Other Recommendations
A part from the strategies, we have obtain through the use of the SWOT Analysis, there are other recommendation I would like to make. First of all, the company should take steps to look into its Financial Management. In sight of the company’s optimal capital structure in line with the Kao’s launch of the EVA program. High gearing might provide cheap capital to the firm. However the trade off is higher financial risk. Higher financial risk would cause shareholders demand for an additional risk premium. This is an increase to the cost of capital.
Moreover, in Appraising projects just considering cost of capital and the usage of Net Present Value Method or Internal Rate of Return would be sufficient. Current there is a new method called the Project Wealth Creation Profile. The idea is that projects are competing for capital and projects should be awarded according to the following criteria: –
(a) Financial Value
(b) Cash Flow Profiles
(c) Strategic Value
(d) Stakeholders Value
(e) Risk Profile
(f) Management Motivation
As capital is scarce, the company should employ careful steps in deciding how to spend its capital.
As for the operation side of Kao Corporation, it has yet to implement Just in Time stocking system. A lot of Kao’s Japanese counterparts have already adopted JIT. JIT can provide Kao with stockholding cost savings. This would be inline with Kao’s ongoing operational reforms and Total Cost Reduction efforts.
In the area of marketing, Kao should develop a catchy jingle to accompany a unique advertisement, which will be shown repetitively. The aim is to have high Brand Recall Rate in the minds of consumers. Then at the point of sale or high traffic outlets, supporting promotional tools such as promoters and shelf fliers should be use. By combining high recall rate and supporting promotional tools at the point of sale, Kao’s sales can be increase. This is because most of the time, the decision to buy a fast moving consumer product like shampoo is made at the point of sales. Moreover, as Islamic countries like Malaysia and Indonesia emerge as the big markets of tomorrow, there is an opportunity for Kao Corporation to use its R&D capabilities that would be specially designed for the Islamic society. Zaitun in Malaysia has proven that this strategy can be very successful.
In addition to obtain further cost reduction, further product standardisation should be adopted. Standardisation of products can give the company more economies of scale. Currently Kao does not standardise its products. Most new products are first launched in Japan then later brought over to the South East Asia region. By launching its new products simultaneously worldwide, it can take advantage of greater economies of scale and faster market penetration.
One last area I would like to make some recommendations on is to use cross-functional management. Currently Ford carries out this practise. By combining all the department of the organisation to perform a project, greater speed and flexibility can be achieve. There is also cost saving in this method of project management. Better understanding can be achieve among members of the different divisions and also decisions are made faster with less bureaucracy.
Conclusion
Kao Corporation is basically a strong and profitable company. It has sound financial fundamentals and has been largely successful in marketing its product both domestically internationally. The strategies that Kao Corporation employs in its bid to achieve profitable growth are admirable. However, Kao still has its weaknesses. These weaknesses can be overcome through the use of an appropriate strategy.
Now, Kao Corporation is moving into the new millennium with new challenges to face and new opportunities to grasp. The external environment is changing rapidly. Changes are not just led by the Internet but also changes in people and their way of life. People have new needs All of Kao’s competitors are well aware of the external environmental changes. Competition is intensifying and in order for Kao to emerge successful, it has to carefully analyse and formulate the appropriate strategies