The purpose of this report is to formulate a strategy that would allow The Gillette Company to improve profitability in the wet shaving market.

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Executive Summary

The purpose of this report is to formulate a strategy that would allow The Gillette Company to improve profitability in the wet shaving market.  The enclosed report contains an evaluation of the current situation of Gillette, strategic direction, evaluation of the three alternatives that the company could pursue, and finally the implementation plan for the chosen alternative.

Gillette's profitability has been declining due to the increasing market share of disposables.  Three alternatives have been selected that would capitalize on company's competitive advantage of being a global leader and an industry innovator.

The first alternative that Gillette could pursue would be to introduce a new razor system for men; the second alternative would involve focusing on the disposables market and launching an affordable, high quality razor; and the third alternative would be to increase emphasis on women, and start targeting younger consumers and minorities.

After careful analysis of each alternative, it is recommended that Gillette launches a new razor system geared towards men. This alternative would add the most value to the company, while not creating substantial risk. It would also make the best fit with the current strategic direction of Gillette. In order to implement this strategy, the company would have to channel advertising and promotional efforts towards this new razor system. This would attract disposable users as well as those who are currently shaving with a competitor's product. The introduction of this superior product to the market would bring Gillette closer to the achievement of its goal, "sustained profitable growth."



About Gillette
In its long history of 100 years, The Gillette Company has established itself as a global market leader. Today, the company primarily competes in the grooming, portable power and oral care businesses, which generate more than three-quarters of its sales. It became more successful than King C. Gillette, its founder, ever envisioned.
Within its strong businesses of grooming, portable power and oral care, Gillette has a great portfolio of global brands. The primary businesses offer great opportunities for growth as company’s products are used by new consumers every day. These leading global brands are a major strength of the Gillette Company. They represent company’s global commitment to growth through innovation, which will assure its long-term success as the world leader.


Since the beginning of its operations, Gillette has been known as an industry innovator. Gillette has introduced the first safety razor almost a hundred years ago, long before its competitors. This situation remained unchanged until today. Even though the Gillette encountered difficulties with foreign sales, which hurt profits, the company continues to dominate the market.
Over 40 % of sales come from products, which have been introduced in the previous five years (www.gillette.com). The company dominates the wet-shave market with a 60 % share, while its closest competitor, Schick, has only 16.2% (Case 21). What makes this company stand apart from the rest of the market is its most successful razor system, Sensor Excel. This system reached sales of $15 million during its first six months, making it the most successful product ever introduced


Situation Analysis


About the Company


The Gillette Company primarily operates in three businesses: grooming, portable power, and oral care. Grooming business includes male and female, wet and dry shaving franchises; portable power includes alkaline and specialty batteries; and oral care includes Oral-B toothbrushes and Braun Oral-B power-assisted plaque removers. These three business generate more than three-quarters of company’s sales and an even higher proportion of operating profits. In addition, Gillette also competes in the toiletries business.
The global grooming market is valued at about $10 billion at retail, and Gillette is, by a huge margin, number one around the world. The Gillette Company currently manufactures nine different types of blades and razors for both men and women. Gillette products have stimulated not only strong Gillette's growth, but substantial category growth as well. Female shaving has become the fastest growing part of the Gillette grooming portfolio, with a compound annual growth rate of 27 percent. Gillette’s most popular products include Mach3 razor for men and Sensor Excel razor for women. In the dry shaving market, Gillette offers leading market entries from Braun, maker of the world’s number one foil electric shaver for men and the number one electric hair epilator for women


Another thriving worldwide business in which Gillette competes very successfully is portable power business. This market is valued at around $15 billion annually. Alkaline battery market is rapidly growing, and the Duracell brand has already captured a market share exceeding 40 percent (
).


The third primary business in which Gillette operates and which offers sizeable growth opportunities for the Company is oral care. It is estimated at only $5 billion at retail, however oral care has been Gillette’s fastest growing business in recent years. The Company’s most popular brands, Oral-B and Braun, hold global leadership positions in manual and power-assisted plaque removal, respectively (
).


Additional market presence and support is provided by Gillette’s well-established deodorant/antiperspirant brands and shaving gels. The most popular brands are Gillette series for men and Satin Care for women.
The Broad Environment



There are several trends in the broad environment which have influenced the Gillette Company and will continue to influence it in the future. The most obvious sociocultural trend, which is apparent not only in the United States but also in the rest of the world, is the increased emphasis on appearance and hygiene. This trend is especially noticeable in the female population, where shaving has been growing at the annual compound rate of 27 percent. Gillette has benefited from this trend, causing large increase in profits as well as market share in the last decade. This trend will continue to have a positive effect on the company, since one of its primary businesses is grooming.
The economic trend, which has affected the company is soft euro and the rising interest rates. Difficult economic conditions and weaker exchange rates have affected international sales, resulting in decline of profits. The consequence was that the company had to cut jobs and close several factories.


The technological trend, which impacted Gillette is the advancements which have been made in the plastic and recycling technology. These advancements have affected the disposable shaving market, because it is now more affordable for competitors to produce high quality disposable razors. Gillette should take advantage of this trend by focusing on manufacturing an inexpensive, high quality disposable razor in order to meet the needs of the consumers.


There are no political or legal trends that could significantly affect the company.


Competitive Environment

Wet shaving industry is very competitive. While Gillette had dominated the wet shaving market for several decades, the introduction of the disposable razor did allow competitors to gain market share. The three main competitors Gillette contends with include Schick, BIC, and Wilkinson Sword. The product in this industry is fairly standardized. Even though some products differ by having lubricating strips and coated blades, the razors are similar in appearance and identical in function. Thus, unless a razor possesses a unique feature contributing to a superior shave, the environment is highly cost-competitive. The entry of potential competitors is not considered to be a threat due to the maturity of the wet shaving industry.


Suppliers sell the materials such as blades, plastic, and lubrication strips to razor manufacturers. Suppliers in the wet shaving industry are powerful for several reasons. There is no substitute product for what the supplier sells. Due to the highly competitive environment and minute possibility to integrate backwards, razor manufacturers depend on supplier’s product. They do not have the capacity to produce both the product and the components necessary to make the product. All of the above mentioned reasons make suppliers a powerful force in the wet shaving industry.


Customers in the wet shaving industry include supermarkets, convenient stores, drug stores, and discount/warehouse stores. Even though customers are not able to vertically integrate backwards and there is a large number of them, they are a powerful force. This is due to the fact that products are standardized, information on the seller is easily obtained and customers can easily switch from one seller to another.


The competitive environment in the wet shaving industry can be characterized as a highly cost-competitive. Both customers and suppliers are a powerful force.


Even though there in no threat from any new competition entering the market due to the maturity of the industry, it is extremely difficult for the existing firms to compete. The only way for firms to have high profits and sales growth is to steal market share from each other.
Task Environment

Competing in personal-grooming products, consumer portable power products, and oral care products; Gillette is fortunate to be operating in an industry that is not heavily regulated.

Unions are not present in the industry, so have no effect on the organization. Gillette does not have a special relationship with the community; however, it responds to community needs and contributes to the welfare of its neighborhoods with financial contributions to organizations in communities in which the Company’s operations are based, with a special emphasis in the Boston community.

 For many years, Gillette has been a flagship sponsor of the largest American Cancer Society's Making Strides against breast cancer event in the country. Gillette has supported the efforts of City Year Serve-A-Thon since its founding in 1988. Gillette is a sponsor of Project Bread’s annual Walk for Hunger, and lastly, Gillette is a sponsor of the annual AIDS Walk to benefit the AIDS Action Committee and 18 other AIDS service organizations.


Gillette has to deal with one important special interest group: animal rights activists. This special interest group fights for the rights of animals by protesting against any company who uses animals in product testing or any other harmful manner. Gillette has encountered no problems with this group because since 1996, no laboratory animals have been used to test Gillette personal care or other consumer products or ingredients; however the company is constantly making sure.


The few regulations that Gillette needs to maintain awareness of are patents and environmental regulations.

Operating since 1903, Gillette has concentrated on research and development from the beginning. The company has established itself as an industry innovator, and therefore holds several of the industry’s patents. Holding these patents allows Gillette to concentrate on new innovations rather than worrying about other company’s patents.


Governments have imposed several environmental regulations in order to preserve the environment. Gillette must abide by these regulations by making its products and operations “environmentally friendly.” According to The Gillette Company’s homepage, “ our mission is to achieve or enhance clear leadership, worldwide, in the existing or new core consumer product categories in which we choose to compete.

” In pursuing its mission, Gillette has established several values. One of these values is to comply with applicable laws and regulations at all government levels. The company will contribute to the communities in which it operates and address social issues responsibly. Its products will be safe to make and use, conserve natural resources, and will continue to invest in a better environment. As long as Gillette abides by its own established values, the outside task environment should have no real impact on the company.
Internal stakeholders


Gillette is one of the best companies in the world, mainly because of the talented workforce who leads the company. Currently, Gillette’s CEO is Mr. DeGraan. He joined the firm in 1968 and served in several core businesses fields that include: manufacturing, technical, marketing and general management positions. DeGraan loyally served Gillette for thirty-two years. Some of his contributions were the merging of Duracell and Gillette in 1996. DeGraan is a sophisticated person that brought a sophisticated viewpoint into the CEO forum. His vast experience led him to undertake major strategic initiatives including the restructuring program that build on Gillette's strengths. On the day that DeGraan was assigned the CEO, Gillette’s stocks were decreasing in value. DeGraan started acting firmly and took on himself the challenge of increasing the stock's value. Slowly but safely, DeGraan improved sales and introduced thirty new products to the market. As a result, Gillette’s stock value increased from low of 27’De to 37’De. DeGraan set five main goals for the company. The first goal is to develop quality products; second, to improve sales near cash registers (“point of sale” purchases); third, to improve advertising; forth, to lower costs of products, and finally, to improve cash management (www.gillette.com). In conclusion, DeGraan is definitely a strength for the company. He is demanding but at the same time creative and innovative. He has a lot of experience in all business fields, which contributes to the company's success.


Gillette is a public company. It merged with several companies, which are: Oral-B, and Duracell (http://web.lexis-nexis.com/universe). Shareholders of the company consist of employees, board of director and private investors. The board of director includes Warren E. Buffett (chairman), Edward F. DeGraan (CEO), and Wilbur H. Gantz (chairman and chief executive officer). These are the key people who give company a competitive advantage in today’s market. Stocks are available to all investors. Gillette offers information for any potential stakeholders on its web site. The company does not have any strong shareholders or owners, other than its directors.

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Gillette is proud to have diverse workforce, which according to the executives at the company, adds to its value. Diverse workforce creates an environment where innovation and creativity are easily produced. In fact, Gillette claims that the foundation of the company’s human resources philosophy is a strong policy as well as effective attainment of its policy. Gillette believes in training, which can be seen in the fact that Gillette invests $125 million each year in worldwide employee training and development programs. Gillette strongly believes in the fact that when employees get the right training, they improve their skills and ...

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