GilletteGilletteChristy KatopodisChristy Katopodis
Roberto AsaroRoberto Asaro
Joe CarpinoneJoe Carpinone
IntroductionIntroduction• Headquarters in Boston, Mass.• Founded in 1901, by King Gillette.• World leader in male grooming
products.• World leader in alkaline batteries.• Top seller of toothbrushes and oral
care appliances.
Recent NewsRecent News• Proctor & Gamble (P&G) acquired
Gillette ($57 billion in stock).• Combined market capitalization of
about $185 billion.• Better distribution channels, keep
competitors away, and leverage with Wal-Mart.
• Gillette strong marketing tactics for men.
• P&G strong marketing tactics for women.
Key FinancialsKey FinancialsYR
Rev ($mil)
Rev
Growth
N.I.
($mil)
N.I.
Growth Margin
Dec-04 $10,477 13.24% $1,691 22.09% 16.10%
Dec-03 $9,252 9.45% $1,385 13.9% 15.00%
Dec-02 $8,453 -5.67% $1,216 33.63% 14.40%
Dec-01 $8,961 -3.59% $910 132.1% 10.20%
Dec-99 $9,897 -6.08% $392 -68.9% 4.20%
Dec-98 $10,056 -1.58% $1,260 16.56% 12.70%
Gillette Revenues
$0.00
$2,000.00
$4,000.00
$6,000.00
$8,000.00
$10,000.00
$12,000.00
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Rev
enu
e ($
mil.
)
Revenue($mil.)
$0.00
$200.00
$400.00
$600.00
$800.00
$1,000.00
$1,200.00
$1,400.00
$1,600.00
$1,800.00
Net
Inco
me(
$ m
il)
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Gillette Net Income
Net Income($ mil.)
2004 Year End Financials2004 Year End Financials
Debt Ratio 75.50%
Cash ($ mil.) $219.00
Current Ratio 0.97
Long-Term Debt ($. mil) $2,142.00
Shares Outstanding 990,000,000
Dividend Yield 1.50%
Market Cap ($ mil.) 44,332.00
SWOT SWOT ANALYSISANALYSIS
Internal: Strengths/WeaknessInternal: Strengths/Weakness
• Product: Top quality, always releasing new and innovative products. Lack of focus on 1 particular brand.
• Place: Geographic diversity, strong position in many countries. Mediocre position in fastest growing markets.
• Promotion: Strategic highly successful promotions, Celebrity promoters – David Beckham.
Internal: Strengths/WeaknessInternal: Strengths/Weakness
• Price: Competitive with rivals, while maintaining market share.
Product Retail $
Schick Quatr. $7.99
Blade Refill $7.99
Gillette Fusion $9.99
Blade Refill $12.99
Schick Power $11.83
Blade Refill $11.49
Fusion Power $11.23
Blade Refill $14.29
Internal: Strengths/WeaknessInternal: Strengths/Weakness
• Manufacturing: High capacity, major realignment to reduce costs in 2003. Increase cost of materials, uncertainty in oil prices.
• Personnel: Highly Skilled, innovative. Job cuts are always looming, trend over past few years.
Gillette: # of Employees
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
# o
f E
mp
loye
es
Employees
External: External: Opportunities/ThreatsOpportunities/Threats
• Economic: Economies of scale, lower cost to produce and distribute. Threat of currency fluctuations.
• Competition: Barriers to entry, very few competitors in each segment. Large retailers like Wal-Mart retails its own brand of batteries at a cheaper price.
External: External: Opportunities/ThreatsOpportunities/Threats
• Industry/Market Structure: Large percentage of market share for its core product (70%). Difficult to exceed this market share, little room for growth.
• Legal/Regulatory: Patents protect brands in this industry. High sunk costs to protect brands and finance legal battles.
Market Market Product Product StrategyStrategy
Market PenetrationMarket Penetration
•$750 million dollars in R&D for Mach 3.
•$200 million for advertising worldwide in marketing year 1.
Market DevelopmentMarket Development
• Developed markets rapidly.• King Gillette said of his own razor, “There
is no article for individual use so universally known or widely distributed. In my travels, I have found it in the most northern town in Norway and in the heart of the Sahara Dessert.”
• 60% of sales generated outside U.S.• Operates production facilities in 14
countries.
Product DevelopmentProduct Development
• Sensor Razors• Gillette’s Mach 3 “The best a
man can get.”• Gillette Fusion “Gillette Fusion
offers every man whether clean shaven or with facial hair a better way to shave.”
DiversificationDiversification
•1996 acquisition of Duracell.
•Oral-B line in April 2004.•2005 P&G merger.
Porter’s Five Forces Porter’s Five Forces ModelModel
Supplier PowerSupplier Power• Supplier Concentration: Raw
materials discount.• Importance of Volume to
supplier: Economies of scale.• Cost relative to total purchases
in industry: Purchasing power for raw materials.
Barriers To EntryBarriers To Entry
•Absolute cost advantage.•Proprietary learning curve.•Capital requirements.•Brand identity.•Switching Costs•Access to distribution.
Buyer PowerBuyer Power•Bargaining leverage.•Threat of backward integration.•Buyer volume.•Buyer information.•Substitutes available: Yes.•Buyers’ incentives.
Threat of SubstitutesThreat of Substitutes• Switching costs: Can easily switch
from one brand to the next.
• Buyer inclination to substitute: Moving towards more expensive wet shave systems, with higher prices could be potential for a substitute.
Degree Of RivalryDegree Of Rivalry•Exit barriers.•Industry concentration.•Fixed costs/Value added.•Product differences.•Switching costs.•Brand identity.•Diversity of rivals.
ConclusionConclusion
•Bold Advertising Campaigns
•Maintain rigorous R&D operations.
•Expand existing product lines.
QUESTIONSQUESTIONS