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 YR Rev ($mil) Rev Growth N.I. ($mil) N.I. GrowthMargin Dec-04$10, %$1, %16.10% Dec-03$9, %$1, %15.00% Dec-02$8, %$1, %14.40% Dec-01$8, %$ %10.20% Dec-99$9, %$ %4.20% Dec-98$10, %$1, %12.70%

2004 Year End Financials Debt Ratio75.50% Cash ($ mil.)$ Current Ratio0.97 Long-Term Debt ($. mil)$2, Shares Outstanding990,000,000 Dividend Yield1.50% Market Cap ($ mil.)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. ProductRetail $ Schick Quatr.$7.99 Blade Refill$7.99 Gillette Fusion$9.99 Blade Refill$12.99 Schick Power$11.83 Blade Refill$11.49 Fusion Power$11.23 Blade Refill$14.29

Internal: Strengths/Weakness Manufacturing: High capacity, major realignment to reduce costs in 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 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