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Kao Case

1. How does Kao go about formulating its strategy? What are the advantages and disadvantages of this process? Kao went about formulating its strategy through integrating and enhancing its capabilities -mastery of technologies, efficient marketing and information systems through learning. Distinct creativity became a policy objective in all areas of research, production & sales, supporting their determination to explore and develop their own fields of activity. The organization was run “as a flowing system” stimulating interaction and the spread of ideas in every direction and at every level.

Kao’s global strategy was to develop local operations sensitive to each region’s characteristics and needs Advantages * Such a strategy made the company adept at inventing new markets, quickly entering emerging markets and shifting patterns of customer choice in established markets (e. g Sofina positioned itself as skin care instead of makeup) * Ability to obtain knowledge from all sources * More in touch with the consumer environment Disadvantages * Information leaks * Constant consultations may take a long time before the product can be launched.

For example, Sofina took 17 years before the vision was translated into a product. * The entire business becomes more fragmented as local operations will increasingly differ from the main operations 2. How has Kao been able to build a learning organization? Since the beginning, Kao had set out to build a learning organization. This started with Tomiro Nagase reorganizing Kao’s production facilities, advertising and planning department on the basis of what he had learned.

After Dr Maruta took over presidency, the organization was designed to run like a “flowing system” in a paperweight organization with a flat hierarchy- sharing of information horizontally instead of having it filtered vertically. This enabled the company to practice “biological self control”, allowing departments to help each other when anything goes wrong. Some initiatives implemented included the encouragement of small group activities to link ideas or discuss issues of immediate concerns. Employees learned through discussions, testing and investigating business ideas until something was learned.

Every individual was expected to coach, both to himself and everyone else. Every piece of new information was treated as a potential key to a new positioning or product. Same level of information was available to all. Kao managers processed the information and added value, transforming it into knowledge or wisdom. 3. What is KAOs core competence? Kao’s competence lay in its ability to integrate and enhance its capabilities -mastery of technologies (particularly that of information technology), efficient marketing and information systems through learning.

This enabled it to come up with new products ahead of its competitors. The edge that Kao had over others in Japan was its integrated learning capability. Other areas of competencies included the ability to introduce a continuous stream of innovative, high quality products. 4. How can Kao adapt its strategy to enable further internationalization? Kao can set up a committee to oversee the development of core products and core competencies much like that in Japan to share information.

This allows the coordination groups and committees to cut across the interests of the individual businesses and empower them to adapt quickly to changing opportunities. Allow employee/talent rotation to address talent shortage. Rotate employees among the various product divisions so that talent gets shared to address the issue of few human resource assets as compared to P & G. Employees will gain international exposure and also get to impart their experience when working in different areas. (pg 89: The Core Competence of the Corporation)

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