Gillette Case Study Essay Example

network, and promotional displays that Gillette has already established with a range of department, variety, and chain stores, accounting for 67% of blank cassette outlets. Despite this, Gillette is aware that Memorex will aim to swiftly extend to similar large-scale retailers.

Considering the competitive environment, Gillette ought to cautiously venture into this new field. The most strategic decision for Gillette would be to buy pre-made blank cassette tapes from a reputable manufacturer at least for the initial one year. This approach would circumvent the need for front-ended expenses and time commitment linked to setting up their own manufacturing operations, while also giving them a chance to probe the market. Taking into consideration the cited cost of $0.159 per case, $0.214 for 60 mins of conventional quality tape, and $0.20 for loading/packaging as well as inspecting, Gillette's expenditure per cassette tape would amount to $0.573. Retailers usually procure merchandise for half the retail price – in this scenario 50% of $1.95 equals $0.975.

The consultant's report indicates that the annual cost of Gillette's sales team is between $5-$6 million, with an estimated 10% devoted to their newest product. This implies a fixed cost of approximately $550,000. If they follow through with their ad agency's proposal for a $2M advertising budget, their total expenses would amount to around $2.55M.

In order to determine Gillette's Break-Even Volume (BEV), we have to divide the firm's fixed expenses by the contribution per unit. The contribution per unit is derived by subtracting $0.57 from $0.98, which equals $0.41. Hence, when dividing $550K by $0.41, we get 1.34M units; and dividing $2.55M by $0.41 results in approximately 6.2M units . Considering a sales forecast of

86 million blank tapes in 1971 along with a media spend of $2M included, Gillette's BEV is likely around 6.2 million units . Given their solid relationships with vendors and wholesalers who carry their products as well as their strong brand reputation, coupled with a BEV of nearly 6.2M units that constitutes only about five percent of total sales volume , it highly suggests that Gillette has a good chance to expand its presence within the blank cassette sector.