The world market for oral care appliances is forecast to grow to $99.78 billion in 2030. This growth is due to improving economic conditions, an ageing Western population, increasing awareness with regard to personal wellness, growing online sales and a further increasing level of automation. There is intense competition in the personal care electrical appliances market due to the presence of a limited number of players, including Colgate-Palmolive, Helen of Troy, Johnson & Johnson, Matsushita Electric Industrial Company, Royal Philips Electronics, Procter and Gamble, Braun, Sanyo Electric Company and Wahl Clipper Corporation. A sub-segment in the personal care market is oral care appliances.

Proctor & Gamble (P&G) is an important player in the oral care market. In 2000, P&G was facing declining innovation payoffs. With the company gradually losing its grip on the market and losing more than half its market capitalization along the way, the new CEO Lafley called for a reinvention of the company’s innovation model. Instead of nurturing innovation from inside the company, Langley set a target to acquire 50 per cent of P&G innovations from outside of the company. In order to facilitate this, the Connect+Develop innovation model was created, which produced successful results.

With Crest, P&G had a strong name in the oral care market in the 1990s. However, it got surpassed by Colgate. Looking for a comeback, P&G focused on disruptive innovation Alliance system 387 through the C+D programme. This resulted in Crest Whitestrips, which allowed customers to whiten their teeth in an easy and affordable manner. In 2006, P&G introduced Crest Pro-

Health, which is a toothpaste that deals with the most common threats to dental health.

Next, in 2010, P&G introduced Crest 3D White, which is an advanced line of oral care products that focuses on improving dental health and aesthetics by the introduction of a product that whitens teeth in less than two hours. By introducing these products, P&G was able to retain the lead in the oral care market. With regard to electric toothbrushes, P&G was anxious to introduce a pulsating toothbrush. However, the development was forecast to last over fve years. Through the C+D programme, P&G established a partnership with a classifed Japanese frm which was producing products that met the needs of P&G. This partnership resulted in the introduction of the Oral-B Pulsonic toothbrush in less than one year.

Like P&G, its competitors also found new ways to innovate their product offerings in the oral care market. During the 1990s, Philips also found itself in decline. Innovation was organized in a fragmented way and did not yield the required results. In 1999, the principles of open innovation were adopted and resulted in the establishment of the world renowned

‘High Tech Campus’. Philips was able to develop appealing new products by setting up alliances with various companies. In 2004, Philips and P&G crossed paths when they announced a joint venture to co-develop and co-market the IntelliClean System. With IntelliClean, both companies wanted to attack their largest competitors in the US oral care market: Gillette and its Oral-B brand. The alliance combined the best companies in the oral health industry, the technological competence of Philips and P&G in the area of oral care, and added Crest’s toothpaste expertise. Initially, the IntelliClean was available only through the American Dental Association (ADA), but it was launched in the US consumer market in 2005.

In 2005, P&G embarked on its largest acquisition to date: a $57 billion deal for Gillette that would create the world’s largest consumer-products company. P&G added Duracell batteries, Right Guard deodorant and Gillette razors to its more than 300 consumer brands.

P&G’s acquisition of Gillette further intensifed competition in the oral care market. In 2005, the SpinBrush product line was acquired by Church & Dwight from P&G, the latter divesting its SpinBrush toothbrush business because it competed with Gillette’s Oral-B brand, which had a better position in the electric toothbrush market. In addition, Gillette was very competitive and probably had the best power-brushes in the world at that time. However, P&G’s acquisition of Gillette conficted with its partnership with Philips for the IntelliClean brand, as Oral-B and IntelliClean competed heavily. Moreover, the US market for rechargeable toothbrushes was highly concentrated, with Gillette and Philips accounting for virtually all sales of these products. The acquisition would have allowed P&G to acquire the only signifcant competitor to its joint venture partner—Philips—which would have reduced P&G’s incentives to support the IntelliClean product. Therefore, the agreement between Philips and P&G was revised to contain non-compete provisions to protect customers’ interests. For example, P&G and Philips agreed to limit joint activities to the US market only.

Since the Gillette acquisition, P&G has continued its proactive marketing of the Oral-B brand. For example, it has established multiple relationships with professional dentists and associated organizations that endorsed the Oral-B brand. In turn, in 2008, Philips Sonicare partnered with Oral Health America (OHA) to conduct a public opinion survey to reveal the state of oral health in America. In 2010, Philips Sonicare also formed an alliance with Susan G. Komen to raise funds for the fght against breast cancer. The power-toothbrush brand donated $100,000 to the organization and agreed to release a commemorative Sonicare toothbrush with a pink power button (pink is the offcial colour of the Komen organization).

Questions 1 Explain how Proctor & Gamble and Philips use acquisitions and alliances to enhance their competitive positions. What are their diferent motives?
2 What changes took place on the alliance, partner frm and alliance environment levels, and how do they afect the alliance system?