P&G's Success Story in China

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Case Details:

Case Code : BSTR194
Case Length : 16 Pages
Pages Period : 1998-2005
Organization : P&G
Pub Date : 2006
Teaching Note :Not Available
Countries : China
Industry : FMCG

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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P&G's Entry Into China

The Chinese government began to open local markets to foreign investment in the early 1980s. At this time, the government started establishing Special Economic Zones (SEZ) to promote free trade.

One of the most prominent SEZs came up near the village of Shenzhen, in Guangdong province. As a result of the SEZs, there was explosive industrial growth in this belt. By 1984, China increased the number of economic zones to 14, and widened the scope of activity. It was during this time that P&G began to focus seriously on China. P&G conducted its first market research in the Chinese market in Beijing and Shanghai in 1985. During that time, foreign trade was still restricted and was channeled through 'friendship stores' where consumers with access to foreign currency could buy a limited range of imported goods. Hence, to understand and develop the Chinese consumer market, P&G sent Berenike Ullmann (Ullmann), a young, Chinese-speaking market researcher...

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The Marketing Strategies

Though P&G usually carried out extensive market research activities, there were some occasions when it used the gut instincts of its marketers to formulate its marketing strategies. For instance, most Chinese experts warned the company that 'nobody in China could afford to purchase Head & Shoulders...'

However, P&G rejected such advice and entered the market with a sound strategy. The company's market research revealed that though there were several shampoo marketers in China, there was no shampoo that could remove dandruff from the scalp. Dandruff was a common hair problem among the Chinese consumers. P&G hence launched Head & Shoulders, a brand that was known for its anti-dandruff properties. Within three years of its launch, Head & Shoulders became China's bestselling shampoo, even though it was priced three times higher than the local brands. P&G aspired for market share leadership in all its core categories including personal and beauty care products, laundry products, pet nutrition products and baby products...

Market Research

P&G was a pioneer in developing the discipline of market research during the 1920s. However, by the early 2000s, the company had made significant changes in the way it handled market research. Instead of finding out what products consumers used, P&G had initiated an exercise to learn how consumers used them. In China too, P&G invested significantly in consumer research. Jim Stengel, P&G's Global Marketing Officer and his team of 3,500 marketing executives visited places where consumers lived and worked, in order to observe their behavior...

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