Transcript Gillette - St. John's University

Gillette
Christy Katopodis
Roberto Asaro
Joe Carpinone
Introduction
• 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 News
• Proctor & Gamble (P&G) acquired
Gillette ($57 billion in stock).
• Combined market capitalization of
about $185 billion.
• Better distribution channels, keep
competitors away, and leverage
with Wal-Mart.
• Gillette strong marketing tactics
for men.
• P&G strong marketing tactics for
women.
Key Financials
Rev
($mil)
YR
Dec-04
Rev
N.I.
Growth ($mil)
$10,477 13.24% $1,691
N.I.
Growth Margin
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%
$1,260
16.56%
12.70%
Gillette Revenues
Revenue
($mil.)
$12,000.00
Revenue ($ mil.)
$10,000.00
$8,000.00
$6,000.00
$4,000.00
$2,000.00
$0.00
1995 1996
1997 1998
1999 2000
Year
2001 2002
2003 2004
Gillette Net Income
$1,800.00
$1,600.00
Net Income($ mil)
$1,400.00
$1,200.00
$1,000.00
Net Income
($ mil.)
$800.00
$600.00
$400.00
$200.00
$0.00
1995 1996
1997 1998 1999
2000 2001 2002 2003
Year
2004
2004 Year End Financials
Debt Ratio
75.50%
Cash ($ mil.)
$219.00
Current Ratio
0.97
Long-Term Debt ($. mil)
Shares Outstanding
Dividend Yield
Market Cap ($ mil.)
$2,142.00
990,000,000
1.50%
44,332.00
SWOT ANALYSIS
Internal: 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/Weakness
• Price:
Competitive with
rivals, while
maintaining
market share.
Product
Retail $
Schick Quatr.
Blade Refill
Gillette Fusion
Blade Refill
$7.99
$7.99
$9.99
$12.99
Schick Power
Blade Refill
Fusion Power
$11.83
$11.49
$11.23
Blade Refill
$14.29
Internal: 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
50,000
45,000
40,000
# of Employees
35,000
30,000
25,000
Employees
20,000
15,000
10,000
5,000
0
1995 1996
1997
1998 1999
2000 2001
Year
2002
2003 2004
External:
Opportunities/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:
Opportunities/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 Product
Strategy
Market Penetration
• $750 million dollars in
R&D for Mach 3.
• $200 million for
advertising worldwide in
marketing year 1.
Market 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 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.”
Diversification
•1996 acquisition of
Duracell.
•Oral-B line in April
2004.
•2005 P&G merger.
Porter’s Five Forces
Model
Supplier 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 Entry
• Absolute cost advantage.
• Proprietary learning curve.
• Capital requirements.
• Brand identity.
• Switching Costs
• Access to distribution.
Buyer Power
• Bargaining leverage.
• Threat of backward
integration.
• Buyer volume.
• Buyer information.
• Substitutes available: Yes.
• Buyers’ incentives.
Threat 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 Rivalry
• Exit barriers.
• Industry concentration.
• Fixed costs/Value added.
• Product differences.
• Switching costs.
• Brand identity.
• Diversity of rivals.
Conclusion
• Bold Advertising
Campaigns
• Maintain rigorous R&D
operations.
• Expand existing product
lines.
QUESTIONS