Retail

To Shave or Not to Shave

Like most men around the world, Prakash, a thirty-year-old Indian port worker wakes up in the morning facing the unpleasant but necessary task of having to shave. But unlike most men in the developed world, for Prakash shaving means sitting on the floor with a small amount of still water, balancing a hand-held mirror in low light, and experiencing frequent nicks and cuts from his double-edged razor[1].

On the other side of the globe, with headquarters in Cincinnati, Ohio, Procter and Gamble (P&G) is one of the largest consumer products companies in the world with operations in more than 80 countries and more than 300 marketed brands sold in 160 countries. Traditionally, P&G’s product mix has focused on high-end products geared towards the developed markets. Hurt by slowing sales growth in developed markets during the recent global recession and European economic crisis P&G began to look at emerging markets for long-term growth[2].  P&G’s historic focus on developed markets left them unprepared to enter the emerging markets where they were blindsided by their competitions’ market penetration. P&G underestimated the cost of building its presence in developing countries resulting in a shortage of funds to finance its expansion in emerging markets and an inability to achieve economies of scale. This resulted in higher priced products in these regions. Compared to its competitors like Unilever or Colgate-Palmolive, P&G has been slower at reverse engineering its products to be affordable to the bottom of pyramid market segment in emerging markets.

A corporate strategy article by Thunderbird students.

In 1887, Mr. Asa Candler was faced with a distribution dilemma. [1] The Atlanta druggist had spent $2,500 on a formula for a sweet-tasting drink and was looking for a way to promote the sale of this little-known beverage named Coca-Cola. [2] His solution: handwritten tickets offering customers a free sample. To Mr. Candler’s surprise, the offer was a huge success. So was born the coupon. By 1913, an estimated 11% or roughly 8.5 million Americans had received a free coke. [1] One could argue that Mr. Candler’s invention of the coupon is the reason Coca-Cola started on its path to becoming one of the most iconic global brands - ever.

Fast forward to 2008, when an internet start up based in Chicago, IL created one of the largest shake ups in the marketing world since Mr. Candler’s first hand written ticket; that company - Groupon. The novelty of Groupon was this: through the power of the internet, select “daily deal” coupons could be offered and if a big enough “group” agreed to purchase the deal, then the deal would become valid. [3] The program was used by participating companies as a way to reduce the risk of losses, increase customer traffic, and drive promotions. Now four years since its launch, the Groupon business model has come under attack and faces many strategic obstacles, including competition from lookalike websites.

A corporate strategy article by Thunderbird students Eric Chown, Veronica Yusz, David Prestin, Sarah Olsem and Rosemary Geelan

The Under Armour brand evokes an image of elite athleticism, almost at odds with the company’s humble beginnings in the home basement of the founder’s grandmother. A simple idea ultimately developed into one of the most prominent names in the industry. As the company evolved, the relative importance of the strategic challenges they faced changed as well. One shift has already occurred – from word of mouth advertising to promotion by professional athletes – and this will likely be insufficient to expand their market in the direction that they are focusing on with their newest production lines. Their marketing strategies and ability to maintain the share they have established will be tested as they move away from their traditional customer base and into new niche markets. The challenge to Under Armour is whether to change their strategy as they expand, or to apply their initial model in new, innovative ways. Both have risks if not executed properly.

A corporate strategy article by Thunderbird students Emma Brown, Caroline Caverly, Julie Goodman, Kelly Post and Angela Wong

Last year, when an apparel giant opened four stores in China and failed to gain a significant portion of the retail sales, multinational retail stores took note. The Gap, an apparel line successful in more than 3,000 locations worldwide, had everything going for them. So, what went wrong?

The Gap’s biggest mistake was the cookie cutter approach it took to establishing its presence in the world’s largest youth market. The Gap sought to target the increasing middle-income consumers in the rapidly growing Chinese market, but failed to capture the attention of their most important customers, the Chinese youth.

In China, the Gap is perceived as middle class apparel selling for a luxury price.  Status and luxury are important goals for China’s consumers, especially for the youth. However, a premium price for a middle class product is a cost youths are not willing to bear.  Moreover, The Gap chose to open stand-alone stores rather than locating in mall areas, forcing customers to go out of their way to make a special trip just to visit the store. The majority of Chinese consumers purchase apparel at a mall because they can use it as a single destination for shopping, eating, and entertainment. The Gap failed to realize that China’s middle class youth consumer is very different from an American consumer.