Gillette Case Study

Context

Production of accessories for hair grooming and hair removal is an ever expanding market that is growing rapidly. Conversion ratio of consumers who prefer modern methods to traditional methods is high. Even though Gillette has a major share in the market, the plan is to expand further to capture the market where it is lacking i.e., low priced economy brand products.

Company

Gillette established in 1901 in the USA gradually expanded its business to other parts of the world and now it is established in almost all countries. Its expansion was facilitated through combination of business and regional operational units. Gillette entered Indonesia in 1972 through a joint venture. Though there has been a very good growth in the Indonesian market by 1995, there is a potential to expand it further in 1996 and beyond.

• In 1995 Gillette’s market share was 48%. In 1996 the market share is expected to be 50%.

• Gillette blade sales increased by 17% from 1994 to 1995

• In 1995 Gillette sold 115 million blades (100million double edged) and the total sales from shaving products were $19.6 million.

• Share of Gillette Indonesia high-margin disposables and systems was projected to increase in 1996 to around 20% of units

• In 1995 sales in five major urban centers Jakarta, Bandung, Surbaya, Semarang and Medan accounted for 60% of Gillette’s.

• Gillette launched women’s razor in 1995

Competition

Gillette faces 2 types of competition. Direct competition is from the already established low priced blades available from other companies and indirect from the traditional methods of shaving.

Gillette faced direct competition from local brands, Bic, and Schick. In the double edged blades Gillette faced competition from imported, low-end blades from Eastern Europe and China (Tatra, Super Nacet, and Tiger). In the disposables section Bic, USA and Bagus, a local brand, were its competitors. But since the sales volumes were low the market was not intense. In the higher end products Gillette faced competition from Schick. Gillette has 90% market share in the high end segment. The prices of Gillette’s products were sometimes four times the competitor prices. In addition Gillette faced indirect competition from substitutes like wet or dry knives.

Apart from the since Indonesia is a growing market there is possibility of other players entering the market in future.

In a competitive market with local brands, Gillette differentiates itself from the competition with better quality and reliability of their products. Also more than half the population surveyed about the shaving incidence, shave 4 times a month at the maximum. Increasing the incidence of shaving habits will improve the market share.

Collaborators

Collaboration with the distributors, retailers, and super markets is essential for success of the product, and has to be done effectively to capture a good share of the market in the low priced product segment. Better margins to the distributors & retailers linked to sales and incentive programs linked to sales is an effective method. This way the premium segment will be protected. Bulk packs and bulk buying should be encouraged and in addition to the major stores, small retailers should also be taken care of in the strategy.

That being said, Gillette faced several problems with distributors. In the past distributors were reluctant to listen to Gillette’s advice on warehousing and handling methods. Also distributors do not have sufficient working capital and there was no timely payment from distributors.

Consumers

Looking at the expansion of the market for blades upto 1995, there is a potential to increase Gillette’s market share further. Few carefully planned strategies are required to achieve this goal.

1. The incidence of shaving less than 4 times a month is more