Notwithstanding such daunting issues, businesses have to make decisions based on growth trends of existing product lines, competitors’ moves, and the forces of globalization.
Procter & Gamble’s (P&G) corporate policies and organizational practices, both at home in the USA and globally, form the backdrop to this case involving critical decisions on introducing Vizir – a heavy-duty liquid detergent (HDL) – in Europe. Although the test marketing results of a few months are encouraging, they may not guarantee the product success in view of the competition and local market conditions. The underlying point is that for a marketer, competition is as important as consumer acceptance (Kotler, 2006, pp. 168-189). In pushing through Vizir either in Germany or in the entire European market, P&G had to assess the threats from competition, risks of high investment in promotion and its impact on the profitability of operations, and changes to its established organizational practices.
Tools
Porter’s Five Force analysis is one appropriate tool that helps us to understand threats from the competition (Porter, 2004). These are segment rivalry from existing competitors, potential new entrants, substitute products, bargaining power of buyers/suppliers. In a related way, the market matrix consisting of entry and exit barriers vs. risk and reward is the other tool for analysis according to Kotler (ibid.).
Key issues
Analysis and recommendation
For P&G with its commitment to total customer satisfaction, heavy expenditure on R&D, market research, and promoting all products intensely, the launch of Vizir would automatically create a high exit barrier. Further, to recoup costs, it has to charge a premium price. This is to be seen in the supposed low entry barrier for HDL due to low investment in manufacturing facilities compared to powder detergents, which can attract many rivals who can charge a marginally lower price than that of Vizir and prevent a decent market share for Vizir. On the contrary, P&G had to overcome major technical challenges in developing Vizir and this feat can’t be easily replicated by small players. Even Colgate fumbled with its HDL, Axion and this is deterrent news for small players. Further, P&G is a global player along with its rivals like Henkel, Unilever, and Colgate and can ill-afford to allow competition to overtake it in new initiatives and therefore, market share. Its present market share of 21% each in Germany/Italy/France, 33% in the UK, and 19% in Spain as against 20 to 25% of each of its rivals in Europe, is an indicator of the rivalry. If washing norms are different in different countries, this handicap is common for rivals also. Added to these factors, the tendency is towards uniformity in machine models, washing temperatures, fabrics, etc. in the face of globalization.
Given the anemic growth rate of the detergent market by the late 70s, intense competition among global players, and the less likelihood of new entrants, P&G should go ahead and commit to launching Vizir on a pan-Europe basis. Restricting to German market would be a half-hearted measure that can’t be strategically justified. Since Lever succeeded with its HDL product Wisk in the USA by way of first-mover advantage in spite of other established powder options, P&G can also upstage Lever and Henkel, as the first mover with Vizir, in the European market.
There is both support and resistance for organizational changes involving developing Euro Brand Teams that would curtail the roles of both the European Technical Center and the Country Manager. Such changes are the essence of a dynamic organization and can not be put off due to reasons of personal likings or otherwise. Euro Brand promotion is in line with the globalization trends.
Comparable situations and benchmark companies
General Electric, Westinghouse, and Square D in the electrical industry, and Kimberley-Clark, Scott Paper, and Johnson & Johnson in paper-based fast-moving consumer products face similar situations as P&G (Porter, 2004, p.322).
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