Download - Procter & Gamble Strategic Analysis
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Steven PerdochMatthew DymitCarrie Loera
Dan McGowanElana Muradova
Strategic Management, Spring 2012
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History
Founded in 1837 William Procter and James
GambleIncorporated in Ohio on May 5,
1905
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In the beginning…
Proctor and Gamble came to be by manufacturing soap and candles.
After the invention of the electric light bulb, the demand for candles fell significantly, thus causing the newly formed P&G to cease their production.
During the Civil War, the government began to order mass quantities of soap from P&G for the Soldiers’ use—this significantly led to P&G’s return to the market and their second chance at rising in the business world.
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Organizational Structure
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Acquisition Summary
Between 1905 (Incorporated) – 2010, P&G invested in 34 acquisitions
Periods of frequent acquisitions occur in the 1930’s, 50’s, 80’s and 90’s.
Some of the larger acquisitions include:– Charmin, Clorox, Crush, Revlon, and Gillette
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P&G Today
Products sold in > 180 Countries On the ground operations in 80 countries Organized into 2 Global Business Units (GBU’s)
Health Care
Grooming
Beauty
Beauty & Grooming
Fabric and Home Care
Baby and Family Care
Snacks and Pet Care
Household Care
&
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P&G: Who we are.
http://www.youtube.com/watch?v=tAT-cFFGNQg
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Health Care
Segment includes products in oral care, feminine care, respiratory, toothpaste, OTC drugs and other personal care categories
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Health Care - Overview
14% of Net Sales in 2011 Products sold in drug stores
supermarkets, and massmerchandisers
Mature market Name Brand & Private Label competitors
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Health Care – Core Competencies
Strong, Dependable, High Quality Products– Strict internal standards and guidelines to comply
with FDA– Most recent recall was early 2010 - Vicks– Vicks 4-Hour Nasal Spray (wrong expiration date)
Health Care Research Center– Promote innovation and bring new products to the
market quicker
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PGT Healthcare
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Threats
Intense competition– Private labels are much cheaper
Company % - 2010 % - 2011 % ChangeWyeth Labs, Inc. (Pfizer) 25.17 25.87 0.7Reckitt Benckiser 26.82 24.23 -2.59Private label 24.78 22.17 -2.61Procter and Gamble Co. 13.59 19 5.41Other 3 3.31 0.31Novartis Consumer Health 2.61 3.02 0.41Blacksmith Brands 0.65 1.12 0.47Health Care Products 1.36 0.73 -0.63Boiron-Borneman 1.13 0.55 -0.58Qualitest Products 0.9 0 -0.9
Top Cough Syrup Makers - Market Share
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Baby Care and Family Care
• Segment includes diapers, baby wipes, paper towels, and toilet paper
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Baby Care & Family Care Key Info.
• 19 % Of Net Sales• Products sold in supermarkets, convenience
stores, hotels,motels,and other industries • Baby Care and Family Care competitors
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Beauty Segment
This segment includes cosmetics, fragrances, hair care, and skin care products
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Beauty Segment
Beauty accounts for approximately 34% of P&G’s product portfolio.
24% of Net Sales & Net Earnings– Head & Shoulders, Olay, and Pantene are some of
the biggest brands within this segment.
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P&G Beauty in The Marketplace
P&G’s beauty products are highly recognizable; brand differentiation is a strength.
Product availably is great; products are sold at practically all domestic retailer chain and drug stores.
Proctor & Gamble is associated with tried and true, trusted products.
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Beauty SegmentCompetition and Growth
Competitors– Unilever– L’Oreal– Private Labels
3% Net sales growth from 2010– 24% of P&G’s Net Sales are from the Beauty
segment
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Threats to Beauty Segment
Greatest threat to P&G’s Beauty Segment is the Threat of Rivalry– Unilever, L’Oreal, Private Labels
Mature Market Threat of Buyers and/or Suppliers?
– Relatively low, due to the working relationship between both categories and the trust created in order to maximize that relationship.
Suppliers are even involved in P&G’s creative process in developing new products.
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Fabric and Homecare
Segment contains products including laundry cleaning products and fabric conditioners; home care products, including dishwashing liquids and detergents, surface cleaners and air fresheners; and batteries
Fabric care dominates the market with over 30% of the global market share
Global home care market share is over 15% across the categories in which we compete
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Fabric and Homecare (Cont.)
Proctor and Gambles largest, and most profitable division - 30% of net sales
Has been increasing steadily - 6% in 2011 Mature Market Market made up of Brand name and Generic
brands
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Snack and Pet Care
This segment includes food products and pet food products
Smallest segment
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Snack and Pet Care Overview
Least profitable P&G business segment 4% of P&G’s net sales in 2011 Pringles was the only existing snack brand* Pringles owned 3% of US Snack Food
Production Industy’s market share Utilizes Eukanoba and Iams to appeal to all
types of pet owners
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Threats
Lack of presence in the industries Mature market Fierce competition Extension would require major investment into
creating new products and brands Competition has more industry-focused
product lines
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Recommendations
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Disinvest/Sell off Snack & Pet Care Business Segment
Least profitable business segment (4% net sales ’11)
Pringles sold for $2.7 Billion Iams and Eukanoba (value?) Increased focus on profitable business
segments Increased opportunity to innovate in successful
segments
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Growth in Developing Markets
FY '00 FY '05 FY '120%
10%
20%
30%
40%
50%
60%
70%
80%
90%80%
77%
63%
20%23%
37%
P&G Sales Growth: 2000 to 2012
Developed
Developing
% o
f T
ota
l Co
mp
an
y S
ale
s
Company-wide initiative: Acquire 1 billion additional consumers by 2014/2015
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Demographic/Socioeconomic Trends
Population is forecasted to grow 700 million people by 2020 (Think of all those diapers?)
95% of this growth will come from developing markets
Wealth and Per Capita income increasing Plan of attack?
– Expand geographically and fill in the “White Space”
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Improve Productivity in All Areas
Cost of Goods – Reduce RM costs
Long-term contracts Increase # of Suppliers?
– Reduce excess inventory– Develop partnerships (PGT Healthcare)
Research & Development ~ $2 billion annually– Continuous improvement– Product Innovation
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Open Innovate Connect + Develop
Continue to nurture the Open Innovate: Connect + Develop method of research and development.
What is OIC+D?
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Connect + Develop
“Today, open innovation at P&G works both ways — inbound and outbound — and encompasses everything from trademarks to packaging, marketing models to engineering, and business services to design. It's so much more than technology.” -Bruce Brown, CTO
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Why is OIC+D Important?
$2 Billion Brand
Joint Venture from Competitor
Collaboration
Ultra-fast product-to-market delivery
$2 Billion Brand
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Marketing Opportunities
Proctor and Gamble wants to cut $10 Billion in expenses
In 2010 P&G spent $2.2 million on Television advertising
While many of its advertising campaigns boost sales is it too much?
Focus on digital marketing & social media and spend more efficiently
http://www.youtube.com/watch?v=PvYP_d2S1Pg
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Top 10 Advertisers in 2010
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Thank you… Any Questions?