Procter And Gamble P And G

Published Date: 02 Nov 2017

Contents

Introduction/Scene Setting

Company Overview

Background/History.

Procter and Gamble (P&G) was formed by William Procter a candle maker and James Gamble a soap marker on the 31st of October 1837. It is an American multination consumer good manufacture and one of the largest in the world. It manufacture’s products ranging from beauty and grooming, pet food and household and fabric care, baby and family home care products and has its headquarters in Cincinnati, Ohio USA.

P&G had about 80 staffs between 1858 and 1859 and sales reached $1million. Winning several contacts from the Union Army during the American Civil War to supply candles and soap earned P&G a lot of profit also expanded its market by introducing military personals all over the country to P&G products.

Operation and brands

Through acquisition, P&G became an international corporation in 1930. It operates in 80 countries, has approximately 135,000 employees and has 50 brands which well-known in about 180 countries. Its brands amounts to more than 90% of its sales and profit. 26 of its leadership brands produce more than a $1billon each in net annual sales. (P&G, 2012).

P&G’ touches the life of people around the world with it brands which includes Always, Ariel detergent, Bounty, Charmin, Crest, Downy, Gillette, Lams, Olay, Pampers, Pantene, and Tide. (Olympics, 2011).

It used to produce food and beverage products prior to the sales of Pringles to Kellogg Company for $2.7 billion in 2012. Pringles was one of P&G’s major revenue drivers with a sale of about $1.5 billion yearly. It was the only remaining food business after the sales of Jif peanut butter and Folgers coffee to Smucker's in recent years. P&G is no longer in the food business, is now lays more focus on personal care and beauty products. (Reuters, 2012).

Procter & Gamble recorded sales of $83.68 billion in 2012 and has received several awards like 5th position on the World’s Most Admired Companies", overall best company for leadership development on the list of the 2012, "40 Best Companies for Leaders" by Chief Executive Magazine, "World’s Most Admired Companies" and Top MBA Employers from Fortune, "World’s Most Respected Companies" from Barron’s, "Best Place to Work" from Glassdoor.com, and " The World’s Most Attractive Employers" from Universum. (P&G, 2013).

Manufacturing Operation

P&G manufacturing operation spread around 5 different regions. (P&G, 2012)

Regions

Details

Regional Headquarter

Countries

Asia

The world faster growing economy and home to over 3 billion customers

Singapore

China, Japan, Korea, Hong Kong, India, Australia, New Zealand, Indonesia, Philippines, Singapore, Taiwan, Vietnam, Thailand, Sri Lanka, Malaysia, Bangladesh

Central & Eastern Europe, Middle East And Africa (CEEMEA).

P&G’s largest Geographic regions.

Geneva, Switzerland

The Balkans, Central Europe North, Central Europe South, Eastern Europe, Middle East, Sub Sahara, Turkey/Caucasia And Central Asian Republic.

Latin America

With presence dated back to 60 years.

Panama City

14 Countries

North America

Cincinnati, Ohio, USA

Over 25 manufacturing plants

Western Europe

With presence dated back to 1930. P&G has presence in ever western European country.

Geneva, Switzerland

4 Countries.

United Kingdom, Belgium, Germany and Italy

Case Study Overview.

A company is an open system. It gets it raw materials and resources from the environment and provides it good to the environment. Environmental forces are of different levels. Some are external, and some are internal forces. External environment forces can be associated with international, local or regional levels. These forces might be opportunities, threats to a business environment. Every organisation tries to make use of the opportunities and also deal with the threats emerging from the business environment.

To examine these factors, I would be using the most popular external environment analysing model known as PEST which means political-legal, economic, social-cultural, and technological.

This coursework will focus on the macro (external) and micro (internal) environments that have major impacts on Procter and Gamble.

Analyse the macro business environment in respect of P&G group and identify the factors that will have significant impact on Groups business.

The success of any company does not reply only on the efficiency and management methods of the company. There are other factors involved the market performance. Macro business environment refers to all external forces or uncontainable influences that affect organisations and its business environments. This factors ranges from political and legal, economic, social cultural and technology forces. The macro environment is also known as external or remote environment. 

As Baines (2011) describe: "The operating environment for all organisations is never static and seldom entirely predictable, and can therefore profoundly affect a company’s course of action."

Strategic management experts stated that for a company to achieve a competitive advantage, its needs to follow strategies that develop existing capabilities, resources and formulate strategies that develop extra capabilities, resources. (Hill & Jones, 2010)

Political Segment.

Changes in both foreign and local political activities have significant effect on companies and group businesses. P&G has developed different strategies over the years which it uses to survive in different political environments and issues.

The nationalisation of foreign companies by most countries in 1960’s affected P&G as it market shares where reduced in the affected areas. This means that companies were subject to local control on import, export, price and employment conditions. Many foreign companies like Coca Cola left India in 1970 as result of the hostile effect of the nationalization policy. Foreign Companies had fear on issues like trademark loss. P&G uses it goodwill and experience to bargain with the government in many countries to modify their policies and regulations. Till date, P&G is a member of many organizations worldwide and has expanded its political ground using it experience and tactical strategy. It aim is to develop a favourable business community and enhance corporate reputation management. P&G also uses advertisement campaign to raise awareness of national or issues, gain public support and sustain favourable political-legal environments.

Economical Segment

P&Gs market environment is highly competitive globally and locally especially in Asia and Europe. It competes with other brands, and Unilever is one of the main competitors in the Europe. The European free trade policy has major effect on P&G market share as cheaper brands are emerging in European countries. Consumers have wide varieties of products to choose from and will choose based on product quality, brand strength, price and eco-friendly product. This is a moderate treat to P&G because of its brand equity in its products

The recent economic recession has changed the spending pattern of consumers, making consumers reluctant in purchase expensive products. This is putting a lot of pressure for on Fast Moving Consumer Goods (FMCG) produces to cut the prices of products.

Market competition in Europe has continued to grow stronger and P&G is struggling in places like Netherlands, Germany, and France. For political unstable countries with developing economies like Africa, P&G implemented marketing strategy to its market share is maintained. Smaller packages is been used for some products for affordably for low and regular income earners. More than 30% of Africa population lives on less than £1 per day.

Social Culture Segment.

The main target group of most personal, household product and consumer goods manufacturing companies are women. A lot of P&G’s hygiene, beauty, skin, and hair care products are focused mainly on women. Products like beverages, pets and human food, detergent and home cleaning products are addressed to women as the decision influencers. P&G has been using sponsored programs attract the attention of its target audience. It is also using marketing and advertisement to establish brand loyalty and persuading customers to purchase their products over other brands. In 2010, P&G spent $9.3 billion on marketing $1 billion more than Unilever its closest competitor (Wikiinvest, 2011).

To reinforce it goodwill, P&G is also trying hard to improve hygiene in developing countries like Asia, Africa and Latin America. It has been working relentlessly to achieve this aim. However, the illiteracy of consumers in developing countries affects marketing strategies like advertisement in print format. This requires the need for more resources to enhance the communication between produces and consumers. Besides, P&G’s employers are from about 110 different nationalities. This ensures that diversity works for all its staffs. The strategy of diversity toolkit was employed to diversity works efficiently for all consumers and employees.

For over 175 years, it has improved and touched the life of over 500 people worldwide through different programs it sponsors as s commitment to social Investment. (P&G, 2013)

P&G is focused on embracing different cultures, languages and ethnicity which results in high market share and increase demand in developing countries.

Technological Environment

P&G has continued to develop since 1920s. It uses new technologies to invent new products, increase production and improve the quality of product. This has led to the continuous increase in market shares since 1950s. P&G set a record of spending spent $2 billion dollars on research and development in two consecutive years (Dan, 2011). The use of modern technologies has increase its market share especially in the e-business sector through the internet. P&G is trying to minimize cost to the use of efficient technology. Continuous investment in technological research and development is a very important factor of the macro environment as important and market leading discoveries are made during this process.

Analyse the micro business environment in respect of P&G Group and identify both the weak and strong market forces that influence Group’s business and any barriers to market entry Political-Legal Environment.

Micro business environment are elements or factors in a company’s internal area of operation that disrupts it decision making freedom and performance. It comprises of a set of forces and factors that originate with consumers, suppliers, employees, stakeholders, media, competitors, and shareholders Factors of the micro business environment, can be control by good management. Below are analyses of micro environments factors.

Consumers

P&G’s major task it is attract and sustain consumers. The success of any business comes from its ability to maintain consumers. P&G factors into production the need of consumers which are quality and durability. They also monitor closely and analysis changes in consumer behaviour like changes in preference, taste and purchasing habit. Considering consumers preferences and taste is a very important micro environment factor, as organisation cannot exist without its customers.

Suppliers

Suppliers are a very important factor in the micro business environment of P&G. It maintains a solid and good relationship with suppliers to ensure the smooth supply of raw material to enable stable production. A disruption in supply channel will affect the sales, and might lead to the loss of consumers to competitors.

Employees

Providing and employing staffs with relevant experience and skills is vital to organisations. P&G provides it staffs with continues staff training right from recruitment stage to retirement. Staff development plays and important role in attaining a competitive edge especially in (SSM) Service Sector marketing. Motivated employees with adequate skills and experience will improve production and customer service. Due to P&G’s good employee relationship, it has won several awards like "Best Place to Work" from Glassdoor.com, "The World’s Most Attractive Employers" from Universum, "Canada’s Top 100 Employers" by Mediacorp Canada Inc and was named one of "Greater Toronto’s Top Employers" by Toronto Star newspaper. (P&G, 2013).

Shareholders

All organisations needs development. Shareholders are the primary decision makers of P&G. Shareholder’s guide the financing, strategy and managemen. Shareholder’s questions and concerns are addressed to assure them of the strength and business directions. P&G carefully manages its relationship with it shareholders which has led to an increase in profit and market shares.

Media

Media has a major impact on a company’s reputation. Positive media attention can immensely increase the market and profit of a company and negative media attention could lead to the failure of a company. P&G has been maintaining a positive media attention and has used media to promote their products. P&G have a very strong public relation team who manages incidents and events.

They also sponsor television programs like Another World, The Brighter Day, etc. to promote promotes and attract the attention of consumers. As recognition of the importance of positive media, is also P&G is the first company to sponsor and produce a prime-time show (As the World Turns). P&G is the 11th organisation to join the top Olympic Sponsorship programme and has a 10-year global sponsorship which covers the Olympic Games through until 2020.(Baker, 2010).

Competitors

P&G is in a very competitive market environment, it adopted a unique selling point (USP) in which it uses to compete. It has been working hard in the past years to expand its market shares in developing counties like Nigeria, India, China and Russia. Its market share grows daily and is far from collapsing. It sales is increasing and market share growing in most countries (Jack, 2012). It made enormous progress in 2011 by climbing to the top three competitors in consumer and house hold goods products manufactures. P&G understands it competitors and similar products in which they both offer which enables them provide better products to their customers.

Identify the core competencies of P&G and justify why they have these competencies

P&G is well known for producing hygiene and cleaning products, but it has other brands which generates a high percentage of its profit. Acquisition is one of the factors that give P&G’s more market share and high competitive advantage. Over the years, P&G has acquired different companies and has turn acquisition into core competencies. P&G’s first acquisition was in 1930 when it acquired Thomas Hedley Co an England Based company. This first acquisition made P&G become an international corporation and helped it maintain a strong connection in England. It introduces several new brand names and products like Tide detergent in 1946 and Prell Shampoo in 1946. P&G acquired another company Charmin paper mill in 1957 and started marking products paper products like toilet rolls (Charming). It has acquired numerous companies like Norwich Eaton Pharmaceuticals, Richardson-Vicks, Folgers Coffee, Shulton’s Old Spice and Lams.

Fragrance brands acquisition is also one of P&G’s competencies. It acquired the Max Factor Company a cosmetics company in 1991, SK2 a skin care product line for $30 million which turned into a $1 Billion dollar business and Fine Fragrance for $30 million which now worth $3billion. P&G is a world class investor and leader in fragrances, manufactures its own fragrances and pattern with some of the world best fragrance designers and formulation houses.

Research and development is also one of P&G core competencies. It has invested a lot in this are for decades. This has led to the development of superior quality products. Superior quality products not only meet the customers’ needs, but also increase market share. Some of P&G’s unique and superior products are Oxydol/Tide the first detergent, Crest in 1955 the first toothpaste to contain fluoride, Crisco the first shortening and Pampers the first popular disposable diaper amongst many others.

As a result in investment in R&D, P&G remains the number one leader in consumer goods products.

Use the results of this analysis to make recommendations for future P&G Group strategy both in terms of where they can exploit opportunities and defend against threats.

Based on the analysis above, it is clear that P&G one of the world leaders in consumer goods products. P&G can also learn for its competitors to develop itself further in the future.

To defends threats from competitors and increases its current market shares, P&G should continue to strengthen to its consumer research to ensure the continuous understanding of the global market environment. This will ensure that their brands and products are meeting the consumer needs.

Further investment in research and development for new and existing product will increase its market opportunities and create a wider horizon for its brands.

Since acquisition is one of P&G core competencies, it should focus more on this aspect. Using market analysis to identifying and purchase potential brands can be used as an opportunity to enhance its market leadership. Under performing brands can be sold off and the proceeds diverted into prospering brands.

It can also expand and exploit its global market by studying and identifying the risks and benefits of potential counties. It can expand its operations to potential regions for growth opportunities where production of household, personal and hygiene products is low.

Make practical suggestions as to how P&G could implement your recommendations while managing business risk.

Further Investment in Health and Beauty Products.

Presently, women are the primary target for most of P&Gs health and beauty products. Using investment research and development, P&G should development more men beauty products like hair gel, body sprays, body lotions etc. P&G can also acquire potential companies that produce male products. Creating market with male target audience will increase its market share as they will gain more male product. In conclusions, P&G should produce more male oriented products.

Unilever must remember to base its strategies and activities on three fundamental questions: Who are our target customers? What value do we want to deliver to these customers? How will we create this value? Based on the results of our analysis presented in this report,

Strengths

Verities of business segments (6 operating segments)

Powerful collection of well-known brands.

Massive world-wide distribution network.

One of P&G’s major strength is the large scale on which it operates. It produces over 300 different products and leading globally in different categories of products like beauty and health, fabric, baby, personal and home care products sold in about 180 counties in the world.

P&G strong brand man is one of the most successful due to its solid branding.

Most of P&G’s products are not for all seasons

Leading globally in detergent, diapers, care products.

Has industry experience of over 170-year, international operations for over 25 years and extensive experience in personal and oral hygiene products.

P&G is one of the world best marketers has it has a wide experience in marketing in different market sectors.

The acquisitions of leading of beauty and health care companies in the products in Europe.

High gross profit margin. P&G’s profit margin is 15 times the industry average.

P & G is known for investing greatly in research and development for improving and developing new products.

Weaknesses

High Production and distribution cost.

Social/Cultural diversity.

P&G is lagging behind in online media. It is making P&G loss most of their top brand.

Most of P&G’s health and beauty care are produced mainly for women.

P&G gives full concentrates to only their major customers.

Easy to "under invest" in lagging brands, compounding the brand's problems

P&G showed sign of weakness in the beauty care sector when it purchased Clairol business in year 2001.this business failed to grow as they were other products in the market.

Opportunities

Global market and possibility to expand into more countries.

The growth of hair and beauty products in the market.

Development of more hair washing products.

The underdevelopment of Hair conditioner market in Europe.

Market share gain from other companies purchased.

Growth in health and beauty product for men.

The use of social media (Facebook, Twitter) to increase awareness.

Threats

Serious Competition from competitors (Unilever, Johnsons & Johnsons) poses a serious threat to market share.

Price difference for same quality.

Change in customer demand might have serious effect on P&G.

Changes in laws, regulation and legislation in home and foreign countries.

Competitors using different promotional and marketing strategies to increase their market share.

Many cheaper substitutes available in the market available for P & G products.

Recession has reduced customer spending globally. As prices of raw materials hike, prices of products are also forced to increase.

http://www.reuters.com/article/2012/02/15/us-kellogg-pringles-idUSTRE81E0S620120215

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