SUMMARY OF CASE

 In 1887 Tomiro Nagase opened a store in heart of Tokyo named KAO.

 They sell soap and other pharmaceutical products.

 In 1890 they introduce first product manufactured by them, Kao soap.

 After they introduce other products like detergents, shampoos etc.

 In 1964 Kao moved into Taiwan & Thailand to enter the market of Asia.

 In current they have 550 products in 9 product lines.

 They make continues growth and profit, also there stock price has soared despite
the overall decline of the Japanese stock market.

 In 1998 decided to withdraw Floppy business because the growth is no longer in it

because of so many players.

 Kao reached at this position with living idea that “satisfying consumer will bring
the company success”.

 Kao done all this with simple formula of providing excellent value and
outstanding performance.

 Kao works on 5 basic principles based on Kao’s slogan and mission.

 Product innovation is a key focus for Kao corp.

 All departments are interlinked or connected with each other.

 Market research is the core activity or key activity done by them.

 Kao’s greatest strengths lies in its “Brand Power”.

 Kao’s four brands were listed in the top 20 of the “Brand Power Ranking” done
by “Nikkei Research Institute of Industry and Markets”.

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MISSION, VISION, VALUES & PRINCIPLES

Mission is "to strive for the wholehearted satisfaction and enrichment of the
lives of people globally" through the Company's core domains of
cleanliness, beauty, health and chemicals.

VISION
The vision of Kao Corporation is “To be closest to consumers or customers.”

VALUES
Kao Corporation accomplish the mission of the company by drawing
Creative and innovative strengths and integrity. Fully committed to the
mission, all members of Kao companies are working together as a single
corporate force to win the loyalty and trust of their customers.

PRINCIPLES

There are five basic Principles that Kao’s management uses as a guide in
devising business strategies in the industry. The principles are

 Ensure Customer’s wholehearted satisfaction worldwide.

 Sustain profitable growth and respond to the trust of stakeholders
 Leverage the abilities of individuals into powerful corporate force
 Encourage close harmony with the environment and the community

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The principles of Kao Corporation are based on the premise of Koa’s slogan
and mission statement and its focus on the customers.

KAO’S SLOGAN

Living by the idea that satisfying consumers will bring the company success
in the market. Kao has lived by a simple slogan, “Create Products of superior
quality that provide consumers with wholehearted satisfaction”.

PRODUCTS OF KAO CORPORATION

Kao is the largest household product manufacture in Japan and Boats over
550 different products worldwide, in 27 different countries. The Product
family includes

 Personal care Products

 Cosmetics
 Laundry
 Cleaning products
 Hygiene Products
 Bath additives
 Food Products
 Information technology
 Chemical Products

PRODUCT QUALITY

In addition to building a strong brand, Kao aim to satisfy its consumers all
around the world. As we know, Kao is dependent on repeat purchase and by
satisfying its consumer, Kao stands to benefit from repeat purchase. A
satisfied consumer would tell 3 people about his/her bad experience. In line
with Kao’s globalization goals, Kao Corporation ensures that the quality of
Kao products all around the world is of similar standards. This is so that
consumer can rely on Kao's products anywhere around the world.

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Strong Presence in Japanese Market
No.1 Brands Total 50 consumers
Products brands

Brands Category
Attack Laundry detergent
Emarl Laundry detergent for wool 62%
Humming Fabric softener
Haiter Bleach
Keeping Laundry starch
Magiclean Household cleaning detergent
Quickle Floor cleaning kits
White Bar soap Sales generated from
Bioré Facial cleanser No.1 brands (FY2002)
Biore U Body cleanser
Cape Hair splay
Liese Hair styling agents
Clear Clean Toothpaste
Econa Functional cooking oil Overall market
： : share
Of Kao in
consumer
Products category
26-28% (Data source: Kao)

BUSINESS PROCESS OF KAO CORPORATION

The Kao Way is shared by all Kao Group members as our corporate
philosophy. Based on The Kao Way, members of individual Kao
Group companies and divisions that operate on a global basis are
engaged in business activities aiming at Yoki-Monozukuri that will
really satisfy our customers and enable us to share our joy with them.

The Kao Corporation has following characteristics

 Kao has world class information network.
 It has 24 Hrs. services at any destination.
 It has hot selling items on shelves faster
 Kao keeps smaller inventories than competitors
 Maximum flexibility

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 Research and
Development

Marketing

Production

Distribution

W.S.

Retailer

Customer Sales Customer

Dissatisfact satisfaction
ion

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RESEARCH AND DEVELOPMENT

Kao's Research & Development Division strives to develop innovative

products with the keyword "integration of diversity." Two research
functions, namely the Product Development Research Laboratories and
Fundamental Research Laboratories, cooperate and flexibly form a
research team in accordance with research subjects. Through such
matrix operations, expertise in each field can be cross-functionally
utilized in a dynamic and flexible fashion. This integration leads to the
development of Yoki-Monozukuri that achieves consumer satisfaction.

Domain of Research and Development Activities

Matrix Management of R&D Division

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MARKETING

Customer-focused Yoki-Monozukuri is the foundation of Kao’s marketing.

We will explore customer needs, meet them with innovative technologies,
and create new products. We will then correctly convey the benefits of
newly-born products and propose the creation of selling spaces where
customers can easily select and buy the products. Individual divisions will
cooperate in working on these consistent activities and, consequently, we
intend to propose new values that respond to the change of the times.

Role of Business Divisions

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PRODUCTION AND DISTRIBUTION

Production Centers have been established across eight production bases in

Japan to formalize the production system which reinforces cooperative
operations between each production base and Business Division. Taking
operations from the purchase of raw materials through to sales to retailers
and consumers as a single process flow, efficient operations are promoted
to keep proper stock by eliminating stock shortage and excess. Kao
thoroughly pursues high quality and low costs and strives to swiftly respond
to the rapidly changing market environment to realize Yoki-Monozukuri.

Kao's Supply Chain Management

SALES

Kao's unique sales system consistently enables detailed follow-up to

maintain reliable delivery of Kao's products to consumers nationwide in
Japan. Utilizing the information and distribution network, and expertise
related to effective product display at retailers and area marketing, the
Company fully exhibits its collective strengths. From consumers'
perspectives and retailers' standpoints, the Company promotes solution-
proposing sales activities to identify and solve retailers' issues in
cooperation with them.

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 Sales System for Consumer Products

Supportive Sales Activities

1,000
Net Sales 140
900
Consumer Communications
Operating Income
800 120

700 NetitIncome
Kao regards as extremely important to take consumers’ “voices” seriously,
100
reflect such “voices” in its corporate activities to facilitate the development and
600
improvement of its products, and to pursue “Yoki-Monozukuri” even more
rigorously. To embody this concept, the Kao Consumer Communication Center 80
500
functions to enable consumers to have direct contact with our company.
400 60

300
Roles of the Kao Consumer Communication Center 40
200
20
100
9
0 0
81

83
84

86

92
93

95

98

01
02
Y80

82

85

87
88
89
90
91

94

96
97

99
00

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 “Accurate, Quick and Kind” Responses to Inquiries
The Kao Consumer Communication Center receives approximately 120,000
inquiries a year (in 2005). While most of these inquiries (about 80%) are via
phone, recent years have seen an increase in e-mail inquiries. Information
from consumers ranges widely from feedback on our products, to inquiries
about how to use our products, to comments. The center provides “accurate,
quick and kind” responses to these calls.

1. “Kao ECHO System” Supporting the Activities of the Kao Consumer

　　 Communication Center
2. Using Consumers' Voices to Promote “Yoki-Monozukuri”
3. Providing Information and Consumer Interaction
4. History of the Kao Consumer Division

TCR ACTIVITIES

We are implementing company-wide management innovation activities that

create value in an effort to achieve profitable growth. The first TCR activity,
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 which commenced in 1986 and was termed “Total Cost Reduction,” was an
effort to directly reduce costs. We then implemented the second TCR
activity, termed “Total Creative Revolution,” which reviewed our
organizational operation and working procedures across-the-board so that
we could display creativity. Since 2000, we have been engaged in the third
TCR (VCR) activity, termed “Value Creating Revolution,” as a management
innovation activity to create value.

Competitive BRANDS

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Probably one of the greatest strength lies in its “brand Power”. According to
the Nikkei Research Institute of Industry and Markets brand power is
determined by a power ranking survey of consumers opinion This survey
takes a look that 170 leading brands in the Japanese market in 19 different
product categories and examines factors like brand recognition, perception
of the product’s quality, and feelings of loyalty to those brands.

According to this survey, Kao’s laundry in 1987, Attack had highest rating.
In addition to this, Kao had four brands that were listed in the top 20 of the
“Brand power ranking”. These products range from shampoos and
conditioners, dish washing detergents, sanitary napkins and cosmetics.

Brand Power Ranking

RANK BRAND NAME PRODUCT POINTS COMPANY
CATEGORY NAME
1 Attack Laundry 83 Kao
detergent Corporation
2 Kleenex Tissue Paper 78.3 CRECAI
Corporation
3 Cup noodle Instant cup 75 Nissin food
noodles Products co.
ltd
4 Whisper Sanitary 73.2 Procter &
napkin Gamble far
east, Inc
5 Asahi Super Dry Beer 69.6 Asahi
Breweries ltd
6 Pabron Cold 68.6 Taisho
medicine Pharmaceutical
co. ltd
7 Handy cam Video 67.2 Sony
camera corporation
8 Meiji Milk Chocolate 67 Meiji Setha
Chocolate Keisha Ltd
9 Merit Shampoo- 66.9 Kao
conditioner Corporation
10 Kinin Ichiban Beer 66.8 Kirin Brewery
Shibori com ltd
11 Lulu Cold 65.7 Sankyo co. ltd
Medicine
12 Family fresh Dishwashing 65.2 Kao
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 detergent Corporation
13 Laurier Sanitary 65.2 Kao
Napkin Corporation
14 Kirin larger beer Beer 64.4 Kirin Brewery
com ltd
15 Georgia Canned 64.3 Coca Cola ltd
Coffee
16 Aisaigo Washing 63.8 Matsushita
Medicine Electrical
Indus Co. Ltd
17 Kirigamine Air 63.2 Mitsubishi
Conditioner Electric
Corporation
18 Sofina Cosmetics 63.2 Kao
Corporation
19 Scottie Tissue Paper 62.4 CRECAI
Corporation
20 Elleair Tissue Paper 61.8 Daio Paper
corporation

The other competitors like McKesson in Health Care Products

BUYER-SELLER RELATIONSHIP

Buyer-seller relationship is dyadic interaction- at both firm and individual

level [power-dependence-cooperation-expectation-closeness]-interaction is a
series of short-term social interaction that are influenced by long-term
business processes that binds the firms together.

Buyers-sellers developed trust & friendship over time supported by good

quality so products & services-firms strive to create these relationships-
acceleration here creates a stressful environment-performance expectations
have increased making successful RM more difficult-became strategic as
firms needed to achieve goals-the range remained unexplored in the long-
term.
Buyers are developing single-source suppliers with view to increase quality-
reduce inventory-develop JIT-decrease time to market –the intensity of
which can’t be accomplished with multiple sources.

In Kao Corporation they communicate with their buyers through Echo

System. They focus on group interviews, calls, and letters to measure
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customer satisfaction which is faster than M.R. Survey. This gives results in
2 weeks after the product launch. Also sales are measured. This gives you
the idea about the buyers and the effectiveness of the products on the buyers
and then changes the product as per the need of the buyer.

FOURTEEN RELATIONSHIP VARIABLES

• Commitment
• Trust
• Cooperation
• Mutual goals
• Interdependence/power imbalance
• Performance satisfaction
• Comparison level of alternative
• Adaptation
• Non-retrievable investments
• Shared technology
• Summative constructs
• Structural bonds Social bonds
• Situational factors

RECOMMENDATION

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 There are many Big Emerging markets, particular in the Asian region,
which are developing countries Kao can expand its operations into
these markets.

 Kao has the capital and with its well-established brand name, the
company should be able to successfully penetrate these untapped
markets.

 As we know one of Kao’s major weaknesses is the many levels in the

distribution channel. This can be overcome through the use of the
Internet and its E-commerce capabilities. E-commerce will link Kao
directly to the consumers and this in turn will make it possible for Kao
to reduce its logistic cost, as there would be no more middlemen cost.

 Kao Corporation should look into appropriate diversification plans,

which could be related or totally unrelated to Kao’s core
competencies.

 As for the intensifying competition, Kao can try to merger or acquire a

competitive firm. The acquired firm should be one that creates value
for Kao Corporation. This would

 As for the intensifying competition, Kao can try to merger or acquire a

competitive firm. The acquired firm should be one that creates value
for Kao Corporation.

 Strategic alliances can also be used to reduce the threat of buyers. By

forming alliances with major retailers, Kao and retailers can stand to
benefit from better understanding of each other’s needs and
difficulties. Then together find a productive solution to the problem.

 As for the operation side of Kao Corporation, it has yet to implement

Just in Time stocking system

 Product standardization should be adopted. Standardization of

products can give the company more economies of scale.

BIBLOGRAPHY
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• Website of Kao Corporation Ltd, Japan
• Notes of Prof. Pherwani
• Website of slash document BETA

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