Free Procter And Gamble Company Case Study Sample
Procter and Gamble Company is a multibillion-dollar multinational company that deals in consumer packaged products. The business units of P & G encompass a variety of products ranging from Beauty & Cosmetics to Baby Care to fast-Moving Consumer Goods. Its operations serve more than 4 billion people in more than 180 countries. In the financial year of 2012/2013, P&G generated USD$83.68 billion in revenue which was about 1.5 times that of Unilever, its closest competitor (Bakker, 2015).Unilever had USD$66.33 billion (Vaccaro, Jansen, Van Den Bosch & Volberda, 2012).P&G is certainly the market leader in various product categories due to its 26 billion-dollar brands (Gergaud & Ziemba, 2012).Such products include Gillette, Tide and Pantene. Perhaps, this is the reason of the Fortune 50 firms that first made the list in 1955, P & G is one of the only ten that are remaining.
In order to have a deeper understanding of the internal and external environment, a SWOT analysis can be done to look at the company’s Strengths, Weakness, Opportunities and Threats.
i) Procter and Gamble has a stable structure of management led by Lafley, its chief executive. The organisation of the management is such that all the heads of the various departments feel equally entitled for the organisation. The board members sit at a round table where the Lafley promote equal sharing of ideas without restriction or specific instructions. Lafley does not limit the staff to his methods but promotes them to be good at what they do.
Ii) P&G is also dedicated to understanding its consumers, allocating a budget of at least $350 million on market research (Baker, 2015).The organisation emphasizes on production of products based on the customers’ needs rather than basing it on new technology.
iii) Its core area of business is in the Home Care and Fabric care that constitutes 32% of Net Sales and 26% of Net Earnings such as Febreeze, Tide and Duracell ().Such products are consumer goods that are non-cyclical and, as a result, the price elasticity of demand is consistently high. Consumer goods assure the company of a ready market for whatever state the economy is.
Iv) P& G boasts of a massive advertising department. There is great brand outreach with a huge public visibility having 250 brands that exist in at least six main product categories (Bakker, 2015).
v) The Human Resource of P & G is highly equipped with a lot of dedicated staffs under the highly skilled leadership of Lafley. Lafley invested his time in knowing his staff well pitting himself along their culture. He steps back to give his staff plenty of responsibility and only help shape decisions by asking a series of keen questions. In turn, the people flow along with his ideas in harmony.
vi) The company boasts of strong financial resources owing to good earnings from the revenue sales. This combined with the decrease in the running costs due to the reduction of the sales force to about twenty-five thousand resulted in a strong financial state.
i) There is declining expenditure on creativity and innovation, which is one of P&G’s core competencies (Lechevallier, 2013).The management of Lafley focusses more on outsourcing the ideas from outside. However, this can be tricky since outsourcing of ideas sometimes make the country lose its control of some things like price or any opportunity to alter the idea.
ii) An underperforming Sales and Marketing Department. There was a decline in sales of new launches by half in the period existing between 2003 and 2008; what were ‘the big product breakthroughs’ dropped to an average of 6 per financial year (Bakker, 2015).
iii) The Net earnings from Home Care and Fabric Care, which is the core product category dropped by 6 % in the financial year of 2011-2012(Bakker, 2015).The fall was a result of entrance of other cheaper products into the market during that financial year. Thus, the sales and marketing area has been a little fragile in the recent couple of years.
iv) Decline in Operating Income and decline in Net Earnings from continuing operations from 2011 -2013 of 14% and 20% respectively(Bakker, 2015).
i) There is an emergence of markets with rapidly rising incomes projecting a great demand potential. Sales from the developing markets represent about thirty-two percent of P & G’s $ 78 billion annual revenue up from 23 % half a decade ago. These sales have been doubling every four years (Gergaud, 2012).
ii) Projections by economists indicate that by 2020, the collective Gross Domestic Product of the emerging markets will surpass the economies of developed countries. There is a prediction of an increase in consumer spending in emerging markets by three times more than that in developed nations, reaching approximately $7.5 trillion by 2020(Bakker, 2015).
iii) The advent and rise of social media provides a new and cost-effective platform for marketing. The platform cuts across different populations and age-groups in the market. The company can use social media mainly to target the young group of the population as they are the main users. Social media platforms include Twitter, Instagram, Facebook, HI5, et cetera.
iv) There is the growing increase in the population of the world. Most of the population cropping up comprises the young aged twenty and below. It presents a growing increase in the market for non-cyclical consumer products that Procter and Gamble specialize in.Examples of such products are beauty and cosmetic products as well as homecare and fabric care.
v) Supplies side shortages & G buys most of its raw materials from external suppliers and has some key role suppliers (Gergaud & Ziemba, 2012).In such a case, the supplier may have an advantaged bargaining power. Alternatively he may not have enough supplies to satisfy demands of P&G.For example, there have been recent supply shortages in P&Gs’ Gillette shavers and Tide Pods. Tide Pods is a new invention that requires complex modern manufacturing systems. It is difficult to get a variety of many manufacturers forcing P&G to depend on one key manufacturer. Such obstacles result in the delay of the launch of new highly anticipated products.
i) With the increase in markets, there is also an increase in competitors eyeing the same markets. Introduction of new products stimulates creation of new better or cheaper products by these competitors. Some of these competitors include Colgate Company that introduced the electric toothbrush prompting a response by the P&G to introduce a similar one of a cheaper price. Another company is Unilever (Bakker, 2015).
ii) In the recent couple of years, there has been an increasing rise in commodity prices as well as costs of production. The rise is due to increasing costs of labour, as well as logistics. Increase in costs such as transport, wages, inventory keeping is contributory to the high costs of production as well.
iii) There is increasing availability of sub-standard products and generics store brands of consumer products. This makes it harder for P & Gs’ brands to compete fairly. The reason is that such products sell at cheaper prices as they do not accrue the costs that come with producing high-quality commodities.
iv) There is limited room for growth of P & G.Its major products are usually in the fast-moving consumer category of consumer goods. Such products include baby products (pampers), shampoo (head and shoulders), beauty products like Olay and house cleaning products (Tide).These products exist in markets that generate frequents sales per consumer but have low margins and low customer loyalty. In addition, P&G low rate of investment in innovation makes it hard for their products to out-compete similar products in the market
v) Cuts in capital and R&D spending whose intention was to increase the gains in profit threaten to sway away useful funds needed for product promotion through advertising and marketing. P&G also passed up a huge opportunity to buy water-soluble strips that contain a mouth wash. Currently, another company, Listerine is making huge profit out of the product.
Despite the weaknesses and threats facing Procter and Gamble Company, the company is still raking in high sales and revenue per year (Bakker, 2015).There is however need for the company to invest in in-house innovation for more benefits as opposed to out-sourcing, even though, the latter is performing relatively well.
Stiff completion from new companies on the basis of different brands market share.
The stiff competition is mostly as a result of the introduction of new products by the rival businesses and selling them at a cheaper price.
ALTERNATIVES FOR PROCTER AND GAMBLE
The alternatives ought to be customer-oriented since the customer is always the ‘‘king of the market.’’
i) Selling of existing product into a new market/environment.
ii) They might opt to sell a new product into the existing market.
iii) To build existing core business into stronger and more firm global leaders.
iv) To develop a stronger, faster growing and higher margin with potential.
v) Improve the growth of sales of top performing line brands.
vi) To foster growth in the key developing markets after an analysis of the international markets.
vii) Since Procter and Gamble target mainly the middle up class of the female gender, it can try to improve the contracts with the currently existing customers.
viii) It can also identify and improve contact with new prospective or potential customers.
The alternatives allow P & G Company to re-establish their superiority in the market without having to incur any more costs. They make use of the pre-existing market while still having the ability to attract more customers.
Implementation involves the use of an effective marketing strategy.
MARKETING STRATEGY FOR PROCTER AND GAMBLE
STRATEGY: P & G should change the price terms and conditions for a particular group of products.
i) They should lower the product price and obtain maximum profits on spare parts.
ii) Use different prices for different markets.
iii) Set price at a discount of 8% below the market leader
Implementation of these strategies will be rolled out in stages but will be complete within three months of inception.
STRATEGY: Penetration policy
Tactics: I) set a low price for a new product so as to discourage competitors from entering the market.
ii) They can also increase turnover to a level where the product will become profitable at that price level.
These tactics will be complete in one month as they only involve passing the decision by a consensus.
Strategy: Discount Policy
The company should offer quantity discount to encourage large purchases effective immediately.
Strategy: Change Product
i) The company should develop separate products for different markets.
ii) Get new products that complement the current existing products by continuing to acquire new businesses.
Brand expansion that involves manufacturing of more alternatives of the same brand.
Strategy: To drop .add or alter products.
Tactics: The Company should drop marginal products, launch a modified product, or it can just develop new products to overcome old products.
CHANNELS OF DISTRIBUTION
Strategy: Change the channels to be done within three months.
i) P & G to set own distribution channels direct to the retail stores.
ii) Change the distribution for the area.
iii) Increase the available number of warehouses for the existing product.
EVALUATION AND CONTROL
The company needs constantly to monitor the market performance as it rolls out the changes. If a plan does not perform as well as expected, the company should gradually shift to another alternative without disturbing the market forces. If a strategy is taking too long to be fully implemented, but the accruing results are impressive, the company can give it more time for full effects to be achieved.
Bakker, D. (2015). Part C Planning for Vertical Brand Portfolio Management. In Vertical Brand Portfolio Management (pp. 83-238). Springer Fachmedien Wiesbaden.
Gergaud, O. & Ziemba, W. T. (2012). Great Investors: Their Methods, Results, and Evaluation. The Journal of Portfolio Management, 38(4), 128-147.
Vaccaro, I. G., Jansen, J. J., Van Den Bosch, F. A., & Volberda, H. W. (2012). Management innovation and leadership: The moderating role of organizational size. Journal of Management Studies, 49(1), 28-51.
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