Gillette€™s Energy Drain - Essay Example

Issue: The basic problem in this case is that Gillette is facing huge financial losses as one of their brands Duracell in not performing well and nowthe company has to decide whether to divest or if they can pursue any other course of action. External Analysis:The industry is flooded with competitors. There are substitutes for the brands in-terms of rechargeable batteries. New competition is entering the market and offering products at a lower price than Duracell. Buyers’ power is high as they have a lot options available.

Supplier power is moderate as Duracell has the largest market share in the industry. Gillette can also use its goodwill in the market to increase brand saliency. It can also show the bigness of the brand by telling people that it is a part of Gillette Family.. It should inform people that the raw-materials used by Duracell are better than those used by competitors. Internal Analysis:Using the VRIO framework, the firm can exploit its brand to help with the brand positioning. However, since competition threat is high, due to lack of barriers to entry, more competition is going enter the industry and will threat Duracell’s position in the market.

This will further drain the resources.However, looking from the SCP model, the firm cannot change much about the structure, it can improve its own conduct and start acting like a market leader. It can also improve the product’s appeal to make it look better than competing brands of batteries. Alternative Course of Action:Duracell can also join hands with one of its competitor to share knowledge and technology to operate in the market as a bigger brand. This would also help the new bigger firm to exploit all the benefits of economies of scale and to lower its costs to compete with the cheaper brands of batteries.

It will really helpful in improve the financial statements of the company and to tackle declining stock prices and deteriorating income statement. Recommendations:The company should try not to divest the brand as it would decrease the product line and hence the firm will then have all eggs in one basket. It will be harmful for the company because any volatility in the razor’s division is going to have a bad effect on the overall liquidity position of the firm. Hence, the firm should consider merging with another firm in order to increase market share and reduce the intensity of competition in the industry.