Gillette in Indonesia

Topics: Economic growth, Marketing, Economics Pages: 10 (1506 words) Published: March 12, 2014

GILLETTE INDONESIAN

Given the information and the projections for 1996 behavior of the Indonesian market, Should Chester Allan implement his strategy based on increase only sales, instead of focusing efforts on market development (marketing, promotion, supply chain) aside of sales, just as Rigoberto Effio suggests?

BACKGROUND

GILLETE
Since its creation in 1901, Gillette has established a solid worldwide leadership as a producer of razors and blades, as well as other consumer product categories. Their spread of wholesalers, retailers and other distributors covers over 200 countries. A strong strategy of operations has been the expansion dividing the operations in region management with drivers such as R&D, advertising, and capital spending as drivers. The approach the company management required is to “think global, act local”

Gillette’s strategy for emerging markets:
Introduce shaving concept.
Higher value products and shaving systems.
Decide product mix.
Marketing push.

Gillette sales in Indonesia are as follows:

Table 1
GILLETTE in Billions of dlls
$
%
Total Sales
6,800,000,000.00
100.00%
Razor sales
2,720,000,000.00
40.00%
Asia- Pacifica razor sales
600,000,000.00
22.06%
Top 5 cities sales
$360,000,000.00
60.00%

Indonesia Market

The Republic of Indonesia is constituted of more than 15000 islands and the Population distribution is as follows:

Table 2
INDONESIA
%
Quantity
Lived in towns
35.00%
68,600,000.00
Lived in rural areas
65.00%
127,400,000.00
Total population
100.00%
196,000,000

The Indonesian government had a series of measures to keep a certain pace of growth within the country. One of these measures was the creation of Replita (Five Year Development Plan), applicable in 1996, is to maintain an annual growth of 6.2%. Also, over the years the government had facilitated Foreign Direct Investment to develop manufacturing infrastructure. This also enables that 2 Million new entrants to active population.

ANALYSIS

The approach this case was given is to analyze what scenario is more profitable to the coming year of sales:

To analyze if the current expansion of the Indonesian market by it self is aligning to the current predictions and forecast for Gillette increase in sales plan by Allan. By increasing market development spending, the increase in sales for the next year would be more than 25%.

To define the best scenario, the first step of the analysis must be focused on the designated market.

Market

As stated in Table B, the total population is 196 M. in 1995. The factors considered for market growth are the following:

Government measures that assure GDP growth, as well as the increase of 2M. to active population The driver for economic progress in Indonesia, as stated in the case, was the per-capita income increase. Acquisition power increases and, since Gillette was viewed in the urban areas as a premium product, potential buyers would increase. Percentage of population that purchases in stores, as well as the substitutes and market share. 60% of Gillette’s sales were in the top five cities of Indonesia

The following tables are a forecast of growth using Table A, which describes the forecasted increments from the year 1995 to 2000. Given this information, the calculation was to determine the growth of population of income segments and take account the percentage of purchasing in super store (Exhibit 1 shows segments distribution via location, Exhibit 2 shows growth on shavers population and usage)

Table 3

The above table is the growth of potential market given the economic growth is constant. Also it takes in account that each year 2 million persons enter the active population. (Exhibit 1 shows 1995 market behavior and segmentations and Exhibit 2 shows increase in usage of blades, generating more demand, assuming growths are constant from past...
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