1/31/2005

Procter & Gamble Buys Gillette.

In the article "Procter & Gamble buys Gillette" Procter & Gamble has made a huge move in wanting to buy The Gillette Company. The stock deal is valued at $54 million dollars. There are those people out there like the Wall Street analyst’s that think it is not a good idea or that it is overpriced. The reasons that they feel this way is because their will be some overlap in a few brands such as deodorants, teeth whiteners, and toothbrushes. Another reason is the advertising and being able to distinguish between the different products. However, I think that it is one smart move by Procter & Gamble. Because with all of the resources that the two companies already have they will be able to combine efforts and resources, and this will create great strength for them that will be hard to compete with.

7 comments:

June said...

The fact that some of the products that Porctor & Gamble currently makes will overlap with Gillette products is ture, but not much of a problem. Proctor & Gamble already makes several products which compete with each other in the market place.

The problem could be that Proctor & Gamble could become too large. If the company grows too large it may experience decreasing returns to scale. It could happen that too many people within the organization will slow it down. Perhaps there will be various people doing the same jobs. This will lead to further economic impact as Proctor & Gamble try to down size and slim out the corporation. The Merger could cause various unforeseen economic effects.

sandy said...

I don't understand why anyone bothers making a "fuss" over P & G overlapping products. They have been making overlapping product for quite some time. It's a perfectly valid marketing strategy that you can learn about in Derek Snow's marketing class.

Fred said...

Just because one company buys another one out doesn't mean that there will be overlap in the two brands. When buying out a company, you can still use its name and its brand equity; it's simply a marketing strategy. I think that it was a very smart move for Procter & Gamble to generate this kind of income. There are many companies already who have merged and combined and many times the consumers don't even know it.

Dr. Tufte said...

-1 for being off by 3 zeros in your post Harry (waived)
-1 on June's comment for spelling errors (waived)

The big thing to remember about mergers and acquisitions is that the acquirer (Procter and Gamble in this case) - on average - is not making a good decision. So, P&G stock is likely to fall. The shareholders of the acquiree (Gillette in this case) tend to make out because the acquirer is paying too much.

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