Key Marketing Issues Facing Gillette Indonesia - Case Study Example

? KEY MARKETING ISSUES FACING GILLETTE INDONESIA Key Marketing Issues Facing Gillette Indonesia Indonesia has a large poor population living in the rural areas and a small wealthy population living in the urban areas. Gillette is an international company and a world leader razor and blades for shaving men. Gillette entered Indonesia in 1971and established a wide market presence (Harvard Business School 1998, p. 1). The company sought to satisfy its domestic and export market. As such, the company manufactures high quality razor blades and shaving systems (Quelch & Bartlett 2006, p. 360). Its target market includes adult urban males who include the working class and college students who manifest western grooming habits (Kanter & Dretler 1998, p. 60-68). However, the company faces immense competition from Tatra, Tiger, and SuperNacet companies that manufactures low-end double-edged blades (Harvard Business School 1998, p. 1). Gillette Indonesia operates in developing countries (Ricardo-Campbell 1997, p. 59) and hence records immense growth from the population and prosperity in Indonesia where shaving is relatively new. The company is already planning to implement a sales price increase (Sarah Ellison & Forelle 2005, p. 1). However, Indonesians only shave 4-9 times in a month. Subject to the fact that the incidence of shaving is relatively low in Indonesia, Gillette Indonesia is having problems in meeting its growth targets. Gillette must consider raising the awareness on shaving and personal grooming to improve the frequency of shaving, to support Gillette’s sales increase. Situational Analysis Gillette Indonesia seeks to grow and satisfy its domestic market as well as its export targets in developing nations. The company is struggling to capture its market share in Indonesia and focuses on expanding its market. However, shaving and personal grooming is not a priority and many people consider it as a luxury. Gillette Indonesia Financial Analysis In 1996, Gillette Indonesia sought to increase its sales by 25%, which necessitated for an effective marketing plan. Indeed, by 1995, Gillette Indonesia had a 48% unit share in Indonesia and the company sought to increase this percentage to 50% in 1996 (Harvard Business School 1998, p. 5). By this time, the overall market had approximately 40 million urban men over 18 years old that shave where about 13 million people in Indonesia used Gillette blades. Notably, the shaving incidence in Indonesia was at an approximated average of 5.5 times per month, which was much lower than the incidence in other countries like U.S. However, with a view of increasing and maintaining profits, Gillette increased its prices, which resulted to a 2% growth of unit sales in the market (Herath & Park 1999, p. 1-35). Actually, the company had a sales value of $23 million and net profit of $4.6 million with its 48% market share in Indonesia. There are two types of Gillette target customers where the premium customer is a male Indonesian in the growing income class of greater than $10,000 household income. On the other hand, the standard customer belongs to the income class of less than $10,000 household income (Harvard Business School 1998, p. 3). Moreover, the economic conditions in Indonesia are on the rise with the average annual GDP growth standing at 7% in 1995 (Harvard Business School 1998, p. 3). As such, the demand and sales for Gillette blades is likely to increase in the future if the economic growth rate persists. Therefore, to increase the sales by 25%, the company must devise an effective marketing plan to segment and target its customers (Herath & Park 1999, p. 1-35), which is seemingly very challenging in a country where many people consider shaving and persona l glooming as a luxury. Gillette Indonesia SWOT Analysis Strengths Gillette Indonesia specializes in the manufacturing of high quality razor blades and shaving systems, which contributes to the competitiveness of the company (Kanter & Dretler 1998, p. 60-68). It offers a wide range of products, which include double-edge blades, disposables, and system blades (Harvard Business School 1998, p. 5). The company is having an effective advertising strategy in the in urban areas where it is enjoying increasing profits. In addition, the company has a strong monopoly, low rivalry, and high concentration ratio (Harvard Business School 1998, p. 12). Moreover, shaving is relatively new to Indonesia hence leading to a tremendous growth potential for Gillette Indonesia (Quelch 2007, p. 573). The company is equally enjoying immense sales increase in quantity and in value. Moreover, the company entered Indonesia with a very successful market penetration where it enjoyed a 48% unit share in Indonesia by 1995 (Harvard Business School 1998, p. 5). Its market share generates a competitive advantage in this industry. Indeed, the company had about 13 million customers in Indonesia using Gillette blades. Additionally, it was the first company to venture in the business of shaving and personal glooming in men. It also manufactures its products locally hence reducing the production costs (McKibben1998, p. 301). The company has a synonymous brand name, which defines shaving in Indonesia (Harvard Business School 1998, p. 5). Weaknesses Most people in Indonesia consider shaving as a luxury and shaving in Indonesia takes place only about 5.5 times per month, which is comparatively low. This trend jeopardizes the company’s chances of meeting its growth targets. Gillette Indonesia has a huge marketing budget to its sales. Additionally, most Indonesians live in the rural areas and do not prioritize shaving. The company is having serious challenges in marketing, distribution (Quelch & Bartlett 2006, p. 365), and local cultural issues relating to traditional shaving methods (Ricardo-Campbell 1997, p. 62). It is also prone to immense competition for double-edged blades and disposables from local and established companies like Tatra, which offers less expensive brands. Opportunities The target market for Gillette Indonesia is increasing as the shaving awareness increases where the company enjoys tremendous growth potential in the rural areas. The annual disposable income of the people living in Indonesia is on an increase thus enhancing the purchasing potential of its customers. There is a great potential to increase the shaving incidents in Indonesia through a successful marketing plan (Quelch 2007, p. 573). The company’s operations are high tech and less labor intensive (Varley et al 1998, p. 244). More so, Indonesia is recording a continuous economic growth with an average annual GDP growth of 7%. About 30% of Indonesians live in the urban areas where they are prone to western influence, which encourages personal grooming. Furthermore, the political environment in Indonesia is stable and more people are accessing employment opportunities. The company treats its employee very well (McKibben1998, p. 317). Threats The presence of established and well-known competitors like Tiger, SuperNacet, and Tatra, which offer less expensive and low quality double-edged razor blade products, is a great threat to market share of Gillette Indonesia. Moreover, poor infrastructure will limit marketing and distribution of Gillette products in the rural areas. Cultural differences within cities and communication barriers threaten the company’s growth in the remote areas. Poor marketing and distribution strategies also limit the success of the company. At the same time, the assumption that personal grooming is a luxury and the consequent low shaving incidents may limit the attainment of sales target at the company. The government policy, which demands for the local production of goods sold in Indonesia, prevents Gillette from importing products that are more efficient. Key Issue in Gillette Indonesia Subject to the financial and SWOT analysis on Gillette Indonesia, it is clear that the company has significant hindrances to the achievement of its growth targets. Gillette Indonesia aims at increasing its prices, increasing unit sales in the market, maintaining profits, and increasing its market share. However, in a country where most people are poor, living in the rural areas, and have an assumption that shaving is a luxury, it is difficult to achieve these objectives. As such, attaining the growth targets in Gillette Indonesia is a key issue in country where shaving is relatively new. Indeed, the company is facing challenges in trying to meet its objectives under the present market conditions. Options for Gillette Indonesia Gillette Indonesia can solve the key issue affecting the company by investing in marketing and increasing promotions through conducting awareness campaigns. This will effectively raise the frequency of shaving thus enhancing an increase in sales. However, this option will require a lot of resources and an effective strategy. Gillette Indonesia can also collaborate with distributors, wholesalers, retailers, and supermarket chains to distribute the company’s products to the rural and remote areas. This should include a reduction in the number of intermediaries in the distribution channel as they raise the distribution costs. This option will demand for the establishment of good relations and working capital flows between the distributors. The company can equally train its marketing agents on the best-selling strategies with an aim of increasing sales and profits for the company’s products. More so, Gillette Indonesia can adopt an effective promotion strategy for system blades with an aim of increasing its market presence. Recommendations for Gillette Indonesia I recommend that Gillette Indonesia seek to reduce prices and costs as this would increase profits and increase the company’s market share. Moreover, the company should think of marketing its products based on the different types and economic status of its customers to ensure diverse market coverage. As such, the company should review its growth targets and establish their realization with a view of instituting the necessary changes. Next Steps for Gillette Indonesia Review the growth targets Consider the effectiveness of the company’s strategy Consider the presented options Choose the best option Devise an effective market plan Works Cited Harvard Business School 1998, Gillette Indonesia. Retrieved 29 October 2013, Herath, H.S.B. & Park, C.S 1999, "Economic analysis of R&D projects: An options approach", The Engineering Economist, vol. 44, no. 1, pp. 1-35. Kanter, R & Dretler, T 1998, "Global strategy" and its impact on local operations: Lessons from Gillette Singapore,’ The Academy of Management Executive, vol. 12, no. 4, pp. 60-68. McKibben, G 1998, Cutting Edge: Gillette's Journey to Global Leadership, Harvard Business Press, London. Quelch, J & Bartlett, C 2006, Global Marketing Management: A Case Book, Thomson/South-Western, London. Quelch, J 2007, Readings in Modern Marketing, Chinese University Press, Shatin. Ricardo-Campbell, R 1997, Resisting Hostile Takeovers: The Case of Gillette, Greenwood Publishing Group, Connecticut. Sarah Ellison and, C.F. 2005, Gillette's Smooth Bet: Men Will Pay More For Five-Blade Razor, New York, N.Y. Varley, P, Mathiasen, C & Voorhes, M 1998, The sweatshop quandary: corporate responsibility on the global frontier, Investor Responsibility Research Center, New York City. Appendix Diagram about the SWOT Analysis for Gillette Indonesia Strengths High quality brand Wide range of products Local manufacturing Strong monopoly Large market share First mover advantage Effective advertising strategy Weaknesses Poor distribution in rural areas Consideration of shaving as a luxury Huge marketing budget Immense competition Most people are poor and living in the rural areas Opportunities Large population Political environment stability Economic growth Increased disposable income Western influence Increase in shaving potential High tech and less labor intensive Threats Poor infrastructure Cultural and communication challenges Poor distribution strategies Competition with low quality low priced products Unfavorable government policies Treatment of grooming as a luxury Read More