group assignment pn g organization 2005

Haris Suhendra 1140003494 | Pramita Wardani 1140003121

Procter & Gamble : Organization 2005 (A) Managing and Sustaining Profitable Growth Group Presentation :

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Table of Contents:

About Procter & Gamble Problems

Business Analysis Recommendation

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About Procter and Gamble | P&G History

From Candle and Soap to multinational empire Founded in Cincinnati, Ohio by William Procter and James Gamble. Differentiation of P&G is an aggressive investment strategy building a large factory in the 1850s despite rumors of impending civil wars. Keywords for P&G : Rapid growth, innovations in HR managements, R&D, Distributions, Marketing and organizational designs.

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Procter and Gamble Net Sales, 1985-2000

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Procter and Gamble Share Price History, 1997-2000

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About Procter and Gamble | The Organizational Structure Changes

Organizational Structure: (1948-1987) • Two different models for

US and Europe were adopted, as US market was more homogenous, a nationwide brand and product division management was adopted.

• Western Europe is a heterogeneous market with different languages, culture and laws therefore a decentralized model was adopted.

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United States The organizational model was developed on two key dimensions: functions and brand. In 1987 structure was changed and functional units were centralized.

Europe P&G organizational model developed along three key dimensions: Geography , function , brand. In 1963 , the European Technical Center (ETC) in Brussels was establish to act as centralized R&D and process-engineering unit.

Problems in Europe: Corporate R&D were completely disconnected from US operations. European functional organizations were also in isolation from US counterparts. Un standardized , sub-scale production was expensive and unreliable. Country R&D were expensive to maintain.

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Global Matrix • In late 1980s, expansion opportunities

in Japan and other parts of world led P&G to develop globalization model. Corporate functions in Brussels still lacked direct control of country functional activities. P&G started migrating to a global matrix structure, country functions were consolidated into continental functions reporting through functional leadership and direct reporting through the regional business manager.

• In 1995 this structure was extended to rest of the world through creation of four regions – North America , Latin America , Europe /Middle East/Africa and Asia.

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Global Matrix Problems • Most functions nominally had straight line reporting through regional

management and also reporting through functional management, the function retained a high degree of de-facto control.

• They develop their own strategic agenda, maximize power, do not coordinate with other functions and business units.

• As regional managers were responsible for profit and loss they were hesitate to launch new product.

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Organization 2005 • Introduced by Durk Jager as an aggressive restructuring program • Designed to generate bolder innovations and accelerate their global rollout in

order to double P&G sales to 70billion in 2005 and achieve annual earning growth of 13-15%

• P&G chain of formal command was based on Geographical, Product, Function. It changed to : product, geography, business process

• The Plan also called to eliminate 6 management layers, reducing from 13 to 7 • Focus was more on rolling out new products at faster rate. Implementation of

3M concept i.e product launched in last 3 year should make up certain percentage of total turnover.

• Previously organization was more decentralized and centralization coupled with separations and negative growth rate has weaken moral of employees

• Jager decided that P&G would sell its products under the same name all around the world. So in Germany, the name of its dishwashing liquid suddenly changed from Fairy to Dawn

• Large level of transfers (2000 from Europe to Geneva ) and relocation led to moral and behavioral changes.

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Situation (2)

Standardization of Work Processes

• One of the major objectives of Organization 2005 program was to significantly improve all inefficient work processes of P&G including its product development, supply chain management and marketing functions.

• In order to achieve this objective, P&G undertook several IT initiatives including collaborative technologies, B2C e-commerce, web-enabled supply chain and a data warehouse project for supplying timely data to company’s various operations located globally.

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Revamping the Corporate Culture

• The Organization 2005 program made

efforts to change P&G from :

• The new structure was directed towards revamping the work culture of P&G so as to focus on its new Stretch, Innovation and Speed (SIS) philosophy. Emphasizing on innovation, Jager said, “Organization 2005 is focused on one thing: leveraging P&G’s innovative capability.

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conservative, lethargic and bureaucratic

modern, quick-moving and internet-savvy organization.


Dismantling matrix organization and replacing with interdependent organizations:

• Global Business Units (GBUs) focus solely on consumers, brands and competitors around the world. They are responsible for the innovation pipeline, profitability and shareholder returns. • Market Development Organizations (MDOs) are charged with knowing consumers and retailers in each market where P&G competes and integrating the innovations flowing from the GBUs into business plans that work in each country. • Global Business Services (GBS) utilizes P&G talent and expert partners to provide best-in-class business support services at the lowest possible costs to leverage P&G’s scale for a winning advantage. • Lean Corporate Functions ensure ongoing functional innovation and capability improvement.

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Problems

Problems

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Problems

Durk Jager , had introduced a restructuring program named “Organization 2005” –

designed to accelerate sales and innovations. In past P&G chain of formal command put geography first, followed by product and function. In new design, P&G was structured as 3 interdependent global organizations, one organized by product category, one by geography and one by business process.

• Missed Earnings in 2000 • In the fourth-quarter profits were flat against the expectation 15-17%

increase • P&G lowered its future quarterly sales growth estimates to 2-3%

• P&G Stock lost 7%, falling to $57 after the announcement • Loss of US market share in 16 out of 30 categories • Lack of immediate results, job reductions, reduced employee morale led to

reduced profits and stock price reduced to half in last six months.

Problems

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Business Analysis

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Strength The corporate ability to create new

strategy Prompts organizational

workforce to work on innovations and competitive advantage;

Strong global brand

Weakness • Organization 2005 affected human

resources and overall employment as there is massive transfer of employees to various countries that resulted to the difficulty of adapting to changes.

• The confrontational management style of Jager and failure to conduct more intensive research and development

Opportunities • integration of information

technology • the strategic arrangement of

organizational structure into business units with five key elements

• expand its operations and even potential business cooperation

Strength – Opportunity Expand the business to

another country The product could be globally

standardize, but it must contains local taste in their products development

Weakness – Opportunity Campaign about the new CEO. Build Leadership Strategy Campaign about value of the

P&G product

Threats • The inability to handle change

management • the unprecedented business

trends and rapid competition

Strength – Threats Innovation in technology for

efficiency Create a good customer

service and communication to their customers

Weakness – Threats • Must create a good corporate

culture phase by phase • Corporate must have a good

communication and the executives must support all employees

SWOT Matrix

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Recommendations Not just strategy but Organization

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Recommendation - To ensure the success out change program “organization 2005”

• The key to success full transformation is employee buy in.

• Proactive two way communication is the key to achieve that.

• The top management of the organization has to meet a good number of employee across all level, functions and countries to seek feedback and provide clarification on Organizations 2005

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Building an organization with the competences, capabilities, and resource strengths to execute strategy successfully.


• The Change should be implemented globally at a rapid speed

• It requires aggressive plan and executives to implement the same

• The new structure and work has to be designed across all global operations, assignment of people finalized and communicated and the new organizations started up on schedule

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Shaping the work environment and corporate culture to fit the strategy.

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Marshaling resources behind the drive for good strategy execution and operating excellence.

• An important element should be to give the great degree of standardizations to the local management align their own design with global strategy

• This will give a feeling of independence to the local management while the global standard will also be met


- not just strategy but organization -

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