P & G Korea - Detergent Division Essay

1150 Words Feb 28th, 2013 5 Pages
P&G Korea Case Study

The main issue of the P&G Korea case is centered around the question of market share. P&G and Unilever are the two major market shareholders in the Korean detergent industry holding 80-85% of the total market share. The remaining 15-20% of the market is held by low-priced local Korean brands. There are no new markets either company can tap for further market share since most Korean households already use laundry detergent, making the market saturated. Other than peripheral chemical changes claimed to be “improvements”, there are no major innovations to be explored for product development or diversification. Per Ansoff’s strategic opportunities matrix, P&G and Unilever are both focused on Market Penetration,
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The strategy of getting back market share by upping marking expenses was reasonable for Unilever since their ROI remained steady as they increased their advertising expenditures over the years. P&G outlook is a little different. As long as market share was increasing, they could ignore the declining ROI. However, now that there is a chance of only holding market share steady while ROI continues to drop, it makes less sense for P&G to try to fight fire with fire and respond with a major increase to their own marketing expenditures in 2007.

Figure 5:

The two companies’ best chance of breaking the destructive cycle of classical Game Theory behavior is to form a cooperative relationship. Neither company has competitive advantage over the other; therefore, there is little to lose on either side. By Unilever and P&G coming to an agreement to maintain or even reduce marketing expenditures in the future, both can concentrate on strategies that aim to keep individual brand equity strong to increase use and satisfaction among current customers rather than continue fighting for market share. As Figure 6 shows, the most desirable outcome is for both to keep or even slightly increase market share while also maintaining higher net profits by not increasing fixed costs in marketing.

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