The main issue of the P&G Korea case is centered around the question of market share. P&G and Unilever are the two major market shareholders in the Korean detergent industry holding 80-85% of the total market share. The remaining 15-20% of the market is held by low-priced local Korean brands. There are no new markets either company can tap for further market share since most Korean households already use laundry detergent, making the market saturated. Other than peripheral chemical changes claimed to be “improvements”, there are no major innovations to be explored for product development or diversification. Per Ansoff’s strategic opportunities matrix, P&G and Unilever are both focused on Market Penetration, working to increase their prospective shares of the Korean detergent market.
As shown in Figure 1, P&G has had a steady increase in market share over the last several years while Unilever has been on the decline. Unilever drastically increased their advertising budget in 2006 likely in an attempt to recapture market share. The tactic worked. As shown below, it resulted in recapture of market share for Unilever, at the expense of P&G.
P&G obviously needs to take some sort of action; they cannot afford to keep losing market share to Unilever. The Korean detergent market is mature with slow growth (see Figure 2). The BCG Product Portfolio Matrix, therefore, defines the product line as a cash cow for P&G. As such, P&G wants to protect their cash cow so they can continue using the money to infuse back into their diverse product line-up and keep their stars going strong.
One possible option that P&G is considering is increasing their marketing expenditures like they have in previous years. The proposed budget for 2007 is $38 million, which is 15% higher than what they spent in 2006. Throughout P&G’s six-year lifetime in the Korean market, P&G’s yearly increase in marketing expenditure...