Sample B Business Management Ee

IB DIPLOMA PROGRAMME 2017-2018
Title:
Shiseido Americas’s acquisition of Gurwitch Product LLC in The United States
Research Question:
HOW SUCCESSFUL WAS SHISEIDO AMERICAS’S ACQUISITION OF “GURWITCH
PRODUCT LLC” IN UNITED STATES AS A GROWTH STRATEGY?
Session: November 2018

IB subject of the essay: Business Management
Word count: 3773
1
Table of Contents
1. Introduction.............................................................................................................................................3-7
2. Methodology................................................................................................................................................8
Secondary Research...................................................................................................................................8
Theoretical Framework.............................................................................................................................8
3. Limitations...................................................................................................................................................9
4. Shiseido Group visions and aims.......................................................................................................10-11
5. Acquisitions as a growth strategy......................................................................................................12-14
6. Market findings....................................................................................................................................15-19
6.1 Background Of Situation In Beauty Industry In United States...................................................15-16
6.2 Factors That Influence Women Look For When Buying Makeup In United States...................17-18
6.3 Shiseido Americas’s Market Share Of Other Business Segments Of Shiseido...............................19
7. Quantitative analysis...........................................................................................................................20-21
7.1 Financial Performacne Of Shiseido Americas Before And After Acquring Gurwitch...............20-21
8. Qualitative analysis..............................................................................................................................22-32
8.1 Ansoff Matrix Of Shiseido Americas Acquisition Strategy........................................................22-23
8.2 Pest Analysis Of Multinational Companies Operating In United States....................................24-28
8.3 Swot Analysis Of Shiseido Americas..........................................................................................29-31
9. Is Acquisition Of Gurwitch Product LLC Successful Or Not For Shiseido Americas?..............32-38
10. Conclusion................................................................................................................................................39
11. References And Bibilography..........................................................................................................40-49

1. INTRODUCTION
Shiseido is a Japanese multinational company specializing in personal health care and cosmetic
products originating from Ginza, Tokyo. It is one of the oldest cosmetic company which
produces skin care, hair care, fragrance and cosmetics.1
Being Number 1 Among Japanese/Asian cosmetics manufacturers for annual sales in the beauty
category2, Shiseido plans to expand widely and to increase their customer base and profits and
decided to take on the expansion strategy of acquisitions.
Shiseido is the fourth largest company in the US beauty market behind Estee Lauder, L'Oreal
and LVMH.3
Shiseido built 25000 franchised outlets in Japan, in stand-alone or department stores, addition
retail outlets are added internationally4
1
Reference for Business, www.referenceforbusiness.com/history2/14/Shiseido-Company-
Limited.html. Accessed on 23 August 2017
2
Shiseido Annual Report 2016. Shiseido Company, Limited, 2016, Shiseido Annual Report
2016, www.shiseidogroup.com/ir/library/annual/pdf/2016_12/anu00002.pdf. Accessed on 26
July 2018
3
“Cosmetics Giant Shiseido Blames Yen for Lower Profit Outlook.” BBC News, BBC, 10 Aug.
2016, www.bbc.com/news/business-37033832. Accessed on 5 September 2017
4
“Shiseido Company, Limited.” History of Shoe Carnival Inc. – FundingUniverse,
www.fundinguniverse.com/company-histories/shiseido-company-limited-history/.
Accessed on 15 September 2017
Shiseido Group owns 85 companies as of 31 December 2017, having a capital of 64.5 Billion
Yen5, Net sales of 1,005.1 billion Yen 6 with 37438 employees. 7
Figure 1 Information about Shiseido Group 8
Figure 1 shows a summarized version of an introduction and details about Shiseido group and
the highlights of their operations.
5
Shiseido Co., Ltd. “Shiseido at a Glance.” News Release | Shiseido Group Website,
www.shiseidogroup.com/company/glance/. Accessed on 15 September 2017
6
“Shiseido: Net Sales 2017 | Statistic.” Statista, www.statista.com/statistics/739778/shiseido-
net-sales/. Accessed on 1 October 2017
7
“Shiseido on the Forbes Global 2000 List.” Forbes, Forbes Magazine,
www.forbes.com/companies/shiseido/. Accessed on 18 April 2018
8
Shiseido Co., Ltd. “Vision and Values.” News Release | Shiseido Group Website,
www.shiseidogroup.com/company/vision/. Accessed on 28 March 2018
Shiseido’s share of sales of prestige brands make up of 42%, while cosmetics make up 30%,
fragrant makes up of 11% and personal care 9%. Becoming global has an impact on Shiseido
sales since 57.1% of it are from outside of Japan. 9
Their current CEO/President/ Representative director is Masahiko Uotani since 1st April 2014 10
Shiseido has a medium to long term strategy called “Vision 2020” to actively change and quickly
create new things while providing more valuable products to customers. Being a company which
responds to expectations of consumers while fully utilizing their technical capabilities, global
business deployment capabilities and the ability to promote a cosmetic culture. 11
Shiseido group has different business segments - Travel and Retail, EMEA (Europe, the Middle
East and Africa), Americas, Asia Pacific, Professional, Japan, China and others.12
Shiseido Americas Corporation is a subsidiary of Shiseido Group, Led by President and CEO,
Marc Rey. Shiseido Americas Portfolio includes many prestige makeup brands and fragrances.
9
Shiseido Annual Report 2017. Shiseido Company, Limited, Shiseido Annual Report 2017,
www.shiseidogroup.com/ir/library/annual/pdf/2017_12/anu00001.pdf. Accessed on 9
March 2018
10
“Stocks.” Bloomberg.com, Bloomberg,
www.bloomberg.com/research/stocks/private/person.asp?personId=9048043. Accessed on
9 March 2018
11
Shiseido Formulated Medium-to-Long Term Strategy "VISION 2020" . Shiseido Company,
Limited, 2014, Shiseido Formulated Medium-to-Long Term Strategy "VISION 2020" ,
www.shiseidogroup.com/ir/strategy/pdf/news20141217_e.pdf. Accessed on 27 March
2018
12
Shiseido Co., Ltd. “Shiseido at a Glance.” News Release | Shiseido Group Website,
www.shiseidogroup.com/company/glance/. Accessed on 9 March 2018
It is headquartered in New York City, employing more than 5000 people in USA, Canada and
Latin America.13
In 2016, Shiseido’s Americas acquired Gurwitch Products LLC based in Houston, Texas to
revive sales after their shares fell by 7.5%14. Gurwitch Product LLC develops and manufactures
cosmetic, skincare, body and bath product and fragrance products. Gurwitch Product LLC owns
Laura Mercier and RéVive Skincare. 15
Laura Mercier is launched in 1966 by Laura Mercier, a famous makeup artist to benefit Woman
of different ages and different skin types. The products makeup of colors and products to satisfy
the needs of her customers, available in 27 countries. 16
RéVive is a luxury skincare line developed by Dr. Gregory Bays Brown, a plastic surgeon. The
products are inspired by the Bio Renewal technology to restore the skin, making it have a
youthful look.17
13
“Shiseido AMERICAS | Shiseido Group Website.” News Release | Shiseido Group Website,
www.shiseidogroup.com/americas/. Accessed on 16 April 2018
14
2016, www.bbc.com/news/business-37033832. Accessed on 14 April 2018
15
Bloomberg.com, Bloomberg, www.bloomberg.com/research/stocks/private/snapshot.asp?
privcapid=1001890. Accessed on 6 April 2018
16
“Laura's Story.” Laura Mercier, www.lauramercier.com/lauras-artistry-2/. Accessed on 5
August 2018
17
“Our Story.” RéVive Skincare, reviveskincare.com/pages/our-story. Accessed on 5 August
2018
Acquisitions is an important role to Shiseido Americas as they acquired Gurwitch Products LLC
for "making every effort to become a global beauty company... with its roots firmly entrenched
in Japan"18
Acquisitions caused Shiseido Americas to be successful through enhancing their product
portfolio and an increase in net sales even though that as both companies are reputable also
thought there might be a decrease in the operating income and margin. Therefore, acquisitions
have advantages and disadvantages which is why I plan to analyse about hence the research
question “HOW SUCCESSFUL WAS SHISEIDO AMERICAS’S ACQUISITION OF
“GURWITCH PRODUCT LLC” IN UNITED STATES AS A GROWTH STRATEGY?”
Will be proposed and discussed analytically. It is essential because it will look into whether
Shiseido Americas’s acquisition of Gurwitch Product LLC (addressed as Gurwitch throughout
the essay) if it was successful or not.
18
2016, www.bbc.com/news/business-37033832. Accessed on 1 October 2017
2. METHODOLOGY
SECONDARY RESEARCH
- Using the internet to find Shiseido Americas’s annual report on the Shiseido group to see
how the financial performance have been affected from acquisitions
- Searching background information on the internet about the acquisition of Gurwitch
Product LLC and the effect of it after
- Context and in-depth analysis about acquisitions to understand the process and find
relevant information on it using the Business Management IB diploma textbook and
searching online
THEORETICAL FRAMEWORK
- SWOT analysis to identify the strengths, weakness, opportunities and threats of a
Shiseido. The opportunities and threats that Shiseido should be aware of during the
acquisition of Gurwitch
- ANSOFF MATRIX to understand what kind of strategy acquisition is to evaluate the risk
factors
- PEST factors of United States for Shiseido to be aware of when the acquisition was
taking place place in United States
- Force field Analysis to evaluate the advantages and disadvantages of acquisition of
Gurwitch Product LLC

3. LIMITATIONS
• Word limit makes further research and analysis impossible
• Cannot use primary research hence cannot have first-hand data
• Future financial data does not take into account external factors that can affect the
business
UNRESOLVED QUESTIONS
• What kind of external factors can have a significant change in Shiseido’s growth
strategy?
• What additional measures must be taken when acquiring companies in United States?
4. SHISEIDO GROUP VISIONS AND AIMS
Shiseido’s mission and aims is “to inspire the life of beauty and culture, achieving a sustainable
society which makes people happy through beauty.” 19
They curated “Vision 2020”, released in 2014 December, enabling a sustainable growth for the
next 100 years with aims with a company full of energy, overflowing with youthfulness, the
younger generation adores. Therefore, Shiseido’s acquisitions will result in stronger brand image
and having more youthful brands to association to the Shiseido Brand name. 20
Figure 2 Expect Sales Target when Vision2020 is implemented 21
19
Shiseido Co., Ltd. “Vision and Values.” News Release | Shiseido Group Website,
www.shiseidogroup.com/company/vision/. Accessed on 8 August 2018
20,21
www.shiseidogroup.com/ir/library/annual/pdf/2016_12/anu_sec03.pdf. Accessed on 5
September 2017
Figure 322 CAGR = Compound annual growth rate
Figure 2 and 3 show that vision 2020 and different strategies implemented, one of them include
acquisitions, the sales would be expected to rise.
Shiseido can increase their global presence, and have as strong brand reputation from
acquisitions, especially with the growing market and demand for prestigious makeup brands
which serves to bring the best quality for many.23
22
www.shiseidogroup.com/ir/library/annual/pdf/2016_12/anu_sec03.pdf. Accessed on 1 October
2017
23
“Shiseido Americas Announces Agreement to Acquire Gurwitch Products.” William Lyon
Homes Announces Agreement to Acquire RSI Communities, a Southern California and
Texas Based Homebuilder | Business Wire, 2 June 2016,
www.businesswire.com/news/home/20160602006426/en/Shiseido-Americas-Announces-
Agreement-Acquire-Gurwitch-Products. Accessed on 1 October 2017
5. ACQUISITIONS AS A GROWTH STRATEGY
Acquisitions refers to a takeover in order to secure market share, revenue and man force.24This
strategy has been adapted by Shiseido, and they are one of the first Asian brands to do so. It
serves more than 1 purpose ; gain an easy entry into the market helped Shiseido to gain customer
acceptance 25
Acquisitions are inorganic and external growth, a faster way to grow and evolve, as well as a
good strategy as it eliminates competition. Companies acquired by Shiseido must be up to date
with the consumer’s changes and can spread ideas so that Shiseido is able to benefit from it.;26
However, acquiring companies has many different risks involved like conflicts because when the
acquisition of western companies may have different work cultures that may not suit the
Japanese style of running a business like Shiseido’s. There can be increased debt, as well as
market saturation. Since Shiseido’s acquiring companies in the same industry of the same place,
there may not be an increased customer base. 27
24
“Growth Through Acquisitions | Angel Investor Report.” Angel Investors As Company
Mentors | Angel Investor Report, www.angelinvestorreport.com/growth-plans-investment-
through-acquisitions.php. Accessed on 2 January 2018
25
“Shiseido - The Iconic Asian Cosmetics And Skincare Brand.” Martin Roll, 9 Jan. 2018,
martinroll.com/resources/articles/asia/shiseido-the-asian-cosmetic-brand/. Accessed on 2
January 2018
26
“Business Management.” Business Management, by Paul Hoang, IBID Press, 2014, pp. 82
Accessed on 4 January 2018
27
Johnston, Kevin. “The Disadvantages of a Business Acquisition.” Your Business, 16 Apr.
2018, yourbusiness.azcentral.com/disadvantages-business-acquisition-11688.html.
This will explain why the net sales in Europe, Middle East and Africa decreased by 8.1%.28
Through acquisitions, Shiseido can benefit as they have knowledge on the market. It can be seen
as a promising decision for Shiseido as in Japan, their net sales increased by 2.9% on the year on
year percentage change, in China it increased to 11.4%, Asia Pacific increased by 7% and United
States has increased by 8%. 29
When Acquiring Gurwitch, Marc Rey, CEO of Shiseido Americas laid out its goals for the
acquisition by saying “Laura Mercier and RéVive are highly complementary to Shiseido’s
portfolio of prestige brands, and we see significant opportunity to further strengthen our
combined position in the fast-growing prestige makeup market and around the world. We have
recently built terrific competencies in the Americas with our global Centers of Excellence for
Makeup and Digital, as well as our Americas Innovation Center. Together, all of our brands will
benefit from even greater innovation fueled by Shiseido’s unique scale, shared resources
platform and global footprint.” 30 As a result, acquisitions as a growth strategy is a common in
many multinational companies like Shiseido. Growth has various factors on how it can be
28
December 2017
29
December 2017
30
Shiseido Co., Ltd. “Shiseido Americas Completes Acquisition of Gurwitch Products.” News
Release | Shiseido Group Website, www.shiseidogroup.com/news/detail.html?
n=00000000001968. Accessed on 10 December 2017
determined. 31However, this essay will focus on the growth through the measure of financial
performance and the brand awareness among consumers of how it will impact Shiseido
Americas.
Through Shiseido Americas’s acquisition of Gurwitch, it is already established that there can be
sharing of ideas through the acquisition, and it enhances Shiseido’s product portfolio on
prestigious brands.32
31
“What Is Business Growth? Definition and Meaning.” BusinessDictionary.com,
www.businessdictionary.com/definition/business-growth.html. Accessed on 10 October 2017
32
“Shiseido Americas Announces Agreement to Acquire Gurwitch Products.” William Lyon
Homes Announces Agreement to Acquire RSI Communities, a Southern California and
Texas Based Homebuilder | Business Wire, 2 June 2016,
Agreement-Acquire-Gurwitch-Products. Accessed on 3 August 2018
6. MARKET FINDINGS
6.1 BACKGROUND OF SITUATION IN BEAUTY INDUSTRY IN UNITED STATES
There are many different beauty companies internationally who have rich innovation ideas they
implemented in their products. Technology advancements enables a direct communication line
and direct contact with consumers, as well as focusing sustainability in the manufacturing
process and ingredients.33
Shiseido’s acquisitions led to increasing net sales and have a global presence, leading to an
increase in brand image. United States is currently the largest beauty market in the world,
expected for the beauty sector to rise from $80 Billion to $90 Billion by 2020, which represents a
45% gain over 10 years. “The US cosmetics market has shifted markedly to premium products,
as consumers are now looking for higher quality products at a variety of price points," said
Euromonitor analyst Amanda Hatzmark. "Cosmetics manufacturers can capitalize on this trend
by examining shifting consumer attitudes and considering the changes in the premium and mass
markets.” 34 The beauty industry is resistant to economic downturns and is still continuing to
33
Szalai, Ildiko. “How Beauty and Personal Care Companies Compete Strategically.”
Euromonitor International Blog, Euromonitor International, 20 Mar. 2018,
blog.euromonitor.com/2017/11/beauty-personal-care-companies-compete-
strategically.html. Accessed on 6 April 2018
34
Gleason-Allured, Jeb. “U.S. Beauty Sector Will Be Worth $90 Billion by 2020.” Global
Cosmetic Industry, www.gcimagazine.com/marketstrends/regions/northamerica/US-
Beauty-Sector-Will-be-worth-90-Billion-by-2020-387002581.html. Accessed on 6 April
2018
grow in revenue and in size.35 This can be seen as the United States beauty sales has increased to
$17.7 Billion, which is a 6 percent increase compared to 2016.36 This increase in sales has shown
that there is a rapid demand for beauty products.
35
“Beauty Industry Analysis 2018 - Cost & Trends.” Fast Casual Industry Analysis 2018 - Cost
& Trends, www.franchisehelp.com/industry-reports/beauty-industry-analysis-2018-cost-
trends/. Accessed on 9 April 2018
36
“U.S. Beauty Sales Continue to Rise.” License Global, 6 Apr. 2018,
www.licenseglobal.com/retail-trends/us-beauty-sales-continue-rise. Accessed on 9 April
2018
6.2 FACTORS THAT INFLUENCE WOMEN LOOK FOR WHEN BUYING MAKEUP IN UNITED
STATES
Figure 4 factors which are important to women when buying makeup in US 37
RéVive Skincare which is owned by Gurwitch, has a range of products from moisturizers to anti-
aging creams38. RéVive uses its products from Nobel Prize technologies, so the products are of
exceptional good quality.39 According to the the graph, most of the customers are concerned
37
“Brands and Luxury Cosmetics: Factors of Good Makeup Products According to U.S. Women
by Age 2017 | Statistic.” Statista, www.statista.com/statistics/722867/important-makeup-
features-among-us-women-by-age/. Accessed on 15 April 2018
38
“All RéVive Skincare Products.” RéVive Skincare, reviveskincare.com/collections/all.
Accessed on 19 April 2018
39
“Tengram Capital Acquires RéVive from Shiseido.” Beauty Packaging,
www.beautypackaging.com/contents/view_breaking-news/2017-11-21/tengram-capital-
acquires-revive-from-shiseido. Accessed on 19 April 2018
about quality of a product and RéVive skincare has fulfilled those requirements.
Laura Mercier, also owned by Gurwitch already has an established brand with loyal followers 40
fulfils one of the demand factors of “ brand”.
Therefore, acquiring Gurwitch which owns RéVive Skincare and Laura Mercier can help
complement Shiseido’s portfolios of prestigious makeup and skincare brands and even allow
Shiseido to have a more secure position in the current makeup industry, 41 since companies
owned by Gurwitch satisfies 2 most important factors that people look for when buying their
products.
40
Chapin, Adele. “Laura Mercier Was Just Acquired by a Beauty Giant.” Racked, Racked, 2
June 2016, www.racked.com/2016/6/2/11846500/shiseido-laura-mercier-revive. Accessed
on 21 April 2018
41
Shiseido Co., Ltd. “Shiseido Americas Announces Agreement to Acquire Gurwitch Products.”
News Release | Shiseido Group Website, www.shiseidogroup.com/news/detail.html?
n=00000000001945. Accessed on 23 April 2018
6.3 SHISEIDO AMERICAS’S MARKET SHARE OF OTHER BUSINESS SEGMENTS OF SHISEIDO
Figure 5 Shiseido's share of Net Sales from each business segment 42
Besides Japan, where Shiseido originally came from43, Shiseido Americas and China play a big
part of the net sales. This shows that Shiseido acquiring Gurwitch has a big impact on the net
sales as the Share of sales for Shiseido Americas has increased, allowing Shiseido Group to have
a higher market share and an increase in the year on year percentage change.
42
www.shiseidogroup.com/ir/library/annual/pdf/2017_12/anu00001.pdf. Accessed on 3 May 2018
43
“About Us | SHISEIDO.” SHISEIDO | Skincare, Makeup & Suncare,
www.shiseido.com/about-the-shiseido-brand.html. Accessed on 3 May 2018
7. QUANTITATIVE ANALYSIS
7.1 FINANCIAL PERFORMACNE OF SHISEIDO AMERICAS BEFORE AND AFTER ACQURING

GURWITCH
Figure 6 Financial Data before and after acquiring Gurwitch Product LLC 44
In 2016, Shiseido Americas has completed its acquisition for Gurwitch LLC. This acquisitions
proved disadvantages because comparing from 2015 and 2016, Shiseido Americas has higher net
sales but lesser operating profitability. The net sales have increased from 2015 – 2017 but the
operating income has decreased by 10.3. This is because profits that are made by Shiseido will
have to be invested in the acquisition. Their operating margin has also decreased by 6.5%.
44
August 2017
There will be an optimistic future for Shiseido as they will obtain more benefits in the long run
as Gurwitch make profits to pay back their debts since the future plan for Shiseido Americas to
boost the growth of Gurwitch companies in order to accentuate and promote the Shiseido brand.
From this, they aim to have a Net Sales of 130Billion Yen 45
45
www.shiseidogroup.com/ir/library/annual/pdf/2017_12/anu00001.pdf. Accessed on 1 September
2017
8. QUALITATIVE ANALYSIS
8.1 ANSOFF MATRIX OF SHISEIDO AMERICAS ACQUISITION STRATEGY
Existing products New products
Existing market Market penetration Product development
1. Shiseido Americas’s
acquisitions of
Gurwitch product
LLC uses the market
penetration strategy
New market
Market development Diversification
Table 1 SWOT analysis of the acquisition of Gurwitch Product LLC
Shiseido Americas’s decision to acquire has used the method of market penetration. This applies
to the acquisition because the beauty industry is ever growing and it can be useful as Gurwitch
already has established channels to supply their products to. 46 Market penetration is used when
companies such as Shiseido’s Americas acquire a company locally, which in this case is
46
“Using The Ansoff Matrix to Develop Marketing Strategy.” Oxford College of Marketing
Blog, 24 June 2018, blog.oxfordcollegeofmarketing.com/2016/08/01/using-ansoff-matrix-
develop-marketing-strategy/. Accessed on 13 July 2018
Gurwitch, with the same target market and with the existing products,47 and it is the lowest risk
strategy48. When acquiring Gurwitch, it can affect the quality of the product received.49
Competitors uses competitive pricing strategy to match prices. Shiseido must also do the same to
have a bigger advantage, however, this will lower the amount of profits.50 During the acquisition,
there can be unforeseen outcomes and external factors which Shiseido has to be aware of 51,
which can be seen under the PEST factors.
47
“Ansoff Matrix.” Use Case Diagrams - Use Case Diagrams Online, Examples, and Tools,
www.smartdraw.com/ansoff-matrix/. Accessed on 18 July 2018
48
Accessed on 14 July 2018
49
Investopedia. “How Does a Merger Affect the Customer?” Investopedia, Investopedia, 8 Apr.
2015, www.investopedia.com/ask/answers/040815/how-does-merger-affect-customer.asp.
50
Martin, Melanie J. “What Are the Disadvantages of the Market Penetration Strategy?” Small
Business - Chron.com, Chron.com, 26 Oct. 2016, smallbusiness.chron.com/disadvantages-
market-penetration-strategy-19339.html. Accessed on 19 July 2018
51
“Ansoff Matrix.” Product Life Cycle, www.quickmba.com/strategy/matrix/ansoff/. Accessed
on 22 July 2018
8.2 PEST ANALYSIS OF MULTINATIONAL COMPANIES OPERATING IN UNITED STATES
PEST analysis is a common used tool to analyze the political, economic, socio-cultural and
technological changes which can occur in a business environment.52
Figure 7 PEST diagram of what is mentioned below ; US = United States; F&D = Food and Drug
52
“PEST Analysis Identifying Big Picture Opportunities and Threats.” From MindTools.com,
Mind Tools, www.mindtools.com/pages/article/newTMC_09.htm. Accessed on 3 August
2018
POLITICAL
- United States rank 6th out of 190 countries for doing business easily53
- Japan share mutual respect with Americans54
- Many business regulations to protect employees rights and highlighting the importance
on sustainability 55
ECONOMIC
- Revenue of cosmetic industry in US is 62.46 Billion USD56
- Skin care products make up 37% of the cosmetics market57
- Fluctuating Economic Growth ( increased from 2014 to 2015, then decreased from 2015
to 2016, then increasing from 2016 to 2017)58
53
“Doing Business in United States - World Bank Group.” Doing Business in Switzerland -
World Bank Group, www.doingbusiness.org/data/exploreeconomies/united-states.
Accessed on 8 June 2018
54
Stokes, Bruce. “How Strong Is the U.S.-Japan Relationship?” Foreign Policy, Foreign Policy,
14 Apr. 2015, foreignpolicy.com/2015/04/14/united-states-japan-relationship-poll-
washington-tokyo/. Accessed on 8 June 2018
55
Holt, Mitchell. “Five Areas of Government Regulation of Business.” Small Business -
Chron.com, Chron.com, 30 June 2018, smallbusiness.chron.com/five-areas-government-
regulation-business-701.html. Accessed on 8 June 2018
56
“Beauty Industry: Revenue in the U.S. 2002-2016 | Statistic.” Statista,
www.statista.com/statistics/243742/revenue-of-the-cosmetic-industry-in-the-us/. Accessed
on 8 June 2018
57
Duncan, Eric. “Topic: Cosmetics Industry in the U.S.” Statista,
www.statista.com/topics/1008/cosmetics-industry/. Accessed on 8 June 2018
58
FocusEconomics. “United States Economy - GDP, Inflation, CPI and Interest Rate.”
FocusEconomics | Economic Forecasts from the World's Leading Economists,
FocusEconomics, www.focus-economics.com/countries/united-states. Accessed on 10 June
2018
SOCIAL
- United States’s population of 326 Million in 2018 with an 0.71% annual population
growth.59
- Beauty industry becomes more complex.
- Traditional Makeup was down 1.3% while independent brands increased up 42.7%60
- Food and drug administration has an active approach regulating cosmetic products 61
- English is the most commonly spoke language à easy communication62
TECHNOLOGICAL
- One of the higher ranked countries of internet freedom ( 4th )63
- United States has forefront enhancing, developing technologies64
59
“U.S. Population (LIVE).” Philippines Population (2018) - Worldometers,
www.worldometers.info/world-population/us-population/. Accessed on 15 June 2018
60
Kestenbaum, Richard. “How The Beauty Industry Is Adapting To Change.” Forbes, Forbes
Magazine, 21 June 2017, www.forbes.com/sites/richardkestenbaum/2017/06/19/how-the-
beauty-industry-is-adapting-to-change/. Accessed on 14 June 2018
61
“Emerging Challenges in the Cosmetics Market.” Nutraceuticals World,
www.nutraceuticalsworld.com/issues/2016-12/view_columns/emerging-challenges-in-the-
cosmetics-market/1484. Accessed on 14 June 2018
62
Burton, James. “The Most Spoken Languages In America.” WorldAtlas, WorldAtlas, 30 Dec.
2015, www.worldatlas.com/articles/the-most-spoken-languages-in-america.html. Accessed
on 13 June 2018
63
Gordon, Kyle. “Topic: Internet Usage in the United States.” Statista,
www.statista.com/topics/2237/internet-usage-in-the-united-states/. Accessed on 14 June
2018
64
“PEST Analysis of USA, the Largest Economy of the World.” PESTLE Analysis, 21 June
2016, pestleanalysis.com/pest-analysis-of-usa/. Accessed on 12 June 2018
Based on the PEST factors on multinational companies in United States, where Gurwitch is
based, Shiseido Americas would have looked into these factors to understand the background
information about United States and tackle any problems if needed.
Through political factors, United states rank 6th for doing business easily.53 Hence, it is not
difficult for Shiseido Americas to acquire Gurwitch. United States and Japanese’s political
relations are good and there is no conflict to go around between Shiseido Americas and
Gurwitch.54 They will put faith in the Japanese system, entrusting their American brand to them.
However, in United States, there are strict rules and regulations to abide when acquiring
Gurwitch about the employee rights and sustainability process.55
According to economic factors, United States has a billion-dollar makeup industry.56 Due to the
large industry, United States rarely run out of resources to provide for companies in the beauty
industry because of the constant growth. The skincare products make up 37% off the cosmetic
market and Gurwitch specializes in that.57 This percentage plays a part in the key role for
Shiseido Americas knowing how Gurwitch can contribute to the cosmetic industry. However, the
fluctuating economic growth in United States can impact the sales of product it decreased from
2.9% in 2015 to 1.5% in 2016 then increasing to 2.3% in 201758
For the social factors, United States has a population of 326 million, with an annual growth of
0.71%.59 Gurwitch has to accommodate to the growing demographic population and adapt the
ever-changing wants and needs since the beauty industry becomes more complex. Traditional
makeup has lost its market share by 1.3%60, therefore, Gurwitch has keep up with constant
change to not risk losing their market position. There are many about having strict regulations
about the cosmetic products in United States.61 However, there will a reduced cultural clash
because everyone in United States speaks English language so there will not be a language
barrier both companies, leading to easier communication.62
Through the technological factors, it is an opportunity for Shiseido Americas to use E-commerce
for Gurwitch to sell their products, since that United States has one of the highest internet
freedom63 and Shiseido Americas is a big company can help Gurwitch establish a good
reputation. United states have enhancing developing technologies allowing Shiseido Americas to
expand the beauty development64 and keep up with the innovative process through Gurwitch.
8.3 SWOT ANALYSIS OF SHISEIDO AMERICAS
Strengths
o Shiseido Americas has an exceptionally good portfolio of prestigious brands that is
supported by loyal customers 65
o Strong product portfolio has increased customer base; different products to suit
different market segments – catering to many types of individuals around the world 66
o Innovation, collaboration, agility and growth are Shiseido America’s distinctive
features67
o Respond proactively and rapidly in the bareMinerals challenges68
65,66
Utroske, Deanna. “Shiseido Americas Gets Serious about Prestige Beauty.”
Cosmeticsdesign.com, William Reed Business Media Ltd., 12 Oct. 2016,
www.cosmeticsdesign.com/Article/2016/10/12/Shiseido-Americas-gets-serious-about-
prestige-beauty. Accessed on 23 July 2018
67
“Shiseido AMERICAS | Shiseido Group Website.” News Release | Shiseido Group Website,
www.shiseidogroup.com/americas/. Accessed on 22 July 2018
68
July 2018
Weakness
o Bad employee reviews that says that Shiseido Americas corporate culture is
unprofessional69
o Aggressive marketing investment and costs for structural reform 70
o New technologies need more investments, with the upcoming competition of beauty
companies of using technology to advance their products, which can be costly.71
Opportunities
o Using American celebrities to enhance the prestigious brands72
o Makeup market growing more significantly in United States 73
o Acquisition will enhance the growth of Gurwitch Product LLC and reinforce the Shiseido
makeup line74
o Shiseido can use interactive features for people to feel involved75
69
“Shiseido Reviews.” Glassdoor, www.glassdoor.com/Reviews/Shiseido-Reviews-E4303.htm.
70,71,72,73
Shiseido Annual Report 2016. Shiseido Company, Limited, 2016, Shiseido Annual
Report 2016, www.shiseidogroup.com/ir/library/annual/pdf/2016_12/anu00001.pdf. Accessed on
24 July 2018
74
www.shiseidogroup.com/ir/library/annual/pdf/2017_12/anu00001.pdf. Accessed on 25 July 2018
75
“Shiseido.com E-Commerce Integrations.” Compose[d], composedcreative.com/our-
work/suncare/. Accessed on 25 July 2018
Threats
o High competition because many beauty companies use advanced technology or good
quality ingredients which adapt to customer’s wants and needs better. An increasing
number of beauty companies 76 are constantly innovating and focusing on
customization,77 therefore competition can lower Shiseido’s market position
o More overseas brands ( competitors) have cheaper option because of overseas labour
from India78 or China79 are low cost so they can reduce their prices. Customers will tend
to buy goods from them because it is more affordable.
o Because Shiseido group carries prestigious brands hence counterfeits goods made will
80
reduce the sales and ruin the brand image
76
“Deep Dive: Active M&A in the Beauty Space Fuels Future Growth.” Coresight Research,
www.fungglobalretailtech.com/research/deep-dive-active-ma-beauty-space-fuels-future-
growth. Accessed on 29 July 2018
77
“Asian Beauty Industry - New Challenges and Opportunities.” Martin Roll, 28 Mar. 2017,
martinroll.com/resources/articles/strategy/the-asian-beauty-industry-new-challenges-and-
opportunities/. Accessed on 29 July 2018
78
Paddison, Laura, and Peter Bengtsen. “Beauty Companies and the Struggle to Source Child
Labour-Free Mica.” The Guardian, Guardian News and Media, 28 July 2016,
www.theguardian.com/sustainable-business/2016/jul/28/cosmetics-companies-mica-child-
labour-beauty-industry-india-. Accessed on 29 July 2018
79
“Manufacturers Step up Search for Low Cost Alternative to China.” South China Morning
Post, South China Morning Post, 11 May 2016,
www.scmp.com/business/companies/article/1863709/manufacturers-step-search-low-cost-
alternative-china. Accessed on 29 July 2018
80
“How Counterfeiting Can Destroy Your Brand & Business.” DataDot Technology USA Inc.,
25 Feb. 2018, www.datadotdna.com/how-counterfeiting-can-destroy-your-brand-business/.
9. IS ACQUISITION OF GURWITCH PRODUCT LLC SUCCESSFUL OR NOT
FOR SHISEIDO AMERICAS?
To analyze if the acquisition is successful, a force field analysis is used. It has restraining and
driving forces from the analysis discussed above, ranging from 1-5. 1 being the least important
factor while 5 is the most important factor81.
Driving forces Restraining forces
Factors Weights Factors Weights
Fulfil Shiseido’s 3 Different work cultures83 4
vision and aims 82
Faster way to grow 4 Increased Debt85 5
and evolve84
Eliminate 4 Market Saturation87 3
competition86
81
Accessed on 5 December 2017
82
4. Shiseido’s Vision and aims
83
5. Acquisitions as a growth strategy
84
85
86
87
Complementary to 5 Competition89 4
Shiseido’s Portfolio of
prestigious brands88
Sharing of ideas90 4 Many Business 4
Regulations to follow91
Gurwitch has an 5 ACQUIRING Fluctuating economic 2
established customer GURWITCH growth94
base92 with customer PRODUCT
loyalty93 LLC FOR
Large beauty industry 3 SHISEIDO Complex beauty 3
with ample AMERICAS industry96
resources95
Gurwitch satisfy 5 Expensive to invest in 2
factors that are technologies98
important when
buying makeup in
United States97
88
89
8.3 SWOT threats
90
91
8.2 PEST political factors
92
6.2 Factors women look for when buying makeup in United States
93
8.3 SWOT Strengths
94
8.2 PEST economic factors
95
6.1 Background of beauty industry in United States
96
8.2 PEST social factors
97
6.2 Factors women look for when buying makeup in United States
98
8.3 SWOT weakness
33
98
8.3 SWOT weakness
34
Shiseido Americas 5 Counterfeit goods 100 2
have higher net sales
with other segments99
Low risk – market 3
penetration strategy101
United States can do 3
business easily102
Mutual Respect 2
between Japan and
United States 103
RéVive specializes in 2
skincare products that
is 37% of the cosmetic
market104
English is commonly 4
spoken à easy
communication105
99
6.3 Shiseido America’s market share of other business segments in Shiseido
100
8.3 SWOT threats
101
8.1 Ansoff Matrix
102
103
104
8.2 PEST economic factors
105
8.2 PEST social factors
34
High Internet 5
freedom106
United States has 3
advancing
technologies107
Profits earned in the 5
long run108
Total 65 Total 29
Figure 8 Force Field analysis of the driving and restraining forces of acquiring Gurwitch Product LLC
106
8.2 PEST technological factors
107
8.2 PEST technological factors
108
7.1 Financial Performance of Shiseido Americas
Driving forces
- Acquisitions allow Shiseido to fulfill their vision and aims in order to achieve their
goals82
- Acquisitions can improve Shiseido’s market position with a large global presence as
Laura Mercier and Revive are well-known companies84
- Gurwitch is in the same type of industry as Shiseido Americas, eliminating competitors
for Shiseido to be a larger cosmetic “giant”86
- Gurwitch brands are complementary to Shiseido Americas’s Prestigious brands88
- The sharing of ideas and resources will occur between Shiseido Americas and Gurwitch.
Shiseido Americas can learn and enhance the experience of running the business as well90
- Gurwitch is an established brand, 92 less money is spent to advertise for the brand with
loyal customers93
- United States has a large beauty industry with ample resources so Shiseido Americas are
provided with guidance95
- Gurwitch brands fulfill the quality that customers look for, potentially increasing their
sales.97
- Acquiring Gurwitch has increased in the Net sales as the sales from the brands will
contribute to Shiseido Americas99
- Acquisitions in this situation is a market penetration strategy with low risk 101
- United States is easy to do business with, so acquiring an American company is not
troublesome102
- United States and Japan have mutual trust. Shiseido Americas is a Japanese based
company will not have conflicts because of political reasons103

- RéVive, owned by Gurwitch specializes in skincare products, which is 37% of the
cosmetic market which have an important role in the market104
- English is primarily spoken in United States; hence there won’t be a language barrier105
- United States has a large online community106 can potentially have a large customer base,
increasing their sales109
- United States have an advantage of developing technologies, 107 Shiseido Americas can
combat competitors as they also use advanced technology to improve their products110
- In the long run, profits are able to made more when debts are paid back108
109
8.3 SWOT opportunities
110
8.3 SWOT threats
Restraining forces
- Cultural conflicts tend to arise in the company. Shiseido Americas follow a Japanese
corporate culture while Gurwitch follow the American corporate culture. Hence the
employees may not be used to follow the Japanese culture and disagreements may
happen83
- Shiseido Americas’s way to fund the acquisition85 can result in a decrease of operating
income and margin111
- There is Market saturation. Gurwitch and Shiseido do not create new products and less
new customers are introduced but instead they are focusing on the loyal customers87
- Number of competitors could decrease the customer base because they can afford cheap
labour overseas and make their products cheaper.89
- The beauty industry has many rules and regulations. Shiseido Americas has follow it
strictly in order to follow the law.91
- The fluctuating economic growth in United States represents of disposable income an
individual has therefore it can impact the sales.94
- Shiseido has to be constantly be up to date with the changes and have to accommodate to
the demand to the complex beauty industry96
- More money is spent in investing new technologies, decreasing profits98
- Counterfeit goods made resulting in customers using it instead as it is more affordable
makes the customer base smaller100
111
7.1 Financial performance of Shiseido Americas
10. CONCLUSION
To answer the research question, “HOW SUCCESSFUL WAS SHISEIDO AMERICA’S
ACQUISITION OF “GURWITCH PRODUCT LLC” IN UNITED STATES AS A GROWTH
STRATEGY?” has been analysed in this paper with the effect internally and externally on the
advantages and disadvantages of the success of the acquisition on Gurwitch Product LLC.
Acquiring Gurwitch Product LLC has proved to be successful as it has increased the net sales the
following year after the acquisition as companies owned by Gurwitch Product LLC fulfils the
factors and wants and needs from Women of the United States. This growth strategy was used
for Shiseido to revive their sales and improve their share of the beauty/skincare industry and they
managed to do so.
However, there are drawbacks to the acquisitions due to cost produced through the acquisitions
which affected the operating income and margin. Acquiring Gurwitch Product LLC also means
that Gurwitch Product LLC’s competitors will become Shiseido Americas. The different types of
corporate culture cause internal conflicts.
Through the use of force field analysis of what has summarized above, proving that the driving
forces serve as a more critical factor than restraining forces. Hence, even though that the
acquisition has a few flaws, IT IS SUCCESSFUL for Shiseido Americas to acquire Gurwitch
Product LLC as a growth strategy in the United States.

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IB DIPLOMA PROGRAMME 2017-2018

HOW SUCCESSFUL WAS SHISEIDO AMERICAS’S ACQUISITION OF “GURWITCH

PRODUCT LLC” IN UNITED STATES AS A GROWTH STRATEGY?

Session: November 2018

4. Shiseido Group visions and aims.......................................................................................................10-11

5. Acquisitions as a growth strategy......................................................................................................12-14

9. Is Acquisition Of Gurwitch Product LLC Successful Or Not For Shiseido Americas?..............32-38

11. References And Bibilography..........................................................................................................40-49

produces skin care, hair care, fragrance and cosmetics.1

decided to take on the expansion strategy of acquisitions.

retail outlets are added internationally4

Yen5, Net sales of 1,005.1 billion Yen 6 with 37438 employees. 7

Figure 1 Information about Shiseido Group 8

the highlights of their operations.

sales since 57.1% of it are from outside of Japan. 9

business deployment capabilities and the ability to promote a cosmetic culture. 11

Laura Mercier and RéVive Skincare. 15

the needs of her customers, available in 27 countries. 16

Acquisitions caused Shiseido Americas to be successful through enhancing their product

question “HOW SUCCESSFUL WAS SHISEIDO AMERICAS’S ACQUISITION OF

“GURWITCH PRODUCT LLC” IN UNITED STATES AS A GROWTH STRATEGY?”

Shiseido Americas’s acquisition of Gurwitch Product LLC (addressed as Gurwitch throughout

the essay) if it was successful or not.

how the financial performance have been affected from acquisitions

- Searching background information on the internet about the acquisition of Gurwitch

Product LLC and the effect of it after

relevant information on it using the Business Management IB diploma textbook and

- SWOT analysis to identify the strengths, weakness, opportunities and threats of a

taking place place in United States

- Force field Analysis to evaluate the advantages and disadvantages of acquisition of

Gurwitch Product LLC

• Word limit makes further research and analysis impossible

• Cannot use primary research hence cannot have first-hand data

society which makes people happy through beauty.” 19

Figure 2 Expect Sales Target when Vision2020 is implemented 21

acquisitions, the sales would be expected to rise.

which serves to bring the best quality for many.23

good strategy as it eliminates competition. Companies acquired by Shiseido must be up to date

there may not be an increased customer base. 27

States has increased by 8%. 29

platform and global footprint.” 30 As a result, acquisitions as a growth strategy is a common in

6.1 BACKGROUND OF SITUATION IN BEAUTY INDUSTRY IN UNITED STATES

implemented in their products. Technology advancements enables a direct communication line

process and ingredients.33

that there is a rapid demand for beauty products.

Figure 4 factors which are important to women when buying makeup in US 37

fulfils one of the demand factors of “ brand”.

Figure 5 Shiseido's share of Net Sales from each business segment 42

7.1 FINANCIAL PERFORMACNE OF SHISEIDO AMERICAS BEFORE AND AFTER ACQURING

From this, they aim to have a Net Sales of 130Billion Yen 45

8.1 ANSOFF MATRIX OF SHISEIDO AMERICAS ACQUISITION STRATEGY

Existing products New products

Existing market Market penetration Product development

LLC uses the market

Table 1 SWOT analysis of the acquisition of Gurwitch Product LLC

which can be seen under the PEST factors.

- Japan share mutual respect with Americans54

- Revenue of cosmetic industry in US is 62.46 Billion USD56

- Skin care products make up 37% of the cosmetics market57

to 2016, then increasing from 2016 to 2017)58

- Beauty industry becomes more complex.

- English is the most commonly spoke language à easy communication62