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 P&G approached Unilever quietly and demanded that Omo Power should be withdrawn.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 had to admit that its "new" product had flaws. Unilever withdrew its product into a niche, and P&G regained the lost market share rather quickly. However, due to the strong interdependence and violation of the tacit agreement, the times of cozy nonprice competition seem to be over. In a consolidated market, the action of one player will most likely lead to a reaction of the other player due to interdependence.
PERFORMANCE.
1. Performance measuring.
There are three different kinds of performance measuring: Economy, efficiency and effectiveness . Most companies tend to measure performance solely on profit. In other words; how much money is made and what is the return on investments? The problem of this way of thinking is, that the effectiveness and efficiency somewhat is being kept out of the main picture of performance measuring.
