PROCTER AND GAMBLE

PROCTER AND GAMBLE

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Procter and Gamble

Executive Summary

The report will focus on evaluation of the competitiveness at Procter and Gamble (P&G) and more so the nature of the consumer goods market.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Introduction

The mission statement provided at Procter and Gamble (P&G) illustrates the focus by the organization on ensuring customer satisfaction. This has resulted in an externally oriented culture that seeks to ensure achieve of positive outcomes from its relationships with customers and other stakeholders. P&G can be termed as a highly competitive entity due to the volatile nature of the consumer goods market. This will utilize a PESTLE analysis whereby the political, legal, technological, and environmental factors, which have been central to strategy development within the organization. Additionally, the report will also utilize a Porter Diamond model to evaluate the firm’s structure, strategy and rivalry in relation to its competitors namely Unilever, Colgate-Palmo & Church &Dwight in the consumer goods market.

In addition, the company’s competitive advantage will be evaluated in terms of the entity’s ability to focus on consumer needs, wants, and preferences. In the wake of declining barriers for international and interregional trade, there is a need to take into consideration the entity’s ability to compete in the international market. The evaluation of the value chain will provide an understanding of the accumulation of customer value in relation to the chain of activities that give rise to the development of a product or delivery of service to the consumers. Procter and Gamble has been in operations for more than 170 years in the consumer goods industry to become a multibillion multinational corporation.

Five critical strategic innovations will also be evaluated using ANSOFF and DIAMOND models to understand the importance and relevance of direct to consumer advertising, marketing research, brand management, direct product distribution and product and technological innovation. This will provide an understanding of the accumulation of competitive advantage and more so the status of the entity in relation to other firms operating in the consumer goods market. There is also a need to illustrate the correlation between sustainable competitive advantage and serial strategic innovation as used by Proctor and Gamble to affirm its position as a market leader in the consumer goods market.

In the year 2007, Procter and Gamble accrued revenues of an estimated $76.5 billion, which was a 12.1% in crease from the previous financial period of 2006. In the year 2013, the company accrued an estimated USD $ 82.6 billion in sales revenue and $83.1 billion in the year 2014. The growth in the sales figures can be attributed to enhance customer focus and diversification of the various product and service offerings provided by the brand. The company notes that it looks forward towards enhancing the number of brands from the initial 70 to 80 in the near future that are organized into several businesses and four distinctive industry based sectors.

Industry Overview

The consumer goods market is considered as one of the most volatile industries in the world with the advantage of new technologies and entry of new players into the market. Manufacturing entities responsible for consumer packaged goods are expected to be faced with two primarily challenges. The first challenge is the shift in consumer attitudes and preferences towards specific brands and products with higher levels of market fragmentation of consumer markets. This has prompted the companies in this market to adapt new technologies, innovate, and become creative in shifting the strategies they utilize to reach consumers in terms of communication and product distribution.  Secondly, the decline in disposable incomes that correlates with economic slowdown around the world has prompted the shift in strategies to cater to such concerns.

It is evident that there will be an increase in the number of consumers in the near future, a majority of whom are residents in emerging markets or developing countries around the world. This is primarily attributed to a growing middle class and a class of overly affluent potentials with the capability of developing an attractive market segment for consumer products. In addition, due to decline in issues of brand loyalty and a focus on price, user experiences, and quality of commodity, it is anticipated that the future of the consumer goods market will be marked by extreme competition and volatility.

Recommendations

The entity was ranked as a leader in the beauty and personal care commodities market in the year 2011 in the international market, which was brought about by the acquisition of Gillette in the year 2005. the entity’s share of beauty and personal care products reduced in the year 2006 as the company faced growing threats in its traditional western markets and more so in the emerging regions. L’Oreal became the top grossing entity to overtake Procter & Gamble as the leader in skin care products in China due to increase in the range of products, which vary across different price points.

SWOT Analysis

Strengths Weaknesses
             I.      Leading brands

II.      Global exposure

             I.      Mature market reliance

II.      Market share erosion

Opportunities Threats
             I.      Emerging markets

II.      High growth markets

             I.      Local and global competition

II.      Chinese personal care products

  1. Strengths

Proctor and Gamble (P&G) has relatively strong brands which are estimated to be worth more than USD $24 billion. In addition, the entity also claims leadership brands that it attributes to more than 90% of its oval profit and sales levels. The entity has relatively extensive global exposure with its products being sold in more than 180 countries around the world. This has also been aided by the presence of a wide and efficient distribution system that includes grocery stores and mass merchandisers.

  1. Weaknesses

The entity has placed over-reliance on mature markets, which lack opportunities for growth. The emerging markets are anticipated to outperform these mature markets in the near future, which are expected to bring about problems for established entities such as Proctor and Gamble.

  • Opportunities

The emerging and developing markets can provide the entity with new market options, which can be explored with ease. In addition, there is also a need to strategize on introducing new products and services aimed at reinvigoration of interest amongst consumers on the various product offerings and services from P&G.

  1. Threats

Growing local and global competition levels is anticipated to have a negative effect on the market share held by the entity across various markets. This is primarily attributed to the entry of new players and continued innovation and creativity that is being exhibited by other market players.

ANSOFF Analysis

Existing Markets Existing Products New Products
New Markets Market Development Diversification
  • Market Penetration

Due to growing competition from new entrants and established businesses, the entity has been prompted to innovate and utilize technology to enhance customer experiences from use of the various product and service offerings provided by the entity. This has been used as a means of enhancing the entity’s capabilities in entry into emerging markets and more so reaffirmation of its position in the consumer goods market.

  • Market Development

The entity should also undertake pursuit of developing new market segments across various geographical locations around the world. This is primarily due to the core competencies of the firm in development and sale of beauty and personal care products. Because of ambitions to expand into new markets, the development of new market strategies can be laden with numerous risks such as cultural differences, which should be acknowledged in the initial stages of strategy development.

  • Product Development

This is relates to initiation of a new product development strategy which should be aligned to the strengths of the organization. The entity has a relatively high level of exposure to international markets and more so it holds a large number of global brands, which are preferred by consumers due to price and quality. This can be utilized as a means of developing new products aimed at competing with other brands through cost leadership and differentiation.

  • Diversification

This is termed as a one of the risky stages as it relates to both product and market development which may be beyond the organization’s core competencies. However, this may be a viable option for the organization as it may provide a relatively adequate means of enhancing the entity’s presence and its revenue streams. The entity can be able to explore new markets through products, which are not classified as belonging to the beauty and personal care segment.

DIAMOND Analysis

  1. Factor Conditions
    • Capital- the organization has a relatively extensive capital, which would enable the entity to explore new markets and new product development.
    • Infrastructure- existing infrastructure that is inclusive of an extensive distribution system can enable the entity to explore new markets and development of new products.
    • Human resource- the presence of a dedicated, skilled and experience workforce can be effective in leading innovation and creativity within the organization and exploring new markets and product development.
    • Physical resources- the presence of the entity in more than 180 states can provide it with an adequate platform to launch new products and explore various market segments as a means of enhancing its revenue streams through diverse product and service offerings.
  2. Demand Conditions

The development of new products and services usually requires the presence of a strong demand for new products and services. In essence, there should be a need or gap within a market, which provides a viable opportunity for the organization to access and achieve success.

  • Related and Supporting Industries

The success of the organization can also be associated with the nature of the relationships between the entity, related industries, and its suppliers. This infers that the decline in the success of the organization should also focus on the strategies utilized in its distribution chain.

  1. Firm Strategy, Structure, and Rivalry

The goals of the organization can be related to the ownership structure. Given that the entity has a family ownership structure, a majority of the decisions made have been influenced by the values, attitudes, and culture of the organization. In addition, the entity is a public corporation, which makes it subject to strict financial and industrial regulations.

Bibliography

Child, J. (1997). Strategic choice in the analysis of action, structure, organizations and  environment: Retrospect and prospect. Organization Studies, 18(1), 43-76.

Niendorf, B. & K. Beck (2008). From Good to Great or just good. Academy of Management Perspectives, 22(4), 13-20.

McCraw, T. (2000). American business 1920-2000: How it worked. Wheeling, IL: Harlan Davidson, Inc.

Kluge, J., J. Meffert & L. Stein (2000). The German road to innovation. McKinsey Quarterly, 2000(2), 98-105.

Hamel, Gary. 2006. The why, what, and how of management innovation. Harvard Business Review, 84(2) 72-84

Sanders, T.J., N. McMinn & N. Bell (2008). Innovation adoption and strategic adaptation: A mutual embeddedness model and application, Business Journal for Entrepreneurs, (2008)4, 15-25.

Davey, Kimberly S. & Tom J. Sanders, Serial strategic innovation and sustainable competitive advantage: A longitudinal case study  Journal of Case Research in Business and Economics, 1-20

 

 

 

 

 

 

 

 

 

 

 

 

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