, and is in a cut throat competition with a local giant, Unicharm and an MNC, P&G (Kao Corporation, 2015).
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We will begin by discussing the global diaper market. In this discussion, we will also take into consideration the countries, which still lack the awareness about the use of diapers. Diapers can come in various classifications – adult diapers and baby diapers, male and female diapers, etc. and are a big help in making daily life easier. However, owing to various factors, the use of diapers is not very common in the developing and under-developed countries. But this trend has begun to reverse in the recent past. The advancement of technology has successfully brought the prices down, which has brought the diapers within the reach of upper middle class families. This has been able to bring about a sudden surge in the demand of diapers in these countries (Dutta, 2012).
Following this, we will elaborate and analyze which research techniques would be useful for an efficient design and structure of the market research. The research techniques discussed in the report are qualitative research methods, quantitative research, correlation, and meta-analysis research techniques. Following this, we will look at how these techniques can be aptly employed to prove to be useful in business and increasing revenue. A recommendation will be justifiably provided as to which research method is the best technique to be employed in the current scenario.
Swot analysis and PESTEL analysis will be carried out thereafter, where studies on different conditions and effect of such conditions on the business will be analyzed. Swot analysis will consist of an analysis of the strengths, weaknesses, opportunities and threats for the Kao Corporation to research and understand the market. PESTEL analysis will deal with the elaboration and analysis of Political, Economic, Social, Technological, Environmental, and Legal aspects of establishing a business in a country.
Introduction
History
Kao Corp. is a prestigious company, which has shown a remarkable growth in the recent times. It carries with itself a long and fruitful business history in the field of consumer goods, health products, soaps, detergent and other toiletry products (Dutta, 2015). It got its first foothold in the market from Japan and later, went on to spread in other European and Asian countries. The corporation came into being in 1887 as a manufacturing soap for toiletry, ran and managed by Tomiro Nagase. At the time of its inception, it was known as Nihon Yuki, later as Kao Soap Company, and in 1985, the name Kao Corporation was penned (Kao Corporation, 2015).
The firm has achieved numerous milestones in business by spreading its name and market all across Asia and Europe. It has created multiple joint ventures with companies like Nivea and Beiersdorf. It also undertook various successful acquisitions in order to capture the market and to create a huge presence worldwide. Companies that were acquired were John Frieda, Molton Brown, and Kanebo Cosmetics, among many others (Johansson & Nonanika, 1987).
Current Business Lineup
Kao Corp. has its subsidiaries currently operating in more than 30 countries. Consolidated net sale of the corporation is 1315.2 million Yen. Consolidated number of employees worldwide is more than 30,000. It currently holds 16,441 patents registered under its name. It operates in three lines of business: consumer business, home and fabric care, and chemical business (Kao Corporation, 2015).
The consumer business of Kao is divided in two categories:
Beauty care business: Every individual is different and their unique beauty needs to be taken care. This is the primary concept behind developing beauty care products by Kao. The company has a wide range with categories like skin care cosmetics and hair treatment products like shampoos and conditioners. In the skin care category, Biore, Curel, Jergen are some of the many well-known products. John Frieda, Essentials, Liese are the products in the hair care range, and Kanebo, Sofina, and Molton Brown in the beauty care (Kao Corporation, 2015).
Health care products: The unique characteristics of Kao health care products make a consumer’s life healthy and comfortable. This category includes products like sanitary napkins, baby diapers, tooth pastes and health beverages with new functionalities. However, it is the ranges of baby diapers and napkins where the company is highly popular, because of the high-end features of extra absorbency and skin-friendly nature offered in the products (Kao Corporation, 2015).
Kao’s home and fabric care business products are famous in Japan, Asia and Oceania countries. Health and cleanliness life style is the motto of this line of business where Kao has developed unique products in order to make daily lives of the people easy. Its detergent Attack is having a wide presence, Haiter is a famous brand for bleach, and Magiclean is widely popular for home cleaning (Kao Corporation, 2015).
Chemical business is also having a global market presence. It serves large business groups and companies in engineering, civil, electronics, and manufacturing areas. They specialize in products like toners, toner binders, fragrances, aroma and oleo chemicals made from natural fat (Kao Corporation, 2015).
As mentioned above, the consolidated net sale is 1315.2 million Yen. Out of this, beauty care products hold the biggest share of 43.4 %, followed by home care products at 23.6%, health care products at 16 %, and chemical business worth 17 % (Kao Corporation, 2015).
Kao corps’ mission and vision is a clear indication of its business motive. It aims to provide satisfaction and enrichment to the lives of people. As a long term vision statement, it targets to be in close proximity to the end users, and be present in the market in order to help the customers with its products. Kao works hard to sustain the values of conservation, community, and culture in its core competency (Kao Corporation, 2015).
Global market of diaper industry
Current Scenario
High income and good economic conditions have rapidly increased the demand of baby diapers. It has been observed since last decade that the demand of diapers in urban areas has increased due to high urbanization, rise in education and improvement in the social class conditions (Dutta, 2012). The global diaper industry is assumed to reach $59.4 billion by the year 2020. Modern diaper ranges are very comfortable and skin friendly, which make them an ideal use for the infants. Developed countries are already contributing large money in this market, but off late, a significant increase in the demand has been observed in developing countries as well. Looking at it globally, diapers are more famous in North American and European countries, but Asia Pacific region has also shown a high potential growth in the market share in the past 5 years. It is expected to increase by 8.3 % in near future (Shende, 2014).
Companies operating in the diaper manufacturing arena are aiming to bring the prices of the products down, while maintaining them to be skin friendly and of high quality. Because of the high level of competition with international players, all the brands aim to sell more in the market with already available advantages. However, the high dominancy of social and environmental disadvantages are bound to affect the current market of diapers, as they are less degradable and their consumption has been forecasted to create serious damage to the environment (Shende, 2014). Nevertheless, companies have already started to promote biodegradable diapers in order to cope up with such problems.
Companies having high presence in the said market are P&G, Kimberly-Clark, SCA Hygiene, Hengen, Kao Corporation, Bumkins, Diapees and wipes, and Unicharm (Hayashi & Nakayama, 2009).
It has been observed in the recent years that there is a high growth potential in the developing countries in this market. Diapers are slowly, but gradually gaining popularity in the developing and under-developed countries, where social life standards and economic conditions are improving. Asian countries like China, India, and Malaysia are some examples of such countries. As more people gain awareness, they learn to replace the cloth with the disposable diapers. People are ready to spend more money in this segment, as they are convenient to use when out of home or even while the baby is sleeping (Dutta, 2012). Convenience is the major force which is driving this change in the use of diapers. Even in small cities and towns, people have now begun to use such disposable diapers and napkins and spend money for a better living. Even for growing babies, diapers present a hygienic option for the working parents, as they are freed from the worry of washing dirty baby clothes. Gradual change in the lifestyle because of all these advantages has eventually led to a significant growth in the market of disposable diapers in the developing countries (Shende, 2014).
Reasons behind less or no usage of diapers
The studies and research data from the developed and developing countries show why people are apprehensive of using diapers on regular or frequent basis for their children. The most important and an obvious reason is pricing. About three years back, the price of diapers in developing countries was extremely high, to the extent that middle class people could not spend such money on a daily basis (Shende, 2014). Even upper middle class were trying to restrict the use of diapers to the need basis. With the companies trying to bring the prices down, people with stable income are able to afford the diapers (Dutta, 2012).
Another reason prevalent in developing countries was the stereotypical behavior of the elder people of the family, who believed diapers to be harmful for infants and babies (Hayashi & Nakayama, 2009). People used to believe that the diapers were a part of high society lifestyle and cannot be used by the people of middle class. Such attitude in developing countries can be used to an advantage by the diaper manufacturing companies and can make good sell in such countries (Johansson & Nonanika, 1987).
Types of diapers
Diapers can be classified by demographic segments, such as baby diapers and adult diapers, and male and female diapers. The increasing awareness about the benefits and the price, and eventually the usage, among the users has led manufacturers to invest more in their facilities in developing countries like Asia Pacific (Dutta, 2012).
Diaper market can be characterized based on many factors:
Size of diaper (generally it comes with reference to the weight of child i.e. below 2 kg, 2-5 kg, 6- 10 kg, 11-15 kg, more than 15 kg)
Type of diaper (pant type, tape type)
Character styles (ultra absorbed, super absorbed, regular, biodegradable)
Because of high cut throat competition among the players of the industry, new innovations are always seen, which brought about a large number of choices of diaper variants for the end users. Obviously, the parents are the decision makers for choosing diapers for the babies. Therefore, the manufacturers try to impress the parents, specially mothers, by providing them more facilities (Shende, 2014).
The adult diaper market is still in its initial stages, which may have very high future growth. The product position and the market demand is not that high currently, but it is expected to increase in the near future (Shende, 2014). Since there are many global players present in the market of diapers, innovations are always going to revolve according to the market situations. Companies are trying to use more technologies and different fundamental designs and material so as to provide the maximum benefit to the customers (Dutta, 2012).
Type of research techniques
Different research techniques which Kao can apply for understanding the diaper market and apply innovative ideas are:
Qualitative research: This type of technique involves interviews, observations, and surveys. It can highly impact the results as the methods involved provide actual results on what customers think and believe (Johansson & Nonanika, 1987). By taking these techniques into account, a proper research depending on region should be carried out. Different methods involved in this research technique are:
Interview: can be done in different ways. Asking direct questions to end users and taking their feedback is one simple yet good technique. Interviews can be conducted via either telephone, in person, or online.
Interviewing customers can provide actual feedback about the questions. They cannot bluff easily and interviewer gets the idea of their beliefs. If an interview is conducted via an answering machine, then the records should be maintained properly for a final feedback (Dutta, 2012).
Observation: may also help companies to understand the purchasing behaviour of the customers. But companies need to keep their eyes open to observe what and how customers are going to purchase or enquire, what made them buy a particular product, how they feel about the brands and their presence in the market, etc. For carrying out this keen observational process, companies generally make a person available in the retail shops. Alternatively, feedback from the owners and malls can also provide useful data (Johansson & Nonanika, 1987).
Survey: can be in the form of questions or personal interviews, where some pre-defined questions are identified and asked the customers. Relevant information can be analysed by total surveys (Johansson & Nonanika, 1987).
All the research methods explained here require a target size, a focus group, and a set of target customers. Only then these techniques can be useful.
Quantitative research: This technique involves the usage of statistical or quantifiable data.
Correlation: This method needs to establish a relation between two variables.
Meta-analysis: This method is based on solving a problem based on certain hypothesis and then analysing and validating/rejecting it (Johansson & Nonanika, 1987).
All these research methods are taken into account while undertaking a research. The use of qualitative methods is recommended, since it can provide wide scope for understanding the demographic variables and the market developments. By doing a proper research, one can achieve satisfactory output of the research. Companies can understand the behavior and the purchasing pattern of the customers. In case of baby diaper market, decision makers are parents and most of the time mothers. Hence, companies must concentrate more on women participation in the survey or interviews (Shende, 2014). Questions should be prepared in a way that all the information is gathered in accordance to the level of understanding and the local presence of the audience. Too high or too low level of questions are bound to create a gap in the research. Questions should be prepared in such a way that all the specifics of required data can be collected and result can be concluded (Hayashi & Nakayama, 2009).
For the collection of data, samples are selected from some criterion group like area, society, social class, economic-education backgrounds, family pattern or style, religions, gender bias etc (Johansson & Nonanika, 1987). Many a time, researchers can come across some demographic hurdles while collecting data from sources. Economical and educational level always helps to find data from questions, but interviewing the backward or lower classes can also be a good option. In the rural and semi urban areas, interviews can provide alternate solutions to the questionnaire (Johansson & Nonanika, 1987).
Swot analysis
Kao Corporation is having a very long historical trail of their presence in the market place. They have made their mark felt in the global market as well, where they are having large portfolio of products. They have good quality research and development centers, which help them bring about new innovations and carry out products, which create milestone in their categories (Kao Corporation, 2015). However, because of the high competition and global presence, the company is always under a constant threat of losing the market share. At the same time, the high brand name in the global market provides them with an opportunity to increase their market web (Dutta, 2012).
Strengths
Long history of market presence, good brand name
Innovative products
Strong market knowledge
Strong product portfolio
Strong commitment to customers
Quality products
Large market share in Asia-Pacific countries
Maintain good relationship with retail market (Dutta, 2012; Hayashi & Nakayama, 2009; Shende, 2014)
Weakness
Lack of human resource
Bad experience in some countries (Dutta, 2012; Hayashi & Nakayama, 2009; Shende, 2014)
Opportunity
Large global market yet to explore
South Asia countries and North American expansion share can provide opportunities for high growth
Good R&D team to support internal product developments.
Good customer base with other products, which creates a positive impression of diapers among the users (Dutta, 2012; Hayashi & Nakayama, 2009; Shende, 2014)
Threat
Highly aggressive competitors like P&G and Unicharm
Investing in other countries can affect total market share capital (Dutta, 2012; Hayashi & Nakayama, 2009; Shende, 2014)
PESTEL analysis
Pestel analysis helps a company to make strategic development based on factors like political, economic, social, technological, environmental and legal (Dutta, 2012; Hayashi & Nakayama, 2009; Shende, 2014).
Political
Stability of government
Tax and other government duties of various countries need to be understood.
Is government helpful in providing the business opportunity in the country? (Dutta, 2012; Hayashi & Nakayama, 2009; Shende, 2014)
Economic
Economic conditions and past stability
Economic state and government policies
Inflation rate of the country
GDP and export businesses
Industrial development in country
Interest rate, foreign currency rate (Dutta, 2012; Hayashi & Nakayama, 2009; Shende, 2014)
Social
Demographic trends
Gender bias
Family pattern and life style of people
Education level and opportunities for employments
Cultural effects
Buying pattern and behaviour towards diapers (Dutta, 2012; Hayashi & Nakayama, 2009; Shende, 2014)
Technological
Facilities available for technology
Resources available for Research and development (Dutta, 2012; Hayashi & Nakayama, 2009; Shende, 2014)
Legal
Internal and external legalities for business trends
Import and export law
Consumer law, safety laws, labour laws in country (Dutta, 2012; Hayashi & Nakayama, 2009; Shende, 2014)
Environmental
Natural Resources availability
Climate conditions for doing business
Geographical location of the country
Environmental offsets (Dutta, 2012; Hayashi & Nakayama, 2009; Shende, 2014)
Conclusion
As per the study discussed in the report, the diapers market in world has huge opportunities available for Kao Corporation (Dutta, 2012). Since they have a large and established product portfolio in the world already, they can easily make diapers and spread the product use across the globe (Kao Corporation, 2015). We can also safely conclude that the market of diapers in the developing and under developed countries has begun to become versatile and Kao can extract maximum advantages out of such conditions. They can target a strong presence in the developing countries of Asia and North America where they are yet to enter, and with a good product quality and innovation, they would be able to attain a good market share.
However, in an attempt to attain new markets, they should not lose focus on the existing business dominant areas. They should consider and keep a keen eye on the competitors’ positions in the countries where they are already present and hold a significant share of the market.
Bringing in new age innovations that make the modern day life of consumers easier will always be the best strategy. However, by providing extra knowledge and awareness about what the corporation is, they can create easy footholds in the new markets in the new countries. It is to be kept in mind that it is always difficult to extract a share from the already well established competitors in the beginning, but with good quality and proper marketing activities, Kao Corporation can create profitable businesses in other countries as well. Entering the developing countries like India and China, which have high population and growing economic conditions, can draw the competitors backwards (Dutta, 2012; Shende, 2014; Hayashi & Nakayama, 2009). Before entering these new markets, a proper research based on Swot Analysis and PESTEL analysis can help the firm come up with a fail-proof strategy and be prepared for unforeseen issues that may crop up later on.
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