Introduction of Disposable diapers

            Disposable diapers were introduced an innovative product that all sudden win the market shares of other all kinds of diapers including cloth and homemade diapers. The case study is about the condition of the disposable diaper industry until 1974. According to the records, disposable diapers were the most frequently and largest consumed product in the US during 1966. Afterward, the largest sales of disposable diapers recorded hundreds of million profit in a single fiscal year. In the present work, case study analysis is presented to project the industry history and situation of several big companies in the US and other geographical markets. The analysis also covers the financial analysis of the industry to elaborate on the sales record of big companies. 

Case Study Analysis of Disposable diapers

          Historical analysis of diaper industry prior to 1966 shows that there were almost 400 companies working to produce cloth diapers. Disposable diapers were introduced as an innovative product in the US during 1966 but at very high prices by the big names Parke Davis, Kendall, and Chicopee Mills. High prices caused a high switching cost and low market demand. While in Europe the situation was quite different. Prices were relatively low and demand was at growth trend. The situation also got changed in US industry when P&G Pamper brand started taking interest in disposable diapers. At that time the only major problem was the high cost of manufacturing. In the beginning, P&G Company managed to sell each pamper at $5.5 price.  

            Another famous company Johnson and Johnson took a decision to get entrance in disposable diaper with their brand Johnson brand against Pamper brand. Hydrophobic plastic in Johnson disposable diaper supported an increase in the sales of their product. Somehow, the disposable diaper product was not only a success-oriented product. A number of companies tried to get entrance in this market to take leverage of the high market demand but failed to attempt so. For instance, Chicopee Chux, Baby Scott and Bordan discontinued their manufacturing operations of disposable diapers after continuous failure to win a secure position in the targeted market.

          While on the other hand, the case study also presented that a number of brands introduced variety in the disposable diaper product line having differentiation regarding quality, performance characteristics, sizes, and prices. Analyzing market demand we can say that it was on a continuous increase. Analysis indicates that the total number of baby birth was also most decreasing on a continuous basis from 1966 to 1973 but still the percentage of sales was increasing with the passage of time. For instance, in 1966 total baby birth was recorded as $3.64 million and at that time total sales of the diaper were $10 million. While on the other hand, the situation was quite different in 1973. Market demand was increased up to $370 million and the total number of baby birth recorded that year was limited to only $3.14 million.

           The rapid increase was caused by the decrease in the prices of disposable diapers and frequent shift in the market to use disposable diapers rather than using cloth and other kinds of diapers. The Case study also presented information about diaper per unit estimated manufacturing cost to elaborate on the profit margin secured by the manufacturing companies. Numerical information presents that raw material, manufacturing labor cost, and all other relevant direct and indirect manufacturing cost were 50% of the total prices. While the ratio of total earned profit limited to 25% only ($.10 per product only). A number of companies also took advantage in the market by supporting their products with high marketing and advertisement budget. Kendall brand spent $313.5 thousand (in 1966), Colgate Palmolive $1370.7 thousand (in 1976), and P&G spent $8927.7 thousand (in 1976) to market and advertise their product. Somehow from these P&G took the maximum profit outcomes on their sales of disposable diapers.