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Clean Edge Razor Case Study

Essay by   •  October 17, 2018  •  Case Study  •  2,203 Words (9 Pages)  •  2,421 Views

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Clean Edge Razor Case Study

Problem Statement

Jackson Randall, product manager for Clean Edge Razor, must determine in which segment his product should compete in order to be most profitable for Paramount. The positioning of Paramount’s newest non disposable product, Clean Edge, is causing dissension amongst the executives of the company. Paramount’s Pro product manager highly opposed positioning Clean Edge in a mainstream super-premium segment stating that by doing so it would risk the cannibalization of Paramount’s Pro shaver and should; therefore, compete in a niche market focussing on highly involved customers. Others believed that positioning Clean Edge in a mainstream market would gain much mass appeal and become a new standard in men’s shaving. Randall must determine the optimal positioning strategy  for the entire company. The question remains as to in which segment Clean Edge should compete in order to maximize the bottom line profitability of Paramount?

Situational Analysis (SWOT)

This section of the case study focusses on the internal and external factors that are and that could possibly influence Paramount’s integration of Clean Edge. To begin, an analysis of the company’s current state in the market was conducted.

Paramount:

Pros

Cons

Strengths

  • Strong market share
  • Growth opportunity in non disposable razors and refill cartridges market
  • Satisfies the social and aesthetic shavers
  • Unit volume leader

Weaknesses

  • Current products lack innovation
  • No presence in Super-Premium market

Opportunities

  • Increase self space for razor products
  • Growth in men’s grooming products
  • New distribution opportunities

Threats

  • Competitive market
  • Increasing substitute products
  • Media expenditures > retail market sales

As it is shown, Paramount currently holds a very strong position in the market with opportunities arising for further growth. However, in order to stay leaders, Paramount must present a new innovation product in a market where there are many competitors and many substitute products.

The following tables represents the factors that would benefit and would possibly threaten Paramount if they were to position Clean Edge in a niche and mainstream market.

Niche

Pros

Cons

Strengths

  • Low cannibalization impact
  • Complement existing product portfolio
  • Creation of a new market segment

Weaknesses

  • High advertisement costs
  • Not a lot of space for new entrants

Opportunities

  • 5% growth in non disposable razors
  • 67% of target market are involved shavers
  • Good segment for super premium products

Threats

  • Takes 35% of sales away from the Pro/Avail
  • Launch of Naive Radiance
  • Test market was very positive for the Naive product
  • A big media lunch planned by Radiance
  • Estimate of 15 million dollars in the advertisement & promotion budget for the first year, 16 million dollars for the second year

Mainstream

Pros

Cons

Strengths

  • Market leader and biggest unit volume in non disposable razors
  • Innovative product
  • More product diverse
  • Clean Edge would prevent customers from being wooed to other more innovative products

Weaknesses

  • A lot of products in the mainstream segment
  • Lack of technological innovation in 5 years

Opportunities

  • 5% growth in non disposable razors
  • 67% of target market are involved shavers
  • Pro in mature phase of product life cycle
  • The sales volume captured with a mainstream strategy would be 3 times the sales volume acquired from a niche strategy

Threats

·           High Cannibalization of the Pro/Avail

Identification and Evaluation of Alternatives Strategies

Jackson Randall, product manager for Clean Edge Razor is faced with a positioning dilemma for his new product. If positioned as a super-premium product in a niche market, Clean Edge would compete in a segment perfect for super-premium products with low cannibalization impact on the Pro/Avail. However, if Clean Edge was to compete in a mainstream market, Paramount would not have to compete with Radiance’s similar product Naive, and would keep their customer base from looking for innovative products elsewhere. Based on this initial analysis, it is very difficult to judge which alternative will best benefit Paramount. As both segments have very good advantages and considerable threats, measuring cannibalization impact on revenue would enable Randall to make an informed decision about a positioning strategy for Clean Edge.

The following formula was used in our calculations in order to find cannibalization impact for both segments at the end of year 1 and 2.

Cannibalization = (cannibalization %) (unit sales) (Contribution/unit)

As it is shown in the table below (results in millions of dollars), the cannibalization impact is much higher in year one if Clean Edge was to compete in a mainstream market with a impact of 20,116,800$ as opposed to 4,536,000$ in a niche market.  In a mainstream segment, Clean Edge would bring total revenue to -14,227,800$. In this case, Paramount would be losing a lot of money from cannibalization of the Pro/Avail shaver as opposed to 3,624,000$ in revenue after cannibalization in the niche segment. If is therefore far to state that based on the calculations from year 1, Randall should recommend positioning Clean Edge Razor in a niche market.

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