Gillette Cassette Case Essay

756 Words Feb 12th, 2013 4 Pages
Introduction The problem that Gillette and Mr. Bingham faces is after splitting off of the Toiletries Division, the Gillette Safety Razor Division needs to find new sources of revenue because razors are maturing and will not sustain high margins for the company. SRD found many potential opportunities within the cassette tape market and it could be a profitable avenue for Gillette and solve Mr. Bingham’s needs. To see if the cassette market will be a good fit for Gillette, some analysis on the market and internal resources must be performed. After analyzing SRD’s findings a better view of the market environment will be presented and recommendations can be made.

Analysis

SRD should be considering blank cassettes for 4 main reasons.
…show more content…
Using its name could motivate consumers to buy because of the Gillette reputation. (Growth rates based on pg.7, par. 2) There are some existing concerns for the marketing program, mainly that only 10% of the time of sales staff will be allocated to marketing the new cassettes. This amount of time is not sufficient in developing and marketing a new product, and will result in poor market penetration. Additionally, will the advertising budget be sufficient when measured against campaigns of the competition? Is the budget substantial enough for the first year on the market? Competition could be another concern when considering how price oriented the market is. It will be vital that Gillette enters with a well-researched introductory price to avoid a negative response from consumers. (10%; pg. 9, paragraph 5) When considering developing a new product, performing a break-even analysis is vital to profitability. In 1970, $150,000,000 in sales was generated through blank tapes. 85% of that was cassettes, resulting in a $127,500,000 market for blank cassette tapes. For the professional tapes $656,387 is needed to break even, so Gillette would need to secure .5% ($656,387/$127,500,000) of the market. For the standard tapes $718,931 is needed to break even, so Gillette would need to secure .6% ($718,931/$127,500,000) of the market. Additionally, the margin on professional tapes would be 24% and a 30% margin for the