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18 Procter Gamble
18 Procter Gamble
Alen Badal
A. Case Abstract
Procter & Gamble (P&G) is a comprehensive strategic management case that includes the company’s year-
end 2010 financial statements, organizational chart, competitor information and more. The case time
setting is the year 2011. Sufficient internal and external data are provided to enable students to evaluate
current strategies and recommend a three-year strategic plan for the company. Headquartered in
Cincinnati, Ohio, P&Gs’s common stock is publicly traded under the ticker symbol PG.
Headquartered in Cincinnati, Ohio, P&G is the world's largest household products company. The firm is
divided into two global units: Beauty & Grooming and Household Care but P&G also makes pet food and
water filters. Many P&G's products are billion-dollar sellers, including Febreze, Fusion, Always, Braun,
Bounty, Charmin, Crest, Downy, Gillette, Mach3, Iams, Olay, Pampers, Pantene, Tide, Gain, and Wella,
among others. P&G’s fiscal year ends June 30 every year.
1. Customers
2. Products or services
3. Markets
4. Technology
5. Concern for survival, growth, and profitability
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees
1. Higher demand for higher-priced products such as prestige cosmetics and fragrances.
2. Younger customers are attracted by social media advertising.
3. Social media advertising is more cost effective than traditional advertising.
4. The beauty and cosmetics industry is expected to increase globally by 8.5 per cent in 2014 according to
recent research from Euro Monitor International.
5. There is an endless possibility to `celebrities’ endorsing fragrances, these products are successful
because many are persuaded by fame of the celebrity.
6. Men are increasingly concerned with their appearance, this provides a opening to grab a new branch of
consumers.
7. Increase in online purchasing, average monthly visits in the U.S. to beauty-related websites topped 60
million and grew 94 percent over past three years.
8. Consumers are interested in products that are made with all natural products.
9. Research shows that by 2015, global women’s purchasing power is expected to increase by $5 trillion
and beauty is the category these consumers are most likely to purchase.
Threats
Critical Success Factors Weight Rating Score Rating Score Rating Score
Advertising 0.10 4 0.40 2 0.20 1 0.10
Market Penetration 0.10 4 0.40 3 0.30 1 0.10
Current Ratio 0.05 1 0.05 4 0.20 3 0.15
Inventory Turnover 0.08 4 0.32 1 0.08 2 0.16
R&D 0.06 4 0.24 3 0.18 2 0.12
Income/Employee 0.05 4 0.20 1 0.05 3 0.15
Financial Profit 0.12 4 0.48 3 0.36 2 0.24
Customer Loyalty 0.08 4 0.32 3 0.24 2 0.16
Market Share 0.10 4 0.40 3 0.30 2 0.20
Product Quality 0.10 2 0.20 4 0.40 3 0.30
Top Management 0.06 4 0.24 3 0.18 2 0.12
Price Competitiveness 0.10 4 0.40 2 0.20 3 0.30
Totals 1.00 3.65 2.69 2.10
Weaknesses
Liquidity Ratios
Debt/Equity Ratio 0.52 0.80 1.00
Current Ratio 0.8 1.0 1.3
Quick Ratio 0.5 0.7 0.9
Profitability Ratios
Return On Equity 18.3 32.6 26.0
Return On Assets 8.7 11.1 8.9
Return On Capital 11.0 15.4 11.8
Return On Equity (5-Year Avg.) 16.7 32.2 23.8
Return On Assets (5-Year Avg.) 8.0 10.0 8.0
Return On Capital (5-Year Avg.) 10.1 13.9 10.8
IFE Matrix
WO Strategies
1. Increase social medial advertising targeting teenagers by $100M (W3, O2).
ST Strategies
1. Engage in talks with Pepsi to purchase Pringles if the deal with Diamond Foods is not completed (S2,
S3, T5).
2. Continue to market low end cosmetics and fragrances (S4, T7).
WT Strategies
1. Reduced advertising by $300M on well established products letting their brand name sell for itself
(W5, W6, T9).
G. SPACE Matrix
FP
Conservative Aggressive
7
CP IP
-7 -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7
-1
-2
-3
-4
-5
-6
-7
Defensive Competitive
SP
Quadrant II Quadrant I
P&G
Weak Strong
Competitive Competitive
Position Position
Household
High
3.0 IV V VI
Low
1.0
Increase Increase
R&D advertising
Opportunities Weight AS TAS AS TAS
1. Higher demand for higher-priced products such as prestige
0.08 4 0.32 2 0.16
cosmetics and fragrances.
2. Younger customers are attracted by social media advertising. 0.06 1 0.06 4 0.24
3. Social media advertising is more cost effective than traditional
0.06 1 0.06 4 0.24
advertising.
4. The beauty and cosmetics industry is expected to increase
globally by 8.5 per cent in 2014 according to recent research from 0.06 3 0.18 4 0.24
Euro Monitor International.
5. There is an endless possibility to `celebrities’ endorsing
fragrances, these products are successful because many are 0.04 1 0.04 4 0.16
persuaded by fame of the celebrity.
6. Men are increasingly concerned with their appearance, this
0.08 4 0.32 2 0.16
provides a opening to grab a new branch of consumers.
7. Increase in online purchasing, average monthly visits in the U.S.
to beauty-related websites topped 60 million and grew 94 percent 0.06 0 0.00 0 0.00
over past three years.
8. Consumers are interested in products that are made with all
0.03 4 0.12 2 0.06
natural products.
9. Research shows that by 2015, global women’s purchasing power
is expected to increase by $5 trillion and beauty is the category 0.05 1 0.05 3 0.15
these consumers are most likely to purchase.
K. Recommendations
1. Spend $400 million in R&D to produce 3 new lines of higher end fragrances.
2. Allocate $100 million for advertising and promoting male skin care products using celebrities as
spokesmen.
3. Increase social medial advertising targeting teenagers by $100M.
4. Engage in talks with Pepsi to purchase Pringles if the deal with Diamond Foods is not completed.
M. Epilogue
P&G’s fiscal year ends June 30 of every year. Therefore, P&G’s Q1 2012 ended September 30, 2011. For Q1 of
2012, the company’s overall earnings fell to $3.02 billion from $3.08 billion a year earlier. During that quarter,
P&G raised prices across all divisions and regions to help make up for higher costs for commodities. P&G’s
overall Q1 2012 net income fell 1.9 percent, but sales increased 8.9 percent to $21.92 billion, from $20.12 billion
earlier.
For that Q1 2012, P&G’s Beauty division sales increased nine percent to $5.4 billion on unit volume growth of
four percent. However, this division reported that net earnings declined 12 percent to $731 million. Also for Q1
2012, P&G’s Grooming division reported a 10 percent sales decrease to $2.1 billion, but that division’s earnings
increased 10 percent to $438 million. For Q1 2012, P&G’s Health Care sales increased 10 percent to $3.3 billion
on unit volume growth of three percent. Sales of Oral Care, including toothpaste and mouthwash, increased about
5 percent as Oral-B toothpaste was marketed in Western Europe and Latin America. P&G’s Personal Health Care
volume increased about 3 percent behind higher shipments of Vicks due to initiative activity primarily in North
America and Asia, partially offset by lower shipments of Prilosec OTC in North America.
P&G’s Feminine Care segment revenues grew about 3 percent in Q1 2012 primarily due to new products in China
and strong growth in India. Net earnings increased 9 percent to $542 million as sales growth was partially offset
by a lower operating margin. Operating margin declined due to higher commodity costs, partially offset by
manufacturing cost savings and a reduction in overhead and marketing spending as a percentage of sales.
P&G’s Snacks and Pet Care division for Q1 2012 reported that sales increased nine percent to $776 million.
Volume in Snacks increased about 9 percent due to increased distribution and market growth in developing
regions, as well as share growth and market growth in North America. Volume in Pet Care decreased about 5
percent mainly due to customer inventory adjustments in North America following a June price increase.
P&G’s Baby Care and Family Care for Q1 2012 reported a 12 percent increase in sales to $4.1 billion. Net
earnings increased 5 percent to $494 million.