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Executive Summary:
The purpose of carrying out the Shampoo Industry Analysis is to study the ICT used by
them internally and externally. Shampoo Industry uses various ICT’s effectively for the
purpose of Growth and development. For this analysis, we have analyzed Shampoo
Industry by using Porter’s 5 Force Model and showed the Positive and Negative forces
with High and Low Power. We have also done Implications of ICT in the 5 Force
analysis.
After that we have done Internal Analysis of this Industry by using Porter’s Value Chain
Model. We have analyses Linkages in the value chain and further marked the ICT’s for
We than finally Concluded our Report on a note that Industry is reaching at the saturation
point but they are fighting hard with the help of ICT’s for survival and managing profit
with the race of Innovation and Imitation. Further more we have given our
Objectives:
Analysis.
• How to sustain for long run in the rat race of Innovation and Imitation.
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Table of Contents:
1) Introduction……………………………………………………………………….
4) Conclusion………………………………………………………………………….
5) Recommendation…………………………………………………………………...
6) References…………………………………………………………………………
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Introduction:
History:
The word “Shampoo” was originated from Hindi (Indian) word “champi” which on
purpose means “to massage”. It was originated way back in the year 1762. To begin with
it was actually Hair and scalp massage provided in British Saloons. The first detergent-
based hair product was innovated in Germany in the 1890s; it was this innovation that
The first powder shampoo was developed by a famous company of Germany named
Schwarzkopf Professional in 1903. Another Innovation in this industry was seen in 1927
by the same company was the first liquid shampoo in front of the world. (Schwarzkopf,
2007)Further Innovation entered this industry with the use of the technology and in 1960s
the real form of shampoo that we are using today was first time ever introduced. (JRank,
2007)
The Industry:
Shampoo is part of Fast Moving Consumer Product (FMCG). FMCG are the products
that consumer use on frequent basis. Shampoo is one of the most frequently moved
products which are used for cleaning of hair. With the world Shampoo Industry, New
Zealand also plays a part in Manufacturing of Shampoo. Some Industry in New Zealand
betaines, amine oxides that are used in Shampoo. New Zealand also imports the same
product from countries like Australia, Asia and rest of the world. (Foster I)
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Furthermore, FMCG goods are also said to be the goods that has low manufacturing and
low consuming cost that’s why they are called quick movers. This Industry is also as
other FMCG Industry is both adaptable and responsive. Proctor & Gamble, Unilever are
couple of best example of the FMCG Industry as they are in the top 5 organization
Industry Analysis:
Power of Buyer
Threat of New
Threat created by entrants that decreases
(-ve)
New Entry in the Firm’s effectiveness
Same field
Substitutes implicate
Supplier apply products Threat of substitutes
(+ve)
Same or better alternative
which cease or decrease
product
Firm’s power
The above mentioned figure shows the Porter’s 5 Force Model which is used in analyzing
the Industry. Here, we use it to analyze the Shampoo Industry. This is actually the first
step of the industry analysis. If a strategist wrongly delineates any of this strategy in the
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analysis, the Industry analysis is blemished. This analysis provides the viable advantage.
Now we will peep in the Shampoo Industry using the Porter’s 5 Force Model.
The threat of New Entry is quite high in the Shampoo Industry. This is the Perfect
competitive Market, so it is open for any body. So entry is quite easy. But there are many
back foots as well such as, in this Industry if there is a new entrant trying to enter this
mass production to start of with! The current players in the industry i.e. if we talk about
UniLever or Proctor & Gamble (P & G), a small player can’t compete with them as they
are big brands. This is the product that deals in the FMCG market hence; it would not be
easy to switch cost for the new entrant. There would be a huge amount of Capital
requirement to compete to this big brands so it’s not easy to invest right from the word
go. Hence, Threat of New Entrant is high and the Force that’s why is Positive for the
Shampoo Industry.
Implication of ICT:
Here current firms that are operating in the Industry spend so much time and money
power in the Research & Advancement Program. This kind of R & D increase the value
for an industry as it improves the product that results into the extension of the product life
cycle. For new Entrants this is not easy. They can’t directly come and compete with these
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players to start of with in the firm with well established and Hi tech complied technology
of established players.
Power of Buyer:
In today’s high competitive era Buyer is the most attentive part for the Industry. In
Shampoo Industry buyer are the retailers/distributors of the product. Buyer always looks
out for the extra bit that they can acquire than the real time. Buyers always play for the
dilution of an Industry. In Shampoo Industry the Power of Buyer is certainly high which
makes this force –ve for the firm. Buyers have certain variety and likings of the products.
They always look out for the cost effectiveness and in good quantity. They sometimes go
for less quality but some are also interested in that. This thing forces a firm to switch their
costs. They always look out for Incentives. They also have their own liking for particular
brand. Hence all these makes Buyer power high which makes this force –ve.
Implication of ICT:
ICT can be used to lower down the buyer’s power in the following ways. Implementation
of cost effective sachets instead of shampoo bottles to attract buyers was the best example
of ICT implication. It cut the cost of production and buyers gets good and better incentive
on selling that. And because of less quantity in sachets the sales also zooms up. Also now
with the use of Internets the ordering has also become easy and due to this the buyers has
in time delivery of stocks. The company using ICT to manage all this can decrease
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Competitive Rivalry:
Shampoo Industry has the enormous growth rate as it is the FMCG product. In this
industry the competitive rivalry is quite high and it is always negative for a firm
operating under this kind of Perfect Competitive market. There are number of players in
the industry. They all are competing with the same kind or imitative products so the
competition level is quite high. More over in the present time of mall culture, every
product is kept side by side so the rivalry becomes more extreme. A plus point is there is
fast movement in the product so there are high chances of survival as well.
Implications of ICT:
There could be much done with the use of ICT in the Shampoo Industry to achieve
advantage. Firstly as some of the big player dose can eat up or merge small firms to gain
advantage. Now with the use of ICT big players plays an important role in R & D as and
improve technology cut down cost add features and differentiate their product to gain
advantage. The journey of Shampoo Industry from “Chumpi” in 1762 to ‘Soap Powder”
in 1890’s and from “soap Powder” in 1890s to Normal liquid shampoo in 1960s and still
innovations are going on for different kind of hair different shampoo like non-sticky one
to thin hair shampoo, etc. this innovation give a firm advantage. (Schwarzkopf, 2007)
This give advantage but other firm also imitate and competition get more intense. So
Power of Supplier:
Power of Supplier is low as far as the shampoo industry is concerned and it is + ve for the
Shampoo Industry. As it is a perfect competitive market there are heaps of suppliers in the
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market. If the producer wants to switch on with the supplier they can do it easily. As we
have seen above in the Introduction in New Zealand Shampoo Industry firms has its own
supply unit. They prepare their own surfactants and use it to prepare shampoo. Thus this
gets the Supplier power down. So in this Industry Firm Concentration is higher than
Supplier concentration. The only threat in the Supplier power is if the supplier is
supplying to more than one firm and if a big firm integrates him, than other firms has to
look out for new supplier and it can cost their couple of months time. Hence this is the
only threat.
Implications of ICT:
As there are number of small to big supplier in the Industry the supplier power is low and
the force is + ve for the industry. So there is nothing much to do with this force as If big
company produces there own surfactants, they are their own suppliers. Hence by using
Technology and Market Information they can easily cut down their production cost to
gain extra edge. Moreover Bottle manufacturer, sachet manufacturer remains the other
supplier, but they are also lots in number as plastic Industry of New Zealand is good in
Packaging and also Plastic is easily available in different countries. Though in many
countries Plastic usage is banned but still with the usage of ICT the suppliers has
Threat of Substitute:
Innovation and wide range of cheap shampoo to the costly one it is easy for the customer
to select one of there choice. And the quality provided is quite significant, so there are
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none or just couple of Substitutes for this Industry. If we peep in further, In India and
many Asian countries, some few people uses some herbal powder like Avala, Aretha,
Beda, etc that are believed to be strengthen the hair and some herbal soaps like Shikakai,
A M Amla No 1, etc. But they haven’t affected the Shampoo industry at all. Hence the
Implication of ICT:
In the threat of Substitute the power is already low so nothing much to do, but Shampoo
Industry is already doing enough to cut short the chances as if any Substitute tries to
threaten them. They used ICT and mixed all these Herbal powder in the shampoo and by
using ICT the Industry comes out with yet another option or innovation of Herbal
Shampoo. Vatika Shampoo of Dabur company in India is the best example of that. So
people who have shifted to that herbal powders before returns back to the shampoo again,
so like this they have kept the threat of Substitute down by the usage of ICT.
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Value Chain Analysis:
Value chain is important for gaining competitive advantage for any firm and how to gain
that advantage. By this analysis firm can identify the value adding activities and can also
detect the non value adding activities. There are primary and support activities in the
Primary activities:
Inbound logistics, Operations, Outbound logistics, Sales and Marketing support, and
service.
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Support activities:
Akkermans H.)
As the industry goes back to 1762 that is around 250 years and the industry has
continuously improved its value chain and tried to giving its customers the best value
added product. Most of the changes have been made by improvements various value
adding activities of the industry. Impact of ICT’s on the business environment is good.
Primary activity Inbound logistics and Supportive activity Procurement have internal
linkage. These activities include warehousing of raw materials, ordering materials, etc.
Internally in the firm Inbound logistics and Procurement activities have linkage regarding
raw material handling. As procurement department works out the purchasing of raw
material, machinery and mainly choosing the best supplier for the company. As inbound
logistics is the primary activity they need help of the procurement department whenever
they need raw material, machinery, etc. So the procurement department in the shampoo
Some firms use intranet to provide the supplier as well as the assigned persons for that
job to access the real time data about material. For example, P&G uses the inventory
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optimization process to improve the inventory management process and technology. The
ICT software (Multi-Echelon Inventory Software) gives planner the information about
the inventory across places. By using the system both departments can work more
efficiently together. The software provides the probabilistic demand forecast so both
activities can access to those data and procurement department can order according to
that data. By this way company will improve its inventory handling cost, storage cost,
improved customer service, etc. They got 99% order filling rate by using ICT. P&G also
improved relation ships with the suppliers to cut inventory materials so that it can add the
value to the company. Unilever is also planning e-procurement in few years for nippy
The Operation one of the primary activity is linked to HR department. The operation
operations department of the firm can ask HR department to recruit the personnel with
the specific knowledge for that manufacturing process. The operation activity is linked to
the one of the support activity Technology Development which deals with R&D, and
technology development activity could benefit by doing some R&D to find better
shampoo products. The shampoo industry also uses CAD/CAM for the manufacturing of
shampoo. Infect it is the first industry to use the CAD/CAM for manufacturing.
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Using ICT in industry:
It is by using ICT company carries out the computer enabled manufacturing processes.
By the use of ICT the company produces on the mass scale to achieve economies of
scale. By using the new technology the companies are making shampoo from the
polymers, silicones and surfactants so that the shampoo will not be much irritating, it will
save the cost of production, it would be more environmentally friendly and provides
better functionality and performance. One of the R&D result is Paper shampoo which is
sign of innovation, in the shampoo industry which shows that products are transforming
As we know the shampoo has been transformed from the soap to the shampoo by use of
For example, P&G has made “preventive codes” where by the company identifies the
dangerous or harmful substances which are not good for the body, environment, etc. and
by that law the company prevents them. Talking about HR,Unilever has outsourced its
the right person to the shampoo units. (Finlaw J, Johns T, Payne B, June 2006)
Primary activity outbound logistics is linked to the firm infrastructure which is a support
distribution of products, etc. For those activities the firm must have sufficient
infrastructure for storage, vehicles for distribution, etc. The outbound logistics also links
to the marketing and sales activity. For example sale and marketing gives its forecast of
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the demand to the warehouse and the distribution of shampoo products to be made to
The intranet and the central database are used to access the information about the
deliveries and managing the shampoo products. They use automated shipment system for
the distribution of the shampoo products. So that firm must have the infrastructure like
There is linkage between sales and marketing with the technology development which is
one of the support activities. Sales and marketing activity deals with the functions like
advertising, promotion, pricing, and channel relations. The technology department which
provides help to marketing and sales activities in terms of providing faster systems to get
the data’s of the stock in warehouse. IT department provides access to the data of the
other departments to the marketing and sales. There should be enough flow of the
information at each stage of the value chain so that marketing and sales can access that
E-business is one way of improving brand awareness and cutting costs on promotion and
advertising. Now a day for fast growth e-business is very essential for the firms to gain
competitive advantage over the competitors. For example Unilever is using e-business to
enhance its growth plans. For enhancing its e-business activities the company jointly
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improve the communication of the shampoo brands. The company by using its IT
facilities developed the integrated regional networks to support their brands and better
By e-business the company can provide e-catalogues to the retailers. By using e-business
the company will develop e-consumer by which the company will provide personal
portals which will aim to the specific customer group e.g. woman’s portal for women
customer. They will do online advertising on alliance partner. They will use e-commerce
to enhance the supply chain of the company. They developed the ECR (existing efficient
customer response) by which they will develop relations with existing customer and find
new customers through them. By using the intranet company shares the information
about innovation projects and enhances global marketing through that system. (Unilever,
2008)
The last primary activity which is service is not applied here because it is FMCG product.
But companies do try to provide after sales service like if the customer is not satisfied
with the shampoo, company do give them their money back. For the customer’s benefit
the industry players introduced the ‘sachets’ which is very cheap for the consumers to
buy. They also study the consumer behavior at some intervals and continuously introduce
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Conclusion:
The Shampoo Industry has a significant role in the FMCG Industry. It is one of the fastest
moving goods with cheap price. The Industry has a major contribution in the FMCG
sector. There is Intensive Rivalry in the Shampoo Industry this has caused these Industry
to the penetration period. But Shampoo Industry Players are effectively using ICT’s to
their potential in developing the strategy for survival and sustainable profit and growth.
There has been constant rat race among the rival firms in Innovation and Imitation
process in Research and Development to eat each other’s profit by using ICT. They have
also eliminated threat of Substitute by constant Research and Development. We have also
seen the affectivity in usage of ICT’s in the Value Chain linkages that adds value in the
So in all the players of Shampoo Industry have effectively followed the big sayings,
“Imagination is not the limit, Strategies (ICT’s) that follows Innovation through R&D is
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Recommendation:
popular selling product in the FMCG Industry. Shampoo Industry continuously keeps on
Innovating from Soap Powder to Shampoo. Shampoo industry should continuously find
new ways of innovation. It should use ICT to find new developments in products to avoid
the threat of substitutes. Strategic innovation in future will help the industry to overcome
The use of ICT can help the industry to manufacture in a cost-effective way. By more use
of ICT industry could attract new customers and it could provide the products in
economically and innovatively. As some large manufacturers like P&G and Unilever
have moved strategically towards use of ICT in raw material handling, finding new
customer, customer relationships, e-catalogue, etc. They can even give their employees
rest at home and allowing employees to work from home. The ICT can help industry
players to provide efficient and on-time delivery of shampoo products. Shampoo industry
players can use ERP (Enterprise Resource Planning) and CIM (Computer-Integrated-
Manufacturing) for effective supply chain of product, to deliver the value added shampoo
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References:
http://www.industryplayer.com/licenceinfo.php?licid=021026
2008 from
http://www.schwarzkopf-professional.com/?id=1295
3. JRank, 2007, How products are made :: Volme-3, Retrieved on July 17,2008 from
http://www.madehow.com/Volume-3/Shampoo.html
http://www.nzic.org.nz/ChemProcesses/detergents/11B.pdf
http://www.shentrepreneur.org/news/2007_05_06_intro_FMCG/fmcg.html
6. Dr. Akkermans H, Porter’s Competitive Forces and Value chain Models, Retrieved
http://e3value.few.vu.nl/docs/misc/Porter.pdf
7. Kerr J, February 2008, Procter and Gamble takes inventory up a notch, Retrieved
http://www.scmr.com/article/CA6531989.html?q=shampoo+industry
8. Trei M, June 2008, Paper shampoo lets you travel with clean hair without being
http://dvice.com/archives/2008/06/paper_shampoo_l.php
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9. Finlaw J, Johns T, Payne B, June 2006, Accenture to help Unilever transform
http://newsroom.accenture.com/article_display.cfm?article_id=4358
10. Unilever, 2008, Unilever Plans Faster Growth , Retrieved on July 17,2008 from
http://www.unilever.com/ourcompany/newsandmedia/pressreleases/2000/growth.a
sp
http://www.jamieandersononline.com/uploads/ANDERSON_EJIM_Creativity_is_
Not_Enough_2006.pdf
12. Wikipedia, March 2007, Enterprise resource planning, Retrieved on July 17, 2008
from http://en.wikipedia.org/wiki/Enterprise_resource_planning
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