Sunday, September 22, 2013

No. 34: Developing business in the global market in the Unicharm way (September 21, 2013)

Unicharm is outstanding in the paper diaper business. It is expected to record sales of 580 billion yen this year. Because low birthrate and longevity dwindles the domestic market, the company has been energetic in developing foreign markets. Actually, its sales from foreign markets exceeded those from the Japanese domestic market for the first time in 2012. It is dominant in Indonesia with a share of more than 80% in the western part of Java. It will start to operate its third plant in Surabaya this year to make the Indonesian market even more solid. The new plant is part of its strategy to increase the share of diaper and sanitary goods from the current 20% to 30% in Asia. 

 Unicharm's products are selling fast in Asia.

Allying with local companies is vital for global competition.
Focusing on newly developed countries is a must for every Japanese manufacturer. Because economies of scale matters a lot to compete in the global market, it is critical even for Unicharm to compete with Proctor and Gamble (P&G) of the U.S. successfully. As a matter of fact, Unicharm projects to increase total sales three times over the current level to 1,600 billion yen in 2020. However, P&G has total sales of 8,000 billion yen, of which 1,600 billion yen come only from the divisions with which Unicharm has direct competition. To cultivate undeveloped markets in Asia, Unicharm merged companies in Vietnam and Myanmar. The M&A strategy allowed the company to have more than 50% share in Myanmar.

Diversify your market, not your business.
The Japanese adult diaper market grew to 140 billion yen in 2012, exceeding the baby diaper market. Unicharm has more than 50% in the adult diaper market. Since establishing a laboratory for the adult diaper market, the company has been developing the adult diaper market in coordination with medical and nursing-care facilities. These hardworking efforts made Unicharm successful in the adult diaper market from which P&G withdrew in 2007 and in which Kao is still struggling. This fact indicates the importance of diversifying your market by developing and sophisticating your products, instead of diversifying your business.

Establish and share the management objectives with employees around the world.
Unicharm has 20,000 employees around the world, of whom 80% are local people in foreign markets. For further growth in the global market, the company has to establish common recognition of the management objectives among all employees. For this purpose, the company introduced the management of resonance that ask every employee to think and work to creates results that exceed the simple addition of all employees. The SAPS management model was created for this purpose. S stands for schedule, A means action, P indicates performance, and the SAP returns to S (schedule). That is, the second S asks every employee to schedule next jobs and actions based on the past SAP. Ultimately, the SAPS model asks every employee to think by himself and act to develop the company. The keywords of the Unicharm management model can be summarized as follows:

Keywords to symbolize the Unicharm management model
Management of resonance
Every employee is asked to work in concert with others to exhibit unlimited power as if he creates resonance.
SAPS management model
Every employee is asked to observe the SAPS management model.
Enhancing communication through a social gathering
Every department holds a social gathering once a month at company expense to activate communication inside the department.
Unicharm way
Every employee is asked to carry a booklet in which Unicharm’s value and action guidelines are described.  

The above Unicharm case illustrates the strategy that a company has to take into consideration for business expansion in the global market. 

Is everything going well, little princess?

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