SITUATIONAL ANALYSIS
Gillette India Limited
Personal Care Products Market in India
Targeting a wider Consumer Base with Personal Care Products
- General Environment- Gillette India Limited and the Indian Personal care Products Industry
- Political and Legal Environment
- Economic Factors
- Sociocultural Factors
- Technological Environment
- Porter’s 5 Forces Analysis
- Suppliers
- Buyers
- Substitutes
- New Entrants
- Rivalry
- Personal Care Products Industry Trends in India
- SWOT Analysis
- Key Success Factors
- Decision Criteria/Recommendations
- Looking Forward- Decision Criteria/recommendations
- Conclusions
Part I
Situational Analysis
- Introduction
Gillette India limited (GIL) is actually among the India’s famous FMCG Companies, which has its portfolio ORAL- B, DURACELL, and GILLETTE MARCH 3 TURBO, the world’s leading brands. This Company has essentially carved a high reputation for delivering both high quality and value added products that meet the consumers’ needs. The principle activity of this Company is manufacturing and marketing the consumer products. The manufacturing facilities of the company are located at Baddi in Himachal and Bhiwadi in Rajasthan.
The company operates three segments that include Oral care, Portable power, and Personal Grooming. The oral care segments include oral care products and toothbrushes. Portable power segment comprises lamps, torches, and batteries. Personal Grooming Segments comprises toiletries, razors, and blades. Gillette India Limited was incorporated at Rajasthan on 9 February 1984. It was promoted by the House of Poddar Enterprise (HOPE) and Gillette Company, U.S.A. (Gillette). More than 60% of goods that are sold in India are domestically manufactured by the Gillette India. The parent Company Gillette holds majority stake in Gillette India (Anand et al., 2007).
The Indian market is essentially growing considerably, exhibiting a high increase in the population. The products under the three categories that the company manufactures have achieved robust sales besides growing their shares in the market considerably through trading consumers up, given the superior consumer proposition.
This paper will thus serve like a bi-partite study beginning with an inclusive situational analysis of the operations of Gillette India Limited in India within the Personal Grooming Industry. The paper then describes various recommendations for the future research as well as action. The data that will be analyzed is in terms of the economic, technological, political, social, and legal factors that affect this company within the Indian Personal Care Products market, to both identify and highlight the micro plus macro environmental forces as well as the industry trends. The key success factors will also be identified and assessed in relation to forces, which influence this firm in both present and future (Balboul, 2010).
- General Environment- Gillette India Limited and the Indian Personal Grooming Industry
The experience of Gillette in India indicates type of challenges, which the company faces in the emerging markets. In terms of volume, India is essentially the largest blade market throughout the world, although in the value terms. Harbans lal Malhotra & Sons (malhotras), the Indian Company follows Gillette in blade making throughout the world. For a long period, this company has actually enjoyed monopoly power and definitely accused of numerous restrictive trade practices.
Gillette entered the Indian market in 1984 with only 24% stake in the Indian shaving products. It later increased its stake to 51%. This company has two (2) arms in India, Wilkinson Sword and ISPL that it acquired in the year 1995. The Company’s distribution network at present controls 400,000 outlets and 2000 distributors all over India. The analyses below will highlight the crucial factors upon which Gillette India Limited needs to center so as to further the market for its products to a broader demographic of consumers in the Indian Personal Grooming Industry (King 2001).
- Political and Legal Environment
In the Indian political system, democracy/social equality is well entrenched. The economic reforms of 1990’s resulted to strong growth, but this growth has really been hindered by poor-infrastructure, corruption, and inflation (India Country Profile, 2013). Due to increased foreign direct investments and deregulation, Gillette India Limited was acquired on June 2006 by Procter and Gamble that was an extension of the global acquisition strategy of the Gillette by P&G (Capasso & Meglio, 2007). The harsh legal frameworks in India regulate all the business entities and this is what has made them to grow. Because of the harsh environmental protection laws that are prevalent in India, this Company needs to center on developing the product mix that comprises the four P’s precisely for the Indian customers. Gillette needs to focus on further improvement of its products as the rise in the income elasticity of demand in India will result to a sharp increase in demand for the personal grooming products.
- Economic Factors
The surging cross border Merger and Acquisitions transactions third wave began in the year 2007where in the same year M&A deals reached 1081 from 467 in the year 2005 (Thornton, 2007). This country was the chief potential market because of the external economic environment experiencing the major change in extensive industrial restructuring as well as the high economic growth. India being a developing nation began liberalization of its investment markets and international trade. The trade friendly policies together with the improved infrastructure of the Indian government will surely prove to be a helpful signal for the Gillette India limited to enter into the stable global investment market that has predominantly resulted from enhanced economic conditions. In fact, the Indian market has experienced a rise in levels of income because of the increasing employment opportunities and sustained economic boom that has resulted to potential development of Indian market as a global turf for the company (Capasso and Meglio 2007).
- Sociocultural Factors
The sociocultural environment centers on sociocultural dimensions of the Indian culture like the behavior, language, and customs that are followed in this country. Gillette needs to study the target culture of this country in depth to comprehend it in a better way. According to the analysis done, the target market for the Gillette’s products in India is customers who are indeed bothered about shaving product’s attributes but do not want to move from price band that they are purchasing currently to higher prices for these products. Culturally, Indian men still go to the small- time salons for shaving or shave on own for day-to-day shaving. Thus, the key factors that normally influence their choices are products attributes, point of purchase, price sensitivity, and extra features such as ingredients, colors, shaving razor, cream, or other goods manufactured by the company (McKibben, 2000). Therefore, the company needs to produce products that favor the social and cultural factors of the Indian people.
- Technological Environment
The contemporary KPMG survey on the Personal Grooming Industry suggests that technology is one of the top urgencies, since technological innovations perform an imperative role in driving the industry forward. Consequently, product innovation in India remains the focus for the capital spending (McNamee & Stewart, 2007). Thus, the company through product innovation has innovated a twin-blade shaving razor among other innovations. It is therefore crucial that Gillette India Limited continue to improve in innovation, as this will led to success.
- Porter’s 5 Forces Analysis
In a competitive market, forces of demand and supply determine the market price in the industry. The marketing management of Proctor & Gamble has to establish a model to counter competitive forces in the Indian market. Porters five competitive Models is the most commonly used tool of analysis. These forces are bargaining power of suppliers, bargaining power of buyers, threat of new entrants, threat of substitutes and competitive rivalry within the industry.
- Suppliers
The bargaining power of suppliers is likely to be high when there are no substitutes, switching costs from one supplier to another or the market is dominated by few suppliers. Beside if the buying industry is reluctant to recognize release of new products in the market, the bargaining power may rise.
Shaving razors, as one of the products of the company enjoys its sole presence in the market .moreover there are no close substitutes due to the variance in technology. Gillette Company’s razorblades are fitted with a triple blade offering by Super-max 3, which is more advanced than Mach3
- Buyers
The bargaining power of buyers determines how much customers can exert pressure on volumes and margins. Factors that influence high bargaining power include customers buying in large volumes, large number of small operators, cheaper switching costs to an alternative products or the product can easily be substituted with another homogenous product.
Buyers in India buy in small numbers and therefore are not powerful. Switching to an alternative product is difficult since the cartridge cannot fit in another product. The management should ensure it maintains its premium Gillette razor to lock-in its rival’s products from sharing the market. Its only competitor of Mah3 product is not price sensitive and has low technology than Super-max3
- Substitutes
This force exists there are alternative product of more affordable products. Factors that affect this force are switching costs for customers, loyalty of customers, relative prices of substitutes and trending issues in the industry.
In the Indian Gloomy industry, Gillette’s razors have no close substitutes hence the threat by substitute is negligible. However, the company’s strategic managers should prepare for the entry of America’s safety Razor that could seek a share of the market. To sustain the market they should carry out post feasibility study about their product to make necessary recommendations to stay ahead of their competitors.
- New Entrants
New entrants could manipulate the market segment of a product including the price and the customer share. It will be affected by high investment capital, economies of scale intellectual property rights and loyalty of customers.
The Gillette Company has the highest market share of its razors. There are minimal barriers to entry .The management should be cautious of the looming entry of America’s razor which could manipulate the market structure.
- Rivalry
This involves competition of the market share among existing firms in the market. Factors that influence this force include; many players with similar strategies, homogeneity of players and products, high barriers for exit are high in terms of technology costs.
Gillette company faces very little competition .Among the products that feel competitors pressure are the flat blades, traditional double-edged users and low-income segment. The Strategic managers should be cautious of the entry of Americas Company into the market. They should focus on the products features and degree of homogeneity.
The company should analyze its product level of dominance and strive to maintain that. For instance, market records indicate that in the flat blade segment, being the cheapest, Malhotra and sons company is dominant in the market. However, Gillette is the market leader in the mid and high-end segment. Gillette also dominates in the twin –blade market (James Kilts," 2004).
- Personal Care Products Industry Trends in India
The rise in economy has led to increased consumer income influencing the demand in high quality products. The industry is anticipated to undergo major shift from conventional double –edge razors segment to twin and triple blades razors segment. A 20% trend has been observed in the last 10 years. In the year 2003,the company re-launched storm force ,an after shave splash and new ultra Comfort shaving gel .It was well accepted across the market due to its new physical look and fragrance. In 2005, the company launched improved Gillette vector plus featuring an attractive look (Pride and Ferrell, 2008).
There is looming entrance of America’s razor in the Indian market. This is likely to competitively attack the Blades market that is widely dominated by Gillette Company. Over the years, products from different competitive segments have been introduced in the market by different industry. Some of the competitive firms include; Colgate Palmolive, which has three products in the shaving, segment cream foam and gel form. Besides, Proctor and Gamble, one of the top brands in the world produced Old spice, which is easily recognized by its fragrance. Other competitions in the market include Unilever and Godre J, which is the domestic brand of shaving cream in the Indian market. The blades industry has revolutionized from single blade to twin blades. In addition, environmental friendly products have also been produced to adhere to the India’s Environmental Hazards Act. For instance, Gillette Company has introduced disposable shaving razors in the industry.
- SWOT Analysis
This Analytical tool involves strengths, weaknesses, opportunities and threats
Strengths
The company’s products have a good reputation of high quality. For instance, Gillette’s Shaving blades segment has dominated the Indian market and the world at large. In addition, its well-established brands such as Oral –B line and Duracell have retained the company’s reputation. This advantage enhances easier entry of new products from the same company since the customers are already acquainted with the previous brands (Great Britain, 2007).
Strength is the diversification of products from personal care products to energy products. This cautions the company from market redundancy, which may result from economic recession. Moreover, diversification of products market to regional level is a great market strategy.
Weaknesses
One major weakness is over- reliance on a single product. In the Indian market, Wal-Mart Stores is the major customer it contributes the largest share of revenue. The Public relations manager should critically observe the trend of relations between the two because it may paralyze the revenue chain. In addition, Gillette’s high profitability on core business is worrying. Razors and blades contributes significantly on the profit of the company .If not well observed it may be detrimental to other products emphasis in the market.
Opportunities
Launch of new products will keep the company relevant in the market. Besides, price increase on high –products will increase revenue .However, the Gillette company should conside4r producing high –tech products that are relevant to the low-end market at a favorable price in the Indian market.
Threats
One major threat is competition, few entry barriers and profitability of existing firms attracts new forms that produce close substitutes to counter the market. This trend if not watched carefully may dwindle the earnings of the firm. For instance, the looming Entry O Americas razor company should worry the management and an approach should be enacted to safeguard the trend of the company.
- Key Success Factors
Gillette Indian Limited has had a consistent trend of success due to its strategic management. Key success factor attributable to the excellence include continued innovation of its products For instance the innovation of twin blade shaving razor. Besides, the company has randomly been conducting customer feedback to remain relevant with the market needs. Consistent and affordable price to the consumers has contributed significantly to the company’s net income.
Part II
Decision Criteria/Recommendations
- Looking Forward- Decision Criteria
Gillette has continuously relied on Proctor &gamble as its main distribution network .This can facilitate in the entry of new products to the market due to its reputation.
Promotion as a tool to counter competition is imperative in the market .The recommendation is to expand advertisements and promotion channel to the televisions, radios websites and shows and exhibitions.
- Conclusions
Gillette India company is likely to remain the market leader in the grooming sector products if the management considers the above-mentioned strategies. The major focus should be in the innovation concept. With increased literacy in the world, customers are more aware of tastes and preferences of the products and are likely to demand a product of a certain quality. Employing people with high skills and a good understanding of the relevant market is paramount in sustaining the positive trend of the company.
References
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