MGT1211 Products and Services for a Global Market In Class Case Study #1. Module 1-Product Development © FITT Meeting India's Needs Through Reverse Innovation A Historical Breakthrough In 1900, King C. Gillette had the revolutionary idea to create a disposable blade that was very thin and very strong. The concept of an inexpensive disposable blade made of stamped steel seemed unbelievable at the time, yet by 1901 he had proven disbelievers wrong. The Boston-based business person founded Gillette that year; he passed away in 1932 after growing the company, eventually selling it to a fellow director, John Joyce. Fast forward to 1971: Gillette was still going strong and producing the first twin-blade shaving system, the Trac II. In 2005, the company was purchased by Proctor & Gamble Co. (P&G), an American multinational consumer goods company, for over USD 50 billion, in the largest acquisition in its history. Today, Gillette is the leading men's razor brand, with 80 percent of U.S. market share. Gillette's most popular razor, the triple-blade Mach 3, with diamond-like coating blades, 'Power Glide' smoothness, ergonomic handles and pivoting precision heads, is sold internationally as a mid-tier product. In 1984, while it was still operating as Gillette, the company entered the Indian market with the Mach 3 in local packaging, targeting professional men with higher-than-average disposable incomes. The Mach 3 promised a close shave, done quickly and with less irritation than other razors, and its promotional materials and distribution models all supported that promise. This value proposition worked well in developed countries, with P&G offering the same razors in different packaging. In India, however, despite market presence for over twenty years, the company was unable to gain dominant market share. Market Research In 2009, deciding to address weak sales in India, P&G sent a diverse team to get a closer look at how Indian men shave. In the 2011 P&G Annual Report, one member of the team, Graham Simms, Male Grooming Research and Development, describes how the team conducted thousands of interviews, home visits and shop-alongs to gain a strong understanding of the habits and routines surrounding shaving in India. At the time, the average Indian man was shaving with a double-edged razor, a century-old technology, because it was a more affordable option. Since the average Indian man represents half a billion potential customers, this was a significant cultural preference that needed to be taken into consideration. Products and Services for a Global Market Module — Product Development © FITT Graham goes on to say the team  discovered Indian men were shaving with a double-edged razor while sitting on the floor, in low light and holding a mirror in one hand. This resulted in many nicks and cuts and an uncomfortable, time-consuming shaving experience. In addition, the lack of running water in their homes meant the men had to go outside to a community water source and pour water into a bowl to carry back to their houses to rinse the blades. Lastly, the team found that Indian men had an indifferent attitude to shaving and went longer between shaves than their U.S. counterparts. It was something they could do to feel good about themselves, but they weren't willing to pay a premium for it, even if they could afford to. Localization Previously, Gillette and P&G had employed the "glocalization" model of international trade, taking a domestic product and doing the minimum to customize it to each international market. This could include using locally targeted packaging or making only slight modifications in manufacturing, both common practices for large companies expanding into new markets. In order to address its market challenges in India, P&G decided to start from the beginning and produce a model that would directly meet the expressed needs of the Indian market: cost, safety and ease of use. This method of wholly customizing to a target market is known as "localization" and is becoming increasingly popular as international customers become more discerning with their disposable income. Through this process, the Gillette Guard razor was created. The Guard is the most significant product launch since the creation of the Gillette brand. It uses 80 percent fewer parts than the best-selling razors and consists of plastic housing, a single blade, a safety comb to reduce nicks and cuts when shaving longer hair, easy-rinse cartridges to minimize use of water, an ergonomic ribbed handle for ease of use, and a hanging hole for easy storage when not in use. Moving to a drastically simplified product design, a process called "reverse innovation", and relocating the entire manufacturing process to India allowed the company to significantly reduce costs and offer the product at approximately USD 0.30 per razor and USD 0.10 per blade when it launched in 2011. As part of the launch, the company revised its marketing strategy to address the indifferent attitudes toward shaving and adjusted its business model in the country. Rather than focusing on strong relationships with a handful of powerful retailers, P&G focused on India's network of local shops, or kiranas, to distribute the newly developed razor, making it readily available to everyone, everywhere. It also began a strategic marketing campaign, hiring Bollywood actors to represent the company in a series of advertisements showing good-looking actors dancing in the streets, gaining the attention of the town and of an attractive Bollywood actress. The series of ads and the local distribution channels worked together to begin changing Indian men's shaving culture, and this contributed greatly to the Gillette Guard's success. Today, Indian men prefer the Gillette Guard to their traditional double-edged razor seven to one, and P&G has over 50 percent of the market share in India. Products and Services for a Global Market Module — Product Development © FITT What's Next? P&G successfully used reverse innovation to become a leader in the Indian market. What are its next steps? Some experts suggest the challenge the Gillette brand may eventually face is a phenomenon called "market disruption". This occurs when a domestic or international supplier begins offering a simpler and cheaper option in a well-developed market. P&G has chosen not to offer the Gillette Guard in its domestic market for the time being; however, at some point in the future another company may offer a similar product. This could greatly decrease P&G's long-held dominant market share domestically. Potential risks aside, the case of P&G and the Gillette Guard in India is an excellent example of a company focusing on localization of its products and reaping the benefits. Learning Outcomes This case study relates to the following learning outcomes from the module Product Development in the course Products and Services for a Global Market: • Describe international trade considerations and their implications when developing or adapting products for international trade, including market entry strategies, product life cycle and market research regarding the product. • Incorporate product design considerations and design policy in products to suit consumer preferences, and to include comparative advantages in international markets • Describe product adaptation and customization, and considerations for use of each. Products and Services for a Global Market Module — Product Development © FITT 1. When Gillette entered the Indian market in 1984, it sold the same domestic product in packaging customized to the local market (language, colour and style preferences). What benefits would there have been for Gillette to only minimally customize its product in this way? 2. What were the three major cultural preferences that P&G found required attention? Explain how each cultural preference was addressed. 3. Having found success in the Indian market through localization, what should P&G's next steps be in India and internationally? 4. As described in the case study, reverse innovation can lead to market disruption. What steps could P&G take to prevent a decrease of its U.S. market share through the introduction of simpler and less expensive razors by its competitors?