ANALYSIS OF CASE 5: GILLETTE AND THE MEN'S WET-SHAVING

MARKET
Introduction
Case 5 of the Strategic Management Course Pack features an article authored by Lew G.
Brown and Jennifer M. Hart of the University of North Carolina at Greensboro. This article
is centered on Gillette company and the men's wet-shaving market, covering a timeline of
the beginning of the shaving practice up until the late 1980's. Taking a critical look at this
case study, it can be divided into three major sections. The fir st section highlights the
progress of the shaving practice from the early man, and how Gillette was able to demystify
a once specialized practice, into something that everyone can do these days through the aid
of witty inventions. The second section reviews the Gillette company, its scope of
operations, marketing strategies as well as those of its competitors. The study concludes
with a story of how the management team of Gillette are brainstorming to overcome a
major challenge that results from a mistake made by the company in the 1970's.

History of the Shaving Practice

The article identifies shaving as a practice that dates as far back as 7000 years ago when
members of the Egyptian dynasties shaved their faces and heads, presumably to deny their
enemies anything to grab during hand-to-hand combat. As society developed, craftsmen
fashioned various types of blades, mostly crescent-shaped knife blades, made from flint,
copper and bronze. Later on, iron was chosen as the preferred material as it was found more
efficient than previously used materials. Up until the 19 th century, shaving was seen as a
tedious, difficult and time-consuming task and was done infrequently by most men. The
blades available at the time had to be sharpened before each use, and required great skill to
deliver a clean shave. This all ended in 1895 when King C. Gillette of Boston invented the
first safety razor. This device came in the form of a permanent razor handle, on which a
thin razor blade with two sharpened edges is attached. This provided men with a safe way
to shave because only the sharpened edges of the blade were exposed, and when it became
dull, it could be discarded and replaced with a new one. This invention revolutionized the
shaving practice and gave birth to the Gillette company.

Gillette Company
The article highlights the brilliance of King C. Gillette. Despite inventing the safety razor
in 1895, he took eight years to perfect its design before the company's first year of
marketing in 1903 where it sold 51 razors and 168 blades. The safety razors were an instant
hit as it sold 90,884 razors and 123,648 blades the following year, thereby cementing
Gillette's position as the pioneer of safety razors. Subsequent years saw rising razor sales
and blade sales at the rate of 400% and 1,000% respectively on an annual basis, leading to
the establishment of its first international branch in London. Gillette's dominance in the
wet-shaving market has not come as a surprise, because they have been strategic from the
onset. Firstly, they specialize in inventing products that make shaving easier for
individuals. Some of these inventions include the first blade dispenser in 1946, the first
silicone-coated blade in 1959, and the first twin-blade shaver in 1971. Gillette was also
wise to back up its inventions with patents to ensure that it reaped the harvest of hard work
before competitors got a share of the market. Another step taken by the company to ensure
it remained an industry leader is significant investment in marketing, distribution and
advertising. Gillette understands that being at the forefront of consumer's minds is key to
consistent sales. This fact spurred the company to use cartoon ads, radio shows, musical
slogans and sponsorship of sports events to draw attention to its prod ucts. Gillette was able
to achieve this by allocating a significant portion of sales revenue to marketing. The third
way that Gillette used to remain relevant was by diversifying its business. The company
had an array of divisions that includes blades and razors, stationery products, toiletries and
cosmetics, Oral B products, and Braun products. Below is a snippet that shows more details
of Gillette's divisions.

Gillette Product Lines by Company Division as at 1988

Although these products are different, some share similarities in areas such as raw
materials, manufacturing processes and distribution channels, so it was easy for Gillette to
integrate these divisions. Also, they provided multiple streams of incomes that ensured that
if one aspect of business was suffering, funds from other thriving aspects could be used to
support it. Regardless of its diversification, Gillette was fully aware that blades and razors
were its main aspect of business and invested more into research and marketing to improve
products in that line. This was the division that consistently returned the highest sales and
profits as seen in the following figure.
 Gillette's Sales and Operating Profits by Product Lines from 1986 to 1988 in
Millions of USD

Competitors in the Wet-Shaving Industry

The article identifies Shick as the second major competitor in the wet-shaving business. It
was able to attain this status due to a merger in 1970 between Warner -Lambert, a
pharmaceutical and chemical manufacturing company, and Eversharp, a lon g-term
competitor in the wet-shaving market. The combination of resources propelled Shick to
have 23.8% of the US market share cutting across blade systems, disposable razors, and
double-edged blades and injectors. Unfortunately, Shick's US market share dwindled,
getting to 16.2% in 1989, losing a lot of ground to Gillette and other competitors. This was
because Warner-Lambert was channeling Shick's cash flow to its research in development
of drugs, rather than into marketing its products. The company changed its strategy in the
late 1980's but the damage had already been done despite its optimism that there would be
a bounce back for the company. In any case, the company learnt its lessons and took the
global market by storm with 67% of revenue coming from overseas, predominantly Europe
and Japan. In Japan, Shick and Gillette were the major players, eventually driving Japanese
competitors from the market. Until Gillette made a costly error by trying to sell razors using
its own sales people, who did not have the distribution network that Japanese companies
had. Shick, on the other hand, chose to leave its distribution to a Japanese firm called Seiko
Corporation, who imported razors from the US and sold to wholesalers nationwide. This
gave Shick the upper hand in Japan from where it gets 40% of its sales and 35% of its
profits.

BIC Corporation was founded in 1958 by Marcel Bich in the United States. The company
used its experience as the largest pen and lighter maker in the US to delve into the wet -
shaving industry in 1976. BIC was a master in the commodity strategy in which its products
were similar to those of competitors but it offered them at lower prices. This gave BIC the
advantage in the pen and lighter markets, and it envisioned that it would do same in the
shaving industry. It was right as the introduction of BIC Shaver led to an intense market
battle between it and Gillette, especially when the unique BIC Shaver for Sensitive Skin
was brought into the US market in 1985. BIC was able to compete with Gillette because it
also had a good marketing and distribution strategy from years of doing business in the pen
and lighter industry. Exhibiting more ambition, BIC tried entering the sailboard and
perfume industries in 1982 and 1989 respectively, using its co mmodity strategy. This led
to low sales and significant losses as it realized that most people regarded these as luxury
products and did not want their favorite perfumes and scent to be available to all due to
low prices. BIC has since moved on from those setbacks and focused on markets where the
commodity strategy thrives.
Wilkinson Sword was ranked as the fourth major player in the wet-shaving business. It is
a subsidiary of Swedish Match Holding Incorporated that already imported and sold doors,
and manufactured wood flooring, self-sharpening scissors and gourmet kitchen knives in
the US. Wilkinson, which had earlier failed in the razor market and dropped out during the
Second World War, made a return in 1956. Hitherto, manufacturers used carbon steel to
make most razor blades but they lost serviceability quickly due to mechanical and chemical
damage. Experimental efforts to use stainless steel seemingly proved abortive because they
didn't sharpen well despite its durability. Wilkinson had a breakthrough i n these
experiments, by developing a coating for stainless blades which masked the edges,
allowing the blades to give a comfortable shave and last two to five times longer than its
carbon steel contemporary. It named the new blade Super Sword-Edge and introduced it in
England in 1961 and in the US in 1962. These stainless blades received increasing
acceptance in the market and helped place the company as one of the leaders in the industry.
However, the company has been unable to surpass Gillette and other c ompetitors due to its
much lesser marketing budgets amongst other factors.
Challenge Faced by Gillette in the Wet-Shaving Industry
After evaluating this case study, it can be deduced that the major obstacle faced in the wet-
shaving industry is the low profit margin experienced by all competitors. This challenge
stems from Gillette's decision to launch ‘Good News’, which was America's first
disposable razor. This was done in response to BIC launching the first disposable shaver
in Europe a year earlier. Gillette did not want BIC to penetrate the US market and become
the leader in that aspect, so it introduced these low-price razors with significant levels of
marketing and advertising. This move backfired as people began to abandon the use of the
more profitable system razors and increased the use of disposable ones. Despite the fact
that most users rate system shavers better than disposable razors, the market became price
sensitive. To worsen the scenario, Gillette who was the market leader, had to increas e the
prices of system razors to compensate for the reduction in sales, which fueled the growth
of the already popular disposable razors. The company never envisioned the growth of the
disposable razor product line to exceed 7% of the market share, but by 1988 it had gotten
to 50% of the entire shaving market.
Apart from the reduced profit margin in sales, as disposable shavers became the
predominant product in the market, it made it easier for competition to come onboard.
Producing disposable shavers is much easier than the more expensive system razors. The
cost required to produce system shavers in large enough quantities to make it profitable,
was exclusive to Gillette and a few others. But with disposable razors being the mainstay,
it gave room for smaller organizations to enter the market, eating into Gillette's share. This
is a concern to Gillette especially because it accrued a large debt profile when its
management team resisted two unfriendly takeover attempts by buying back significant
number of shares in 1986 and 1988. These takeover battles put its debt load at $2 billion
and pushed its total equity negative to $84.6 million.
Proposed Solutions
The closing section of the article outlines the proceedings of a meeting of the Gillette
management team at its office in Boston. The team has identified two possible solutions to
revive the company's profit margins. The first is to accept the transition to disposable razors
and to try segment the market based on performance. The team acknowledge s that there
are people who would continue to buy based on prize, but that there are shavers who would
pay more for additional features such as lubricating strips and adjustable heads. This would
help improve profitability while delivering better performan ce disposables within a similar
price range. The second option identified by the team is to slow the growth of disposable
razors in an attempt to reinvigorate the system razors market. A similar approach was used
by Gillette in the 1980's when it slowed the growth of the system razors market in order to
boost sales of its disposable razors.

The first solution is clearly the better of the two. The predominance of barbing saloons in
current times means that most people use system razors that are publicly ava ilable at salons
rather than buy personal ones. Sterilizing techniques used at these saloons to keep the
blades clean has further encouraged shavers to keep to the public system razors. When it
comes to shaving more sensitive parts of the body, most people clearly prefer the
disposable razors due to low maintenance. Despite Gillette's status as a market leader in
the shaving industry, any attempt to slow down the growth of disposables by increasing
prices and cutting short supplies would turn out negatively for the company. Such a move
would simply hand the advantage to its competitors because most shavers now see razors
as a commodity and are not willing to pay significantly larger amounts to obtain system
razors.
Conclusions
This article gives an interesting and detailed insight into the wet-shaving industry with data
that backs its findings. Despite the study period terminating in the late 1980's there are
some key lessons which can be utilized in succeeding at modern business. Some of these
include:

• Innovation and Securing Creations are Key to Business Success: Gillette's

ability to remain the market leader in the shaving industry for over a century is
 mostly driven by its creativity and initiative to secure its inventions using patents.
The inventions empowered the company to make striking impressions on customers
who really appreciated their products by purchasing them, while the patents gave
the company enough time to reap the benefits of hard work, before other competitors
were allowed to enter the market. Many young businesses can learn from this
because with the speed at which information moves in the current age, it is easy for
ideas to be stolen and put to profitable use by an entity that did not create it.
• Competitors are not Always Enemies: The major challenge faced in the shaving
industry resulted from Gillette seeing BIC as an enemy to its dominance in the
shaving market. Even though both companies are striving to obtain the same
customers, adopting a collaborative approach would have been more p rofitable in
the long run for Gillette and the rest of the industry.
• Identify the Trend and Flow with it: Gillette's failure to predict that people were
adopting the disposable razors more than the system razors proved costly to the
business finances. It is important for every business to invest resources that help
them identify or predict human preferences as it affects market trends. The results
from such investigations should govern decision making beyond any other
sentiments or data.
• Outsourcing is a Necessity: There is a popular saying that goes: “Jack of all trades,
master of none.” It is important for every business to identify its strengths and focus
on executing those aspects themselves. Areas of weakness should be outsourced to
specialists or partners, until capacity is built to execute those aspects of business if
necessary. Ignorance of this is what led to Gillette losing significant market share
to Shick in Japan when it decided to handle distribution of its products itself, while
Shick outsourced distribution to Japanese company Seiko Corporation.