Gillette Indonesia

SECTION-A, GROUP-1

SUBMITTED BY-

Apurva Bharadwaj
T Aravinth
Shekhar Teny
Sunaina Kapoor
1. What factors determine the demand for blades? How can demand be increased?

Factors determining the demand for blade:

1) Stable government is important for a country to help market develop. Political stability
ensures continuity of demand in the markets.
2) Infrastructure facilitates market development. Poor infrastructure leads to low market
penetration of a product and demand does not rise significantly.
3) Economic prosperity of people also contributes to demand for a product. When people
are well-off, they tend to spend more on lifestyle products.
4) Demand for blade is affected by people’s shaving habits. Americans shave 26 times a
month whereas Indonesians shave only 5.5 times a month.
5) Demand for blades is subject to growth rate of hairs. Asian beard don’t grow as fast as
Caucasian or Latino beard.
6) Successful advertising can change trends or create new trends.
7) People’s religious and social beliefs and cultural trends also determine the demand for
blades.

Ways to increase demand:

1) Advertise generates a pull-effect for a product, which leads to higher demand from
consumers.
2) Placing product at multiple supermarkets and retailers.
3) Appointing more wholesalers to increase efficiency and competition.

2. How is Gillette doing in Indonesia? Has Gillette leveraged its first mover advantage?

Gillette is growing fast in Indonesia. In 1993, it had 28% market share and in 1995, its
market share grew to 48%. However, due to lack of infrastructure and transport facility in
Indonesia, it is unable to price its products at low rate and hence they are not consumed by
low income group. It maintained dominance in the high segment market. Some key changes
in distribution channels like appointment of 23 new distributors has resulted in 60% sales
growth. Diversity and language are other hurdles that Gillette faces. It has leveraged its first
mover advantage and has covered 60000 small kiosks and mom-and-pop shops. It is also
selling products through supermarket chains.

3. How should Gillette accelerate the development of blade market in Indonesia?

It can increase sale by aggressive advertising on products like disposables and system
blades and making them popular among youth, middle and upper class consumers. It can
increase the number of distributors to reach out to hitherto untouched customers and
compete hard for double edged blade market with Chinese and Eastern European rivals in
the market. In 1993, it appointed 23 distributors and next year its sales grew by 60%. So,
the market has immense potential and it can tap it by increasing penetration through
developing an efficient distribution network. Although supermarkets account for only 5%
for sales by volume, by value it accounts for 8% share because high segment customers buy
high priced products from supermarkets. Aggressive advertisement on lifestyle trends can
boost sale in this market segment.

4. Refer the contribution calculations for Allan 1996 (E) growth estimates of 19% in the
excel template, attached. You may calculate the contribution of different products
for Effio 1996 (E) for 27.5% growth. Further, prepare an income expense statement for
1996 (as in Exhibit 3/ 4) based on revised 27.5% growth estimate of Effio (you may
assume the same product mix of Allan 1996 E for estimating contributions for Effio's
growth estimate of 27.5%).

Refer attached excel sheet for calculations.