capstone

External Environmental Scan

In India, Procter & Gamble operates under three entities or business units, which include Gillette India, Procter & Gamble Home Products, as well as, Procter & Gamble Hygiene and Health Care. Of particular interest in this paper is Gillette India, a business unit focusing on providing oral care, portable power, as well as, personal grooming products. Personal grooming products include cartridges, razors, shaving brushes, toiletries, blades, cartridges and twin-type shaving products. Among the oral care products are toothbrushes while portable power products comprise of batteries. This paper seeks to conduct an environmental scanning of Gillette India to inform strategy audit of the company that will help in developing the appropriate strategy (EuroMonitor, 2012).

Economic Factors and Trends

India’s economy has experienced the surge in international Merger & Acquisitions since year 2007, a time that M&A grew from 467 in year 2005 to 1081 in year 2007. India has seen become a key investor attraction hub because external economic development resulting from nationwide industrial restructuring in addition to increased economic growth. It has management to liberalize its investment markets and international trade by introducing improved infrastructure and trade friendly policies. In this case, Gillette has benefitted and will continue to benefit through India’s steady economic growth. Evidently, income levels have increased in the Indian market because of increased employment opportunities and sustained economic boom, thus making Indian market its global turf. Hence, predictably the increased elasticity of demand in income will see an increase in personal grooming products’ demand. Nonetheless, in some areas, such as in smaller towns and rural areas, quality and price do not count as driving factors, thus less likely to value attributed to parting with higher prices to get safer and better products (Raider Group Investors, 2012).

Regulatory and Legal Factors and Trends

Legal and regulatory factors include tax policy changes, environmental protection laws, deregulations and regulations, antitrust enforcement, as well as, privatization among others. Increased deregulations, since Gillette India entered into India in year 2007 has led to increased direct investment in India. Accompanying the deregulation are the stringent environmental protection laws. In this case, Gillette India would need to alter its strategy, including eco-friendly packaging and products, as well as, avoiding manufacturing practices that damages the environment. Evidentially, because India’s air is adversely affected by urbanization and industrialization leading to health concerns, regulations on disposal and waste control, noise control and environmental pressure groups are putting immense pressures on companies to develop eco-friendly practices (EuroMonitor, 2012).

Societal Factors and Trends & Technological Factors and Trends

There has been a change in social health, with men seeking to uphold their hygiene. Most consumers are purchasing products in pursuit of improving their self-image and physical appearance, as well as, live healthier lifestyle. This has provoked Gillette to come up with a man grooming line that comprise of shave gels, moisturizer, cleansers and an aftershave soother. Consumers are also purchasing their products based on the social class level, in reference to whether they are middle-income, low-income and high-income earners. In this case, to expand on its sales, besides offering premium products and products targeting middle-income earners, it should consider offering low-priced goods to target the over 17.3% of the population in the low-income class. India lags behind in technological advancements compared to western countries. Gillette Company is among the global companies leading in technologies, thus having a cutting edge over other companies (Raider Group Investors, 2012).

Porter’s Five Forces Analysis

Threat of New Competition

Gillette’s product portfolio operates in mature markets thus making it impossible for new companies to venture. Most new entrants are private labels offering low-cost product, which has the potential of disrupting the market. The high capital needed deters most companies from entering most of the markets offered by the products. Gillette is a world leader in producing razor and Schick, its major competitor has an expansive history of razor production, thus making the market have high levels of concentration ratio. The battery market has experienced an increased number of new companies entering the market but substantial costs and concentration ratio has made sustaining the businesses impossible. In Oral Care products market is easy to enter compared to battery and razor markets partly because of continued market development attributed to innovation and technology (Davis, Nikolov & George, 2013).

Threat of Substitute Products or Services

For every product that Gillette produces there are many substitutes in the market because of the increased number of competitors, as well as, nature of market, which allows alternatives that offer the same service. For example, razor blade substitutes include a shave from the classic barber and other electric razor, which appear to be more efficient and faster in shaving. There are substitutes for batteries, including solar powered gadgets that are cheaper and affordable in the long-run. Braun and Oral Care products have substitutes from low-end private labels that are affordable to many (Davis, Nikolov & George, 2013).

Bargaining Power of Customers (Buyers)

Customers have high bargaining power, as there are different types of buyers demanding for the Gillette product portfolio, including the government, schools, general consumers and beauty salons. These groups are divided into recreational and professional users that each have distinct requirements and needs they seek in products. General consumers focus on price, thus having immense influence on product prices with a focus on goods with cheaper prices. On the other hand, of significant importance to the professional group is quality over price. Hospitals’ concern is on the quality over price in relation to whether the product will work well or last. In this case, Gillette unit must make sure that it serves both groups of customers well else, they will start seeking for substitutes that meet their needs, which are easily available (Davis, Nikolov & George, 2013).

Bargaining Power of Suppliers

In India, where the production of Gillette products takes place, there is minimal supplier power because India is a third world country, where the economic conditions are not fully developed. Owing to the over population, India is not experiencing a shortage of workers. In most cases, individuals have less concern for wages paid because of the limiting economic conditions and lack of unionization (Davis, Nikolov & George, 2013).

Intensity of Competitive/Industry Rivalry

In India, Gillette has achieved dominant position in the market with its product portfolio. The markets in which the products are located are mature, thus limiting mobility. The company has lower-cost label products that it produces in larger quantities, thus shifting the industry and altering practices that leading companies employ. The most mature market, the razor market, leads with a market share of 28% with the best competitor, known as Shick having a 21% market share. Wal-Mart, Costco and Schick have introduced low-cost razor but this has not deterred Gillette from increasing its share by 3% in a span of three years. In the battery industry, Gillette produced Duracell label with the 30% market share. Energizer label, its competitor has equal market share. In this category, introduction of private-label and low-cost batteries has made the two competitors invest in R&D and advertising. Gillette has tried to introduce similar low-cost products, such as Duracell Ultra but has been unsuccessful. When it comes to household and luxury personal care market all under Oral B, Right Guard and Brauna names, the market is less mature compared to razor and battery markets. Nonetheless, the markets are saturated because of the wide array of products available. In the dental care market, Oral B products offer heavy competition because of the preferences people have. Nonetheless, this product line lacks a niche market because, thus making it impossible from achieving full potential (Raider Group Investors, 2012).

Conclusion

This analysis reveals several threats and opportunities that could be included in the SWOT analysis. The threats include new entrants, stiff competition from major competitors, disruption from new entrants offering low-priced products and strict regulatory framework, primarily pertaining to environmental laws. Opportunities include tapping into the market requiring low-priced products, and using its R&D to expand its product portfolio to help it produce unique products to help it counter competition.

References

Davis, E., Nikolov, D., & George, E. S. (2013). Strategic report: The Gillette Company. Retrieved from http://economics-files.pomona.edu/jlikens/SeniorSeminars/PAC2004/Drafts/gillette.pdf

EuroMonitor. (2012). Procter & Gamble company profile – SWOT Analysis. New York, NY: EuroMonitor.

Raider Group Investors. (2012). Procter & gamble equity valuation & analysis. Retrieved from http://mmoore.ba.ttu.edu/ValuationReports/Fall2007/ProcterGamble.pdf