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Proctor and Gamble Strategic Management Case Study Management
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PROFESSIONAL SUMMARY Proctor and Wager (P, G) over its journey of approximately 175 years has become among the world’s greatest consumer products Company with sales of nearly $80 billion and a net profit of around $10 billion. P&G includes a presence in more than 180 countries with brands that accumulate to in excess of $25 billion. The organization has attained success by simply creating top quality brand recognized products that are sold upon multinational level.
It enjoys one of many largest manufacturers in home products like Pampers, Gillette, Tide, Ariel, Downy, Pantene, Head&Shoulders, Olay, Oral-B, Reputation, Dawn, Fairy and Always and segments just like household treatment, beauty, combing, and personal medical care. Although, P&G has internationally renowned brands, P&G needs to choose strategies that enable it to maintain its competitive edge over the rival. Customer Goods market where P&G operates features matured reaching the consolidation stage and competition amongst rivals is strong.
P&G has its own strategic alternatives create competitive advantage over its rivals such as further market penetrations by rebranding its current line of products and selling them at a lower price. Another choice for P&G is to grow in the emerging markets by collaboration or perhaps alliances with local businesses in various geographical regions. Finally, P&G may specialize in epidermis care/beauty portion of buyer industry. P&G can provide consumers with items that are made with natural ingredients as trend in health and wellness is growing along with providing specific products males.
INTRODUCTION P&G is a part of a competitive industry, therefore faces incredibly stiff and fierce competition from its opponents. The competition encountered by the firm is nearly on every entrance like, business, product line up, innovation of recent products, R&D for new and existing goods. It has witnessed a drop in market share and revenue from the produced market and but endured appreciable overall performance in the producing markets.
This kind of report gives a thorough internal as well as exterior analysis of P&G, identifies its requirement, along with certain tactics that would help it to increase the profitability, revenue growth and sustain the competitive benefits in both developed and developing market segments. The limitations with this report are due to the fact that this primarily depends on the information and facts since presented just in case 27, Proctor & Gamble: The Beauty/Feminine Care Section of the Customer Goods Industry.
External recommendations were also used and information was searched for from the Proctor & Bet Company 2012 Annual Report and the Proctor & Bet website. BUSINESS OVERVIEW Procter & Gamble was founded in 1837, simply by William Procter and Adam Gamble, who also laid the building blocks of P&G by primarily making and selling cleaning soap and candles. By 1879, founders of P&G developed Ivory detergent and set up their own lab, and by 1935 the company founded another manufacturing plant in the Israel after their acquisition of the British detergent manufacturer, Jones Hedley & Sons.
In January 2005, P&G announced an purchase of Gillette, forming the largest consumer goods company and inserting Unilever in second place. At present, Procter & Gamble sells much more than 300 leading brands, including Pampers, Tide, Pringles, Ariel, Downy, Pantene, Head&Shoulders, Olay, Cover Young lady, Pantene, Crest, Duracell, Secret, Folgers, Hugo Boss, Mister. Clean, Oral-B, Old Essence, Clairol and Zest. The corporation markets its products through mass merchandisers, food markets, membership golf club stores, drug stores, high-frequency stores, malls, perfumeries, medical stores, salons, and e-commerce.
It markets its products to over 160 countries, and operates a total of 116 plants much more than 80 countries around the globe. Procter & Gamble’s head office are located in Cincinnati, Kansas and this employs more than 98, 000 employees throughout the world. Off late, the company’s functionality has dwindled as the organization has been shuffling its technique and is not able to maintain competitors away (Chung, 2012). Recently the company’s Board has unanimously approved CEO McDonald, who had joined them July 2009, as normally the one who would prepare and head the company’s turnaround of functionality (Chung, Jul 2012).
As a result the company features adopted a multi-fold technique to cut costs by a big amount and bring up new and innovative products to coast up profits. Example staying the fact that “the organization will launch at least nine new items in the next several months, most of them priced at reduced to generate bigger profit margins (Monk, 2012). MANDATE The mission in the company is usually to “provide brand products and services of superior quality and value that improve the lives of the planet’s consumers, today and for generations to come.
And this will automatically create value for a lot of its stakeholders in form of higher product sales and earnings. The eye-sight of the organization is to be acknowledged as “the finest consumer services and products company in the world. P&G has stored is perspective powerful yet pretty very clear. This eyesight of the organization is simple enough be easily comprehended by most its stakeholders. The main values of the company move around the buyers, its brands and its personnel. These principles are leadership, ownership, sincerity, passion intended for winning and trust.
The business, through every its key values, provides tried to treat the fact that they can seek to operate and deliver a trust to their consumers by making use of their personnel, who are expected to work with leadership and ownership and will need to have a passion for winning so that they can with each other work to strive to accomplish the eyesight of the organization. Just like the vision of the company, the main values are very clear and straight forward define the reason for the existence of the company. P&G’s stakeholders happen to be its consumers, shareholders, employees, uppliers and communities through which it works. P&G’s buyers are the types who finally use the products and given the fact that the market is highly consumer oriented and demand influenced. The investors invest in P&G’s shares providing the company with capital and the company benefits them simply by consistently creating and elevating the shareholder value. Proctor and gamble employees globally are considered the most important asset who would be the back bone of this big corporation, they expect ethical treatment along with reasonable wages and good working conditions.
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Another important stakeholder of P&G is definitely its suppliers whose companies heavily count on the business agreements with P&G, and the businesses who promote and disperse P&G goods. Also, diverse communities around the globe from Cincinnati, Ohio for the many areas around the world who are provided with jobs, employee education, stableness and who pay fees because of Procter & Gamble. EXTERNAL EVALUATION 1 . Competitive Rivalry: The industry that P&G are operating in is highly competitive and it includes emerged among the leaders in the market.
This sector has five major opponents and features reached the stage of consolidation. Because of industry consolidation, changes made by one company forces various other competitors to react and follow fit. This improves rivalry and may lead to price wars. The necessity for splendor and personal health products is on the rise as a result of many factors such as, the growth in the economies of growing world features improved the typical of living of people in those regions, men are becoming more interested in beauty and skincare, and also as a result of growing with regard to products constructed with natural ingredients and raw materials.
This increase in demand and prospect of growth has provided stability in the industry. installment payments on your Threat of New Entrants: Five major competitors in this industry have captured most of the market share through economies of scale and company loyalty. The wide range of products in significant competitor’s collection makes it really difficult intended for the new traders to contend and gain any significant market share. Potential entrant will require a massive amount of capital for manufacturing along with a huge plan for marketing actions, R&D, supply/sales channel to be able to compete at the same level because major rivals.
This provides an impressive very high barrier to access in the industry which makes the threat of new traders, very low intended for the industry. The patents held by company upon various items also work as barriers to entry. three or more. Bargaining Benefits of the Customers: Businesses in this industry count heavily in its potential buyers to generate a substantial portion of revenue. Buyers on this industry are mainly distributors like Walmart, Macy’s, Target etc . These marketers buy in big amounts which boosts their obtaining power allowing them to bargain affordable prices.
As a result, more than exposure of sales to any single client could cause a serious menace to this sector if opponents do not have their particular customized distribution network. 4. Bargaining Benefits of Suppliers: You will find almost no alternatives for raw materials being used in products made by this market which is a source of concern. Suppliers seem to enjoy high negotiating power but the sheer size and amounts purchased by major opponents in this sector tends to reduce the dealer power because competitors can move towards vertical integration.
Hence, the buying power of suppliers can be medium. your five. Threat of Substitutes: You will find no well-known substitutes in this industry which usually places the threat of substitutes at a very low-level. Macro Environment The recycleables used to production products in a variety of segments of Fast Moving Client Goods (FMCG) industry are regulated simply by governments around the globe. There is a risk that at the moment used raw materials may be regarded potentially dangerous and therefore restricted in their work with due to the embrace health intelligence especially in western markets.
Merchandise testing can take months possibly years prior to getting an agreement for consumption and during this time around regulations can transform preventing a product from at any time being introduced to the market causing large R&D expenses which might never be recovered. Social forces can have an effect on this kind of industry including the desire for organic products as buyers become concerned that chemicals currently being utilized can cause long-term health problems like cancers and skin diseases.
Guys are also fast becoming more interested in beauty and hygiene products and foule in expanding countries are also turning towards beauty and personal health products his or her living criteria improve. The future for this sector is shiny with possibility of growth however for some businesses this can be a danger if they fail for product innovation and strategizing their organization as per the changing trends. Technical changes including exponential growth in internet and ecommerce provides a great platform to this industry to market usana products directly to target demographics and to raise understanding of personal health.
On the net, there is a significant potential to focus on consumers depending on their net searches, earlier online buys, etc . Advancement in technology can also help this industry’s distribution systems such as emergence of real-time inventory devices allows inventory levels to get replenished promptly and prevent extreme inventory on-hand in industrial facilities or facilities. The reduced barriers to international operate give firms in the industry a chance to expand into various areas of the world. Various regions just like China, India, and South America are opening up to the community providing a great opportunity for expansion.
However , the reduced boundaries to international trade can also be considered a threat in the event international businesses expand into home angles such as The european countries and America which will in turn give rise to the local competition. INNER ANALYSIS P&G is the sector leader because of its ability to keep a competitive advantage more than its opponents resulting in more than average success. P&G has its own resources that contribute towards gaining and maintaining competitive advantage over the rival. Certainly one of
P&G’s main strength is definitely its good financial position that enables it to acquire other companies. P&G has attained Gillette increasing its competitive advantage above its competitors as Gillette mainly provides Men which is growing industry. Strong budget also permits P&G to incur excessive R&D costs i. e. in excess of installment payments on your 2 billion dollars. P&G is constantly purchasing product advancement and enhancing its current line of products. The organization over the past several years has effectively launched and managed new releases.
As such, P&G has the ability to press for development and ensure faster commercialization than any of the competitor in the industry. This purchase in increasing brands and innovation also promotes brand loyalty. P&G operates in several segments of FMCG sector such as Personal hygiene, Home care, and Beauty. This kind of variety of goods offerings from P&G caters to almost all demographics, throughout distinct ages, genders, countries and cultures. P&G operates in numerous regions across the globe and offers successfully was able to establish by itself as a innovator in these markets across many segments.
This kind of diverse variety of product offerings along with its operation in numerous geographic locations allows P&G to fishing reel through the recessions in the economy and maintain its success. Any slow down in the economy of anyone place or segment is countered by developing economy and segments consist of regions. As well, type of products offered by P&G are considered to become recession proof as they considered to necessity including soaps, shampoos, personal wellness products etc . P&G comes its advantages from its different capabilities. Firstly is that P&G has the advertising of usana products in the industry.
This enables P&G to convince their consumers to get products and likewise keeps them up to date with new products and also about any improvements in the present line of products. P&G also has an efficient distribution system which allows it to spread its products in various region in the globe at a lower cost than it is competitors. P&G also works with marketers like Wal-Mart, Target and so forth to keep supply chain functioning efficiently. This permits restocking of shelves for distributors much easier as it delivers real time data to P&G as stock levels consume.
This allows P&G to save expenses associated with huge stocks and facilities. Also, P&G owns and operates practically 115 developing facilities across 80 countries around the globe. This really is a great property of the organization which provides that with the capacity of saving in cost of shipping and delivery products from region to a different. All these models of co-related resources and capabilities let P&G to reduce costs and give high quality products at an acceptable people which in turn has produced above average earnings in the industry making P&G the industry innovator.
Along with strengths, P&G also has particular weaknesses and threats that may offset it is competitive benefits and influence its earnings. In the current global down change commodity rates across the globe happen to be increasing due to transportation costs associated with higher olive oil prices. This will force P&G to raise prices on a lot of their products that might affect market share because a lot of consumers may possibly switch to more affordable low quality goods. This is further exacerbated by fact that transitioning costs intended for consumer are quite low between the competitors in lots of segments of this industry.
When P&G features great cooperation with Wal-Mart, which allows this to maintain an effective supply sequence management but this is also one of many weaknesses of P&G while Wal-Mart is its leading buyer as considerable amount of P&G sales will be accounted to Wal-Mart and followed by various other major retailers like Goal, Zellers, etc . This provides purchasers with tremendous buying electricity and any kind of decrease of product sales at any in the top buyers can affect P&G effecting it is revenues and subsequent profitability.
P&G is likewise exposed seriously towards the full grown markets of Europe and North America. STRATEGIC OPTIONS Additional Market Penetration ” With this strategy, P&G should enhance market transmission its current skin care and private hygiene segments. P&G should certainly look towards in its customer base and specifically concentrating on low income consumers in mature market segments. P&G is capable of economies of scale in its current item mix simply by rebranding just like packaging or perhaps size/volume in the product. This way P&G will be altering its existing goods at a low fixed price.
By harbouring this strategy, P&G will be able sell its products in a cheaper price and increase its revenue and subsequent earnings. This is low risk approach because P&G has were able to achieve strong brand reputation and buyer loyalty so P&G would not have to bear huge advertising costs to be able to introduce its products to the market. P&G already and successful supply string management and it has very good relationship with mega vendors like Wal-Mart, Target etc . so it will probably be much easier intended for P&G to introduce these types of rebranded products to customers.
Furthermore, P&G has a strong financial position which can be essential just in case the approach fails to garner expected results. Further Marketplace Penetration| Arena| All market segments where P&G currently contains a presence| Differentiator| Price, Quality| Vehicles| Rebranding, marketing| Staging| Rebrand products in different packaging with less volume quantities| Economic Model| Sell rebranded products in lower price to the low income consumers| Pros| Enhances existing capabilities and resources Low Risk| Cons| Short to medium term solutionBrand loyalty is scarce in buyers looking for cheaper products| Table 1
There are some drawbacks from this strategy which must be considered such as the shortage brand dedication in low income buyers. Low cash flow consumers often prefer goods that are competitively priced so if an additional competitor implements the same approach they can take away P&G’s business. Hence, this tactic is only practical from short to medium term. Global Expansion in Emerging Markets ” P&G derive the majority of its revenues from matured market of North America and Europe in which market provides reached the saturation stage and earnings growth is usually stagnant.
Contrary to the adult markets, rising or development markets include a lot of potential for progress and there is a whole lot of market share up for grabs. As P&G looks to gain greater share inside the developing countries, it needs to adjust its organizing according to the demographics of these kinds of country i actually. e. cultural groups based on a skins, types of hair etc . As P&G previously has a good set of products, it must be fairly easier to get P&G to penetrate in emerging marketplaces especially in conditions of brand identification, mass industry presence, and brand dedication.
P&G can easily avail this opportunity by simply introducing quality products based on the specific needs of the regional population or by purchase of businesses who also produce this sort of products. This tactic would help P&G in the end as it will allow P&G in keep the revenues up during the economic downturns in mature market segments as sales in appearing markets will certainly offset the recessions in the mature market segments. Rules and regulations fluctuate country to country therefore some countries can possess stringent guidelines for Multi-national Corporation to protect its neighborhood businesses.
Global Strategic Cha?non or aide with neighborhood businesses can enable P&G to grow in to the community market in areas including China, India or South America. The comprehensive knowledge of consumers, market developments, laws and regulations that Partner Organization brings to the table can be viewed an excellent distinctive competency. Global Expansion in emerging Markets| Arena| Rising Markets| Differentiator| Price, Quality| Vehicles| Aide (Global tactical alliances), Purchases, | Staging| Collaboration with local businesses and then approach towards acquisition of the same. Economic Model| Provide quality product at fair price to consumers inside the emerging markets| Pros| Great long term potentialDiversification through businesses in various regions which provides an opportunity to keep revenues up during recession in a single region| Cons| High risk linked to collaboration/acquisitions together with the instability of economic growth in appearing marketsCompany may lag behind in innovation| Table a couple of P&G will need to select it partner properly in emerging markets remembering the risks associated such as rules, regulations etc .
P&G must form a structure in which the share, responsibilities of each party is clearly defined along with contingency programs to reduce various hazards involved. P&G should protect its operate secrets and product remedies so production facilities should have separate units, and PG should also receive all it is patents acknowledged in the region in which it will operate. Some of the downsides of this technique are stuck with the aide with neighborhood businesses and the instability in the emerging marketplaces.
Also, P&G will essentially be rebranding most of the items it sells in mature markets along with providing some items of its partners meaning there will be significantly less spending on R&D and organization might lag behind in innovation of new revolutionary items. Differentiation in Beauty/Skin Care Segment ” In this strategy, P&G offer unique and innovative items that talk about special requires of various marketplace segments and demographics just like products with natural/organic materials, products for certain demographics such as men, cultural groups etc .
Beauty/skin proper care segment of consumer items industry keeps growing as consumers are more interested in grooming themselves with better products and growing trends in health/wellness. P&G can make a competetive edge by specializing in products created for men and products made with natural/organic materials. This strategy will require acquisition of products or spending in R&D to pioneer such products in house. This will likely also require aggressive advertising branding of such items to bring in them to the customer.
These products must be priced at a premium price based upon the advertising and marketing costs, purchases and R&D spending. Various features of the merchandise along with quality is going to offset and justify the larger price to get such products. With continuous R&D spending over time, growth in systems and elevating competition, prices will sooner or later reduce. If perhaps P&G will be able to acquire or create fresh line of specialised products which caters to particular market portions or demographics, it will be a competitive benefits for P&G above its competitors.
Differentiation in Beauty/Skin Treatment Segment| Arena| Mature Marketplaces first and move into growth/emerging markets| Differentiator| Selection, Quality| Vehicles| Purchases, Signalling| Staging| Acquisitions of major business involved in organic and natural and guys beauty/personal hygiene segments| Financial Model| Offer specialized products targeting certain customers with premium rates i. elizabeth. organic products| Pros| Utilizes existing solutions and capabilitiesLong Term potential| Cons| Risky with acquisitionsHigh costs associated with R&D spending| Desk 3
This strategy has some down sides as well including it requires a lot of capital investment either for acquisition or R&D to produce new products. SOURCES Mockler, R. J. (2007). “Procter & Gamble: The Beauty/Feminine Attention Segment from the Consumer Goods Industry In C. T. L. Mountain & G. R. Roberts, Strategic Administration: An Integrated Approach, 6th Model. Boston: Houghton Mifflin Chung, J. (2012). “P&G’s Panel , Unanimously Supports’ CEO McDonald Retrieved from http://online. wsj. com/article/SB10000872396390444464304577534930564069566. tm m Monk, M. ( 2012) “Procter, Gamble planning nine new product launches Retrieved from http://www. bizjournals. com/cincinnati/blog/2012/09/procter-gamble-planning-nine-new. html Annual Report (2012) Gathered from http://annualreport. pg. com/annualreport2012/files/PG_2012_AnnualReport. pdf P, G History (2012) Retrieved from http://www. pg. com/translations/history_pdf/english_history. pdf G, G Goal, Vision and Principles. (2012) Retrieved by http://www. pg. com/translations/pvp_pdf/english_PVP. pdf format
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