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The Gillette Case

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Sarah Gojecki

on 28 March 2016

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Transcript of The Gillette Case

The most common environmental threat
Political and Government Policy Uncertainties
Changes in government do not necessarily result in changes in government policies affecting business investment.
Political Risks

Political uncertainties

Instability in government policies

Faced at home country as well.
Thursday, October 1, 2015
Vol XCIII, No. 311
Introduction of...
Brand's Operations & Products
Economic Risks
Businesses must adapt quickly to economic shifts
Fiscal and monetary reforms
Price controls
Trade restrictions
Government regulation
Barriers to earning repartition
Inadequate provision of public services

The Gillette Case
Gillette and Economics
Global brand - with operations in approximately 70 countries and products sold in more than 180 countries.

Fluctuations in exchange rates - such as the recent volatility in the Russian ruble, may reduce the U.S. dollar value of revenues, profits and cash flows and increase our supply costs.

Global economic environment – such as: a slow-down in the general economy reduced market growth rates, tighter credit markets for suppliers, vendors or customers.
Risk of uncollectible accounts and longer collection cycles – economic conditions may cause suppliers, distributors, contractors suffer financial difficulties

Imposition of increased or new tariffs, quotas, trade barriers

Changes in exchange controls and other limits the ability to repatriate earnings from overseas
The Authors
Iris Huang
Ann Heng
Sarah Gojecki
Ying Guo
Depamphilis, D. (2009) Mergers, Acquisitions, and Other Restructuring Activities: An Integrated Approach to Process, Tools, Cases, and Solutions. 5th edn.

Gillette India Ltd. “Coporate Presentation” (2013) <https://www.pg.com/en_IN/invest/gillette/company_updates/pdf/Gillette_India_Company_Presentation_vF.PDF> [Assessed 30 September 2015]

Koyama, T. and S. S. Golub (2006), “OECD's FDI Regulatory Restrictiveness Index: Revision and Extension to more Economies”, OECD Working Papers on International Investment, 2006/04, OECD Publishing.

Miller, K. D. (1992). A framework for integrated risk management in international business. Journal of international business studies, Vol. 23, No. 2. 311-331.

Narayan, P. K. (2005). The saving and investment nexus for China: evidence from cointegration tests. Applied economics, 37(17), 1979-1990.

Schneider, F., & Frey, B. S. (1985). Economic and political determinants of foreign direct investment. World development, 13(2), 161-175.

Sun, Q., Tong, W., & Yu, Q. (2002). Determinants of foreign direct investment across China. Journal of international money and finance, 21(1), 79-113.

The Global Economy. “India Political stability: Compare to other countries” (2015) http://www.theglobaleconomy.com/India/wb_political_stability/ [Assessed 30 September 2015]

Transparency International. “Corruption Perception Index 2014:Results” (2015) <http://www.transparency.org/cpi2014/results> [Assessed 30 September 2015]

Vijay Govindarajan. (2009) How GE Is Disrupting Itself, Harvard Business Review.

What are the factors that your brand should consider in determining the economic and political risks associated with a country?
1. Government instability

India’s constitutional set-up is federal
Current political power held by Bharatiya Janata Party (BJP)
BJP made up by coalition of 12 parties
The World Bank political stability index consistently -1

1.Government instability

-Political and economical instabilities
-Reduced investment confidence
-Greater market uncertainties
-Difficulties in economic forecasts
-Difficulties in marketing strategies
2. Government policies

Preference for economic self-sufficiency
Trade policies that protect domestic manufacturing, agriculture, and other sectors
In 2012, the World Bank’s International Finance Corporation ranks India 142 among 183 world economies in its ease of doing business survey
Organization for Economic Co-operation and Development ranks India high as a closed economy in its FDI Restrictiveness Index
Fiscal and monetary reforms
Price controls
Trade restrictions
Nationalization Government regulation
Barriers to earning repartition
Inadequate provision of public services …
2. Government policies

-Barriers to trades and investment
-Import tariffs
-Operating cost forecasts and considerations

-Changing political outlook
-Ease on FDI restrictions
-Improve corporate governance laws

But still:
-Stalemated parliament
-Uncertainty about the pace and efficacy of additional measures for improving the investment climate
3. Bribery and corruption

Power of politicians and enforcement officials
Lacks transparency
Over 62% of Indians had first hand experience of paying bribes or influence peddling to get jobs done in public offices successfully
In 2015, India was ranked 85th out of 175 countries in Transparency International's Corruption Perceptions Index
3. Bribery and corruption

-Loss of credibility
-Barrier to the effective development
-Slower economic growth rates
-Requires pro-active management
-Requires careful management
-Operating cost forecasts and considerations

-High profile scandals and prosecutions
-Plenty legal framework for fighting corruption
-Indian Government regularly blacklists companies
4. Socioeconomic factor

-Using traditional shaving technology
-Time consuming
-Prone to nicks and cuts
-No clean running water
-Shaving in huts, dark toilets, hand held mirrors
-Thicker hair

-Price elasticity
-Income disparity

-Increasing western influence and awareness
-Increased emphasis on being efficient
4. Socioeconomic factor

-Different consumer preferences
-Poor infrastructure
-Distribution and logistics issues
-Changes in
marketing strategies
Effects on Gillette’s marketing strategies in India

Coup d’état
Democratic changes in government
Other political turmoil

1. Product

Reverse Innovation”
(Vijay Govindarajan, 2009)

-Gillette Guard
-Inclusion of only the most important features
-Simplified product design (80% fewer parts than Gillette Vector)
-One blade (instead of 2-5 blades in US razors)
-Emphasis on easy rinse and safety (instead of closeness)
2. Pricing

-Streamlined manufacturing process, reduced costs
(e.g. hollow handles)
-Lower retail prices
Guard @ US$0.23 in India Mach3 @ US$2.74 in India Mach3 @ US$12.89 in UK
3. Promotion

-Availability of cheaper razors (Guard) as well as standard (Mach3)
-Collectivism vs individualism
e.g. use of celebrities
World Economic Forum. (2015) Section 7: The Role of Government and Regulatory Policies in Entrepreneurial Ecosystems: Growth Accelerators or Growth Inhibitors? Retrieved from http://reports.weforum.org/new-models-for-entrepreneurship/section-7-the-role-of-government-and-regulatory-policies-in-entrepreneurial-ecosystems-growth-accelerators-or-growth-inhibitors/ Accessed on 30 September 2015

World Bank Group. “Economy Rankings” (2015), Ease of Doing Business Rank. http://www.doingbusiness.org/rankings [Assessed 30 September 2015]
In 1901s factory create in Boston
Over 30000 employs
90% market in US
70% market in the whole world

Products designs:
Good quality

Product Line:
Shave Gel and Foam
Skin Care
Group A2
Example in a country - China

Gillette investments (China) ltd. was established in 1997

Population: 1.375 billion people (September 2015);

GDP: 11,211 billion U.S. dollars (From: IMF World Economic Outlook, April 2015)

Only 8% net sale from Great China (P&G 2015 Annual report)

Some economic issues need to be considered in China:

Limits on the ability to repatriate earnings from overseas - liberalization of capital account.
Market barriers - Chinese enterprises can easily get cheap land and preferential financing condition, which would pose a threat to foreign companies in terms of cost and price competition.
Risk of uncollectible accounts – a considerable number of suppliers and distributors makes it difficult to manage.
Gillette and Politics
1. Government instability
-Market uncertainties
-Investor confidence

2. Government policies
-Industrial & trade policies
-FDI restrictions

3. Bribery and corruption
-Power of politicians and enforcement officials
-Lack of transparency

4. Socioeconomic factors
- Urban vs. Rural
-Income disparity

5. Affects on marketing mix
-Product, price, promotion
World Presence
Gillette and Politics
Case Study: India
Gillette in India
(Gillette India Limited )

• Product range: Blades & Razors, Oral Care (Oral B), Personal Power (Duracell)
• Focus: Blades & Razors
• Population = 1.252 Billion
• India market size: US$530mm
• Commands over 50% market share in India
• World’s largest shaving blade market by volume
• Contributes approx. 23% of FY13 revenues
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