Gillette Final

STRATEGY & MARKETING MANAGEMENT

“GILLETTE IS THE GLOBAL LEADER IN MALE TOILETRIES PRODUCTS”

Data Monitor Research, Oct. 1999

19th December 2001

Course Tutors : Professor Patrick McNamee Doctor Kate Stewart

PRESENTATION SUMMARY

•EDEL TONER - INTRODUCTION

•COLIN SYKES - ORGANISATION AND PRODUCTS

•ORLA OKUNAIYA - STRATEGY

•SARAH SHAW - FINANCIAL PERFORMANCE

•JIM McCALLUM - INDUSTRY AND MARKETS

•NILE SMITH - STRATEGY AND COMPETITORS

•PADDY McKIBBIN - CONCLUSIONS

THE GILLETTE COMPANY100 YEARS 1901-2001

•1901 Founded by King C Gillette with William Nickerson in Boston.

•1902 1st Product – Double edged, T shape disposable razors.

•1905 Develops new markets by opening London Offices.

•1914 Gillette brokers deal with US Army (3.5 Million razors, 36 Million

blades)

•1950 Spends $6 Million for TV rights to Baseball World series for 6 years.

•1964 Gillette splits into 2 SBUs, for grooming, the other for all other products.

•1973 Net Sales exceed $1Billion.

•1980 Net Sales exceed $2 Billion.

•2001 Gillette has 61 Facilities in 25 Countries, and employs 40,000 people

NORTHAMERICA

SOUTHAMERICA

UK

EUROPE

AFRICA

ASIA

AUSTRALIA

GILLETTE WORLDWIDE MANUFACTURING SUBSIDIARIES

ORGANISATIONAL CHART

Oral Care(Oral B Brand)

Braun(Electrical Appliances)

Portable Power(Duracell)

Grooming(Blades & Razors)

Global Business Management

Latin America

North America

AsiaPacific

AfricaMiddle East

Eastern Europe

Western Europe

Eastern Hemisphere

Commercial Operations

Gillette Company

Western Hemisphere

GILLETTE PRODUCT RANGE

PRODUCT MARKET PORTFOLIO

RMS

MA

RK

ET G

RO

WTH

(%

)

1.0

Oral-B

Toiletries

Blades & Razors

Duracell

Braun

GLOBAL STRATEGY

• Corporate Objective

– global focus on consumer products

– global competitive advantage in quality, value added personal care/use products

• Global Market– competing in the triad markets (Europe, Japan, North and South

America)

– industry concentration (SWOT Analysis)

– global market leadership in male and female grooming products

THE GILLETTE STRATEGY

• Global resources organised and deployed to achieve market leadership in all their products

• to maintain and increase existing market share in male and female grooming products

• Corporate Strategy

– aggressive research and advertising

– strategic diversification e g mergers & acquisitions

– new product developments (invest in technology and product innovation)

– focus on core competencies

– maximise e-commerce opportunities

– build strong product portfolio

MERGER & ACQUISITION STRATEGY

• Diversification - make or buy decisions

• Stainless steel blade controversy and the multi-product market strategy

• String of multiple acquisitions - some successful and some unsuccessful

• Moderation of Diversification due to failed acquisitions

GILLETTE MARKET STRATEGY

• Strategic Market Objectives

– Achieve a well integrated programme of marketing mix elements.

– To enter the direct sell market via the Internet.

• Target Market Analysis– early entry into the UK market by the FDI mode

– presence in the UK as a strategy for European Common Market

– high industry concentration ratio (SWOT Analysis)

– market leadership in men’s shaving products

SALES BY PRODUCT

• Sales of Blades & Razors up 8% 1999-2000

• Sales of toiletries and Duracell products are both down from 1999 - 2000

• Oral B products have had the largest increase of sales of 10% from 1999 - 2000

• Braun has recovered from 1999 where its sales dropped by 9% from1998 and has increased by 3% in year 2000

Gillette Sales by Product ($ Millions)

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2000 1999 1998

Year

Sal

es

Braun Products

Oral-B Products

Duracell Products

Toiletries

Blades & Razors

GILLETTE'S PROFIT BY PRODUCT

• Blade and Razor profits up 11% in 2000, due mainly to sales of Mach 3

• Profits for Toiletries and Duracell are both down but this is in line with Sales

• Oral B’s profit only increased by 3% even though sales increased by 10%, this was due to higher marketing expenses

• Braun’s profits increased by 41%, this reflects sales growth/improved mix and lower overheads

Gillette Profits by Product

0

500

1000

1500

2000

2500

y2000 y1999 y1998

Year

Pro

fit

$Mil

lio

ns

Braun Products

Oral-B Products

Duracell Products

Toiletries

Blades & Razors

COMPANY SWOT ANALYSIS

Strengths

Threats

Weaknesses

Opportunities

Market LeaderStrong Brand ImageGlobal PresenceAggressive AdvertisingQuality & InnovationPortfolio Range (Mach 3 etc)

Long Development CyclesRelatively Static Market GrowthHeavy Dependence on High Street Retail OutletsExpensive Brand Maintenance

Demographic ChangesChanging Societal AttitudesConsumer Brand PreferenceDemand for High QualityUse of JIT and ICT (e-com)New Production TechnologyIncreased Grooming Sophistication

New CompetitorsCloning of Successful brandsIncreasing Buyer Power(Inventory De-stocking)Growth in SubstitutesOwn Label FitsEconomic Downturn

BLADES & RAZORS SEGMENT

DisposableRazors

ShavingSystems

ReplacementBlades

Blades &Razors

ElectricShavers

Shaving Products

Pre-Shave Post-Shave Deodorants

Toiletries

GroomingMale & Female

TOTAL UK BLADES & RAZORS MARKET

Replacement Blades

Disposables

Systems

£m

%

•Systems 102 64

•Disposable 39 25

•Replacement Blades 17 11

Source: Mintel Report, 1998

WET SHAVING PRODUCTS

•Mach3

•Sensor & SensorExcel

•Atra

•Trac II

•Custom Plus

•Good News

•SensorExcel for Women

•Sensor for Women

•Agility

•Gillette for Women Venus

BiC Products

• Sensitive

• Twin Select Sensitive Skin

• Twin Lady Shaver

• Twin Select Silky Touch

• Softwin

• Softwin for Women

Wilkinson SwordProducts

• Extra II

• FX Diamond

• Lady Protector+

• Protector 3D Diamond

• Xtreme 3

COMPETITOR SHAVING PRODUCTS

UK MARKET SHARE FOR BLADES & RAZOR (1998)

55%25%

9%11%

GilletteWilkinson Sword

BiCOwn Label


MARKET POSITIONING

Price

Quality

WilkinsonGillette

BiC

Own Labels

BLADES & RAZORS STRATEGY

• Innovation through Research & Development

• Premium Brand - Premium Price

• Build Global Product Branding

• Build Strong Brand Loyalty

• Greater Efficiency at Lower Cost.

• Maintain Superior Growth in Market Share

• Build Shaving Systems Sub-Segment

• Invest in technology and product innovation

RAZORWARS

v

• The Defender

• Product Development

• Consumer Research

• Elevate the “Psychology of Shaving”

• Captive Systems mean High Margins

• Women Shavers are Growth Area

• Razors are a Commodity

• Shaving is a Chore

• Price

• Positioning

• Innovation

• Short Product Life Cycles

• Disposables

UK BLADES & RAZORS

0

50

100

150

200

250

1994

1995

1996

1997

1998

1999

2000

*

2001

*

2002

*

2003

*

Market by Value (£m)


UK BLADES & RAZORS

0

2000

4000

6000

8000

1000019

94

1995

1996

1997

1998

1999

Monitored Advertising Expenditure (£000)

GilletteWilkinson SwordBiC


SALES / PROFITABILITY RAZORS & BLADES

• Increase in sales from 1998 - 2000 is 13%

– 5% 1999 and 8% 2000

• Increase in profit from 1998 - 2000 is 16%

– 5% 1999 and 11% 2000

• Gillette attributes the increase in sales and profits primarily to the sales growth of the Mach 3 in North America, Europe and Latin America.

Razors & Blades - Profitability

0500

1000150020002500300035004000

y1998 y1999 y2000

Year

Val

ue £

000

sales

profit

PORTERS FIVE FORCES MODELBlades & Razors

Industry CompetitorsStrong image, Brand Loyalty, and Innovative R&D.

Potential EntrantsBarrier to entry - customer loyalty, high set-up costs.

BuyersRetailers power increasing.

SubstitutesElectric razors - Gillette already competitive (Braun).Clever marketing - not socially acceptable not to shave.

SuppliersGlobal economies of scale keep suppliers priceslow.

Source: Porter, 1978

MACH3 TURBO

“As the undisputed leader in men’s grooming, Gillette is committed to innovation and to developing products which will provide men with a superior shaving performance. MACH3Turbo and the new Gillette Series fulfil that promise”

Peter K. Hoffman, President,Gillette Grooming Products 30 October 2001

FUTURE GILLETTE STRATEGIES

• High Branding/Quality - Premium Price

• Develop New Market Segments & Niches through R&D

• Maintain/Promote Strong Brand Loyalty

• Tailoring Demographic Targeting (E.g. US vs Europe)

• Reduction in Product Unit Costs

• Grow Razor Systems Segment

• Strategic Alliances (Suppliers and Distributors)

• Shedding Non-Core Businesses (E.g. Papermate)

CONCLUSIONS

• Diversifying capital, investment, products and other resources to maintain and expand position as market leader.

• Strategically positioned as leader, and regularly reorganising its structures to respond quickly to changes in business and competitive trends.

• Developing and maintaining a high profile for its brand names through marketing.

• Continuing to maximise efficiency in production and distribution, rather than focusing on direct retailing.

• Likely to remain as the market leader of Grooming sector products for the foreseeable future.

STRATEGY & MARKETING MANAGEMENT

GILLETTE STILL THE GLOBAL LEADER IN MALE

TOILETRIES PRODUCTS

Economy & Finance

Gillette Final