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Gillette Case Study

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Chris Lois

on 25 October 2013

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Transcript of Gillette Case Study

Global Strategic Management - Group Presentation
By Christopher Lois, Mario Leonidou, Sam Carling & Rachel Madeley

Question 1: Does Gillette have the resources and capabilities to take advantage of opportunities?

Question 2: How can Gillette overcome Weaknesses?

Question 3: Is this an attractive industry?

Question 1: Does Gillette have the resources and capabilities to take advantage of opportunities?
Question 2: How can Gillette overcome Weaknesses?
How do you determine Gillette's weaknesses?
1. Analyse Gillette through the Resource Based View
2. Look at Competitor Strengths
Question 3: Is this an attractive industry?
Through assessment of Porter’s (1980) Model, we can see the collective span of influence of each force
Conclusion & Insights
Gillette has been able to acquire many valuable resources and capabilities over years of operation
Gillette can overcome weaknesses by focussing on what it does best
Competitor strategy a threat 'simple, inventive and innovative’
Industry is established and profitable for established players, hard to break into
Synpopsis
Gillette is the world leader in the wet-shaving market. Since the 80's, competition has seen the game change.

To answer the questions we critically assess via:
Internal analysis of Gillette through Resources & Capabilities
Threat Assessment
Competitor Strategy
External Industry Analysis
Porter's Five Forces Analysis
Supplier Bargaining Power
Influencing Factor
:
Low

Opportunities:
• Products are developed, distributed and marketed in house
• Reliance on raw materials of plastics, metals etc.
• Access to economies of scale with suppliers.

Threats:
Bic has significant established plastics capability

Bargaining Power of Buyers
Threat of New Entrants
Influencing Factor:

HIGH

Opportunities:
• High barriers to entry, three main competitors with large market share
• Requirement of capital for large advertising and promotional budgets. Promotional budget for the launch of the Mach3 razor was estimated at $100m (Ellison & Forelle, 2005)
• High R&D costs and capabilities to produce differentiated high quality goods (lubrication strips, blades, handles, powered heads)
• Requires significant economies of scale to satisfy efficiencies in fast moving, low value consumer products
• Well developed distribution channels and agreements with large retail organisations

Threats:
• Potential entrants targeting non cost
advantage/knowledge - usage of the
internet and alternative distribution
channels to gain competitive advantage
(Glazer, 2012)

Intensity of Rivalry
Influencing Factor:

HIGH

Opportunities
:
• Smaller number of global competitors; Gillette, Shick & Bic
• Differentiated product offerings – innovation and technology in razors
• Gillette continue to command the largest global market share


Threats:
• Introduction of the low cost disposable BIC – the disposable razor blade. Focus on the cost leadership approach.
• Razors are low cost, high frequency purchases. Increased likelihood of rivalry
• High levels of advertising budgets and campaigns
• While brand market share peaked in 2006, by 2012 share distributed amongst the three major competitors indicated more intense rivalry with Gillette commanding 66% share of the global market.
• Schick made up 12.5%, and reached BIC 5.2%. (Glazer, 2012). This may also indicate the impact of the declining premium segment.


Threat of Substitutes
Influencing Factor:

Medium

Opportunities
:
• The product is viewed as a necessity in grooming and healthcare
• Low likelihood of substitution of product due to research and development lag, along with product nature (safety shaver)

Threats:
• High likelihood of generic substitution and creation of lower costs market segment, e.g. BIC disposable razors
• Significant down trading to low cost / value products
• Sales of cheaper, disposable razors rose 4% in Quarter 2 of 2013 (Ziobro, 2013)
• Doing without becoming a cultural phenomenon in some markets with facial hair popular and changing consumer preferences


Short term disadvantages to industry profitability
Unsuitability of product focus the organisations strategy relies upon
Product differentiation strategy impacted by bargaining power of the buyer
BIC and Schick’s success of gaining a toe hold of market share
Gillette has needed to respond in the short term


SWOT

Core Competencies

VRIO

So can Gillette Take Advantage?
YES!
So is it an attractive industry?
Influencing Factor:

Medium

Opportunities:
• High quality, high margin product
Only three major global competitors in market; Gillette, BIC & Schick
• Consumers are predisposed to trade up due to perceived quality (Ellison & Forelle, 2005)
• Strong brand fundamentals. In 2006, total Gillette brand share globally was 80% (Neff, 2006)
• Multiple segments - e.g. women’s shaving market (Cardona, 1999)

Threats:
Growth in wet shaving premium product market is margin growth and not organic volume growth
Economic uncertainty and recession - Sales of premium products decline 6% in Quarter 2 2013, while unit sales volume sank 10% (Ziobro, 2013)
Switching costs are low due to introduction of disposables (BIC, Schick). Low cost (relative) product.
Trend of margin growth may be changing as consumers seek to cut costs by reusing blades – threat of backward integration

High margin product
Market leader in a highly competitive marketplace
Long term, this bargaining power may become lower, strengthening the competitive differentiation strategy of Gillette.
How long should the current organisational strategy remain in place?
When would Gillette follow a cost leadership driven strategy?
Industry remains an attractive proposition for the established players in the market, unattractive for new entrants
Simple, inventive and innovative products.
The target of the brand is very large, ‘for everyone, everywhere, every time’.
The vision of the group is to offer standard products that satisfy different needs, offer large choice, in order to address to everyone.
Product offering is quality products at affordable price.







BIC Competitive Advantages
BICs Global Strategy

2. Competitor Strengths
1. Threat Analysis (RBV??)
Threatening Forces
Growth in Substitutes/Competition
Products are easily imitated
Cant prevent other firms interpretation and application

Continuous product innovation and improvement
Focus on innovation and quality creates brand loyalty
Protect current products
Static Market Growth
Razor market is static

Tighten product margins, reduce costs
Need to expand into other markets
Target marketing e.g razor guard in India
Extensive Brand Maintenance
P&G spent $146 million in 2013 in the US alone

Practice brand cannibalisation
Keep the brand relevant
Heavy Dependence on Retail Outlets
Wal Mart stores are Gillette's major customer
The Company is at risk as there is a heavy reliance on the conditions of the relationship

Diversify revenue streams
Embrance online technologies?
Long Development Cycles
Gillette's products typically take....

Aggressive R&D
Prioritising profitable product lines i.e. through brand cannibalisaiton
Team Shaving Profile
Rachel
"Anything that a man would consider using on his face is good enough for me to use on my legs"

"I would never pay a premium just to have a girly coloured razor blade that does the same job as a good old blue throwaway"
Gillette can overcome these weaknesses by continuing on what it does best.

'To build total brand value by innovating to deliver consumers value and customer leadership faster, better and more completely than our competitors'
Threat Profile Summary
Chris

"Shaving is a chore. Willing to pay more for premium given it's one of the only times I have a blade against my throat!"
Sam
"I'm a sucker for 4 blade technology"
Mario

"Seriously, I'll use anything. $5 razor, $18 razor. Fancy colours is the difference I see..."
Full transcript