In 2000 Durex condoms went on sale in Japan for the first time after SSL International, the
Question:
In 2000 Durex condoms went on sale in Japan for the first time after SSL International, the manufacturer and distributor of healthcare products, announced it is to expand its operation in the country. SSL International was formed in June 1999 by the merger of Seton Scholl Health Care and the London International Group (LIG). Durex was the highest-selling condom brand in the world, available in more than 140 countries, and with approximately 22 per cent of the global branded condom market. The Durex brand name was registered in 1929, with the name Durex derived from durability, reliability and excellence.
Generally, the SSL managers ran a brand-oriented strategy: ‘We want Durex to be the Coca-Cola of the condom world.’ The move into Japan was made possible by the 1999 merger. Seton Scholl has its own presence in Japan, with marketing and distribution networks set up, whereas LIG did not. Through Seton Scholl Japan, it already distributed Scholl products such as shoes and other footwear products throughout the country as well as surgical gloves, which were manufactured by the old LIG company.
SSL terminated a long-term distributor contract with Okamoto, the largest supplier of condoms in Japan, freeing it to vie for a share of the country’s 200 million condom market. The chief executive said, ‘It now makes sense for us to take control of our own destiny in Japan.’ SSL aimed to have won 5 per cent of the market within five years, generating £10 million worth of new revenue. SSL has bought out its partner in Seton Scholl Japan, giving it full control.
The CEO added: ‘We saw more prospect of generating value for shareholders by doing it alone in Japan.’
He said that Durex was already well known as an international brand in the country.
The Japanese market for condoms was said to be one of the world’s largest, with annual turnover worth about £200 million. It was dominated by Okamoto (42 per cent market share) and other locally produced products. The Japanese market was as large as it became because until June 1999 the contraceptive pill was banned, and most people had to rely on condoms for birth control. Experts said that it will still take one or two generations before the pill is widely used in Japan.
One reason it took 40 years for the contraceptive pill to be legalized in Japan was lobbying by condom-makers against its introduction. Japanese health officials said they were concerned that use of the pill, instead of condoms, would spread sexually transmitted diseases.
Questions
1. What were the main motives for SSL establishing its own distribution channels for condoms in Japan?
2. What were the major barriers to SSL reaching a higher market share for condoms in Japan?
Step by Step Answer:
1 What were the main motives for SSL establishing its own distribution channels for condoms in Japan SSL had several primary motivations for establishing its own distribution channels in Japan a Control Over Business Operations Its clear from the passage provided that SSL wanted to take control of their own destiny in Japan They terminated their distributor contract with Okamoto which allowed SSL to pursue their own marketing and distribution strategies b Increase Market Share SSL aimed to secure 5 of the market within five years which would translate to 10 million in new revenue Having their own distribution channels would give them a better opportunity to reach their target market and implant their product as a trusted brand c Leverage Existing Presence in Japan Following the 1999 merger SSL already had a presence in Japan through Seton Scholl They had existing marketing and distribution networks set up which could be leveraged for the distribution of Durex products d Foster Brand Recognition The managers at SSL wanted Durex to be as recognizable as CocaCola in the condom market By establishing their own distribution channels they could control how and where their product is marketed 2 What were the major barriers to SSL reaching a higher market share for condoms in Japan The major barriers SSL faced while trying to achieve a higher market share in Japan were a Competition Okamoto endured strong market presence in Japan with a 42 market share The condom market in Japan was predominantly populated with locally produced products which could be difficult for an international brand like Durex to penetrate b Cultural Factors Historically the contraceptive pill was banned in Japan making the use of condoms more prevalent However the legalization of the pill may cause a shift in contraceptive methods and reliance on condoms may reduce over time c Lobbying Efforts by Condom Makers It took 40 years for the contraceptive pill to be legalized in Japan Part of this delay was attributed to lobbying by condommakers These lobbying efforts could potentially work against SSLs attempts to establish ...View the full answer
