Drawing on the discussion of Porter’s single diamond framework versus the double diamond framework, what suggestions would you give Shiseido to help it to develop further its perfume business? Case 3.2 Shiseido: becoming an insider in the perfume business in France28 Initially founded as a pharmacy in Japan in 1872, Shiseido expanded into the cosmetics business in 1897 by introducing a skin lotion. Shiseido then gradually expanded its product offerings in the makeup and skin care business. It also started to expand internationally, entering the Taiwan market in 1957. By the 1970s, Shiseido had established itself as the market leader in the makeup and skin care business in Japan.29 However, Shiseido was still weak in the fragrance business. At that time, Japan had a limited tradition of perfume use: the fragrance market in Japan accounted for only 1 per cent of the entire cosmetics market, much lower than the 30–40 per cent characteristic of most Western countries. Because of its limited tradition of perfume use, Japan lacked domestic fragrance experts and senior management with fragrance business experience.

Shiseido’s small domestic fragrance market did not prepare it adequately to compete in the international market. In 1964, Shiseido launched the perfume Zen in the US. Driven primarily by the marketing concept of ‘oriental mysteriousness with a subtle fragrance’, Zen’s US sales increased rapidly because of its novelty, but then quickly declined.

Because the fragrance market represented about 30–40 per cent of total cosmetics sales in Europe and America, Shiseido’s lack of a significant position in the fragrance market also created barriers for the firm to secure strong distribution networks internationally. Thus, in spite of its limited domestic experience with fragrances, Shiseido felt it had to develop strengths in the fragrance business in order to become a truly world-class cosmetics company.