Scribd Logo
Upload

Welcome to Scribd!

  • 48 views

    Group 8 - Disposable Diapers

    Uploaded by

    aabfjabfuagfuegbf
    The disposable diaper industry in 1974 was dominated by a few large players like P&G, Kimberly-Clark, and Johnson & Johnson. P&G controlled over 50% of the market due to advantages from economies of scale in manufacturing and distribution. Factors like the rise of working mothers and increased mobility were driving demand for disposable diapers. New entrants faced significant barriers from capital requirements, supplier integration, and P&G's strong brand and marketing. The industry was expected to continue growing through the late 1970s as diaper usage increased.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Group 8 - Disposable Diapers

    Uploaded by

    aabfjabfuagfuegbf
    48 views8 pages
    The disposable diaper industry in 1974 was dominated by a few large players like P&G, Kimberly-Clark, and Johnson & Johnson. P&G controlled over 50% of the market due to advantages from economies of scale in manufacturing and distribution. Factors like the rise of working mothers and increased mobility were driving demand for disposable diapers. New entrants faced significant barriers from capital requirements, supplier integration, and P&G's strong brand and marketing. The industry was expected to continue growing through the late 1970s as diaper usage increased.

    Original Title

    Group 8_ Disposable diapers (2)

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The disposable diaper industry in 1974 was dominated by a few large players like P&G, Kimberly-Clark, and Johnson & Johnson. P&G controlled over 50% of the market due to advantages from economies of scale in manufacturing and distribution. Factors like the rise of working mothers and increased mobility were driving demand for disposable diapers. New entrants faced significant barriers from capital requirements, supplier integration, and P&G's strong brand and marketing. The industry was expected to continue growing through the late 1970s as diaper usage increased.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    48 views8 pages

    Group 8 - Disposable Diapers

    Uploaded by

    aabfjabfuagfuegbf
    The disposable diaper industry in 1974 was dominated by a few large players like P&G, Kimberly-Clark, and Johnson & Johnson. P&G controlled over 50% of the market due to advantages from economies of scale in manufacturing and distribution. Factors like the rise of working mothers and increased mobility were driving demand for disposable diapers. New entrants faced significant barriers from capital requirements, supplier integration, and P&G's strong brand and marketing. The industry was expected to continue growing through the late 1970s as diaper usage increased.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    You are on page 1of 8

    The Disposable Diaper Industry in 1974

    Group 8
    Amol (065) | Gagandeep (80) | Jay (90) | Ridhi (105) | Surya J (119)
    Overview
    Industry Analysis Market Players
    • Largest product category in baby care segment in 1973 with
    $554.6 mn
    • Industry was performance sensitive and not price sensitive
    • Convenience and quality were important P&G
    • Market was highly concentrated with stiff competition

    Factors for increase in demand K-C J&J


    • Increase in number of working mothers
    • Older and more educated mothers
    • Increasing mobility of affluent families
    • Forecast births (Declining)
    • No. of women in child-bearing age (Increasing) Union
    • Market Trend for disposable diapers – Col-Pal Carbide
    Continuous improvement in quality
    Heavy advertisement of product
    High exposure of product in the hospitals
    Entry Barriers

    • Key component purchases from suppliers create


    • Capital intensive manufacturing process margin problems and even bulk orders or scale
    • R&D changes takes toll on efficiency of machines purchases not help in savings
    and thus production output • Some manufacturers integrated in fluff pulp because
    • P&G has very efficient production process able to of increasing supply prices, but P&G already has a
    produce 400 diapers/ min division which produces fluff pulp
    • It is difficult for new entrants to achieve economies • Weyerhaeuser, only player fully integrated in fluff
    in scale in a short span of time as designing one Manufacturing Suppliers pulp, P&G could fulfill requirements partially
    requires $2 to $4 Mn Process Integration

    • P&G has already become a nationally popular brand Distribution • Regional plants across different locations leading to
    with huge expenditure on marketing ($ 8.9 Mn Marketing efficient distribution
    annually) Networks • Prior relations of P&G with supermarkets enabling
    • P&G ran many marketing campaigns like premium it to leverage on it
    and cents-off deals, extensive test marketing, etc. • Wide range of product chain (P&G has) allows
    • They also offered variety of diapers easier transportation by making full load trucks
    Cost Advantage of P&G

    Efficient production system evident from better


    output rate and sales rate per machine
    Annual sales rate
    Machine output rate
    per machine
    P&G: 350-400/min
    P&G: $5.5-$6.6 mn
    Depreciation and maintenance costs
    KC: 250-275/min
    KC: $4.0-$4.5 mn distributed over larger volume of production

    Distributed production
    P&G: 4 plants Distribution costs control with distributed
    KC: 5 plants production across multiple plants
    J&J: 1 plant

    Flexibility to adjust profit margins to lower price


    vis-à-vis competitor
    P&G’s Defense Strategy
    Structural Entry Barriers Scope for Entry Deterring Strategies
    Control of Essential Resources: Very little Limit Pricing: Unviable
    • Fluff Pulp is integrated into the P&G supply chain • Price not a very big criteria in the purchase decision
    • Fluff Pulp prices are going up & the supply is tight • Limit Pricing will only eat away at profits
    Economies of Scale: Very High Predatory Pricing: Unviable
    • Capacity of over 4 times the next biggest competitor • P&G has a high market share
    • Market share of over 4 times the next biggest competitor • Industry subject to many anti-competitive lawsuits
    • Revenue per Machine highest in the industry
    • More affordable product Capacity Expansion: Viable
    • Industry is projected to grow at a good pace
    • Existing revenue per machine levels can be enhanced
    Economies of Scope: High
    • Transportation (10% of total cost) is largely reduced Other Methods
    • Able to leverage the P&G brand • Patent Infringement Lawsuit delayed entry of J&J
    Marketing Advantages: High • Retailer marketing through incentivizing exclusive stocks of
    • Aggressive Marketing Strategies on Consumer media P&G
    • Sampling to Hospitals
    • Couponing to increase penetration

    Conclusion: Capacity expansion is a viable deterrent strategy despite there being some structural barriers
    Entrance Strategy
    J&J Union Carbide
    Suggested Strategy – Differentiation Suggested Strategy – Integration

    • Use the Baby care image and expertise to create a • Expertise in Glad Bags can give some impetus towards
    better consumer appeal a cost efficient production process
    • Price product at a premium and take advantage of the • Supply chain integration (both plastic liners
    price insensitivity by offering a better product manufactured in-house) gives cost cutting impetus
    • Leverage the sales network of the existing baby care • Superior product quality gives an impetus to
    products differentiation
    • Use the hospital route to market by using the J&J • Using the Glad Bags distribution network reduces its
    brand costs
    • Increase the number of production facilities to reduce • Deep pockets allow it invest in R&D (increasing
    costs chances for differentiation as well as in more
    • Spend more in R&D to maintain the differentiation plants(reducing costs)
    levels
    Evolution of Industry

    • Market is slowly shifting from


    performance sensitive to price sensitive 196 196 196 196 197 197 197 197
      6 7 8 9 0 1 2 3 1974 1975 1976 1977 1978 1979 1980
    owing to increased number of players
    in the market Manufacturer's Sales 10 20 60 90 130 200 280 370 430 492 557 625 696 770 847
    Percent Penetration 1 2 7 11 15 22 35 42 47 51 56 61 66 70 75
    • Acquiring suitable competitive threats Number of births 3.64 3.56 3.54 3.63 3.74 3.56 3.26 3.14 3.25 3.36 3.47 3.57 3.68 3.79 3.9
    to maintain its leadership position may  

    help P&G retain the premium pricing Price of diaper(Cents) 5.5

    advantage Number of diapers/week/baby 53

    • R&D investment may help them Estimates indicating the growth in demand over next years till 1980
    maintain an edge in products quality
    and demand
    Thank you!

    You might also like