Question

Consider Neutrogena Corporation’s original strategy for producing and selling “kind to the skin” residue-free soap with pH balance (prior to the Johnson & Johnson acquisition of the firm in 1994).   Neutrogena sold its products primarily through drug stores, while large soap manufacturers such as Ivory (produced by Proctor and Gamble) sold their products primarily through supermarkets, mass merchandisers, and warehouse clubs. Ivory, Lever, Dial, and other major soap manufacturers spent a great deal of money on television advertising. They also promoted their products through coupons inserted into Sunday morning newspapers. Moreover, they engaged in other price promotions on a regular basis. Neutrogena did not spend money on TV ads, coupons, etc. Instead, it tended to employ direct mail to doctors as well as attendance at medical conferences to promote its products. At that time, more and more customers in the US were buying soaps with deodorants and skin softeners in them. Ivory, Lever, Dial, and others had produced a wide variety of soaps to cater to these customers’ desires. Neutrogena chose not to add any deodorants or skin softeners to its soaps.   Many of Neutrogena’s choices seemed to be limiting its revenue growth; for instance, resisting the move toward distribution through supermarkets and mass merchandisers greatly constrained the firm’s sales growth potential.   The same could be said for its decision not to advertise on television or employ skin softeners in its products.

Please identify what generic business level strategy Neutrogena used from this case? Explain its key strategic elements (e.g., cost drivers/uniqueness drivers).

Answer 1

In this case neutrogena uses the differentiation strategy

Around the world the various firms are producing differentiated products like soaps,toothpaste,skin creams,lotions,chocolates,all complementary and substitute products are creating a line in the market.The customers are actually confused to take the product in the market.Some product are already making the cusomer loyalty and other substitutes are facing difficult to make a place in the market.In this case neutrogena facing the similar issue and they uses differentiation strategy for penetrating the market.The firm reduces the cost of ads and spending cost for the hiring highly skilled force and expensive material added to the product for making uniqueness,this will eco friendly as well as nature friendly.To satisfy the diverse needs of customers it become essential to the firms to adopt the differentiation strategy.In this strategy to firms get premium position in the market.In this case neutrogena not add any deodrants for their products so its complete chemical free and its a unique quality to strive the market and customers

Key strategic elements used by neutrogena:

Policies: Forming own policies to chart the activities that performed for the firm,and deciding what services to be performed for the customers

Learning: Continuously learning for better performance of the firm

Location: Deciding proper location for selling the products,that should be unique

Timing: Timing of applying this strategy is important for the success.