Europeans_Soap_War

Europeans Soap War 1. Introduction The European retail detergents market is dominated by two companies, Unilever and Procter and Gamble (P&G). High barriers to entry into the detergent industry were erected through the achievement of superior brand loyalty, absolute cost advantages (due to “secret” processes and access to deep corporate pockets), as well as economies of scale. As a consequence thereof, both enjoyed a tacit nonprice competition which enabled Unilever and P&G to earn above-normal profits. However, Unilever felt bored with this cozy arrangement and decided to rock the boat with the introduction of Omo Power. This detergent was promoted as the biggest technical advance in fabric detergents in fifteen years. Sales of Unilever skyrocketed throughout Europe and Unilever gained market share at P&G’s expense. This awakened the P&G giant. After intensive investigation of Omo Power, P&G found out that Unilever had used an “old” ingredient which caused holes in the clothes if washed repeatedly. The interdependence between both companies becomes even clearer when one considers P&G’s first step after this discovery. P&G approached Unilever quietly and demanded that Omo Power should be withdrawn. However, Unilever decided to play hard ball, so P&G joined them in the game. After P&G publicized their findings, Unilever unilever, product, pg, industry, companies, soap, products, power, market, competition, management, resources, new, instead, however, crisis, very, value, strategy, should, case, war, two, substitutes, problem, performance, one, often, different, costumers, both, because, bargaining, after, unique