Federal Urdu University Islamabad

Course No.: … Course Title: Intro to International Management

Total Marks: 18……………… Date of Exam: 22-09-2020
Degree: …………M.com Semester: 3rd Section: A
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Name of the teacher: MISBAH RIAZ
Who taught the course:Signature of teacher / Examiner:

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Registration No.: ……22055……………… Name:…Muhammad Afraz Hussain Chishti…

Answer the following questions.

CASE STUDY

Gillette Targets Emerging Markets'

As it entered the twenty-first century, Gillette faced a difficult choice. Should it continue
targeting emerging markets or not? Its strategy to move aggressively into markets in the
developing world and the former Soviet bloc had been hailed as a success only a few
years before. Recent poor earnings, however, had management considering whether this
choice had been a wise one.

The Boston-based firm was founded in 1895 and is still best known for its original
products, razors and razor blades. By the end of the twentieth century, Gillette had
grown into a global corporation that marketed. Its products in 200 countries and
employed 44,000 people worldwide. About 1.2 billion people use Gillette products every
day. Its sales are about equally distributed among the United States (30 percent),
Western Europe (35 percent), and the rest of the world (35 percent).

As markets matured in developing countries, Gillette sought growth through product

diversification, moving into lines such as home permanents, disposable lighters,
ballpoint pens, and batteries. In the mid-1990s, Gillette targeted several key emerging
markets for growth. Among them were Russia, China, India and Poland. Russia was
already a success story. Gillette had formed a Russian joint venture in St. Petersburg and
within 3 years Russia had become Gillette's third-largest blade market.

Gillette's move into the Czech Republic had prospered as well and in 1995 Gillette
bought Astra, a 10caI; privately owned Razor Blade Company. Astra gave Gillette
expanded brand presence in the Czech market. Astra's relatively strong position in export
markets ~n East Europe, Africa and Southeast Asia proved a boon to Gillette in those
markets as well. Jus.t as in other markets in the developing world, 70 percent of East
European blade .consumers used the older, lower tech double-edge blade. In more
developed markets, consumers appreciated product innovation and the shaving market
had moved to more high tech systems such as Gillette’s Sensor.)

Then disaster struck. A financial crisis that began in Thailand quickly spread across
Asia. Many wary investors responded by pulling money out of other emerging markets
as well depressing economies across the globe. Bad economies meant slower sales for
Gillette, especially in Asia, Russia and Latin America. In Russia, wholesalers could not
afford to buy Gillette products. Consequently, these products disappeared from retail
stores and Gillette's Russian sales plummeted 80 percent in a single month.

Gillette found it could not meet its projected annual profit growth of 15-20 percent. The
price of Gillette shares tumbled 36 percent in 6 months. To save money, Gillette planned
to close 14 factories and layoff 10 percent of its workforce. .

Despite its recent bad experience in developing countries and in the former Soviet bloc,
Gillette was still moving ahead with plant expansion plans in Russia and Argentina that
would total $64 million. Some even suggested that this was a good time to expand in the
emerging markets by buying up smaller competitors that had been hurt even worse by the
crises. Meanwhile, back in the developed world, another large global consumer products
firm, Unilever, announced that it would be entering the razor market.

Discussion Questions
1). WHY DO COMPANIES SUCH AS GILLETTE TARGET EMERGING MARKETS? DO YOU AGREE WITH
THIS STRATEGY?

The companies like Gillette target emerging markets because the developed markets are
already matured. There the sole method to realize consistent growth is through the
merchandise diversification like just in case of Gillette which moved into lines like home
permanents, disposable lighters, ballpoint pens and batteries. aside from that the
corporate could expand its business operation in developing countries where the presence
of inferiority products pave way for the new and top quality products sold by the
multinationals. This manner a replacement market would emerge that might help in
developing business at consistent rate needless to say. As an example through the
expansion of business within the emerging market, Gillette was ready to develop its
business in 200 countries and use the workforce of 44,000 employees. This manner the
corporate was ready to secure sales at 30% in us, 35% in Western Europe and
35% within the remainder of the planet. This manner the business expansions in
several countries bring along profits from different countries at just one occasion. So if a
business process is facing issues in one country than that would be compensated by the
earnings in other country. As an example within the case when sales for Gillette products
fell in Russia and other Asian countries, it had been compensated by earnings in Europe
and us (Kaden, 2006).

2.) WHAT ARE THE DANGERS TO GILLETTE OF TARGETING EMERGING MARKETS?

The dangers to Gillette on targeting emerging markets include the approaching from the

financial crisis that would affect the sales of the corporate and will cause negative sales
figures. For instance the financial crisis that started in Thailand that later spread across Asia
affected the development of sales of Gillette Company. Therefore if a developing country
proves to be a nasty economy that might end in losing money for the corporate within the end
of the day. As an example Gillette had high sales in Russia earlier to the financial crisis
which made Russia the third largest consumer of company manufactured blades. However
after the financial crisis struck an equivalent country observed a fall in sales by 80%. This
manner the merchandise was completely wiped far away from the market. Additionally the
investments made by the corporate also face a Setback as an Example.

Gillette had expansion plans for Russia and Argentina that might worth $64 million which
were now at stake thanks to the danger caused by the slowing down of those economies. Not
even that the worst danger that the corporate had to face within the emerging markets is that
the immediate fall in share prices that would end in quickly losing of giant money. As an
example after the financial crisis the shares of Gillette tumbled by 36% in 6 months. As a
result the corporate had to shut down its 14 factories and lay off 10% of its workforce
(Jayachandran, 2004).

3.) WHY WOULD LOCAL, PRIVATELY OWNED COMPANIES LIKE ASTRA WANT TO SELL OUT TO
COMPANIES LIKE GILLETTE? WHY ARE SUCH COMPANY’S ATTRACTIVE ACQUISITIONS TO
MULTINATIONAL FIRMS?

The local, privately owned companies like Astra would really like to sell bent the companies
like Gillette with the aim to take care of their presence within the business. Although these
companies lose their ownership but the business continues to grow and expand under the
leadership of the multinational company. The owners of the business get good money
reciprocally of selling the business and should even secure an honest job position in their own
sold out company.

The multinational company on the opposite hand gets the advantage of already developed
physical distribution system and other management applications within the organization. This
manner with the infusion of additional money and expertize the work process is improved
and therefore the old and native company is formed to figure sort of a global world class
company (Bitner, 1992).

The smaller competitors are attractive to be targeted by the multinational firms because they
could buy these companies easily and utilize their already developed business process for
expanding their business within the new region. This manner already developed business
processes are utilized for spreading business of the multinational company.