P & G Korea - Detergent Division Essay

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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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Despite the inconsistent changes in spending from year to year, P&G’s market share consistently increased between 1% and 2% every twelve months (see Figure 1). The question is, with Unilever’s actions in regards to marketing expenditures, is the 15% increase going to be enough to restart P&G’s upward growth of market share?

Figure 3:

Another option to consider is to increase the marketing budget beyond 15% as a direct response to Unilever’s marketing expenditure increase in 2006. This increase in marketing expenditure could also lead P&G to reach the recommended 120 GRP’s in television advertising. P&G could also use this extra advertising budget to strongly increase trade sales promotions in an attempt to balance out Unilever’s greatly increased trade sales promotions from the prior year.

Both of these options are a demonstration of classic Game Theory behavior, both companies increasing expenses in an attempt to regain market share. Figure 4 shows how this action/reaction in the battle for market share works. When Unilever markedly increased their marketing expenditures in 2006, the result was a loss of market share and profit for P&G. Therefore, without knowing if Unilever is going to continue with a strong budget for marketing in 2007, P&G’s natural response is to consider also budgeting a strong increase in expenditures to hold onto current market share and profits and possibly even increasing both. Of course, the additional
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