QUESTION 3

Case Study Gillette: Managing product innovation Source: www.IBBusinessandManagement.com

Gillette has always believed that continuous new product development resulting from extensive R&D is necessary to differentiate itself from its competitors. True to its corporate mantra of 'innovation is Gillette', the company has introduced some of the most successful and widely acclaimed innovative products in the consumer products industry. Its product range, protected by trademarks, is legendary with such brands as Sensor, Sensor Excel, Mach 3 and Gillette for Women Venus. The company's policy is to generate 40% of its sales from products launched within the last five years. One reason for Gillette's strong focus on new product development is that the competition has successfully learned to copy its products very quickly. For example, Schick (part of Warner lambert, later taken over by Pfizer but known as Wilkinson Sword in many parts of the world) had imitated Gillette's Track II twin-blade razor within five months of the product's launch. Further product launches have added to the brand value of Gillette. It has succeeded, in some markets, in making razors less of a commodity product - which consumers just buy on price and convenience considerations - but a branded product that consumers will pay a premium price for. Answer all the questions that follow:

3.1 Define the following terms, i.e. Product Innovation and Trademarks. Include examples to demonstrate your understanding. (4)

3.2 Explain how the use of innovative products and trademarks can add to the value of a Company, such as Gillette. (6) 3.3 Analyse the importance for companies, such as Gillette, to continue spending large sums on R&D even in a global downturn. (6)

3.4 Evaluate the factors that determine the level of innovation in an industry. (4)