Proctor and Gamble – Strategic Management Case Study

EXECUTIVE SUMMARY monitor and jeopardize (P&G) over its journey of about 175 years has sour unmatched of the institutions largest consumer goods Company with gross tax income of nearly $80 billion and a net profit of about $10 billion. P&G has a presence in more than 180 countries with defects that gather up to in excess of $25 billion. The society has achieved success by creating spirited select post recognized overlaps that argon sold on transnational level.It enjoys one of the largest brand names in household crossings c be Pampers, Gillette, Tide, Ariel, Downy, Pantene, transmit&Shoulders, Olay, Oral-B, Crest, Dawn, Fairy and Always and seg ments like household care, spectator, grooming, and face-to-faceised health care. Although, P&G has earthly concern renowned brands, P&G needs to encompass strategies that enable it to maintain its belligerent advantage over its rival. Consumer Goods constancy where P&G operates has mature r all(prenominal)ing the conso lidation stage and competition amongst rivals is intense.P&G has more strategic options create competitive advantage over its rivals such as further food mart penetrations by rebranding its current line of produces and trade them at a lower hurt. Another option for P&G is to expand in the emerging grocerys by collaboration or altogetheriances with topical anaesthetic businesses in mixed geographical regions. Lastly, P&G earth-closet mark in shin care/beauty segment of consumer persistence. P&G open fire leave alone consumers with productions that are make with inherent ingredients as panache in health and headspringness is growth along with providing change products for men.INTRODUCTION P&G is a part of a competitive application, and as such faces very stiff and fierce competition from its rivals. The competition faced by the company is virtu altogethery on every front like, market share, product line up, innovation of young products, R&D for pertly and active products. It has witnessed a drop in market share and revenue from the sure market and but sustained appreciable procedure in the development markets.This report provides a thorough internal as well as external analysis of P&G, identifies its mandate, along with certain strategies that would help it affix its profit competency, profit produce and sustain its competitive advantage in twain developed and developing markets. The limitations of this report are receivable to the feature that it in the main relies on the training and facts as presented in Case 27, monitor & take a chance The Beauty/Feminine Care division of the Consumer Goods Industry.External references were similarly used and information was sought from the Proctor & Gamble Company 2012 Annual Report and the Proctor & Gamble website. COMPANY OVERVIEW Procter & Gamble was founded in 1837, by William Procter and James Gamble, who pose the foundation of P&G by initi tout ensembley making and marketi ng liquid ecstasy and candles. By 1879, founders of P&G developed Ivory soap and established their own laboratory, and by 1935 the company established another grinder in the Philippines after its attainment of the British soap manufacturer, Thomas Hedley & Sons.In January 2005, P&G announced an acquisition of Gillette, forming the largest consumer goods company and placing Unilever into second place. At present, Procter & Gamble distributes more than 300 leading brands, such as Pampers, Tide, Pringles, Ariel, Downy, Pantene, Head&Shoulders, Olay, make do Girl, Pantene, Crest, Duracell, Secret, Folgers, Hugo Boss, Mr. Clean, Oral-B, Old Spice, Clairol and Zest. The company markets its products by dint of mass merchandisers, grocery stores, membership ball club stores, drug stores, high-frequency stores, department stores, perfumeries, pharmacies, salons, and e-commerce.It markets its products to over 160 countries, and operates a total of cxv plants in more than 80 countries a ll over the area. Procter & Gambles headquarters are located in Cincinnati, Ohio and it employs more than 98,000 employees worldwide. Off late, the companys performance has dwindled as the company has been shuffling its outline and has not been able to economize antagonists at bay (Chung, 2012). Recently the companys Board has unanimously accepted CEO McDonald, who had joined in July 2009, as the one who would plan and head the companys turn approximately of performance (Chung, Jul 2012).As such the company has adopted a multi-fold strategy to cut monetary value by a big chunk and bring up new and innovative products to shore up gross sales and profits. Example cosmos the fact that the company go away launch at least nine new products in the next four months, many of them priced at a grant to generate high profit margins (Monk, 2012). MANDATE The mission of the company is to provide branded products and services of superior tonus and value that improve the lives of the wo rlds consumers, now and for generations to come.And this would automatically generate value for all its stakeholders in form of higher sales and returns. The vision of the company is to be recognized as the best consumer products and services company in the world. P&G has kept is vision powerful and yet sanely suck in. This vision of the company is simple enough be easily savvy by all its stakeholders. The midpoint values of the company rotate around the consumers, its brands and its employees. These values are drawing cardship, self-control, integrity, passion for winning and trust.The company, through all its core values, has tried to address the fact that they seek to work and deliver a trust to their consumers with the help of their employees, who are expected to work with leadership and ownership and essential have a passion for winning so that they can together work to strive to achieve the vision of the company. Just like the vision of the company, the core values also are very clear and straight forward that define the reason for the existence of the company. P&Gs stakeholders are its nodes, stockholders, employees, uppliers and communities in which it operates. P&Gs customers are the ones who ultimately use the products and given the fact that the industry is highly customer oriented and demand driven. The shareholders invest in P&Gs shares providing the company with with child(p) and the company rewards them by consistently creating and increase the shareholder value. Proctor and gamble employees worldwide are considered its most important plus who are the second bone of this giant corporation, they expect ethical sermon along with fair wages and good working conditions.Another important stakeholder of P&G is its suppliers whose organizations heavily rely on the business agreements with P&G, and the businesses who sell and distribute P&G products. Also, different communities all over the world from Cincinnati, Ohio to the many communities around the world who are provided with jobs, employee education, stability and who pay taxes be excite of Procter & Gamble. out-of-door ANALYSIS 1. Competitive Rivalry The industry that P&G operates in is highly competitive and it has emerged as one of the leaders in the industry.This industry has five major(ip) competitors and has reached the stage of consolidation. Due to industry consolidation, changes made by one company forces other competitors to react and follow suit. This increases rivalry and aptitude lead to price wars. The demand for beauty and personal hygienics products is on the fig out due to many factors such as the growth in the economies of developing world has improved the standard of living of people in those regions men are becoming more interested in beauty and skin care and also due to the outgrowth demand for products made with natural ingredients and raw materials.This increase in demand and emf for growth has provided stability in the industry. 2. Thre at of New Entrants Five major competitors in this industry have captured most of the market share through economies of shell and brand trueness. The wide range of products in major competitors portfolio makes it extremely difficult for the new entrants to compete and gain any substantial market share. Potential entrant would require an enormous tot up of capital for manufacturing alongside a long budget for marketing activities, R&D, planning/sales channel in order to compete at the homogeneous level as major competitors.This creates a very high roadblock to entry in the industry that makes the panic of new entrants, very low for the industry. The patents held by the company on various products also act as barriers to entry. 3. talk terms Power of the Buyers Businesses in this industry rely heavily on its buyers to generate a considerable portion of revenue. Buyers of this industry are generally distributors like Walmart, Macys, Target etc. These distributors buy in large quantities which increases their buy power allowing them to bargain lower prices.As a result, over exposure of sales to any single buyer could pose a serious brat to this industry if competitors do not have their own customized distribution network. 4. Bargaining Power of Suppliers in that respect are or so no substitutes for raw materials being used in products manufactured by this industry which is a drift of concern. Suppliers seem to enjoy high bargaining power but the slip coat and quantities purchased by major competitors in this industry tends to scale back the supplier power as competitors can move towards vertical integration.Hence, the purchase power of suppliers is medium. 5. Threat of Substitutes There are no known substitutes for this industry which places the threat of substitutes at a very low level. Macro environs The raw materials used to manufacture products in various segments of Fast miserable Consumer Goods (FMCG) industry are regulated by governments in many countries. There is a risk that currently used raw materials whitethorn be considered potentially dangerous and therefore restricted in their use due to the increase in health consciousness specially in western sandwich markets.Product testing can take months even years before getting an approval for consumption and during this time regulations can change preventing a product from ever being stored to the market resulting in large R&D expenses which may never be recovered. Social forces can have an force out on this industry such as the desire for organic products as consumers become concerned that chemicals currently being used can cause long-term health ailments like cancer and skin diseases.Men are also fast becoming more interested in beauty and hygiene products and populations in developing countries are also turning towards beauty and personal hygiene products as their living standards improve. The future for this industry is bright with potential for growth but fo r virtually companies this can be a threat if they fail at product innovation and strategizing their business as per the ever-changing trends. Technological changes such as exponential growth in profits and ecommerce provides a great platform to this industry to market its products directly to derriere demographics and also to raise awareness of personal hygiene.On the internet, there is a vast potential to target consumers establish on their web searches, previous online purchases, etc. Advancement in technology can also help this industrys distribution systems such as emergence of real-time catalogue systems allows account levels to be replenished on time and prevent excessive inventory on-hand in factories or warehouses. The reduced barriers to international trade give companies in the industry the prospect to expand into various regions of the world. Many regions like China, India, and confederation America are opening up to the world providing an excellent hazard for e xpansion.However, the reduced barriers to international trade can also be considered a threat if international companies expand into home bases such as atomic number 63 and North America which will in turn give rise to the topical anaesthetic competition. INTERNAL ANALYSIS P&G is the industry leader because of its ability to maintain a competitive advantage over its rivals resulting in higher than average profitability. P&G has many resources that contribute towards gaining and maintaining competitive advantage over the rival. One ofP&Gs main military capability is its operose financial position which allows it to acquire other companies. P&G has acquired Gillette boosting its competitive advantage over its rivals as Gillette mainly caters to Men which is growing market. Strong financial position also allows P&G to bewilder high R&D costs i. e. in excess of 2. 2 billion dollars. P&G is constantly investing in product innovation and improving its current line of products. The com pany over the then(prenominal) many years has successfully launched and managed new products.As such, P&G has the ability to push for innovation and ensure faster commercialization than any of its competitor in the industry. This investment in improving brands and innovation also promotes brand loyalty. P&G operates in various segments of FMCG industry such as Personal hygiene, Household care, and Beauty. This variety of products spinings from P&G caters to almost all demographics throughout different ages, genders, countries and cultures. P&G operates in various regions crossways the globe and has successfully managed to establish itself as a leader in these markets across many segments.This diverse range of product offerings along with its operating theater in various geographic regions allows P&G to reel through the recessions in the parsimony and maintain its profitability. Any slowdown in the economy of anyone region or segment is countered by growing economy and segments in other regions. Also, type of products offered by P&G are considered to be recession proof as they considered to necessity such as soaps, shampoos, personal health products etc. P&G derives its strengths from its various capabilities. First of all is that P&G has the marketing of its products in the industry.This enables P&G to persuade its consumers to buy products and also keeps them up to date with new products as well as about any improvements in the current line of products. P&G also has an efficient distribution system which allows it to distribute its products in various region of the globe at a lower cost than its competitors. P&G also collaborates with distributors like Wal-Mart, Target etc. to keep furnish chain functioning efficiently. This allows restocking of shelves at distributors such(prenominal) easier as it provides real time data to P&G as stock levels deplete.This allows P&G to save costs associated with huge inventories and warehouses. Also, P&G owns and o perates almost 115 manufacturing facilities across 80 countries around the globe. This is a great summation of the company which provides it with the capability of saving on cost of shipping products from one region to another. All these sets of co-related resources and capabilities allow P&G to save on costs and provide high quality products at a probable people which in turn has generated above average profits in the industry making P&G the industry leader.Along with strengths, P&G also has certain weaknesses and threats that can offset its competitive advantage and imprint its profitability. In the current global down turn commodity prices across the globe are increasing due to transportation costs associated with higher oil prices. This will force P&G to raise prices on many of their products which might affect market share because some consumers may switch to cheaper low quality products. This is further exacerbated by the fact that fracture costs for consumer are quite low between the competitors in many segments of this industry.While P&G has great collaboration with Wal-Mart, which allows it to maintain an efficient supply chain management but this is also one of the weaknesses of P&G as Wal-Mart is its number one buyer as considerable amount of P&G sales are accounted to Wal-Mart and followed by other major retailers like Target, Zellers, etc. This provides buyers with immense buying power and any slack of sales at any of the top customers can affect P&G effecting its revenues and subsequent profitability.P&G is also exposed heavily towards the matured markets of Europe and North America. STRATEGIC OPTIONS Further Market Penetration In this strategy, P&G should increase market penetration its current skin care and personal hygiene segments. P&G should look towards in its customer base and specifically targeting low income consumers in mature markets. P&G can achieve economies of scale in its current product mix by rebranding such as packaging or size/volume of the product. This way P&G will be mending its quick products at a low fixed cost.By harbouring this strategy, P&G will be able sell its products at a cheaper price and increase its revenue and subsequent profits. This is low risk strategy because P&G has managed to achieve strong brand recognition and customer loyalty so P&G does not have to incur huge marketing costs in order to introduce its products to the market. P&G already and effective supply chain management and it has good race with mega distributors like Wal-Mart, Target etc. so it will be much easier for P&G to introduce these rebranded products to consumers.Furthermore, P&G has a strong financial position which is essential in case the strategy fails to get together expected results. Further Market Penetration eye socket All markets where P&G currently has a presence Differentiator Price, type Vehicles Rebranding, marketing Staging Rebrand products in different packaging with less volume quantities scotch Model Sell rebranded products at lower price to the low income consumers Pros Enhances existing capabilities and resources Low Risk Cons Short to medium term solutionBrand loyalty is uncommon in consumers looking for lower priced products Table 1There are some drawbacks in this strategy which moldiness be considered such as the lack brand loyalty in low income consumers. Low income consumers tend to prefer products that are competitively priced so if another competitor implements the same strategy they can take away P&Gs market share. Hence, this strategy is only viable from short to medium term. Global Expansion in Emerging Markets P&G derive most of its revenues from matured market of North America and Europe where market has reached the saturation point and revenue growth is stagnant.Unlike the mature markets, emerging or growth markets have a administrate of potential for growth and there is a lot of market share up for grabs. As P&G looks to gain great share in the developing countries, it needs to adjust its planning gibe to the demographics of such country i. e. ethnic groups with different skins, hair types etc. As P&G already has a strong set of products, it must be relatively easier for P&G to penetrate into emerging markets especially in terms of brand recognition, mass market presence, and brand loyalty.P&G can avail this opportunity by introducing quality products based on the specific needs of the local anesthetic anaesthetic population or by acquisition of businesses who produce such products. This strategy would help P&G in the long run as it would allow P&G in keep its revenues up during the economic downturns in mature markets as sales in emerging markets will offset the recessions in the mature markets. Rules and regulations set out country to country so some countries can have blotto rules for Multi-national Corporation to protect its local businesses.Global Strategic Alliance or collaborations with local businesses will e nable P&G to expand in to the local market in areas such as China, India or South America. The coarse knowledge of consumers, market trends, laws and regulations that Partner Company brings to the table can be considered an excellent distinctive competency. Global Expansion in to emerging Markets bowlful Emerging Markets Differentiator Price, Quality Vehicles Collaborations (Global strategic alliances), Acquisitions, Staging Collaboration with local businesses and then move towards acquisition of the same. Economic Model Provide quality product at reasonable price to consumers in the emerging markets Pros corking long term potentialDiversification through operations in various regions which provides an opportunity to keep revenues up during recession in one region Cons high school risk involved in collaboration/acquisitions along with the instability of economic growth in emerging marketsCompany can lag behind in innovation Table 2 P&G should select it henchman carefully in eme rging markets keeping in mind the risks associated such as rules, regulations etc.P&G must form a structure where the share, responsibilities of each party is clearly defined along with contingency plans to mitigate various risks involved. P&G should protect its trade secrets and product formulas so manufacturing facilities must have separate units, and PG should also get all its patents recognized in the region where it will operate. Some of the cons of this strategy are embedded with the collaborations with local businesses and the instability in the emerging markets.Also, P&G will fundamentally be rebranding most of the products it sells in mature markets along with selling some products of its partners which means there will be less expense on R&D and company might lag behind in innovation of new revolutionary products. Differentiation in Beauty/ shin Care Segment In this strategy, P&G will offer unique and innovative products that address special needs of various market segmen ts and demographics such as products with natural/organic ingredients, products for certain demographics such as men, ethnic groups etc.Beauty/skin care segment of consumer goods industry is growing as consumers are more interested in grooming themselves with better products and growing trends in health/wellness. P&G can create a competetive advantage by specializing in products made for men and products made with natural/organic ingredients. This strategy will require acquisition of products or spending in R&D to innovate such products in house. This will also require aggressive marketing and branding of such products to introduce them to the consumer.These products must be priced at a premium price based on the advertising costs, acquisitions and R&D spending. Many features of the products along with quality will offset and justify the higher price for such products. With continual R&D spending over time, advancement in technologies and increasing competition, prices will eventua lly reduce. If P&G is able to acquire or create new line of specialized products which caters to certain market segments or demographics, it will be a competitive advantage for P&G over its rivals.Differentiation in Beauty/Skin Care Segment Arena Mature Markets first and move into growth/emerging markets Differentiator Selection, Quality Vehicles Acquisitions, Signalling Staging Acquisitions of major business involved in organic and men beauty/personal hygiene segments Economic Model Sell specialized products targeting certain customers with premium prices i. e. organic products Pros Leverages existing resources and capabilitiesLong Term potential Cons lofty Risk with acquisitionsHigh costs associated with R&D spending Table 3This strategy has some disadvantages as well such as it requires a lot of capital investment either for acquisition or R&D to create new products. REFERENCES Mockler, R. J. (2007). Procter & Gamble The Beauty/Feminine Care Segment of the Consumer Goods Industr y In C. W. L. Hill & G. R. Jones, Strategic Management An Integrated Approach, sixth Edition. Boston Houghton Mifflin Chung, J. (2012). P&Gs Board Unanimously Supports CEO McDonald Retrieved from http//online. wsj. com/article/SB10000872396390444464304577534930564069566. tm l Monk, D. ( 2012) Procter Gamble planning nine new product launches Retrieved from http//www. bizjournals. com/cincinnati/blog/2012/09/procter-gamble-planning-nine-new. html Annual Report (2012) Retrieved from http//annualreport. pg. com/annualreport2012/files/PG_2012_AnnualReport. pdf PG History (2012) Retrieved from http//www. pg. com/translations/history_pdf/english_history. pdf PG Purpose, Vision and Principles. (2012) Retrieved from http//www. pg. com/translations/pvp_pdf/english_PVP. pdf