CASE STUDY: Shiseido https://www.parfumdreams.fr/Shiseido/Fragrance/Women Shiseido: becoming an insider in the perfume business in France • Initially founded as a pharmacy in Japan in 1872, Shiseido expanded into the cosmetics business in 1897 by introducing a skin lotion. Shiseido then gradually expanded its product offerings in the makeup and skin care business. It also started to expand internationally, entering the Taiwan market in 1957. By the 1970s, Shiseido had established itself as the market leader in the makeup and skin care business in Japan. However, Shiseido was still weak in the fragrance business. CASE STUDY: Shiseido • . At that time, Japan had a limited tradition of perfume use: the fragrance market in Japan accounted for only 1 per cent of the entire cosmetics market, much lower than the 30–40 per cent characteristic of most Western countries. Because of its limited tradition of perfume use, Japan lacked domestic fragrance experts and senior management with fragrance business experience CASE STUDY: Shiseido • Shiseido’s small domestic fragrance market did not prepare it adequately to compete in the international market. In 1964, Shiseido launched the perfume Zen in the US. Driven primarily by the marketing concept of ‘oriental mysteriousness with a subtle fragrance’, Zen’s US sales increased rapidly because of its novelty, but then quickly declined. Because the fragrance market represented about 30–40 per cent of total cosmetics sales in Europe and America, Shiseido’s lack of a significant position in the fragrance market also created barriers for the firm to secure strong distribution networks internationally. Thus, in spite of its limited domestic experience with fragrances, Shiseido felt it had to develop strengths in the fragrance business in order to become a truly world-class cosmetics company. CASE STUDY: Shiseido • In the late 1970s and early 1980s, Shiseido decided to learn more about the international fragrance business. The lack of a favourable domestic environment in Japan pushed Shiseido to seek solutions in the very markets it wanted to penetrate. France was identified as the ideal place to gain expertise, because it was the heart of the international fragrance industry. However, simply being in France did not ensure that the firm would automatically gain access to the local knowledge network. In fact, Shiseido had to spend a long time learning how to become an insider in this industry. CASE STUDY: Shiseido • Shiseido’s initial failures: In order to absorb French perfume development techniques, especially the subtle interactions between laboratory development and consumer tests, Shiseido established in 1980 a 50/50 joint venture with the French cosmetics company Pierre Fabre S.A. • Faced with substantial market hostility in France at that time, Shiseido chose a joint venture as its entry mode in order to reduce risks, especially in terms of potential financial losses. At the same time, in order to collect information related to the fragrance industry, it also established the Shiseido Europe Techno Centre as the ‘eye’ of its headquarters in France. CASE STUDY: Shiseido • Japanese expatriates were sent to the centre to collect vital local information and transmit it to headquarters. Unfortunately, the Japanese expatriates did not have access to the social networks required to gain deep insights into the complex and tacit knowledge aspects of local perfume development and exploitation. Consequently, the information transferred back to Shiseido’s headquarters tended to be superficial and did not truly help product development in Japan. Gradually, Shiseido realized that its strategies so far had not made it a player in France. Shiseido learned that, in order to learn the intricacies of perfume development, it would have to become an insider in the French fragrance industry. CASE STUDY: Shiseido • Becoming an insider: • To access the required tacit local knowledge, Shiseido decided to establish operations in France to develop and sell perfume in France, rather than simply collecting information there. • This involved extensive activity development in France. Local operations (plants and salons) In 1990, Shiseido established a 100 per cent subsidiary in Paris called BPI (Beauté Prestige International) to develop and sell fragrances in France. In 1992, Shiseido also set up a plant in Gien, a town south of Paris. Shiseido also ran salons in France to learn how to provide beauty services. CASE STUDY: Shiseido • In 1986, Shiseido acquired two high-end French beauty salons, Carita and Alexandre Zouari. Carita and Alexandre Zouari were among the top five salons in Paris, the other ones being Alexandre Paris, Maurice Franc and Claude Maxim. • In 1992, Shiseido opened a prestigious parlour called Les Salons du Palais Royal (‘Les Salons’) in Paris. These operations helped Shiseido understand the world of sophisticated French customers and the importance of local adaptation. At that stage, Shiseido’s products were of high quality from a manufacturing perspective, but they lacked the cultural dimension of a fragrance as a story/concept, which was a crucial element driving French customers’ tastes CASE STUDY: Shiseido • Shiseido also ran salons in France to learn how to provide beauty services. In 1986, Shiseido acquired two high-end French beauty salons, Carita and Alexandre Zouari. Carita and Alexandre Zouari were among the top five salons in Paris, the other ones being Alexandre Paris, Maurice Franc and Claude Maxim. • In 1992, Shiseido opened a prestigious parlour called Les Salons du Palais Royal (‘Les Salons’) in Paris. These operations helped Shiseido understand the world of sophisticated French customers and the importance of local adaptation. At that stage, Shiseido’s products were of high quality from a manufacturing perspective, but they lacked the cultural dimension of a fragrance as a story/concept, which was a crucial element driving French customers’ tastes CASE STUDY: Shiseido • In 1992, BPI launched two perfumes branded after the names of their designers: Eau d’Issey and Jean Paul Gaultier. The former was designed by the famous Japanese fashion designer Issey Miyake and the latter by the well-known French fashion designer Jean Paul Gaultier. Manufactured at the Gien plant and marketed to French customers. • Building local relationships Shiseido used several techniques to build relationships with major stakeholders in France, including celebrities, journalists, bankers and local communities. First, Shiseido invited leading celebrities in Parisian high society to its receptions held at ‘Les Salons’. CASE STUDY: Shiseido • For example, the celebrations at the 1992 opening of ‘Les Salons’ lasted two days, with numerous parties, including a reception for journalists, a reception for VIPs and a reception for bankers. Such events at ‘Les Salons’ were not only covered by articles in newspapers and magazines, but also widely discussed in Parisian high society. • The exposure in the media connected ‘Les Salons’ and Shiseido’s brands with sophisticated customers and supported the firm’s efforts to establish its brands as premium fragrances. More importantly, this exposure helped Shiseido build strong linkages with beauty and fashion journalists, local celebrities and bankers. CASE STUDY: Shiseido • Second, Shiseido became actively involved in local communities, especially by sponsoring various cultural events in France. For example, Shiseido was active as a patron for the Festival International de Sully-sur-Loire, where Shiseido’s Val de Loire factory was located. Such activities with local communities increased the connection between Shiseido and French consumers. • Local hiring: • Rather than sending Japanese expatriates to direct its French operations, Shiseido hired local experts to manage several important positions throughout the value chain. CASE STUDY: Shiseido • Finally, Shiseido hired locally at its Gien plant. The plant, although managed by a Japanese president, had a French vice-president. In 1998, the plant employed only six Japanese expatriates out of 180 local full-time staff and 80 temporary workers. By 2005, Shiseido had 12 organizations in France, with 12 Japanese nationals out of 1,300 employees. The local hiring policy helped Shiseido to become a true insider in France. CASE STUDY: Shiseido • Local success Although the major objective of the French operations was to plug into the local fragrance knowledge, Shiseido did not assess its success simply based on the amount of knowledge transferred back to Japan. Rather, success was assessed by the company’s competitiveness in France itself. Perfumes such as Eau d’Issey and Jean Paul Gaultier were launched first in France and marketed first to French customers. CASE STUDY: Shiseido • These premium fragrances did very well there. For example, Jean Paul Gaultier Le Mâle produced by BPI was the leading brand among men’s premium fragrances in France, with a market share of 4.8 per cent in that country in 2005. Among all fragrances in France, Jean Paul Gaultier Le Mâle was ranked tenth in 2005 with a market share of 1.2 per cent. This was good penetration, considering that the leading (down market) brand Yves Rocher had a market share of only 2.6 per cent in the same year/ CASE STUDY: Shiseido • Similarly, the quality of the perfumes produced at the Gien plant was also evaluated against the French standard of perfume quality. In this context, Chantal Roos was very satisfied with the quality of Shiseido’s products when benchmarked against high profile French rivals such as Christian Dior’s Svelte. Local decisions Shiseido granted substantial autonomy to BPI, because it realized that Japanese headquarters lacked sufficient understanding of the French artistic style in the fragrance industry. Therefore, product development, packaging and labelling of BPI products were all performed by BPI and the Gien plant’s R&D division, without intervention from Shiseido. CASE STUDY: Shiseido • Subsequent developments Brands such as Eau d’Issey and Jean Paul Gaultier have given Shiseido a solid position in Europe, and some of the knowledge learned by the expatriates has been transferred back to Japan for the development of future perfumes. In 1997, Shiseido decided to spend $30.5 million building a new plant at Ormes, France, to meet the expected rising demand in Europe for its fragrances and skin care products. In 2004, Shiseido ranked 14th in the fragrance business with a market share of 1.8 per cent – still far behind L’Oreal Groupe, the market leader in fragrances with a market share of 8.9 per cent. CASE STUDY: Shiseido • First, Shiseido hired a French creator, Serge Lutens, to craft Shiseido’s overseas brand image. Before joining Shiseido in 1980, Lutens had worked for Christian Dior for 14 years. Serge Lutens contributed substantially to Shiseido’s becoming an insider in France, by designing ads and posters that created a mysterious and artistic image for the firm. Even though his work was viewed as too indirect and artistic in Japan, he achieved his goal: his work became well accepted in Europe and America CASE STUDY: Shiseido • Second, a French CEO, Chantal Roos, headed BPI. Involved in launching the famous Opium perfume when she was marketing vice-president of Yves Saint Laurent, she was an expert in creative marketing and fragrances, and well known in the French fragrance industry. It was very rare for a Japanese company to hire a local person to head a strategically important subsidiary, but it was a wise move. Chantal Roos brought to the company a much-needed creative and artistic culture. She led Shiseido’s credible entry into the French fragrance industry by leading the development of Eau d’Issey in 1992. Moreover, she insisted on creating a separate BPI division in each host country to distribute BPI’s high-end fragrances
