The Diaper War: Kimberly Clark versus Procter and Gamble Harvard Case Solution & Analysis

The Diaper War: Kimberly Clark versus Procter and Gamble Case Study Analysis

Threats

The biggest threat for P&G is the entrance of Japanese Manufacturers with high technology in the USA’s market. These manufacturers can attract K-C’s customers towards their self by their technological features and environmental community’s support. K-C can avoid the threat by adopting the technology through aggressive geographical expansion towards Japan. Another threat for K-C is the increased environmental concerns which could result in increased costs for recycling projects and increased taxes for K-C. The threat can also be avoided by using biodegradable plastics through outsourcing supply of plastics from Japan.

Quantitative Gap Analysis (Analysis of Financial Statements)

The gaps between K-C and P&G can also be analysed by the analysis of financial statements using various profitability, leverage and turnover ratios of both the companies. The deep calculations of the ratios of both companies are given in the Exhibit B, and the gaps between the ratios are given in the Following Table-1:

Table 1:

 GapsFavourable/Unfavourable
 19891988-----------
Debt ratio-7%-3%Favourable
Debt to equity ratio-32%-10%Favourable
Operating margin3%3%Favourable
Return on equity ratio1%4%Favourable

 

From the above table it can be analysed that the quantitative gaps between K-C and P&G are quite favourable for K-C than P&G, showing and strong financial performance of K-C over P&G. The negative gap of Debt ratio shows that K-C has less default risks as compared to P&G. The positive operating margin gap shows that K-C is more cost efficient in its operations than P&G. Along with it positive gap in its return on equity shows that K-C has more efficient utilization of its assets than P&G. Overall the gap analysis provide good hopes for K-C to have a parity in the market share with P&G, if it would continue its efficient financial performances and would fill the qualitative gaps with P&G.

Alternatives

Alternative-1: National Roll-out of Specific Gender Disposable Diapers

Pros:

  • The launch would maintain the competitive position of K-C in the US diaper market.
  • It would avoid the risk of capturing more market share by P&G through it’s His and Her disposable diapers.
  • Signal to be responsive in the market against the competitors’ activities.

Cons:

  • Roll out of the product would send a market signal about acknowledgement of P&G as market leader by K-C.
  • Opportunity cost of high growing markets outside the North American industry.
  • Distraction of company’s R&D spending from environmental concerns, would result in criticism from environmental communities.
  • Distraction of KC from a growing market segment of adult incontinence products.

 

Alternative-2: Quit Specific Gender Disposable Diapers and Focus on Incontinence Products

Pros:

  • It would provide a high sales growth to K-C than specific disposable products, as the market segment has more potential to grow as compared to saturated market segment of disposable diapers.
  • It would prove to be a new product, and Specific diapers would be the extension of the features in the existing product.
  • It would open a new market segment to the company i.e. adults aging 65+, while the specific disposable diapers would target the existing market segment.
  • In specific diaper market there is more chances of failure as P&G has already launched the product, however incontinence product has less chances of failure, as both the rivals would be new to the segment.

Cons:

  • Huge investments would be required than Specific diapers, which is at market testing phase.
  • It would send a signal about the company’s incompetency over market responsiveness.
  • It would require high promotional expenditures as the company is going to target a completely new market segment with a new product.

Alternative-3: Quit Specific Gender Disposable Diapers and Focus on International Markets

Pros:

  • It would allow the company to capture more growing markets than focusing a single saturated market of the USA.
  • K-C can adopt the technology used by Japanese with its exposure to Japanese market and implement that technology in its production to pacify environmental concerns.
  • It would provide a sales growth much higher than above two alternative as Japan and Europe both are markets with huge potential as compared to the US.
  • It would enable the company to compete P&G not only at local levels but also at global levels.

Cons:

  • Huge capital would be required for the geographical expansion.
  • K-C may loss its local market share due to its shift to international markets.
  • K-C may fail to get potential sales from international markets with intense competition and competitors with high technologies.

Recommendations:

With a deep analysis of the company’s internal strengths, gaps among K-C and its close competitor, growth in the international markets and the USA’s disposable diaper industry, along with an analysis of various alternatives, Alternative 2 and 3 can be recommended to K-C. As Alternative 2 allows K-C to maintain a competitive position in the local market, and Alternative 3 allows K-C to become a global competitor and maintain its sales growth. The better financial performance of K-C also enables the company to further invest globally as well as locally. Therefore in order to achieve the market share parity with P&G; K-C should go with Alternative 2 and 3.

Implementation Plan

The company should take step by step measures in implementing its geographical expansion and introduction of incontinence products. First it should analyse the global markets and the local market segment with age above 65. Than it should start aggressive marketing for its incontinence product to capture the local market, and should start its introductory marketing strategies in Japan first by providing free samples to the Japanese consumers. If it fails to gain the market attention in Japan, then it should analyse the features of the Japanese diapers and try to introduce them in its own diapers. After getting a green signal from the overseas consumers; it should build its supply chain in Japan and start focusing on the other emerging international markets in Europe. It could use its own resources to fund the investments and marketing expenditures,and it can also acquire loans, as the company’s debt ratio is quite favourable than its close competitor. By implementing the strategies through the stated step by step implementation plan, the company would be able to become a competitive local as well as global player in the Disposable Diaper Industry......................

 

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