strat audit final
TRANSCRIPT
STRATEGIC AUDIT
Procter & Gamble Co.
Multinational Consumer
Goods
Prepared by: Jacquelyn M. Sutterman
California State University, Long Beach Business Strategy and Policy: MGMT 425-09 Professor Bruce Sparks December 9, 2014
1
Company Background
Procter & Gamble Co., (P&G) is an American multinational consumer goods company
founded in 1837 by William Procter and James Gamble, both originally from the United
Kingdom. Today, P&G has grown to be a global, publically traded, Fortune 500 company.
Headquartered in Cincinnati, Ohio,
Procter and Gamble produces a great
variety of consumer goods. They have
recently grouped these global business
units into the following four, industry-
based sectors:
♦ Global Beauty ♦ Global Baby, Feminine and Family Care
♦ Global Health and Grooming ♦ Global Fabric and Home Care
At the beginning of 2014, Procter & Gamble owned over 100 global brands serving nearly
5 billion people internationally, in 180 different countries are the world.
http://www.pg.com/en_US/brands/index.shtml
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I. Current Situation
A. Current Performance
#31 on the Fortune 500 List, competitor Johnson & Johnson sits down at #39.
MARKET SHARE- - - P&G’s market environment is highly competitive with global,
regional and local competitors. In many of the markets and industry segments in which
they sell their products, they are competing against other branded products as well as
retailers' private-label brands. Also, many of the product segments in which they
compete are differentiated by price (super-premium, premium, mid-tier, and value-tier
products).
Procter & Gamble is currently well positioned in the industry segments and
markets in which they operate, often holding a leadership or significant market share
position. See Corporate Structure for a summary of their standings in the market of each
of their global business units.
RETURN- - - P&G has been paying a dividend for 124 consecutive years since its
incorporation in 1890 and has increased its dividend for 58 consecutive years at an annual
compound average rate of over 9%.
ROI declined from around
10% in 2009 and 2010 to
plateauing around 8% in
more recent years. This
measurement reflects
management’s efficiency; it
shows the return on all the
assets under its control,
regardless of source of
financing.
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P&G must work towards operating more efficiently to get ROI back up. Meanwhile, Johnson
and Johnson experienced a considerable downfall from 13% return in 2009, straight down to 8.5%
by 2011.
PROFITABILITY- - - Over the past five years, P&G experienced quite a slump of declining net
earnings attributable to their company between 2009 and 2012.
In 2013 things turned around for them and have being steadily coming back up in recent years.
Interestingly, the decline starts
the year A. G. Lafley left his
original CEO position with the
company, and progress picked
back up the year of his return.
The net profit margin
profitability ratio
followed a similar pattern over
this time.
Net Profit Margin: See page XX for financials
2014
= 14.0%
2013
= 13.7%
2012
= 13.1%
2011
= 14.9%
2010
= 16.8%
2009
= 18.3%
Unilever 9.7% P&G 13.7% J & J 19.4%
Johnson & Johnson had a bad year in 2011 when they had to recall over 45 million
products. Affected brands were Tylenol 8 Hour, Tylenol Arthritis Pain, and Tylenol
upper respiratory products, as well as some Benadryl, Sudafed PE and Sinutab products.
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Gross Profit Margin peaked in 2010, and has mostly declined since then.
This indicates that the total
margin available to cover
other expenses beyond cost
of goods sold and still yield a
profit has been diminishing
over the past several years.
P&G has followed a
somewhat similar pattern of
gross profit margin over the
past five years. Though, has
earned a consistently higher GPM than P&G.
Return On Equity gradually increased over 2009, leveled out and dipped to 14.3%,
then back up to 16.7% by 2014.
P&G 49.9% J & J 68.67%
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In 2009, earnings per share equaled $4.49. They declined almost exponentially to $3.82
per share in 2012, and came back up to $4.04 in 2013 and $4.19 this year. Competitors Johnson
& Johnson and Unilever had very different EPS overtime compared to P&G. Johnson and
Johnson has had a higher diluted net EPS, with the exception of 2011.
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B. Strategic Posture
MISSION- - -Procter & Gamble Co. is in the business of multinational consumer goods.
They employ a gainfully narrow mission statement that has the can keep the company
focused, especially during any times of industry turbulence.
Their mission clearly states the organization’s primary business (branded products and
services…) and the market(s) they look to serve (the world’s consumers, for now and for
generations to come).
OBJECTIVES - - -According to P&G’s 2014 Annual Report, managed to meet their
business and financial objectives for this fiscal year:
Their organic sales grew 3%, along with the market; Core earnings per share
increase 5%, and $10.1 billion of free cash flow was generated.
Dividends increased 7%, making this the 58th
year in a row that P&G’s
dividend has increased.
They returned $12.9 billion in cash to shareholders through $6.9 billion in
dividends and $6 billion in share repurchase.
P&G seeks to accomplish the following in years to come:
Grow organic sales modestly above market growth rates in the categories and
geographies in which they compete. (Low-to-Mid single digit range).
Achieve core earnings per share growth of high single digits.
Generate free cash flow productivity of 90% or greater.
“We will provide branded products and services of superior quality and value
that improve the lives of the world’s consumers, now and for generations to
come. As a result, consumers will reward us with leadership sales, profit and
value creation, allowing our people, our shareholders and the communities in
which we live and work to prosper.”
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Objectives continued…
Manage and maintain key customer relationships
Maintain key manufacturing and supply sources (including sole supplier and
plant manufacturing resources)
Successfully manage volatility in foreign exchange rates, as well as our debt
and currency exposure (especially in certain countries with current exchange,
import authorization or pricing controls.
Stay on the leading edge of innovation; maintain the positive
reputation of our programs.
STRATEGIES- - -Moving forward, Procter and Gamble aims to be a
“A Focused Company of Leading Brands”. They are working toward
becoming a simpler company of only 70 to 80 brands, organized into
about a dozen business and four industry-based sectors, previously
mentioned in the Company Background section.
P&G wants to compete in businesses that are structurally attractive, and that have
leadership potential. This strategy is very consistent with Procter and Gamble’s mission.
Additionally, P&G will rid itself of underperforming brands and product lines.
“We will discontinue or divest businesses, brands, product lines, and
unproductive products that are structurally unattractive
or that don’t fully play to our strengths.”
The 70 to 80 brands P&G wants to end up with are leaders in their industries that
offer differentiated products and have a track record of growth and value creation driven
by product innovation and brand preference. The 90 to 100 brands they plan to exit have
declining sales of -3%, declining profits of -16% and half the average company margin
during the past three years.
Annual Report 2014
--CEO A.G. Lafely
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Since returning as CEO in 2013, Lafely has “hardly been a caretaker waiting for
sales to revive. He slashed thousands of jobs, ordered a review of factory operations for
consolidation and sold off the pet care business.” –Cincinnati USA
As reported by several news outlets, this past April
P&G began the streamlining of their portfolio of brands as
shown by the divestiture of pet food brands Iams, Eukanuba,
and Natura to candy maker Mars Inc. for $2.9 billion in cash;
making this the highest profile P&G brand sale since 2012.
In August, P&G’s CEO, A.G. Lafley, told Cincinnati News.Net that the company
hopes to improve its financial performance by "doubling down” on about 80 brands that
generate 95 percent of the profits and 90 percent of sales. Lafley also revealed that the
company has been facing pressure as
consumers continue to spend less than
they did before the financial crisis. P&G
presently refuses to identify the estimated
100 brands that would either be
discontinued or sold.
By November of 2014, A.G. Lafley announced that P&G will be conducting a split type
of transaction with Warren Buffet,
in their exit of the Duracell brand;
the recapitalized Duracell
Company will be exchanged for
Berkshire Hathaway’s shares of
P&G stock. Berkshire’s stock
ownership is currently valued at
approximately $4.7 billion. P&G expects to contribute about $1.8 billion in cash to the
Duracell Company in the pre-transaction recapitalization.
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According to P&G’s press release, Duracell employees will find themselves under new
ownership by the second half of the 2015.
Through all these newly drafted strategic actions, P&G will try to become a faster
growing, more profitable company that is far simpler to manage. They will do this by
focusing their selling resources on businesses they know they can “win”. This will
simplify shelf sets, providing a better shopping experience for consumers and in turn
accelerate growth and value creation.
More Current Strategies…
P&G’s current strategies implement line extensions as opposed to launching
or acquiring new brands. This year they have been offering improvements
over private-label products or brands currently in their portfolio; P&G has
discovered that consumers today are willing to pay a premium price for
improvements of brands they currently have some level of loyalty to as
opposed to switching to a new brand with better
claims.
Newest, premium priced
brand extensions:
o Gillette Flexball
o Tide Pods
o Always Discreet
Product innovation must be designed to constantly up-scale consumer
preferences. The company intends on using this in breaking into developing
markets.
Despite the economic recession, P&G has increased prices as a value-addition
strategy. This contributed to overall annual sales growth in 2012. Raising
prices enabled the company to get past unfavorable geographic and product
mixes executed during the financial year. This did not carry over to Q4, thus
the company needs to increase its focus on innovation to justify its premium
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pricing strategy and/or increase its coverage in the economy price range to
boost volume sales growth.
To improve P&G’s productivity they’ve announced a $10 billion productivity
program to enhance the company’s performance. The program “includes
funding top-line growth, ensuring consumer value propositions are superior,
overcoming macro headwinds and delivering better bottom line growth.”
POLICIES- - - The following is a brief outline of Procter & Gamble’s company policies:
A. Respect of Government and the Law (Legal Compliance, Accuracy of Records, Securities Trading, etc.)
B. Respect in the Workplace (Behavior, Child Labor, Wage and Hour Practices, Health, Environmental Safety…)
C. Respect in the Marketplace (Product Safety, Bribery, Fair Competition, Consumer Privacy, Research Involving Animals)
D. Respect in Society and Our Communities (Community Relations and Support of Universal Human Rights)
E. Sustainable Development and P&G
Statement from P&G, concerning company policy: “Our system of internal controls
includes written policies and procedures, segregation of duties and the careful selection
and development of employees. The system is designed to provide reasonable assurance
that transactions are executed as authorized and appropriately recorded, that assets are
safeguarded and that accounting records are sufficiently reliable to permit the
preparation of financial statements conforming in all material respects with accounting
principles generally accepted in the United States of America.”
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“The Board of Directors at
P&G consists of men and
women who are leaders in
the fields of business,
government, law, medicine
and education.”
--PG.com
II. Corporate Governance
A. Board of Directors
According to PG.com’s Board Composition page:
“The Board has general oversight responsibility for the Company’s affairs pursuant to
Ohio’s General Corporation Law, the Company’s Amended Articles of Incorporation and
Code of Regulations and the Board of Directors’ By Laws. In exercising its fiduciary
duties, the Board of Directors represents and acts on behalf of the Company’s
shareholders.”
P&G’s board includes 12 members
who are each elected for a one-year term.
Johnson and Johnson has 13, and Unilever
has 14. All board members but one are over
the age of 55. The CEO is the eldest at 67
years old.
Angela F. Braly Director since 2009. Age 53
Former Chair of the Board, President and CEO of Inc. (healthcare
insurance). WellPoint, Inc. is the largest for-profit managed health care company in the
Blue Cross and Blue Shield Association. She is also a member of the Audit and
Governance & Public Responsibility Committees. She resigned in August 2012
following a disappointing second quarter earnings report.
Kenneth I. Chennault Director since 2008. Age 63 Independent Financial Expert
Chairman and CEO of the American Express Company (financial services),
Member of the Audit and Compensation & Leadership Development
Committees. Also a Director of International Business Machines Corporation..
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Scott D. Cook Director since 2000. Age 62
Chairman of the Executive Committee of the Board of Intuit Inc.
(software and web services). Also a Director of Ebay Inc
A Chair of the Innovation & Technology Committee and member of the Compensation
& Leadership Development Committee.
Susan Desmond-Hellmann Director since 2010. Age 57
CEO of the Bill & Melinda Gates Foundation
(private foundation supporting U.S. education, global
health, development, and community in the Pacific Northwest), Distinguished Professor,
University of California, San Francisco 2009-2014.
Member of the Audit and Innovation & Technology Committees.
Terry J. Lundgren Appointed to the Board in January of 2013. Age 62
Chairman, President and CEO of Macy’s Inc. (a national retailer).
Also a Director of Kraft Foods Group. Member of the Governance &
Public Responsibility and Innovation & Technology Committees.
W. James McNerney, Jr. Director since 2003. Age 65
Chairman of the Board, President and CEO of The Boeing Company (aerospace
engineering). Also a Director of International Business Machines Corporation. Presiding
Director, Chair of the Compensation & Leadership Development Committee and member
of the Governance & Public Responsibility Committee. Recently faced bad press from
the Wall Street Journal, who report the explosion of the 787 Dreamliner as the biggest
crisis of his eight-year tenure as CEO.
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Margaret C. Whitman Director since 2011. Age 58
President and CEO of Hewlett Packard since September 2011.
Former President and CEO of eBay Inc. (ecommerce and
payments company) from 1998 to 2008. Also a Director of Zipcar
(car rental company). 2010 California Gubernatorial candidate.
Has been facing a series of crises at HP since she joined the board in 2011. HP hit a five
year low in November of 2013.
Mary Agnes Wilderotter Director since 2009. Age 59
Chairman of the Board, CEO of Frontier Communications Corporation (communications
company specializing in providing services to rural areas and small and medium-sized
towns and cities). Also a Director of Xerox Corporation and
Member of the Audit, Compensation & Leadership
Development, and Innovation & Technology Committees.
Patricia A. Woertz Director since 2008. Age 61 Independent Financial Expert
Chairman, CEO and President of Archer Daniels Midland Company (agricultural
processors of oilseeds, corn, wheat and cocoa, etc.).
Chair of the Audit Committee and member of the Governance & Public
Responsibility Committee.
Ernesto Zedillo Director since 2001. Age 62
Former President of Mexico, Director of the Center for the Study of Globalization
and Professor in the field of International Economics and Politics at Yale University.
Also a Director of Alcoa Inc., Citigroup, Inc.
and Promotora de Informaciones S.A. Chair of the Governance & Public Responsibility
Committee and member of the Innovation & Technology Committee.
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An Executive Share Ownership Program is currently in place that requires senior
executives to own shares of Company stock and/or restricted stock units valued at eight
times base salary for the Chief Executive Officer, and five times base salary for the other
senior executives. Non-employee directors must own Company stock and/or restricted
stock units worth six times their annual cash retainer. These compensation programs help
to ensure the alignment of the interests of our senior executives and directors with
shareholders. [Source: http://www.pg.com/en_US/company/global_structure_operations/governance/index.shtml]
Procter and Gamble is said to have one of the strongest boards in the world,
including several CEOs from many different major corporations. Some investors and
corporate governance experts
say that having so many
powerful directors could also
be a weakness because
serving CEOs are under a lot
of pressure in their own jobs
and therefore cannot commit much time to being a director of another company.
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Over the past two years, P&G has had four board executives face bigger than
usual challenges; two of the four have actually stepped out of their CEO positions within
months of each other. Cincinnati.com reports that some corporate governance experts
argue that P&G’s board is “too loaded with America’s business elite to be effective.
Rather than keeping tight watch over the company they direct…a board like P&G’s is too
susceptible to distractions closer to home.”
However the article also reported that “There’s no indication these situations
distracted from their P&G board duties. P&G says the three directors have consistence
attendance records at the regular scheduled full board of director meetings.”
According to the 2012 proxy, average attendance at board and committee
meetings is 97%, and 100% attended the annual meeting.
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B. Top Management
Outside the board, P&G is served by 41 top-level executives all around the world. Top
Management has been responsible for much of the company’s performance over the past
few years. Strategic decisions are made responsibly in consideration of the environment
and society at large. It is my opinion that top management is sufficiently skilled to cope
with likely future changes.
Werner Geissler Director since 2007. Age 67
Vice Chairman of the borad, Advisor to CEO – set to retire December 31, 2014
Started at P&G in 1979 as a Brand Assistant. He currently leads the reorganization of
global operations.
Spend 2 years in the German Air Force
Graduated with an MBA from the University of Cologne
Regularly engages in the communities in which he has lived
and holds an honorary doctorate from the International University in
Geneva, as well as an honorary ambassadorship from Hyogo
Prefecture and Kobe City, Japan for which he developed a marketing
strategy to attract more foreign direct investments. He serves on the
Executive Board of Lausanne-based IMD, the leading global
institution for senior management education.
A.G. Lafley Director since 2013. Age 67
Chairman of the Board, President and CEO.
Also a Director of Legendary Pictures.
Previously served as P&G’s President & CEO
from 2000 to 2009. During this time, sales more
than doubled and P&G’s portfolio of billion-
dollar brands grew from 10 to 23.
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More on Lafley…
Oversaw 10,000 Navy and Marine corps and their families (1970)
Graduated from Harvard Business School; Joined P&G (1977)
Delivered record results, responsible for some of P&G’s biggest innovations
including Liquid Tide and Tide with Bleach that continue to fuel growth today.
Grew P&G’s business in China from less than $90 million, to nearly $1 billion
in sales over his five year stay in Asia.
Retired from P&G in early 2010, and returned to the CEO position this year.
Lafley’s systematic approach to strategic management (from his new book “Playing to Win”):
What is winning?
“If you aren't trying to win, if you're just trying to participate, you are wasting the time of your
people and the money of your investors.
A company has to define its purpose strategically, decide what specific victories would lead to its
ideal future.”
Where am I going to play to win?
“You can't win the whole world or please everybody. Trying to be all things to all people is a
recipe for failure. You have to strategically narrow the field to the geographies, demographics,
and channels where your company is most competitive, and can get the best possible results.”
How am I going to win where I play?
“This choice is intimately connected with the former. It's deciding how to create unique value,
and how the company can deliver it over a long period to create a superior return.”
What are my core competencies that are going to enable me to win?
“In order to make the above decisions work, they have to be based on and supported by the
things that a company's best at. For P&G, it was innovating quickly and understanding
consumers.”
What management systems and measures are going to help me execute?
“Strategies have to be measured and executed by people. Companies have to decide who they
need, how to enable them, and how they can tell whether the strategy's succeeding.
This framework helped Lafley make the extraordinarily difficult choice to completely change his
company.”
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III. External Environment: Opportunities and Threats (SWOT)
A. Natural Physical Environment: Sustainability
There has been continued global threat of economic uncertainty and disruptions,
especially in the company’s significant geographical markets, due to a wide variety of
factors, “including but not limited to terrorist and other hostile activities, natural
disasters and/or disruptions to credit markets, resulting from a global, regional or
national credit crisis.”
Advances in sustainability, concerning the natural physical environment:
• A P&G plant in Huangpu, China partnered with a local utility supplier to install solar
panels on the plant’s rooftop. This will eliminate 600 metric tons of CO2 emissions
annually from the local community.
• Global expansion of Tide PODS has continued. This is one of the most concentrated
detergents on the market and reduces plastic use by 50% per consumer.
• Over 50 P&G sites around the world now send zero manufacturing waste to landfill,
including every site currently in Germany.
• P&G has helped increase the number of washing machine loads washed in cold water
from 38% to 50% since FY10/11.
• Gillette Venus packaging was redesigned for Venus & Olay to be recyclable and is
manufactured using 26% less plastic.
• Water use has been reduced by nearly 25%, at the Oxnard, California site resulting in a
cost savings of over $900,000 annually.
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B. Societal Environment
ECONOMIC
- - - - -Opportunities
China and India have both shown exponential growth in the middle class.
Procter & Gamble currently enjoys a strong presence in Latin America, Asia
Pacific, and Eastern Europe, but Unilever has been outperforming P&G in
recent years.
Latin America is forecasted to have a leading compound annual growth rate of
5.2% in the beauty and personal care sector. Also, this is currently the largest
region in terms of market size behind North America.
- - - - -Threats
The recession has globally decreased consumer spending.
Quarterly profile of earnings will be heavily influenced by the variation of
foreign exchange impacts between periods. P&G expects significant negative
sales and earnings impacts from foreign exchange in October-December 2014
quarter. They’re especially having issues with Venezuela, Argentina, China,
India and Egypt in terms of currencies.
TECHNOLOGICAL
Any bad news about the company has the potential to get leaked and will
spread like wildfire over the internet. The extreme popularity of social
networking is definitely a threat if and when any information gets out that
represents P&G in a negative way.
o Also, not embracing the power of communication with consumers over
the internet presents the threat of losing relationships with consumers.
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SOCIOCULTURAL
- - - - -Opportunities
Lack of health and beauty products for men; men are becoming increasingly
interested in personal cosmetics.
The overwhelming reach of social media and internet marketing.
- - - - -Threats
Emergent Trends
o There has been a shift towards premium color cosmetics that benefited
competitors like L’Oreal and Estée Lauder over P&G brands like
CoverGirl, which produce more drugstore-esque basic cosmetics.
o Today’s consumers seem to change their preferences more rapidly
than in the past. For example, the popularity of various product types
has changed over the years; Bleach was once the most popular
cleaning product, followed by Lysol. Now various cleaning products
for specific surfaces (and desired scents) are the mainstays of most
homes.
o There is a tremendous rise in consumer that demand products that are
environmentally friendly as well as unaffiliated with animal testing.
PG’s systematic approach towards reducing environmental
impact has greatly improved its manufacturing efficiency. For
example, P&G’s energy usage is now nine times more efficient
than it was in 1985. Also, P&G is now able to produce 50%
more product output per unit of waste water than in 1990.
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The following is an except illustrating P&G’s strides
towards eliminating harmful research practices involving
animals, in response to recent consumer concerns.
“P&G
strongly believes that ending
animal testing is a benefit for all: consumers,
animal welfare advocates, and industry. Our
goal is to stop animal testing completely. We
are fully committed and passionate about our
goal and believe the only way to stop animal
testing is to develop alternatives.”
“We are proud of the work that we have led in
finding alternatives. We have developed more than 50 non-animal testing methods and
invested more than $330 million in research and development in finding these
alternatives. We have also published our results so that others [in the industry] can
benefit from our research.”
“Today, we complete more than 99% of all safety
evaluations without testing on animals. The remaining
tiny percentage comes from studies required by law or
because of legally obligated safety requirements where no alternatives are available yet.”
P&G Animal Research Alternatives Brochure 2009
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POLITICAL-LEGAL
- - - - -Opportunities
Several members of the board have international political ties; i.e., Ernesto
Zedillo former president of Mexico, and Meg Whitman, former gubernatorial
candidate.
P&G has a Global Government Relations & Public Policy team (P&G
GGRPP) that represents the Company’s point of view in Washington, D.C., in
U.S. state capitals and in key country capitals around the world. The GGRPP
works with businesses focusing on legislative and public policy issues that
impact the Company’s bottom line and long-term business interests. This
group educates policy makers and key stakeholders on issues that impact their
business. Information gets exchanged between key decision-makers and
public policy organizations in the U.S. and abroad.
- - - - -Threats
Several consumer protection groups becoming increasingly concerned about
the presence of harmful chemical ingredients in cosmetic products. A recent
study showed that about a third of cosmetic products contain carcinogens.
Public pressure has caused the U.S. Food and Drug Administration to begin
imposing strict quality requirements on cosmetic products. These regulations
may delay launching of new products in the future, and also raise the cost of
product development. In addition, this might impose new liabilities or
declines in profitability.
C. Task Environment
THREAT OF NEW ENTRANTS – LOW
This industry is dominated by only a handful of companies. The threat of new
entrants is low because the barriers to entry are so high. Consumer Goods is a
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tough business to get into domestically, let alone multinationally like P&G.
There are several markets being served all at once of many different
backgrounds by a vast number and variety of products all made by P&G.
Additionally, the rules and regulations associated with the production of
consumer goods serves as a considerable barrier to entry.
However, because P&G’s competitors like Johnson & Johnson and Unilever
current possess many brands in several different categories like Procter and
Gamble, there is a threat of them infringing on P&G’s new product endeavors,
because they have very similar means of power and they have already
surpassed industry barriers.
BARGAINING POWER OF CONSUMERS- LOW
Even though there are so many brand options available, P&G has such a vast
market shares that their revenues are virtually unaffected by consumer
bargaining power. This is shown by their sales growth during economic
downturn, while implementing a strategy involving price increases.
THREAT OF SUBSTITUTE PRODUCTS - HIGH
As a multinational company, P&G needs to compete against a slew of other
consumer goods manufacturers domestically and internationally.
There are many substitutes for P&G products available, often times on the
same shelf at cheaper prices.
The growth of private label brands is a serious threat to market shares.
P&G is under pressure from retailers like
Wal-Mart, who are cutting prices and
continually introducing and promoting
their own labels, i.e. Equate and Up & Up.
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P&G products in the Health sector are
especially susceptible to this threat, as consumers
are becoming increasingly disloyal to brands of
over the counter medication. Consumers are now
conditioned to read labels more than ever before.
They simply match up active ingredients and
generally decide the store-brand meds are
essentially identical.
Several oversees brands are selling counterfeit versions of P&G consumer
products. Look-alike products resembling the original are being put on the
shelves in places like Shanghai. The trademarked brand names on the packaging
is misspelled, for example, Sunslik instead of Sunsilk, or Collegiate instead of
Colgate. According to a spokesman from P&G,
the company has been repeatedly challenged by
intellectual property infringement since it entered
the world’s most populous market in 1988.
BARGAINING POWER OF SUPPLIERS- MEDIUM
P&G has mutually dependent relationships with most suppliers. They
produce such a high volume of product that they help suppliers continually
generate a lot of revenue, as long as they carry good quality supplies.
RIVALRY AMONG COMPETING FIRMS– HIGH
As mentioned earlier, there is not a great number of big players in this space.
Thus, many directly competing products made by different manufacturers are
very similar in the minds of consumers. There are not many tangible reasons
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keeping a customer from buying one brand over the other. Example: Scope
(P&G) and Listerine (Johnson & Johnson) perform the same function.
Global Trends Affecting the Industry:
Opportunities
Consumers “going green”
Shifting demographics (aging, consumption patterns)
Rise of digital consumers and digital commerce
Health and Wellness concerns
Rise of the value segment
Threats
Eroding brand loyalty
Increasingly volatile input costs, driven by natural resource shortages
Labor shortages in emerging markets
Rising trade protectionism
Changing tax regimes
D. Summary of External Factors
External Factors Weight Rating Score
OPPORTUNITIES
♦ Rise of digital age 0.15 1.5 0.2
♦ Consumers “going green” 0.15 4.5 0.7
♦ New foreign markets (rising middle class in developing countries) 0.20 2.5 0.5
♦ Political involvement/connections via board members 0.05 5.0 0.3
♦ Advances in Technology (boosting efficiency) 0.10 5.0 0.5
♦ Market Reach (products sold in 180+ countries) 0.35 4.9 1.7
Total: 3.9
THREATS
♦ Foreign Exchange issues 0.15 3.5 0.5
♦ Global Economic Recession 0.10 3.0 0.3
♦ Stricter FDA regulations on manufacturing of cosmetic products. 0.15 4.5 0.7
♦ Substitute products: Emergent store branded economy products 0.35 3.9 1.4
♦ Counterfeit brands 0.10 3.0 0.3
♦ Changes in consumer preferences 0.15 5.0 0.6
Total: 3.9
26
IV. Internal Environment: Strengths and Weaknesses (SWOT)
A. Corporate Structure
P&G like others in the industry has had an average of over 100,000 employees over the
past decade.
They have over 300 brands globally, most with high recall and visibility due to excellent
marketing and advertising.
Procter & Gamble’s organization is structured into 1.
Global Business Units (GBU’s),
2. Global Operations,
3. Global Business Services (GBS) and
4. Corporate Functions (CF).
1. Global Business Units: The GBUs are responsible for developing overall brand strategy,
new product upgrades and innovations and marketing plans. The following provides
additional detail on P&G’s reportable segments and the key product categories and
brand composition within each segment.
Beauty: 24% of Net Sales | 23% of Net Earnings
P&G is a global market leader in the beauty category. Most of these markets are
highly fragmented with a large number of global and local competitors. Procter
and Gamble competes in beauty care, hair care and color, and prestige. Their
Olay brand (beauty care), is the top facial skin care brand in the world with over 8%
global market share. They also hold 20% global market share in the retail hair
care and color market with brands like Pantene and Head & Shoulders.
Grooming: 10% of Net Sales | 17% of Net Earnings
P&G is the market leader in the blades and razors market globally, at 70%
market share. Contributing brands fall under the Gillette franchise, such as
Fusion, Mach3, Prestobarba and Venus.
27
Health Care: 9% of Net Sales | 9% of Net Earnings
P&G holds 20% global market share in oral care, and thanks to brands like Vicks,
Prilosec OTC, P&G is a top ten competitor in personal health care.
Fabric & Home Care: 32% of Net Sales | 26% of Net Earnings
This segment is comprised of laundry detergents, additives and fabric
enhancers; home care products, including dishwashing liquids and
detergents, surface cleaners and air fresheners; and batteries.
P&G generally has the number one or number two share position in the markets in which
they compete in fabric care products. They’re the global market leader, with over 25%
market share, primarily behind Tide, Ariel and Downy brands. Their global home care
market share is approximately 20% across the categories in which they compete. In
batteries, P&G has over 25% global battery market share, by
Duracell.
Baby, Feminine & Family Care: 25% of Net Sales | 25% of Net Earnings P&G mainly competes in diapers, pants and baby wipes, with over 30% global market
share. They are the number one or number two baby care competitor in most key markets,
primarily by the Pampers disposable diaper brand with annual net sales of more than $10
billion.
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2. Global Operations: Global Operations is comprised of Sales and Market Operations,
which is responsible for developing and executing go-to-market plans at the local level.
The Sales and Market Operations (SMO) includes dedicated retail customer, trade
channel and country-specific teams. Through June 2014, it was organized along five
geographic regions:
Asia
Europe
India, the Middle East, and Africa
(IMEA)
Latin America
North America
3. Global Business Services: “GBS provides technology, processes and standard data tools
to enable the GBUs and the SMO to better understand the business and better serve
consumers and customers. The GBS organization is responsible for providing world-class
solutions at a low cost and with minimal capital investment.” –P&G Annual Report 2014
4. Corporate Functions: CF provides strategy and portfolio analysis to the company; also,
corporate accounting, treasury, tax, external relations, governance, human resources,
legal, as well as other centralized functional support.
Competitor corporate structure:
is also divided in terms of function into Consumer Healthcare, Medical
Devices & Diagnostics, and Pharmaceuticals. categorizes its businesses into
Food and Drink, Home Care, and Personal Care functional units.
29
B. Corporate Culture
Procter and Gamble has a well-defined culture composed of share beliefs, expectations,
and values. All of these are spelled out in detail in their “Purpose, Values and Principles”
document found on their main website.
From PG.com:
“Our shared Purpose attracts and unites an extraordinary group of people, P&Gers, around the world—the most diverse workforce in P&G history.
Together, we represent more than 140 nationalities.
Our recruiting and development philosophy to “build from within” fosters a strong culture of trust and shared experiences. Our diversity, our shared culture and our unified Purpose are the defining elements that enable P&G to touch lives and improve life every day.”
Diversity and inclusion is deeply rooted in the company’s purpose, values, and principles.
P&G understands that each life touched by their products is unique, having “different
backgrounds, cultures, thinking styles…remarkably different talents, perspective, life and career
experiences.” In their increasingly interconnected world, P&G finds
it only appropriate to celebrate everyone’s uniqueness, every day.
This corporate culture translates consistently across all of
their brands.
30
C. Corporate Resources
MARKETING
- - - - -Strengths
Extensive sales force
o Example: P&G has approximately 300 people dedicated to serving the
needs of its largest customer Wal-Mart at its headquarters in
Bentonville, Arkansas.
All major products and trademarks in each P&G business registered. Their
success can be in part attributed to the existence and continued protection of
brand trademarks, patents, and licenses.
$13 billion dollar marketing budget
Ranked as an industry leader in terms of innovative marketing programs.
o Elaborate product displays often showing product effectiveness are
now standard in most retailers. (Left: Gillete motorized display, Right: Tide
Pods with press button video screen.)
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Consumer understanding---Strong appeal to families and individuals,
emphasizing unity. Also, P&G has done a great job at adjusting to the
conditions in each country in which they operate
P&G has contributed as sponsors in major sporting and entertainment events.
--Strategies
Marketing managers and their departmental associates at P&G have been
repositioned within the corporate structure. As of July 2012 they are now referred
to as “Brand Officers”, any positions titled with the word “marketing” have been
changed to having the word “brand”. This change did not necessarily change
their company duties, but changed their outlook and lift arbitrary limitations.
o They still use accepted marketing concepts and techniques, but simply
marry these concepts to company specific lingo.
32
P&G works collaboratively with customers to improve the in-store presence of
their products and win the “first moment of truth” – when a consumer is shopping
in the store.
P&G is one of the biggest ad spenders in the world, and AdAge very recently
reported that P&G is shifting to focus on sampling, aiming at driving trial. CEO
A.G. Lafley wants to take advantage of what he calls POME or “Point[s] of
Market Entry”.
o For instance, Gillette is looking into making an effort to send every U.S.
male a new Fusion ProGlide Razor with FlexBall technology on his 18th
birthday.
o P&G can reach new mothers at hospitals. P&G has taken advantage of
this POME in overtaking Kimberly-Clark’s Huggies for market share
leadership in the U.S. diapers and training pants in the past year after
trailing for the past twenty years. P&G’s Pampers and Luvs have
collectively sold more diapers than Huggies but the brands individually
are ranked behind Kimberly-Clark in market share overall.
P&G is shifting marketing dollars to less expensive digital media. They are
looking to make TV and print more effective, in part by making fewer ads. This
is part of the effort to reduce $4 billion being spent on “non-working” marketing
costs.
(2013) P&G began narrowing their global scope to 10 emerging economies
including: Brazil, China, South Africa, Mexico, Nigeria, and Poland.
o Their new approach toward emerging markets has started to pay off.
Organic sales grew 8% by the fall of 2013.
33
P&G has differentiated several of their products in an eco-friendly way. They
have been making strides to follow the trend of environmental friendliness in
newly designed product design and packaging strategies.
o For instance, in 2008 Charmin started packing their toilet paper rolls in
“Mega Rolls” which are equal to four generic sized rolls.
o In 2011 Pantene launched the first sugarcane-based plastic packaging via
their NatureFusion line. This reduced greenhouse-gas emission by 170%.
34
- - - - -Weaknesses
P&G’s more recent strategy has involved emphasizing benefits of premium
products. Which did not bode very well for them with consumers affected by
recent economic downturn the world.
P&G’s huge advertising budget is adversely affecting its margins.
According to AdAge, P&G lost market share across 60% of its business last
quarter. In learning this however, we must take into account the divesture of a
few top brands, i.e. Duracell.
Despite the strength and reach of Procter & Gamble’s portfolio, its
performance abroad is not great relative to the competition.
o Colgate-Palmolive and Unilever have done exemplary jobs in
emerging markets. They’ve not only been focused on supply chain
efficiency, but also on product localization and non-traditional
marketing to achieve global objectives.
For example, Axe’s controversial commercials for their male
grooming products; some say containing overtly sexual
innuendos.
o P&G’s marketing efforts have been labeled by branding consultants as
“old school” and “too traditional”.
35
Corporate Performance Domestically and Internationally:
Over half of net sales are made from North America and Europe
Developing markets account for a minority 39% of net sales.
Overall, P&G leads in global net sales. As seen by the graph below.
36
Consumer Goods Industry Snapshot How does Procter & Gamble compare with similar corporations?
P&G Brands
37
38
FINANCE P&G financial statements are prepared according to the United State General Accepted Accounting Principles
P&G is famously successful in terms of global sales; however their growth rates need work, and
as previously mentioned, their margins are lower than those of competitors.
Liquidity
At the end of this financial year, June 30, 2014, P&G current liabilities exceeded
current assets by $2.1 billion ($4.3 billion, excluding current assets and current liabilities
of the Pet Care business held for sale). This was largely due to short-term borrowings
under their commercial paper program. Their latest annual report states that P&G
anticipates being able to support short-term liquidity and operating needs largely through
cash generated from operations.
Current Ratio: P&G’s current ratio is below 1.0, and is
low than competitor Colgate-Palmolive and
nearly half of that of Johnson & Johnson. For
every dollar of current liabilities, P&G only has
79 cents available to cover them; thus proving
Johnson & Johnson’s edge in terms of general
efficiency.
Year 2013 2014
Johnson & Johnson 2.20 Not Avail.
Colgate-Palmolive 1.08 Not Avail.
Procter & Gamble 0.79 0.94
Unilever 0.70 Not Avail.
2014 Annual Report
39
Return On Assets:
P&G has shown to have a
generally higher return on their
assets than big competitor J&J.
Both companies are seeing this
figures decline. Colgate-
Palmolive’s ROA is very small.
Procter and Gamble is generating earnings from their assets quite efficiently.
Leverage
Debt-Equity Ratio:
P&G has a much higher debt
to equity ratio that Johnson &
Johnson but beats out both Unilever
and Colgate-Palmolive. The ratio is
well below 1.0 which means they are
not financing their growth by more
debt than equity. In comparison to
the competitors listed, they are closer
to the middle.
Activity
Inventory Turnover:
P&G has turns over
inventory much slower than
Johnson & Johnson. However,
P&G stocks much more annual
inventory in any given year. Both
competitors, however, have
declining rates, whereas P&G’s has
increased about 30% since 2013.
Year 2012 2013 2014
Procter & Gamble
0.62 0.59 0.58
Johnson & Johnson
0.55 0.54 Not Avail.
Colgate-Palmolive
0.20 0.17 Not Avail.
Year 2013 2014
Johnson & Johnson 0.25 Not Avail.
Procter & Gamble
0.46 0.51
Unilever 0.59 Not Avail.
Colgate-Palmolive 2.23 Not Avail.
Year 2012 2013 2014
Procter & Gamble
Not Avail.
1.80 2.37
Johnson & Johnson
2.89 2.84 Not Avail.
Colgate-Palmolive
12.76 12.00 Not Avail.
40
Financials
Income Statement 2014 2013 2012 2011 2010 2009
Operating Revenues
$ 11,643
$ 11,312
$ 10,756
$ 11,797
$ 12,736
$ 13,436
R&D Expenses
$ 2,023
$ 1,980
$ 1,987
$ 1,940
$ 1,888
$ 1,802
Advertising Expenses
$ 9,236
$ 9,612
$ 9,222
$ 9,086
$ 8,338
$ 7,338
Operating Income
$ 15,288
$ 14,330
$ 13,035
$ 15,233
$ 15,306
$ 14,819
Net Income
$ 83,062
$ 82,581
$ 82,006
$ 79,385
$ 75,785
$ 73,565
Common Size
Income Statement 2014 2013 2012 2011 2010 2009
Operating Revenues 14% 14% 13% 15% 17% 18%
R&D Expenses 2% 2% 2% 2% 2% 2%
Advertising Expenses 11% 12% 11% 11% 11% 10%
Operating Income 18% 17% 16% 19% 20% 20%
Net Income 100% 100% 100% 100% 100% 100%
0%
5%
10%
15%
20%
2014 2013 2012 2011 2010 2009
Operating Revenues
$68,000
$70,000
$72,000
$74,000
$76,000
$78,000
$80,000
$82,000
$84,000
2014 2013 2012 2011 2010 2009
In M
illio
ns
Net Income
41
2.4% 2.4% 2.4% 2.3% 2.3% 2.2%
11% 12% 11% 11% 11% 10%
2014 2013 2012 2011 2010 2009
Ad and R&D Expenses as % of Sales
R&D Expenses Advertising Expenses
2.4% 2.4% 2.3%
4.0% 4.3% 4.4%
2013 2012 2011
R&D of Consumer Goods (as % of Sales)
Procter & Gamble Johnson & Johnson
% of Sales by Business Unit
42
RESEARCH AND DEVELOPMENT (R&D)
- - - - -Strengths
Product development and innovation is one of the cornerstones of P&G’s
corporate culture. They look to produce differentiated brands and better-
performing products
P&G has a R&D budget of $2 billion, which supports 8,000 engineers and
scientists at 25 research centers in 12 countries.
The company currently holds $2.85 billion worth of intellectual property.
- - - - -Weaknesses
Too many products in the same category. For example, the success of Gillette
Fusion in 2011 led to some cannibalization of the Gillette Mach3 blades.
Over engineering—extending brands/product lines to more premium items as
opposed to offering lower prices solutions to appeal to underprivileged market
segments.
One of their newest innovations, the Gillette Fusion ProGlide with Flexball Technology, launched just months ago has acquired 88% share of the premium razor market. Men prefer this new razor 2-to-1 versus the best-selling razor in the world—P&G’s own Fusion ProGlide.
http://www.pg.com/en_US/innovation/index.shtml
The New Product Pacesetters list is published by the independent analytics firm Symphony IRI Group, Inc. Acknowledged as the industry benchmark, the list recognizes the consumer packaged goods industry’s most successful brand launches.
43
R&D Strategies in Action:
P&G has also made strides towards digitizing product innovation via the use
of modeling and simulation on computers.
They have also digitizes the creation of molecules. In the R&D for a new
dishwashing liquid, they used modeling to predict how moisture would excite
various fragrance molecules so that throughout the dishwashing process you
get the right fragrance notes at the right time; all done virtually.
P&G now does quicker consumer testing using multiple screen projectors to
create a ‘virtual wall’ to simulate store shelves. (See photo below)
44
OPERATIONS AND LOGISTICS
& INFORMATION TECHNOLOGY (IT)
- - - - -Strengths
Global Operation
Strong Distribution Network (over 180 countries)
o P&G has established industry leading “go-to-market” capabilities.
o They are consistently ranked by leading retailers in industry surveys as
a preferred supplier.
P&G’s main objectives in this area are to lower costs, raise productivity, and accelerate
growth.
Current CEO Lafley has made progress on his mission to improve productivity and cut
costs. Last year, the company delivered $1.2 billion in cost savings and improved
manufacturing productivity by 7%, which helped boost 2013 profits to $11.3 billion, or 5%
higher than the previous year.
In 2012, former CEO Robert McDonald initiated a new digitization strategy. P&G’s
head of technology announced that the company has since tripled their innovation success
rate.
They developed something called “consumer pulse” which uses Bayesian analysis
to scan the universe of comments, categorize them by individual brand, and put
them on the screen of the relevant individual. This allows for real-time reaction
to what is happening in the marketplace, and to improve the things that are
already working.
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P&G is digitizing their operations everywhere from manufacturing plants to stores
where consumers purchase their products. The company is currently striving to
adapt operational digitization as one of their competitive advantages.
The plan is to put a system in place where top management could literally see any
product at any moment as it goes through the manufacturing line of any P&G
plant, and see the costs associated with that product at the same time.
The company is currently working on integrating their operational system with
their digital financial system.
In transport and logistics, P&G has created a digitally enhanced operations
program they call Control Tower that lets them see all the transportation they’re
doing (inbound, outbound, raw materials, finished product). A similar interface
called “Distributor Connect” lets P&G link directly with distributors and help
them run their businesses; this improves service and reduces inventory across the
supply chain.
P&G is the second or third largest user of trucks in America. Technology has
enabled them to enact a 15% reduction in “deadhead” movement (travel time
spent by the for-hire truck not generating revenue P&G).
Also in 2012, P&G started connect digitally with retailers. They use a
standardized data warehouse that allows them to do commerce with retail partners
in a completely automated way, with no human intervention. Recent studies
found that 70% of orders between retailers and supplier had errors before
digitization. If all players involved use the digital warehouse interface, that
percentage goes to virtually zero, saving millions of dollars.
Another thing P&G is doing is brining state-of-the-art technology to retailers they
do business with, who otherwise cannot afford it. For instance, a small shop in
the Philippines; P&G can provide sophisticated ordering applications to help the
people “run their businesses better than they would be able to otherwise.” P&G
46
now offers mobile phone applications that allow retailers to order from them
wirelessly.
P&G has a training facility for their workforce, so that if you are working in a
particular area, you’re competent on the systems for that area.
- - - - -Weaknesses
P&G relies on external data partners and a digital global workforce.
HUMAN RESOURCES
HR associates work on developing winning business and organization strategies.
They work to create a work environment that's friendly, motivating, and
productive for all P&G organizations
o Other duties include:
Recruitment, development, and retention of top talents
Creating systems, strategies and tools that attract, develop,
challenge, motivate and reward their people
Leading projects such as: Training, Diversity, Recruitment,
Organization Effectiveness, Employee and Labor Relations, or
Compensation and Benefits
P&G likes to say they hire “the person and not the position.”
In recruiting, they look for people who relate to their “Success Drivers”: The
Power of Minds, the Power of People and the Power of Agility.
47
D. Summary of Internal Factors
Internal Factors Weight Rating Score
STRENGTHS
♦ Portfolio / Scale .20 5.0 1.0 P&G brands are among the world’s best known
household names.
♦ Diversity .05 5.0 0.3 Diverse workforce/involvement in foreign markets
♦ Strong Distribution Network .10 4.5
0.5
P&G uses an intensive distribution strategy. Because of
the high threat of substitutes in the consumer goods
market, distribution must be very strong and proactive to
achieve P&G’s level of continuous penetration.
♦ Advances in Sustainability .10 4.0 0.4
♦ Product Differentiation .15 5.0 0.8
♦ Corporate culture .05 4.5 0.2
♦ High R&D Budget / Emphasis
on product innovation .10 5.0
0.5
♦ Skilled Board of Directors .10 5.0 0.5 Exceptional attendance rates at board meetings
♦ High marketing and advertising
budget .15 5.0
0.8
Total: 4.8
WEAKNESSES
♦ Sales increases, relative to
competition .25 3.0 0.8
Mostly caused by underperforming in narrow emerging
markets outside the U.S., and the need for low cost
commodity products
♦ Online media content .25 3.0 0.8
♦ Catering to local consumers .30 2.0 0.6
♦ High expenses have led to lower
margins, relative to competition .20 1.5 0.3
Johnson and Johnson has about 20% higher gross profit
margins. P&G’s ad expenses were $9.2, $9.6, and $9.2
billion in 2013, 2012, and 2011 respectively; whereas
J&J’s were $2.5, $2.3 and $2.6 billion.
Total: 2.4
48
V. Analysis of Strategic Factors (SWOT)
A. Situational Analysis
SFAS Weight Rating Score Duration
Strategic Factors (S/L/I)
(S) Portfolio / Scale 0.04 5.0 0.20 L
(S) Strong Distribution Network 0.06 .10 0.01 I
(S) Product Differentiation 0.13 .15 0.02 L
(W) Sales increases, relative to
competition 0.05 .25 0.01 S
(W) Online media content 0.05 .25 0.01 S
(W) Catering to local consumers 0.05 .30 0.02 I
(W) High expenses have led to lower
margins, relative to competition 0.05 .20 0.01 L
(O) Rise of digital age 0.07 1.5 0.11 S
(O) Consumers “going green” 0.05 4.5 0.23 I
(O) New foreign markets (rising middle
class in developing countries) 0.10 2.5 0.25 S
(O) Advances in Technology (boosting
efficiency) 0.05 5.0 0.25 S
(T) Foreign Exchange issues 0.10 3.5 0.35 I
(T) Stricter FDA regulations on
manufacturing of cosmetic products. 0.05 4.5 0.23 S
(T) Substitute products 0.10 3.9 0.39 I
(T) Changes in consumer preferences 0.05 5.0 0.25 I
Total: 2.32
B. Review of Mission and Objectives
1. In light of the key strategic factors and problems, the company’s current
mission is appropriate.
2. If any change to the mission or objectives would be considered, I would
suggest integrating mention of catering to emerging markets around the
world (outside the U.S.), and also include some more time specific
objectives relating to the digitization of operations.
49
VI. Strategic Alternatives and Recommended Strategy
A. Strategic Alternatives
TOWS Strengths Weaknesses
Opportunities
(S) High Marketing and Advertising
budgets
(O) Arising foreign markets
Growth
(W) Online media content
(O) Rise of digital age
(W) Low Sales Growth
(O) Market Reach (P&G products in
180+ countries)
(O) Growing middle class (horizontal)
(W) High expenses
(O) Advances in technology
Threats
Growth (horizontal integration)
(S) Product Differentiation
(T) Counterfeit Products
(T) Substitute Products/Store Brands
Concentration
(S) High R&D budget
(T) Changes is consumer preferences
Retrenchment / Concentration
Divest underperforming brands/Focus on
top earners.
B. Recommended Strategy
So far, P&G has done a wonderful job of maintaining a slew of wildly successful
brands. Like the industry leader that they are Procter and Gamble is always find new
ways to innovate on the product front. However, a strategy tune-up is seemingly
necessary in order to achieve their objectives of accelerating sales growth. Just like the
company currently does and has been doing concerning emphasis on product R&D, they
need to stay ahead of the curve and focus just as much, or more, on strategic R&D of
their business.
All of P&G’s consumer web and mobile applications need work. The
groundwork is there but the software accessibility is not up to par with today’s
50
tech. For example, their Pampers mobile app that encourages parents to earn
rewards by collecting and entering codes printed on their diaper packaging has
received many obvious complaints that the app does not have a camera feature
in which they could scan the codes from the Pampers instead of manually
entering a string of numbers. Also, cashing in the rewards they do own is
very time consuming and difficult.
A lot of their apps are not integrated with social media, which is important to
most consumers in this day in age.
P&G needs to keep a more watchful eye on consumer trends, especially in emerging
markets. They need to take advantage of their presence in nations with a growing middle
class and be sure to cater to the local needs of these regions.
They must update their marketing programs and utilize the talents of their marketing
departments in creating fresh new campaigns that appeal to modern day consumers.
P&G’s done well by their huge advertising projects, however their approach is going a bit
stale. P&G needs to step outside their comfort zone when it comes to running new ads.
Instead of repeating overarching themes that are meant to include everyone on the planet,
they should specialize their marketing efforts to target individuals in a more specific way.
Unilever does a good job of this by creating relatable situations in their print ad and
commercial copy. For instance, Unilver’s Dove commercials in which many different
shapes and ethnicities of women are celebrated for their differences/individual
uniqueness in a way never done before in a television ad. P&G’s Old Spice brand
commercials are some of their most memorable and appealing campaigns; more of their
brands need to be steered in that direction.
Moreover, it is time for P&G to kick the habit of “masstige” line extension. Masstige is
a marketing term combining the words ‘mass’ and ‘prestige’. In other words, P&G needs
to look towards coming out with more affordable options.
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Bloomberg Businessweek writer
Larry Popelka suggest that
“P&G’s biggest obstacle to
growth is its centralized planning
and decision-making. In today’s
faster-paced environment, this structure slows innovation and turns every project into a
big investment. Companies with more decentralized models are winning in the
marketplace because their innovations come more quickly and are less costly, which
translates into lower risk. The best innovators don’t try to do everything themselves.
They identify what consumers want and coordinate the assembly and delivery of it in the
most efficient manner using outsiders. They also make quick, low-risk decisions without
a lot of bureaucracy.”
P&G’s slow execution time mentioned by this article is a weakness that is
exploited by today’s online small to midsized business community. Launching and
distributing product over the internet is a great innovation for the market overall, however,
this is starting to lower once very high barriers to entry into the consumer goods industry.
The individual categories P&G is involved in are starting to get attacked by new entrants,
since the playing field has been level quite a bit.
P&G’s trailblazing innovation mantra will not be enough to get the company
going as fast as top management and shareholders want it to, without matching product
r&d importance with that of strategic innovation.
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VII. Implementation
P&G has a history of excellent total quality management. At this point they would most benefit
from a Management By Objectives technique.
They need to work on decentralizing their massive structure of decision makers, and empower
lower level managers and staff to constantly update their strategic focus to fit departmental
objectives. Everyone at P&G needs to understand these objectives and have a well-defined
strategic goal and time-frame.
I suggest weekly briefings between superiors and subordinates in order to maintain fluidity in
attempts to achieve company-wide and departmental goals. Raising the frequency of
communication to this level is necessary to accelerate P&G’s growth meanwhile keep the global
workforce on the same page.
VIII. Evaluation and Control
As mentioned in the Operations and Logistics sections, P&G has launched a digitization
strategy that is quickly proving successful. Specific information about the supply chain and
access to distributors’ orders is all accessible now, in real time.
Furthermore, if P&G invests some of its research and development dollars towards fixing
and updating its internet applications and raising its online competency to a competitive level,
decision makers will be able to much better maintain indispensible relationship with consumers
and instantly learn from their feedback.
The primary goal for this company is currently to increase the rate and which their sales
are growing around the world. If strategies are updated and evaluated frequently and
thoughtfully, their net sales should go up by the next fiscal year’s end.
