owering of prices could cause its image to be jeopardised. However in the shampoo market, Kao is the market challenger of P&G. In this case, Kao would change its prices according to changes in prices of P&G products. Overall, due to the sensitivity in prices, Kao has to adopt a follow the leader pricing strategy in order to avoid a wide price war among competitors that would be very costly to the industry as a whole. Kao’s Pricing strategy during the Asian Crisis The Asian Crisis, which caused many repercussions in the region, has a significant impact on Kao Corporations especially several of its foreign subsidiaries. Kao Malaysia was very heavily dependent on imports for its raw material. However when the Asian Crisis struck the Malaysian ringgit depreciated drastically. This in turn caused its cost to rise drastically. This left Kao no choice but to increase prices as well in order to survive. However, should Kao Malaysia had increased it prices in proportion to the rise in cost, the Kao would have faced the risk of losing market share to its competitors. In order to cushion the effects of the price increase, Kao increased its prices gradually. Kao Malaysia increased its prices quarterly and each time the increase would be an increase of 10% - 15%. This would consumers would not feel the price increase is too exorbitant. The psychological effect of this strategy on the consumers proved largely successful. Today, prices have stabilised and Kao managed to pull through the crisis without losing its market position. Distribution Channel Kao Corporation established on information oriented sales organisation to carry out regional marketing directly with retailers. In 1994, Kao incorporated the Electronic Data Interchange (EDI) program. The EDI is an online processing of information between Kao and retailers to enable speedy and efficient distribution of products. This co-operation thus successfully minimised transaction and operationa...
