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Safety Razor Blade Industry Marketing Essay

4159 words (17 pages) Essay in Marketing

5/12/16 Marketing Reference this

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For thousands of years man has been fighting the unending battle with his stubborn facial hair, therefore over the years an average man has spent approximately 3000 hours in the act of shaving. The ancient Egyptians have been known to shave their heads and beards, a custom later adopted by the Greeks in 330 BC. The first safety razor was developed by a French by the name of Jean Jacques Perret in the late 1820s a similar razor was developed in Sheffield, and 1870s a single blade hoe shaped handle razor was available in Germany and Britain.

The First safety razors were initially developed and crafted by individual expert blade makers in workshops, the blades were simple, however over the years the technology has evolved due to increasing demand from consumers for better and more complex razors and blades. The production of modern blades today therefore is an extremely complex and highly technical process occurring at high rates of speed. During the late 19th century a significant change occurred in safety razors, the new T shaped instruments incorporated a guarded blade in order to prevent severe skin cutting and used only restroppable or disposable blades made of carbon steel. Over the years features like Flexible cartridge and the flexing action of the twin blade cartridges, thin wire wraps for safety purposes and comfort or lubricating strips on the caps over the blades have been incorporated into the safety blades. Electric razors/ shavers are the latest additions to the shaving arena.

The Shaving industry has few major big players who hold the secrets of trade. Manufacturing of safety razor blades is using state of the art of equipment and machinery; following is an outline of a typical safety razor and blade manufacturing process:

Drawing the blade strips from the spools

High speed punching of the blade banks in high speed punch presses (950-1000 SPM) i.e. splits per meter.

Bliss Press Operations

Heat Treatment (automatic electric hardening systems)

Cutting operations

Grinding

Stopping (lapping with leather belts)

Coating

Printing of brand name

Quality check

Packing and dispatch (automated)

The RAW MATERIALS required during this production process (for blade) include the following:

1095 Carbon steel

Heat treated stainless steels

301 stainless and 17-4, 17-7 PH Stainless

High speed Steels

Tool Steels

Tungsten Carbide

Zirconia Ceramic

Coatings (including titanium nitride and tungsten carbide)

The final product is tested against the following quality control measures various aspects of the blades mentioned in the article of laws below:

Pakistan Standard Specification for Safety Razor Blades (4rth Revision)

Hardness Test

Nick Test

Shaving Test

Flexibility Test

All these tests test various aspects of the blades and have their own respective criteria for determining the quality of the final product and whether it is fit for consumer use or not.

World Safety Razor Market:

For over a generation, Gillette has been the most profitable brand with approx. 80% market share and regular price hikes. Over the years competitors have entered the game as well challenging Gillette. The prominent competitors in the international market or on a global level are:

Schick Hydro

Tiger

Shark

BIC

Sword

But the major competitor for leader Gillette stands to be Schick in the world market, the following table taken from Advertising Age (http://www.adage.com, 2012) shows the growth trend for Gillette and Schick and other brands over the past 8 years. There is a clear indication that although Gillette is still the market leader but Schick is already catching up with it.

(Razor Shares, 2011)

In Pakistan there are only two companies which have local operations including Treet Corporation and Gillette. All other blades are imported.

Literature Review:

Company Overview:

Company Introduction:

Treet Corporation Limited or Treet Group of companies is perhaps one of the oldest players in the safety razor industry with more than 50 years of experience in the manufacturing and production of all types of Shaving blades and razors.

The enhanced expertise gained over the years by operating in the blade technology has led the company to better understand the diverse needs of their customers, which is the reason why they have a wide range of shaving solutions to suit different ages, lifestyles and income groups. There are more than 20 specifications in multiple series of products having been sold to number of areas at home and abroad, and being highly appreciated. The company has a perfect quality control and regulation system. Company has been confirmed by the ISO 9001 Quality Control Standards. (Treet Corporation Limited, 2012)

Company Background:

The Ali family of Pakistan commenced its business activities in South East Asia about a century ago under the dynamic leadership of Late Sir Syed Muratib Ali, a nationally respected an honored pioneer. His efforts and devotion towards the highest standards of integrity contributed in a large way to the success of his ventures in the highly competitive environment of pre-independence days in subcontinent. It is a legacy that has been maintained to this day. From 1947 onward, the family diversified from the main business of agriculture & trading into the fledgling and young industries comprising of soaps, vegetable oil and razor blades in 1954 & 1956. The enterprises were consolidated in to a Public Limited Company, quoted on Pakistan Stock Exchange in 1959. Later, in 1977, the razor blade and soap operations were managed under the rubric of new company, the Treet Corporation, also a Public Limited Company, Quoted on the Stock Exchanges.

In 1984, Treet set up a second factory, the machinery and technology was imported from American Safety Razor Company Staunton USA to manufacture super quality, double edge stainless steel blades & bounded shaving system. In 1997 Treet obtained ISO-9002 Certification from BSI, UK. The Manufacturing Operations of blades are located in Hyderabad and Lahore and that of Soaps in Gujranwala and the marketing of all brands produced through these locations are managed from marketing and sales offices situated in Lahore. Treet’s distribution network covers more than 350 cities in Pakistan, 35,000 retailers directly and indirectly. Through the extensive distribution network Treet enjoys 75% Share of the Pakistan domestic marketing double edge blades category and 60% share of exports of total razor blades from Pakistan. Treet Corporation Limited, the leading manufacturer of top quality shaving products for the past 45 years, received ISO-9002 certification in 1997 from BSI, U.K., one of the initial recipients of certificate in pakistanTreet practices and closely monitors quality through Total Quality Management. Quality products for the satisfaction of its customer are the main objective of the company. Hence ISO-9002 is an assurance that Treet meets the world quality standards and its products can compete in the world market on quality. In 1984, Treet set up a second factory, the machinery and technology was imported from American Safety Razor Company Staunton USA to manufacture super quality, double edge stainless steel blades & bounded shaving system. In 1997 Treet obtained ISO-9002 Certification from BSI, UK. The Manufacturing Operations of blades are located in Hyderabad and Lahore and that of Soaps in Gujranwala and the marketing of all brands produced through these locations are managed from marketing and sales offices situated in Lahore.

Treet’s distribution network covers more than 350 cities in Pakistan, 35,000 retailers directly and indirectly. Through the extensive distribution network Treet enjoys 75% Share of the Pakistan domestic marketing double edge blades category and 60% share of exports of total razor blades from PakistanTreet Corporation Limited, the leading manufacturer of top quality shaving products for the past 45 years, received ISO-9002 certification in 1997 from BSI, U.K., one of the initial recipients of certificate in Pakistan. Treet practices and closely monitors quality through Total Quality Management. Quality products for the satisfaction of its customer are the main objective of the company. Hence ISO-9002 is an assurance that Treet meets the world quality standards and its products can compete in the world market on quality. (Treet Corporation Limited, 2012)

Product Portfolio:

Treet Corporation, as mentioned before is engaged in myriad different businesses, overall the portfolio includes the following:

Blades and Disposable Razors.

Soaps

Corrugation

Paper and Board

Motorcycle Project

The main focus of my research would revolve around the blades and disposable razors business of Treet Group (Treet Corporation Limited, 2012)

In terms of blades and safety razor business, the product portfolio or product lines are as follows:

Treet II Platinum: The affordable and the most basic product in the line, but perhaps the most widely accepted edition of the product category. The unique profile of the platinum coated twin stainless steel blades ensures safe and comfortable shave at low and affordable prices. (Treet Corporation Limited, 2012)

Swift II Platinum Disposable Razor: This blade is the next generation of the twin stainless blade fixed head disposable razor. The platinum chromium coated blades provide a sense of luxury to the customer whilst shaving. (Treet Corporation Limited, 2012)

Trim Razor & Cartridges: This Treet razor comes with an elegantly designed long handle coupled with high quality stainless twin blade cartridges that are platinum chromium coated. The razor is available in a packing of 24 different razors to provide variety and comfort to the customer. (Treet Corporation Limited, 2012)

Treet Swift XL disposable razor: This razor offered by Treet is basically an advanced version of the basic disposable razor. It carries the functional characteristics of the Swift razor II put together with a longer handle and is more user friendly for customers. (Treet Corporation Limited, 2012)

Treet Double Edge: This range includes two main components: Trim Platinum Super and Trig Silver Edge. The trim platinum super is a high quality performer; this super stainless blade has special edge treatment provided by Platinum Chromium and PTFE, which enhance the durability and sharpness of the blade. This helps Treet in providing optimum shaving comfort and gaining a high level of shavers’ satisfaction in turn. The Trig silver Edge on the other hand is a blade made from high quality stainless steel, which goes with the Treet trim platinum razor and ensures the maximum number of smooth shaves at a price which makes it a market leader in the SEC B and SEC C customers’ stainless blade market. (Treet Corporation Limited, 2012)

Treet Dura Sharp Blades: This is perhaps one of the most basic and earliest models of blades initially produced by Treet Corporation. It has now been introduced in its new model, the new shape of the model aims at providing the customer with the same great quality shave at affordable low process. These blades happen to be a favorite with, majority of barber saloons across the country and have been in a market leading position for the past 50 years now. (Treet Corporation Limited, 2012)

Treet Platinum Safety Razor: Treet Corporation produces a wide variety of razors for a variety of different customers, for every customer with a special preference for shaving Treet has a product. This platinum razor by Treet is for those customers who prefer a more traditional style of shaving. This elegantly designed safety razor is available in an attractive packaging which also comes with two premium quality platinum blades. (Treet Corporation Limited, 2012)

Treet Starline Safety Razor: This razor by Treet is a high quality, metallic head razor that caters predominantly to the needs of the self-shavers. This razor also comes in a pack accompanied by two superior quality Treet Platinum Blades.

Treet Cartridges & Handles: Treet cartridges are premium quality and are designed to fit not only on its Treet handle but also on all other fixed head and swivel head razors. (Treet Corporation Limited, 2012)

Treet II Disposable Razor.

Competitor Analysis:

As mentioned above Treet is perhaps one of the largest producers of safety razor blades in Pakistan, it also exports its blades to Europe and USA. Unfortunately due to the economic condition of Pakistan and the persistent political instability over the years averted foreign safety razor manufacturing firms from setting up operations in Pakistan. The only other safety razor blade manufacturers locally producing blades in Pakistan is Gillette a brand of Procter and Gamble Ltd.

Gillette:

Company Background (information source: (Ahmed, 2009))

A straight-edge razor required frequent honing and stropping, an inconvenience that frustrated King C Gillette, a forty year old traveling sales man living in Brook Line, Massachusetts. Gillette was an author and social reformer who had lofty goals for the betterment of mankind. A persistent thinker and a mature investor, he also had a personal dream, to invent a product that would bring back satisfied customers again and again.

One morning while shaving, the concept of the safety razor with disposable blades came to him ” in a flash of inspiration”. He begins working on a model razor that same day. Gillette was beset with financial and technical problems for several years, but his dream finally became reality. In 1901, he founded the Gillette Company, and in 1903 the Gillette safety razor was launched. Gillette’s invention was said to have changed the face of a nation and revolutionized the shaving habits of mankind.

Although the first year, sales of the safety razor amounted to only 51 razors and 168 blades, the self-shave concept was beginning to take hold. By the end of the following year, over 90,000 razors were in the hands of American shavers. 1905.The Company quickly grew internationally as well. By the end of the decade, Gillette has established a factory in Paris to meet European demand and had sale office in London, Paris and Berlin. Before the outbreak of World War 1, total blades sales had risen to over 40 million units annually.

From there, the company continued to grow, and by the time Gillette celebrated its twenty fifth anniversary in 1926, King C Gillette’s face and trademark were recognized throughout the world. Even at the stage, the Gillette Company was considered an innovative marketer of new shaving products of consistently better quality.

The company has grown tremendously since then expanding its business into toiletries, personal care products, cosmetics, oral care, household and personal care appliances, stationary products and alkaline batteries. Today Gillette employees more than 44000 people with sales of $10 billion, and has distribution in more than 200 countries. But now, just as at the beginning of this century, the core of the company continues to be its worldwide leadership in blades and razors.

Gillette has pioneered virtually every important advance in the art of shaving. Double edge blades and coated blades, twin blades, pivoting cartridges, lubricating strips, individually spring mounted blades. The first razor designed specifically for the unique shaving needs of women, and micro fins. Major introduction includes.

Gillette at a Glance (information source: (Ahmed, 2009))

In 1926, the year of the Company’s 25th anniversary, King C. Gillette wrote of the Company’s flagship product, the safety razor, and “There is no other article for individual use so universally known or widely distributed. In my travels, I have found it in the most northern town in Norway and in the heart of the Sahara Desert.”

These words could just as easily be written today – not just about our razors, but about the wide range of top-selling Gillette products.

From Boston to Bangkok, Johannesburg to Mexico City to Berlin, the modern traveler encounters a Gillette product portfolio far broader, and a worldwide presence far stronger, than any envisioned by the Company’s founder. The Gillette Company today is the global market leader in nearly a dozen major consumer products categories, principally in the grooming, alkaline battery and oral care businesses.

In the more than 100 years since the Company was founded, Gillette has gained, held and strengthened leadership positions through the Company’s strategy of managing its business with a long-term, global perspective.

This demonstrated ability to generate long-term, profitable growth in a changing global marketplace rests on several fundamental strengths. These include a constantly increasing accumulation of scientific knowledge in core businesses, innovative products that embody meaningful technological advances and an immense manufacturing capability that produces billions of flawless products every year – reliably, efficiently and cost-effectively.

Transforming innovative ideas into useful daily products sold at a fair price engenders another fundamental Gillette strength – strong and enduring consumer brand loyalty around the world.

Skillful marketing of superior technology to achieve worldwide leadership is the goal of The Gillette Company. It is a goal pursued in global businesses that are large and healthy, with tremendous potential derived from normal market development, as well as from growth stimulated by new products. Nowhere are these qualities more evident than in the Company’s powerful grooming, battery and oral care franchises.

As its exceptional performance throughout the 20th century has shown, Gillette is without peer in the grooming business. The Company has the scientific knowledge to create, and the technical ability to develop and produce, hair removal products that deliver a superior shave, whether wet or dry, whether for men or women. An array of premium quality shaving preparations and after-shaves complements the shaving process and rounds out the Gillette grooming franchise. Additional market presence and support is provided by the Company’s well-established deodorant/antiperspirant brands.

Batteries are another thriving worldwide business in which the Company competes successfully. Duracell, the most popular brand of alkaline batteries in the world, is the clear global leader in the growing alkaline battery market. Today, consumers around the world are embracing a growing number of portable digital electronic devices. Enhancing its growth prospects, Duracell offers strategic power-consulting services to leading device manufacturers to further the inclusion of alkaline batteries as a power source in these increasingly popular consumer devices.

Another large global business offering sizable growth opportunities for the Company is oral care. It has been Gillette’s fastest-growing business in recent years. The Company’s Oral-B brand holds the global leadership positions in manual and power toothbrushes.

Within its powerhouse businesses of grooming, batteries, and oral care, the Company has a formidable portfolio of global brands. These seem poised for growth as Gillette products across a spectrum of product performance and price points continuously attract new consumers.

In the grooming business, for example, the great majority of male Gillette shavers in developing markets use double-edge blades. The first step up the performance/price ladder for these consumers is to advance to Gillette twin-blade shaving systems or disposable razors. In more developed markets, the movement may be entirely within the systems category, as consumers trade up from twin-blade to triple-blade shaving.

Similarly, more than 75% of the world’s consumers of batteries use less costly zinc carbon batteries, rather than better performing alkaline. Once converted to Duracell alkaline batteries, these consumers can then trade up to the advanced technologies and top performance of the Duracell brand.

Oral care offers a comparable opportunity as consumers trade up from regular Oral-B manual toothbrushes to the premium-priced Cross Action manual toothbrush, and then move on to power-assisted Oral-B toothbrushes-which generate a highly profitable refill brush-head business.

These leading global brands are the strength of The Gillette Company. They demonstrate our global commitment to growth through innovation, which will assure the Company’s long-term competitive success as a world leader in the consumer products marketplace.

Gillette has pioneered virtually every important advance in the art of shaving. Double edge blades and coated blades, twin blades, pivoting cartridges, lubricating strips, individually spring mounted blades. The first razor designed specifically for the unique shaving needs of women, and micro fins. Major introduction includes.

1903: Gillette Safety Razor

1932: Gillette Blue Blade

1938: Gillette Thin Blade

1939: Gillette Three-piece Razor

1960: Super Blue Blade

1963: Coated Stainless Steel Blade

1965: Super Stainless Blade

1969: Platinum Plus

1971: Tracll / Gll-First Twin Blade Shaving System

1977: Altra / Contour-First Pivoting Head Shaving System

1985: Altra Plus / Contour Plus- First Lubricant Strip

1990: Sensor- First Spring-Mounted Blades, Shell Bearing Pivot

1992: Sensor for Women-ergonomic Handle, Designed for women’s shaving needs

1993: Sensor Excel- Soft Flexible micro fins, elastomeric handle

1996: Sensor Excel for women-microfins, elastomeric handle designed for women

In 1949 after the independence of Pakistan Gillette started its operations from the city of Karachi, going on to become one of the leading companies in Pakistan. Gillette Pakistan Limited established head office which is situated on Dr. Ziauddin Ahmed Road, Imperial Court building, Karachi. All the activities and related paper work from purchase to sales, billing and credits is done here.

Overall the sales of safety razor blades in Pakistan remain stable in the wake of changing economic conditions, increasing inflation trends, political instability and changing oil prices. The reason for this is that safety razor blades have become a want rather than a need, and are perhaps one of the most frequently used toiletries and grooming products. However leading manufacturers Gillette and Treet exercise price control to further boost affordability and demand by customers.

Treet Corporation ltd had a leading position in Pakistan during 2009 with a 35% value share through its leading brands Treet, Trim and Swift. The popularity of Treet blades comes mainly due to its affordability and wide variety of products available; there is something for every person from Sec A to Sec C, this culminated into Treet’s leading position with 46% value share in 2010. Leading just behind Treet is Gillette which saw an increase in its value share of 2% to 28% in 2010. Another main reason for Treet Corporation’s success is its maintenance of classic products, for example the open blades which are the most frequently used products in men’s shaving razors and blades in Pakistan, Treet’s marketing leading position can be contributed to the fact that it stands till today as the leading producer of open blades in Pakistan.

However despite the increase in value share witnessed by these two companies, the share value told another tory altogether. Treet’s share value continued to decline during the review period, while P&G’s (Gillette’s parent brand) continued to rise during the same period. One major reason suggested by analysts is that Treet is synonymous with and excels in the production of more traditional and classic products when it comes to shaving blades and razors. While Gillette on the other hand is synonymous with modern shaving system, and it can be said that Pakistan’s male population is shifting from traditional shaving products towards the more modern equipment.

Overall Gillette is ahead of Treet in terms of product image and advertising as compared to Treet however Treet excels in quality traditional shaving products.

Financial Analysis:

Gillette’s name is synonymous with safety razors and blades world over, including in Pakistan. Since it took over the local shaving blades and razor company 7’0 clock and changed its name from Interpak shaving Products Company to Gillette Pakistan, it performed well in terms of market presence and building up sales and a loyal customer base. However due to consolidation of operations P&G (the parent brand of Gillette) shut down the production, becoming a trading concern (importing razors and blades from its network of subsidiaries in Middle East and supplying them to Pakistan market). On the other hand Treet Corporation is still engaged in the local production of the safety razors and blades, in order to provide with an accurate analysis data from the years 2001-2002 has been selected for analysis only.

Ratio

Gillette 2001

Treet 2001

Gillette 2002

Treet 2002

Gross Profit Ratio

40.37%

39.33%

Operating Profit Ratio

14.39%

17.30%

NP Margin

12.15%

14.62%

ROA

21.67%

23.29%

ROE

33.90%

40.83%

Inventory Turnover Ratio

4.7

8.7

Average Collection Ratio

1858

1843

A/R Turnover

10

8.1

Debt Ratio

36.1%

43%

Debt to Equity Ratio

56.43%

75.35%

EPS

4.2%

5.1%

Current Ratio

2.5

2.2

NWC

199488

209346

Quick Ratio

1.4

1.74

TAT

1.8

1.6

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