Gillette: A Situation Analysis Presentation

Internal Analysis

• Gillette is a dominant global brand.
• Gillette has massive resources and technical knowhow of its employees.
• It is highly innovative with competitive products.
• It has high returns or cash flows from its global market share, which leads to a strong balance sheet.
• Gillette is a technology-driven company.
• It has fast expansion strategies.
• Gillette uses effective differentiation of products in terms of pricing strategies (low costs and high costs).
• The brand is physically present in major supermarkets globally.
• Gillette has design capability.
• Rising costs of promotions and advertisement.
• Failure to meet some of its set objectives, especially during 2008 -2009 recession in which sales dropped by 10% per month.
• The rising costs of product developments.
• Inability to match technology and innovation.
• Inability to develop robust marketing and sales strategies as marketing share declines because of competition.

Internal analysis helps in understanding internal conditions of Gillette with the specific focus on its resources and capabilities.

Gillette uses its human resources for creating competitive advantage in the industry. This has allowed the company to retain its leading position in the razor industry globally.

Gillette has capabilities to allow it to undertake any specific activities by using its resources. Therefore, all its functional areas have worked effectively for the overall success of the company.

While Gillette has effectively used it resources to lead the razor industry, in some instances, the company has failed to promote and execute sales effectively. In addition, the speed and efficiency of fulfilling strategic objectives are effective.

Financial management, particularly cost control, has been a major challenge as costs continue to rise in different departments such as product developments and marketing. Hence, strategic control has suffered drawbacks under such circumstances.

Gillette is also unable to maintain the pace of technology and innovation. However, overall management of resources is impressive.

Customer Analysis

• Gillette has comprehensive customer segments, including gays, lesbians, WWE wrestlers, professionals, students, young adults, women, and men.
• Gillette uses geographical, sex, age, sexual orientation, and behavioural aspects to position its products to customers.
• It has been difficult for Gillette to get loyal customers because of its highly priced Sensor, Sensor Excel, and Mach 3.
• Customers complain that new and expensive products lack any additional performance benefits.
• Gillette also classifies its customer segments based retailers or distribution channels.
• This is important for identifying any sales opportunities that the company may explore.
• The company focuses on value addition through new, innovative features to different customer segments.
• Pricing strategies and product features have been the major factors that influence the company’s customer segments.

Gillette segments its customers based on their unmet needs, motivations, lifestyle, geography, and behaviours.

It also considers customers’ knowledge, attitude, loyalty, and price sensitivity.

Gillette believes that it can get competitive advantage by focusing on different customer segments and behavioural bases for developing specific target markets.

This strategy can allow Gillette to understand the global strategy and brand loyalty.

Price sensitive customers may display split loyalty to the company. As a result, Gillette may be able to understand market dynamics and its competitive position.

Some of these customers may be loyal or use Gillette brands due to high costs of switching to competitors.

The first segment consists of consumers who are extremely price sensitive and do not necessarily care about new additional features.

Gillette is a premium global brand. Consequently, it can differentiate its products from other shaving razor competitors. This implies that Gillette would not get much returns from its price sensitive customer segments. Hence, it must focus on consumer segments with high returns.

Second, Gillette consumers also consider product features and additional attributes rather than the price. Gillette should focus on this segment of consumers because of possible high returns and sales volumes. Gillette can promote its premium brands for this segment of consumers.

Finally, some of the customers also look at the price, product features, and other attributes. This is the most significant segment of the market because it has the highest number of consumers. Gillette can use its ‘Series’ product line for this segment.

Competitor Analysis

• Gillette is the industry leader in the razor business.
• Gillette faces fierce competition from Schick, BIC Corp., Colgate-Palmolive, and Wilkinson Sword.
• Competitors have acquired a significant market share of Gillette.
• Gillette’s partnership with P&G has allowed the two companies to leverage on their strengths and technologies for innovative products (Procter & Gamble, 2013).
• In the US, Gillette lost a market share by 4.3 percent to 63 percent. Meanwhile, Schick’s Quattaro gained the market share by 2.9 percent to 17 percent.
• However, Gillette leads in the global market share by rebranding and launching new product lines to deter competition.
• Small and emerging firms also give Gillette fierce competition in emerging economies and third world countries.

Colgate-Palmolive continues to be a strong competitor in FMCG sector. It competes with Gillette’s shaving gels. Colgate-Palmolive has International Palmolive Shave Gel and Shave Foam. These are new products as the company focuses on meeting the growing demands for skin conditioning products and their benefits.

Schick competes with Gillette on the razor grounds, but Gillette has won with five-blade razor products, which have relatively higher prices.

Colgate-Palmolive continues to focus on the shaving cream market with its foam, gel, and cream products.

Since P&G merged with Gillette, competition in shaving and grooming industry has slowed down. However, other brands, such as Schick, Wilkinson Sword, and BIC have continued to scramble for the Gillette’s market share.

Gillette continues to dominate the industry because of its innovative products with relatively high prices.

The merger between Gillette and P&G has resulted in a stronger brand, which has allowed the company to penetrate the global market.

Market Analysis

• Shaving and grooming industry will continue grow further.
• Gillette shall continue to dominate and define the market , especially in the West.
• Fusion ProGlide razors (it sold 2.5 million razors within 10 weeks after the launch) have performed better than Gillette Fusion (Research and Markets, 2011).
• Emerging markets are challenging because many consumers are not ready to abandon their old shaving habits and high prices.
• Gillette has focused on consumer-driven marketing in order to overcome consumer scepticism.
• Gillette wants to focus on early adopters, especially with Fusion ProGlide, P&G’s skincare (Trefis, 2013).
• Focused pre-launch campaigns have earned consumer confidence, especially with the Gillette Fusion ProGlide.
• The company responds with innovative products to meet the unmet needs of consumers as a way of growing the brand.
• The global markets, especially emerging economies present challenges to the company because of high price issue.
• Gillette continues to observe market trends and stays ahead of competition (Trefis, 2013).

Today, Fusion ProGlide remains the world’s best selling razor (Research and Markets, 2011).

In the shaving industry, Gillette has been men’s favourite brand, especially in the West. In Europe and the US, Gillette products, including razors and cartridges, enjoy a near monopoly in most shelves. In fact, the market share could be more than 70 percent in most developed economies.

Schick competes for the second position as major market trends and dynamics remain unchanged in the past few years (Trefis, 2013).

Gillette and P&G have noted that emerging economies cannot operate under the proposition that worked in developed economies.

Gillette shaving product lines have failed to dominate markets in emerging economies due to price issues and fierce competitions.

Gillette has found it hard to convince consumers to adopt new shaving habits and products.

The solution to high prices would mean that Gillette must focus on lower-tier products for emerging economies instead of its premium brands for the Western markets.

Environmental Analysis

• Gillette products are disposable at the end of their life cycles.
• Disposable products have raised environmental concerns.
• Consequently, Gillette has removed plastic packaging from some of its products.
• Fusion ProGlide Power Razor packaging has reduced plastic by 79 percent.
• P&G introduced fibre-based packaging technology for Gillette high-end products.
• Gillette uses technology to achieve environmental friendly packaging.
• It achieves new packaging without any additional costs or compromise to the aesthetic of the Gillette pack.
• Since 2011, Gillette and P&G have focused on the use of renewable-sugarcane-derived plastic for Pantene Pro-V, COVERGIRL and Max Factor brands (Environmental Leader LLC, 2011)
• The packaging is completely recyclable.

Gillette parent Procter & Gamble have changed the razor packaging by introducing fibre-based packaging materials from moulded plant fibre firm, Be Green Packaging.

The new approach has allowed Gillette to cut gross weight by 17% and enhance pallet density by 16% (Environmental Leader LLC, 2011).

Gillette and P&G have developed long-lasting approaches to sustainability strategies.

They want to eliminate any wastes for landfills (Environmental Leader LLC, 2011).

The new packaging would meet the consumer needs and conserve resources.

However, consumers continue to pay for higher prices, especially in Western markets despite low costs of production.

In emerging economies, some products are still in their plastic packaging.

Strategic Options

Gillette must convince customers that its new products are better than competitors and they justify relatively higher prices

• Behavioural Segmentation – Gillette will focus on consumer attitude, knowledge, product usages, and price sensitivity.
• Differentiated Marketing – Gillette will continue to focus on the global market and design products features and attributes for specific market segments.
• Mixed Bundling Pricing – Gillette could offer discounts on its bundled product (razor and gel) but charge higher for individual products.

These strategic options would help Gillette to convince consumers that its products are better than competitors and slightly higher prices are necessary.

These approaches could be expensive for the company, especially if it must develop products, which will convince other consumers to change their old habits of shaving and adopt new innovative razors, gels, and foams.

Gillette is likely to increase sales volumes from differentiated products and strategic targeting of consumer segments.

Marketing Strategy

• Products: Gillette products should have strong features and attributes in order to continue as the dominant brand globally. Brand extension must exceed basic features in other regular competitive products
• Value pricing: Gillette must focus on developing quality low-priced products in order to attract the masses and get loyal customers. This strategy has worked well in the razor product line, especially in emerging economies.
• Distribution: Gillette must focus beyond Wal-Mart. It must adopt new and hybrid distribution channels. Internet sites, online stores and other affiliated links with P&G can help Gillette to increase product distribution globally and reduce threats from competition
• Promotion – Gillette must continue with its aggressive promotional strategies in both traditional media and online channels. It must use celebrities to promote its products

Gillette must enhance the use of modern technologies to develop low-cost products for the mass market. This would allow the company to appeal to consumers from different segments of the market.

While consumers find Gillette products useful and innovative, they have major challenge with pricing strategies. Gillette offers premium products. It should consider value pricing and product bundling to increase sales and market share. This would ensure that the company attracts and wins new customers.

Increasing the number of distribution channels is critical for Gillette as many competitors emerge in developing economies. Gillette must adopt new trends of distribution, including online stores.

Gillette has run some of the most elaborative promotional and marketing campaigns. The company must continue with the similar trends and develop new marketing messages for different markets and products. For instance, ‘the best a man can get’ campaign worked well for several years. Today, the company has launched other product lines, which require new messages for different markets globally.

All promotions and advertisement must communicate value to potential consumers.

SWOT

• Strength:
  • Market leader; strong brand image; global distribution; quality and innovation; competitive advantage based on resources; several product lines; aggressive advertisement.
• Weaknesses:
  • Long product development cycles; rising costs of production and advertisement; weak emotional connection with the brand; dependence on retailers for distribution; poor response in female markets; high prices (Dorfman, Brad and Jones, David, 2012).
• Opportunity:
  • Changes in demographic trends; changes in consumer attitudes; new technologies, potential mergers; growing demand for high quality products; growing number of shaving female; emerging markets.
• Threats:
  • Increasing number of competitors; brand imitation by competing brands (King of Shaves); buyer power; technology adoption; substitute products; economic downturns.

Despite fierce competition from other product developers, Gillette continues to dominate the market as it leverages on its resources for competitive advantage.

Premium brands have attracted massive revenues and profits, which have allowed the company to conduct aggressive marketing campaigns. Gillette has continued to develop quality, innovative products for different segments of the market.

The company also has some internal challenges, particularly its inability to manage rising costs of production and advertisement. Moreover, few distribution channels continue to affect products’ distribution.

Gillette must appeal to female consumers and emerging economies through value pricing strategies and promotions (Dorfman, Brad and Jones, David, 2012).

Gillette has several opportunities, which can result into significant growths of the brand. The growing male grooming and emerging markets present good opportunities for growth. The female market segment also continues to grow as many female consumers seek for sleek and smooth armpits and skin. However, Gillette must change old habits in emerging economies in which people are not ready to adopt highly priced shaving products from Gillette.

Gillette also faces several threats from external sources. Product imitation and fierce competition continue to affect the company. Economic downturns also affect sales and revenues as buyer bargaining power increases.

Appendix

Reference List

Dorfman, B and Jones, D 2012, P&G cuts forecast, will focus on big businesses. Web.

Environmental Leader LLC 2011, Gillette Shaves Plastic From Packaging. Web.

Procter & Gamble 2013, 2013 Annual Report. Web.

Research and Markets 2011, Research and Markets: Gillette Fusion ProGlide Case Study: Using Consumer-Focused Marketing to Instil Brand Confidence. Web.

Trefis 2013, Emerging Markets Trim Gillette’s Profit Margins. Web.