i.

Discuss three (3) factors in the general environment that have a significant impact
on the Gillette business. (15 marks)

1) Demographic

Demographic segment is a genetic and observable characteristics of a population,

including the levels of growth of age, density, race, ethnicity, education,
geographic, region and income. This segment consists elements of aging
population, rising affluence, changing in ethnic composition, geographic
distribution of population and greater disparities in income levels.

In this case, an aging population comprises by men that entershaving age, which
grooming facial hair is part of their routine and it becomes a habit.Razors are
needed by these men to shave and this is seen as an open opportunity for King C.
Gillette to exploit it by came out with safety razor as his first invention.Its Trac II
users came from young and college-educated men indicated that the end users of
this product have entered shaving age.

Being the leader of men’s shaving market, the older generation has associated
Gillette with their life and they passed it on to their sons whom started shaving.
That is how Gillette remains in the market over the years and maintain the
people’s identification of Gillette with men and shaving.
2) Sociocultural

Sociocultural forces influence the values, beliefs and lifestyle of a society.Personal

care and grooming is something that is essential and embedded in our daily
routine.Thus, it is part of our lifestyle.

For a man that has lifespan of 70 years, 130 days would be spent on shaving
according to Gillette’s research. This proves that men spend a quite amount of
time of their life to shave.

Shaving is part of men’s way of taking care their personal hygiene to look tidy and
clean.It is important for students and career men to appear neat and not shabby
with their facial hair untrimmed. So, a razor is an essential grooming aid.This
lifestyle gives positive impact to the growth of Gillette business.

Men also like shaving because according to survey, if given a cream that would
eliminate shaving and facial hair, they would not use it.This contributes to the
repetitive purchase of razors and blades because of men’s continuous need to
shave. Gillette, as a producer of grooming aids benefit from this shaving habit.
3) Technological

Technological segment is the innovation and state of knowledge in industrial arts,

engineering, applied sciences and pure science as well as their interaction with
society. Developments in technology lead to new products and services and
improve how they got delivered to the end users.

Gillette has make men’s shaving habit an evolutionary experience as their

products have gone through a number of innovative processes. From it’s first
safety razor that made them the industry innovator to its first silicone-coated
blade, Super Blue Blade that spiked its share in razor and blade market.

Gillette used advance technology to develop Trac II, a twin blade shaver, clog-free
and dual-blade cartridge for a closer shaving experience. This creation has
influence the switch of preference to twin blades.

Then, Atra a razor equipped with pivoted head to maintain the most effective
shaving angle. Atra is the improved version of Trac II. This creates value to
Gillette as they gained one third of the razor market when Atra was introduced.

These are part of innovation of shaving system that Gillette offered by using
advance technology to elevate men’s shaving experience and sustain their
business in the industry.
ii. Analyse the segments of the external competitive environment of Gillette that
include competitors, customers, suppliers, substitutes and new entrants.
(25 marks)

1) The intensity of rivalry among competitors in an industry.

The intensity of rivalry exist when firms in the same industry compete to gain
competitive advantage by using tactics such as price competition, advertising
battles, product introductions and increased customer service or warranties. The
higher the intensity of rivalry among competitors the more aggressive the firms will
be in an efforts to put their products at the best level in the societies.

As per case, Gillette faced with competitors that sell the same product. The
intensity of rivalry is very high and in order to confront with all the competition
Gillette have spent heavily in terms of advertising and research and development.
Since razors are the main products that Gillette sells, they have to maintain in the
industry and overcome all the competition. The intensity of rivalry among Gillette
and other competitor reach to the extent such that they drove the Japanese
competitors out of the industry in Japan. Competitors such as Schick, BIC and
Wilkinson Sword plays a major role in the industry that keeps Gillette at its
position and remained aware all the times.
 2) The bargaining power of buyer.

The bargaining power of buyer are influenced by the options that the buyer have
in the market, the switching cost and the quality of the product. If the buyer have
high bargaining power then they can put the firms under pressure to lower down
the prices thus decreasing the profits of the firms. Buyers can threaten the
industry by forcing down the prices by way of demanding higher quality products
or more services and playing competitors against each other.

As per case, the consumers of Gillette thought that as little as 25 cents, they
could get the same cartridge mounted on a plastic handle that they had been
buying for 56 cents to put on their Trac II handle. Gillette company that assume
the market share of disposable razor blade would never gain more than 7 per
cent share however turn upside down when actually the market share for
disposable razor blade reach more than 10 per cent. This shows that the
consumer prefer the disposable razor thus forcing Gillette to invest more in the
disposable razor blade.

3) Threat of substitute products.

The threat of substitute product is when the consumer have the other alternative
that they can choose which serve the same purpose as the product that they
already use. The firms will face with limitation of returns in the industry when
facing with the threat of substitute products especially when the substitute
products of lower price and improvement in terms of performance which will
eventually weaken the profitability and the position of the firms in the market.

As per case, Gillette faces with threat of substitute product when electric razors
were introduced however the consumer would generally prefer the wet-shaving
since they are lower in cost so the threat of substitute product would be minimal
for Gillette Company.
4) Threat of new entrants.

Profitable markets will attracts new firms to enter the markets. Firms will need to
set the barrier for new entrant in order to protect their business of such rivalry
and to sustain in the industry. The barriers to new entry includes patents,
economies of scale or government policies, this will help the firms to have strong
position in the industry thus preventing the new entrants’ impacts on the firms. If
the firms have low barriers entry their position in the industry will be affected
significantly since they do not have something to strengthen their position in the
industry.

As per case, BIC, one of the major competitor in the industry introduced new
razor products and product enhancement that was the BIC Shaver for Sensitive
Skin. Being a major player in the industry serve the company in a comfortable
position in the industry since they have economies of scale and being trusted as
the first producer of razor blade for so many years. So the threat of new entrants
was low, however Gillette always take precaution to ensure their market share
are big and strong enough to withstand the new entrants.

5) The bargaining power of suppliers.

The bargaining power of suppliers exist when suppliers can exert the bargaining
power by threatening to raise prices or reduce the quality of purchased goods and
services. The bargaining power of suppliers can reach to the extent that they can
squeeze the firm’s profitability to the level that the firms will not be able to cover
for the cost of the raw material purchased.

As per case, Gillette manufactures its own products thus giving less impact on the
bargaining of power of suppliers. Gillette have advantage in terms of supplier
since they can get the raw material from anywhere and little switching cost would
be incurred. Furthermore, since Gillette is a global brand and established
company it enables the supplier’s prices o be driven low.
iii. Discuss how the two primary value chain activities below could create value for
both the business and customers (20 marks)
a) inbound logistics
b) operation

Value-chain analysis is a strategy tool to analyse an organization that uses value-

creating activities. While value is quantity or price buyers willing to pay for what a
business provides them and this is measured by total revenue, a reflection of the
price a firm’s product commands, and the quantity it can sell. The firm is consider
profitable if its value exceeds total costs involved in creating its product or service.
Creating value for buyers that exceeds the costs of production is a key concept used
in analysing a firm’s competitive position.

Primary activities are sequential activities of the value chain that refer to the physical
creation of the product or service, its sale and transfer to the buyer, and its service
after sale, including inbound logistics, operations, outbound logistics, marketing and
sales, and service.

There are few ways that the primary value chain activities of inbound logistics and
operation could create value for both business and customers.
a) Inbound Logistics

Inbound logistics is where all the processes that involved in the receiving, storing,
and internal distribution of the raw materials or basic ingredients of a product or
service. The most critical part of this process would be when the raw material is
received as the relationship with the suppliers is essential to the creation of value.
This part includes mainly two third parties that are suppliers of the raw material
and the transportation part which may be handled by another third party.

Any delay that may incur during this process will clearly affects the entire value
chain which resulting delay in delivering the final product to the end customers.
The way to create and increase value in this part of process includes two key
elements which are reducing the lead time in delivery and reduce cost.

In reducing the lead time in delivery, the business needs the raw material to be
delivered from supplier warehouse to their warehouse with the priority of to bring
the raw materials as quick as possible. The management team needs to come out
with efficient and effective delivery term with supplier.

Cost will be always high when involving more parties in deliveries instead of only
one. If the business nominate a single agent for delivering the goods from the
given port to their warehouse, they can to deliver the goods with a less lead time
and with a less cost.

This will create and increase value to the inbound logistic process since it reduces
the transportation lead time and cost of raw material delivery which ultimately
affects the final value of the product.

According to Gillette case, Gillette owns a few warehouse and distribution centre
especially in United States. They are really particular in choosing suppliers and of
course the finished product quality. This shows that Gillette has an efficient and
effective inbound logistics management in choosing suppliers that can supply a
good raw materials with an affordable price
b) Operations

Operations are all activities associated with transforming inputs into the final
product form. In this activity, the most crucial part would be the operation
management have to ensure the quality control of the production and operation.
They have to make sure that products of the business are produced efficiently and
effectively and avoid any wastage of business’s resources. This will resulted in
more competitively priced product reaches consumers due to production costs
being reduced without compromising on the quality of a product.

Other than controlling the current operations and resources, the operation
management needs to come up with long-term planning. Long-term planning will
contribute to sustainability of the company, products and relationship with
customers. This is essential for better financial and operational health of business.
This involves recognizing and planning for new product innovations, product
redevelopment, product enhancement, and complementary products that can be
sold with an existing successful product and service.

These will create and increase value to the operations since product will be
produced in good quality with a long-term planning for the product from the
operation management.

According to Gillette case, Gillette has several advance facilities as well as

numbered of skilful manufacturing engineer and workers specialize in shavers
industries in order to achieve efficient operation that are located at Gillette’s South
Boston Plant. Moreover, Gillette also create such a creative shave test lab that are
designed to compare its product effectiveness with competitor’s product so that
they can improve their product performance.
iv. Using the four criteria for sustainable competitive advantage, discuss whether
the Gillette’s product will be a source of competitive advantage to Gillette on the
following two perspectives : (20 marks)

a) Short-term perspective

1) Is the product valuable?

Currently Gillette’s product is considers valuable since the product’s attribute is

neutralize the threats and exploit the opportunities. It is considered valuable when
Gillette enable to formulate and implement the product that improve its efficiency
and effectiveness. Gillette can enjoy the economies of scale since they received a
very good demand in the market and the competitor also feels the pain of the
success of the product. It can see on Gillette annual report in 1986 to 1988 where
the profit of Gillette is increasing and it reflect the valuable of Gillette’s products to
company. Besides that, Gillette’s product are most recognisable by society for its
Cavalcade of Sport program, where the company sponsor the World Series.
Therefore, Gillette’s product is valuable since it has been well recognised by the
society.

2) Is the product rare?

Currently Gillette’s product is considers rare since Gillette is the first company that
introduce blade dispenser that used to eliminate the need to unwrap individual
blades and also the first that introduced silicone-coated blade. The product of
Gillette is rare since no other company had produced that kind of blade. Other
than that, Gillette’s product which is Trac II show the innovative shaving system,
where it is twin-blade shaver that make shaving more clean.
 3) Can the product be imitated easily?

For short-term perspective, Gillette’s product is hardly to imitate since Gillette

always come out with new and latest product with better function. The
competitors will find it difficult to beat Gillette’s product in the short-term period
since they need to do some research first on what resources did Gillette used or
what the feature on Gillette’s product that consumer like it. All these will take
long time to produce. Therefore, Gillette’s product are different compare to
others competitors for short-term perspective.

4) Are substitutes readily available?

The substitute for Gillette’s product is not readily available since there is no
strategically equivalent valuable resources or capabilities. Other competitors still
did not find any way to imitate or make a substitute for shaving product of
Gillette.

Therefore, Gillette’s product would be a source of competitive advantage to Gillette in

the short-term perspective due to the above sustainability competitive advantage
criteria.

b) Long-term perspective

1) Is the product valuable?

The Gillette’s product is still considers valuable since it has a 17-year patent that
make it a well-known company in shaving industry. It can be shown when it still
can compete with other brand such BIC when Gillette decided to launch Good
News! Which it was the first disposable razor for men sold in United States even
though both company are launched the same type of razor. These indicate that
Gillette’s product are valuable in long-term perspective since it has its own patent
and loyal customers.
 2) Is the product rare?

In long-term perspective, Gillette’s product is no longer rare since lots of

competitors also produced the same quality and type of razor or blade. Based on
case, we can that Gillette and BIC both had produced disposable razor and both
of them have their own market. The successful introduction of both product had
represent a watershed event in commoditisation where it is the process of
converting well-differentiated products into commodities. For Gillette’s product to
have sustain competitive advantaged in this industry, they need to ensure that
their product will always unique and differentiate from other competitor’s product.

3) Can the product be imitated easily?

The Gillette’s product can be imitated easily in the long-term perspective. The
competitor will eventually discover a way to copy most of various resources of the
product and start to produce the same type of product. Based on the case, in
1985 Gillette had introduced the first disposable razor with an ultra-slim head
name Micro Trac, however in late 1988, Schick also introduced the same feature
of disposable razor which is narrow-headed razor name Slim Twin.

4) Are substitutes readily available?

The substitutes of Gillette’s product are readily available in the long-term

perspective. The competitor will start to think to come out with the same product,
even though it may be impossible for a firm to imitate exactly another firm’s
resource but it may be able to substitute a similar resource that enables it to
develop and implement the same product. The competitor might even produce
better product than existing products. Based on the case, survey found that there
are a cream that would eliminate facial hair and this product could be a substitute
for shaving products. Another example is Wilkinson Sword had produced straight
razor to attract the consumer of Gillette’s products which it is regular razor.

Therefore, Gillette’s product would not be a source of competitive advantage to

Gillette in the long-term perspective due to the above sustainability competitive
advantage criteria.
v. Suggest two (2) approaches each for Gillette to (a) attract and (b) retain human
capital especially the professionals that are known to be demanding. (20 marks)

Two approaches to attract human capital are:

1) Consider branding as part of recruitment

Branding of the company means the value of the company in the eyes of potential
employees and outsiders. Branding is used as an attraction for potential
employees to be interested in working with the company. Employers who have
‘high employer brand value’ are perceived by potential employees as more
attractive than those with lower employer brand value. It will attract them because
of wanting to acquire the experience and to develop their career by working with
good reputations company.

A potential employee’s appraisal of an employer brand is prompted by factors

including their awareness and perceptions of the employer brand which may be
developed through word of mouth, personal experience and marketing strategies
The brand should be promoted with telling people regarding company’s
commitment to an employee-cantered work environment and broadcast the ways
that the organization engages and responds to the interests of employees.

Branding also can reduce cost of recruitment. If the company have a well known
brand then the company does not need to spend as much on the recruiting costs.
Potential candidates will find the company and apply the positions naturally.

2) Getting feedback on attraction strategy

Feedback is used to describe the helpful information or criticism about prior action
or behaviour from an individual, communicated to another individual (or a group)
who can use that information to adjust and improve current and future actions and
behaviours.

Getting feedback on attraction strategy is important to find out what works and
what doesn't. Assessing the most successful strategies and matching the cost
against actual performance whether the cost incurred are worth with the actual
performance by the employees.
 Feedbacks are valuable information to be used to improve the strategies.
Unsuccessful strategies should be stopped to cut the cost as they were not
effective in attracting human capital into the company.

Two approaches to retain human capital are:

1) Recognition and rewards systems

Recognition and rewards means that the company recognizes employees’ works
and give rewards to them accordingly. By recognizing and rewarding them,
employees will felt appreciated and motivated to repeat the behaviour and meet
their role description and objectives.

Recognizing the efforts of employees and encouraging their morale results in

increased productivity and decreased resignation rate. It is a documented fact that
an encouraged and dedicated workforce can change the fate of a company.

For team accomplishments, it is important to reward the whole team, otherwise it

will create competition, not cooperation. Still, there are always some team
members who give more effort, and sometimes there are members who coast
along on the efforts of others. When the coasters get the same reward as the
doers, resentment builds. Some companies are meeting this challenge with a
double-tiered system of team and individual rewards. What ties it together is that
for individual rewards, the assessors are fellow team members.

2) Set a mission and vision

A mission and vision gives an employee meaning and purpose. It is important to

make an employee feel like they are belong, and their contribution are valued. A
clear vision will help the employees to stay motivated and continued to stay in the
company. A clear vision also helps companies run more efficiently because it
keeps everyone on the same page. If the employees don't know what the
company hopes to achieve, they can't help the company achieve it.
Company’s vision must be something the company and its employees believe in,
both intellectually and emotionally. The vision also needs to be a constant focal
point. In order for the vision to be visible to employees everywhere, it needs to be
concise and relatable to every employee at every level.