P&G’s structure has removed many of the traditional overlaps and inefficiencies that exist in many large companies.Global Business Units (GBUs) focus solely on consumers, brands and competitors around the world. They are responsible for the innovation pipeline, profitability and shareholder returns from their businesses.Market Development Organizations (MDOs) are charged with knowing consumers and retailers in each market where P&G competes and integrating the innovations flowing from the GBUs into business plans that work in each country.Global Business Services (GBS) utilizes P&G talent and expert partners to provide best-in-class business support services at the lowest possible costs to leverage P&G’s scale for a winning advantage.Lean Corporate Functions ensure ongoing functional innovation and capability improvement.
Glad: Competition turned Joint venture.PG provided information from plastic research done via diaper testing.Olay: Partnership with french brand to develop anti-aging creams to fight wrinkles.Pulsonic:Febreeze: PG exited candle industry and febreeze invited PG to enter the market with them to collaborate on the febreeze candle line.P&G brought their air care expertise to the table, while febreeze brought the candle-making and scent expertise.Swiffer:
Social Media + Digital AdvertisingReduce Advertising and Marketing costs from 15% of sales to 10% of sales
Procter & Gamble Strategic Analysis
Steven PerdochMatthew Dymit Carrie LoeraDan McGowanElana Muradova Strategic Management, Spring 2012
History Founded in 1837 William Procter and James Gamble Incorporated in Ohio on May 5, 1905
In the beginning… Proctor and Gamble came to be by manufacturing soap and candles. After the invention of the electric light bulb, the demand for candles fell significantly, thus causing the newly formed P&G to cease their production. During the Civil War, the government began to order mass quantities of soap from P&G for the Soldiers’ use—this significantly led to P&G’s return to the market and their second chance at rising in the business world.
Acquisition Summary Between 1905 (Incorporated) – 2010, P&G invested in 34 acquisitions Periods of frequent acquisitions occur in the 1930’s, 50’s, 80’s and 90’s. Some of the larger acquisitions include: – Charmin, Clorox, Crush, Revlon, and Gillette
P&G Today Products sold in > 180 Countries On the ground operations in 80 countries Organized into 2 Global Business Units (GBU’s) Health Care Fabric and & Home Care Beauty & Household Baby and Grooming Grooming Care Family Care Beauty Snacks and Pet Care
P&G: Who we are. http://www.youtube.com/watch?v=tAT-cFFGNQg
Health Care Segment includes products in oral care, feminine care, respiratory, toothpaste, OTC drugs and other personal care categories
Health Care - Overview 14% of Net Sales in 2011 Products sold in drug stores supermarkets, and mass merchandisers Mature market Name Brand & Private Label competitors
Health Care – Core Competencies Strong, Dependable, High Quality Products – Strict internal standards and guidelines to comply with FDA – Most recent recall was early 2010 - Vicks – Vicks 4-Hour Nasal Spray (wrong expiration date) Health Care Research Center – Promote innovation and bring new products to the market quicker
Threats Intense competition – Private labels are much cheaper Top Cough Syrup Makers - Market Share Company % - 2010 % - 2011 % Change Wyeth Labs, Inc. (Pfizer) 25.17 25.87 0.7 Reckitt Benckiser 26.82 24.23 -2.59 Private label 24.78 22.17 -2.61 Procter and Gamble Co. 13.59 19 5.41 Other 3 3.31 0.31 Novartis Consumer Health 2.61 3.02 0.41 Blacksmith Brands 0.65 1.12 0.47 Health Care Products 1.36 0.73 -0.63 Boiron-Borneman 1.13 0.55 -0.58 Qualitest Products 0.9 0 -0.9
Baby Care and Family Care• Segment includes diapers, baby wipes, paper towels, and toilet paper
Baby Care & Family Care Key Info.• 19 % Of Net Sales• Products sold in supermarkets, convenience stores, hotels,motels,and other industries• Baby Care and Family Care competitors
Beauty Segment This segment includes cosmetics, fragrances, hair care, and skin care products
Beauty Segment Beauty accounts for approximately 34% of P&G’s product portfolio. 24% of Net Sales & Net Earnings – Head & Shoulders, Olay, and Pantene are some of the biggest brands within this segment.
P&G Beauty in The Marketplace P&G’s beauty products are highly recognizable; brand differentiation is a strength. Product availably is great; products are sold at practically all domestic retailer chain and drug stores. Proctor & Gamble is associated with tried and true, trusted products.
Beauty SegmentCompetition and Growth Competitors – Unilever – L’Oreal – Private Labels 3% Net sales growth from 2010 – 24% of P&G’s Net Sales are from the Beauty segment
Threats to Beauty Segment Greatest threat to P&G’s Beauty Segment is the Threat of Rivalry – Unilever, L’Oreal, Private Labels Mature Market Threat of Buyers and/or Suppliers? – Relatively low, due to the working relationship between both categories and the trust created in order to maximize that relationship. Suppliers are even involved in P&G’s creative process in developing new products.
Fabric and Homecare Segment contains products including laundry cleaning products and fabric conditioners; home care products, including dishwashing liquids and detergents, surface cleaners and air fresheners; and batteries Fabric care dominates the market with over 30% of the global market share Global home care market share is over 15% across the categories in which we compete
Fabric and Homecare (Cont.) Proctor and Gambles largest, and most profitable division - 30% of net sales Has been increasing steadily - 6% in 2011 Mature Market Market made up of Brand name and Generic brands
Snack and Pet Care This segment includes food products and pet food products Smallest segment
Snack and Pet Care Overview Least profitable P&G business segment 4% of P&G’s net sales in 2011 Pringles was the only existing snack brand* Pringles owned 3% of US Snack Food Production Industy’s market share Utilizes Eukanoba and Iams to appeal to all types of pet owners
Threats Lack of presence in the industries Mature market Fierce competition Extension would require major investment into creating new products and brands Competition has more industry-focused product lines
Disinvest/Sell off Snack & Pet CareBusiness Segment Least profitable business segment (4% net sales ’11) Pringles sold for $2.7 Billion Iams and Eukanoba (value?) Increased focus on profitable business segments Increased opportunity to innovate in successful segments
Growth in Developing Markets Company-wide initiative: Acquire 1 billion additional consumers by 2014/2015 P&G Sales Growth: 2000 to 2012 90% 80% 80% 77% Developed % of Total Company Sales 70% 63% Developing 60% 50% 40% 37% 30% 23% 20% 20% 10% 0% FY 00 FY 05 FY 12
Demographic/SocioeconomicTrends Population is forecasted to grow 700 million people by 2020 (Think of all those diapers?) 95% of this growth will come from developing markets Wealth and Per Capita income increasing Plan of attack? – Expand geographically and fill in the ―White Space‖
Improve Productivity in All Areas Cost of Goods – Reduce RM costs Long-term contracts Increase # of Suppliers? – Reduce excess inventory – Develop partnerships (PGT Healthcare) Research & Development ~ $2 billion annually – Continuous improvement – Product Innovation
Open Innovate Connect + Develop Continue to nurture the Open Innovate: Connect + Develop method of research and development. What is OIC+D?
Connect + Develop“Today, open innovation at P&G works both ways — inbound and outbound — andencompasses everything from trademarks to packaging, marketing models toengineering, and business services to design. Its so much more than technology.”-Bruce Brown, CTO
Why is OIC+D Important? Collaboration Ultra-fast product-to-market delivery
Marketing Opportunities Proctor and Gamble wants to cut $10 Billion in expenses In 2010 P&G spent $2.2 million on Television advertising While many of its advertising campaigns boost sales is it too much? Focus on digital marketing & social media and spend more efficiently http://www.youtube.com/watch?v=PvYP_d2S1Pg