SK-II: Damage Control in China, Case Summary
Major Strategic Challenges:
P&G´s miscommunication had led SK-II to be torn by political debate, treated not on a fact basis. Rather, SK-II became a symbol of consumer dissatisfaction in foreign cosmetic overpower in China, and public hysteria was machinated as a tool (also in supporting nationalistic trade wars between China, the U.S., and Japan).
Negative effects were looming on P&G´s other brands in China and the SK-II brand in other markets in which it was still sold.
As a reaction to AQSIQ test results showing chromium and neodymium traces in SK-II products, P&G had responded by denying the authority´s allegations, and aligned it´s consumer response/refund strategy accordingly. These were mistakes soon escalating into customer care dissatisfaction, harming the brand, and ultimately leading to SK-II´s withdrawal from China.
Suggest a course of action for P&G with the SK-II brand in China.
P&G had reacted quickly, withdrawing the nine allegedly unsafe products in 4 days, and halting sales of the entire SK-II product range through its own booths only 8 days after the original test announcement. Similarly, some of its partner distributors such as Mannings, SaSa, and 4 out of 13 Beijing department stores had revoked the product from shelves, or given into a refund or recall policy.
However, SK-II booths in major department stores and all 1st and 2nd tier cities created an extensive retail network, which had taken time to create. Despite the SK-II brand image suffering a hard blow in value and sales accordingly diminishing to near zero, the less intangible asset of retail locations was still in place. If P&G would decide not to use this for SK-II, the negotiated booths and staff of 400 should be transferred under another P&G brand, to avoid further losses and actualize on the presence. Even those department stores bitter about having been involved with...
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