Gillette Christy Katopodis Roberto Asaro Joe Carpinone Introduction

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%

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 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 Schick Quatr. Blade Refill Gillette Fusion Retail $ $7. 99 $9. 99 Blade Refill Schick Power Blade Refill Fusion Power Blade Refill $12. 99 $11. 83 $11. 49 $11. 23 $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.

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