Case Analysis Note Gillette Indonesia

Objective: In order increase sales from 19% which was projected by country sales manager to 27% of potential observed by Director of regional sales, we have these decision issues Major Decision issues in the case (Issues DI) DI.1) Identify the potential target market that can provide increase in sales as observed by Effios. DI.2) How to improve distribution network? DI.3) How to bring Awareness about the Gillette products in potential target market. Advertise and promote Gillette products in the existing market.

Recommendation/inferences on the major issues (Recommendations R) Recommendation for DI.1 : From 1996 onwards, Gillette should also target rural areas that possess huge potential for double edge blades. Gillette has to target those sections of shavers who are using conventional method of knives, to go for blades. Also, target those people who shave less frequently and persuade them for increase in number of shaves.

Recommendation for DI.2 : There is need for increase in the number of distributors and those increased staff should be for remote and rural areas. In rural areas, products can be distributed through itinerant salespersons.

Recommendation for DI.3: Increase in the share of advertisement expenditure from 66% to 80% targeting first time shavers and increasing the incidence of shaving among existing shavers. Promote Gillette blades to rural areas by providing free samples and awareness campaigns.

Summary of Analysis (Quantitative and Qualitative) supporting the recommendation :Analysis for Recommendation of DI1: By 1995, 65% of Indonesia population lives in rural areas and that can be a huge potential market for Gillette blades. (page 2 , last paragraph, under: Indonesia in 1996) As per Table (B), 51% of urban population are falling under 1-4 times shave per month, which clearly indicates there is need for persuading consumers to shave more frequently. Under Indonesia Shaving practices, it has been mentioned that only 40% existing shavers are purchasing blades from stores, which means other 60% are on dry or wet knives. These shavers can be Gillettes potential consumers. Analysis for Recommendation of DI2: There are 15000 islands spread over 3000 miles due to which distribution challenges are there. (page 7 of second para) There are 60,000 kiosks and MOM&POP shops present in rural areas which are virtually untouched by Gillette so far. (page 8, 5th para, under: Distribution and Sales) Analysis for Recommendation of DI3: Indonesia is still in increase of number of first time shavers. Under Indonesia Shaving practices, it has been mentioned that only 40% existing shavers are purchasing blades from stores, which means other 60% are on dry or wet knives. So advertising to use Gillette (branded) will provide safe and convenient alternative. It shows potential market over there.

SWOT Analysis: Strengths: Business: Personal grooming products Focus: shaving products Growth drivers: Geo expansion, R&D, Advertising & Capital spending.

Double edge blade sales projected for 1996 is 100 million and in 5 years it is expected to reach 230 million (CAGR-19%) Shaving market is in nascent stages of growth and hence there is good potential for growth. Strengths: High monopoly in the market with very low rivalry. 50% market share 97% Brand awareness and 55% brand most used ratings Threats: There is a strong threat of using substitutes like dry and wet knives but to increased exposure to western media and westernization this threat of substitutes is expected to decrease. Competitors import products (double edged blades) from East Europe and china. Since Gillette women razor was imported and packed in Indonesia, Delays in custom clearances could impact the entire manufacturing cycle. Low priced products which suit rural population of low income group , which can be a threat to Gillette. Weaknesses: Indonesia is a highly separated country, both geographically and culturally, making distribution difficult. Indonesia also has a growing balance of wealth, and growing centralization of population. Foreign investment has recently been liberalized. Regulation forces products sold to be produced locally to some degree, preventing the adoption of more efficient imported products. In rural areas, the market has been a Pull Type market due to more dependence on distributors. Only 19% sales increase as compared to the complete market growth of 30%. Opportunities: Gillette market is males over 18 years age with major chunk comprising of college students and graduates entering workforce. Capitalize on growing income among its urban population. Increase demand for high end/ sophisticated products with high margins. Analysis of present methods:

Promotion is not an issue since they have 97% brand awareness and sales & distribution network seems to be doing pretty good. Only concern is the pricing of the products. Recommendations: Increase in Advertising/Promotion Spending: Gillette is already 55% of the populations most preferred brand, therefore an increase in promotional spending may increase this to some extent, and also increase Gillettes brand awareness by another percent, but this would not result in a large increase in sales. Maintaining Status quo:

Since Gillette is already losing 11% , only growth of 19% as compared to market growth of 30%, maintaining status quo will make Gillette vulnerable to the competition with chances of new entrants filling the gap to meet the needs of unsatisfied customers. Conclusion: Gillette need to focus on capturing the market in remote and rural areas by segmenting people in first time shavers, shavers using conventional methods and shavers who do less frequently. Gillette need to also focus on improving operational efficiencies and has to pass on those benefits to end customers by the way of reducing cost of their products. Considering this factor of high product prices as the main problem in slow growth of sales, this price reduction could help to boost the sales of the company.