Professional Documents
Culture Documents
Submitted By:
Delagua, Carlo Brylle
Gayanilo, Gabrielle Nicole
Maglana, Kim
Maquilan, Rasylane
Mayor, Robin Vincent
Molina, Jessie Lyn
Members
Submitted To:
Dr. Emmanuel C. Aznar
This study mainly focuses on Procter & Gamble Co. also known as (P&G) where it
demonstrates the company’s key internal and external forces, vision and mission statement,
organizational structure, financial statements and competitors. The study is based on the fiscal year
2011 where according to CEO A.G. Lafley in a recent interview of Harvard Business Review,
“P&G learns much more from failed new brands and products like Dryel at home-dry cleaning and
Fit Fruit & Vegetable Wash than we do from huge successes like Febreze and Swiffer”. It resulted
from ending food business through selling its Pringles line of snacks at a cost of &1.5 billion to
Diamond Foods in the purpose of concentrating more on beauty and personal-care products.
Recently, Procter & Gamble is the world's largest producer of household and personal
products by revenue, with its products reaching 4 billion people worldwide. P&G’s product line
includes 23 brands across beauty, healthcare, and food including Tide detergent, Pampers diapers,
and Gillette razors, that generate over $1 billion in revenue annually, with the company's total
revenue in fiscal 2010 in excess of $78.9 billion (Proctor & Gamble Company. Wikinvest). This
company focuses on 10 product categories namely; Fabric Care, Home Care, Grooming, Oral Care,
Baby Care, Feminine Care, Family Care, Personal Health Care, Hair Care, Skin and Personal Care.
All of which belong to financially attractive categories that consumers purchase and use on a daily
basis.
P&G’s products are sold in more than 180 countries primarily through mass merchandisers,
grocery stores, membership club stores, drug stores and “high frequency stores. P&G continues to
expand its presence in other channels including department stores, perfumeries, pharmacies, salons
and e-commerce. P&G has on-the-ground operations in approximately 80 countries. Its market
environment is highly competitive, with global, regional and local competitors. In many of the
markets and industry segments in which the company sells its products, it competes against other
branded products as well as retailers’ private-label brands.
P&G’s mission is to provide branded products and services of superior quality and value
that improve the lives of the world's consumers, now and for generations to come. And as a result,
P&G believed that the consumers rewarded it with the leadership sales, profit and value creation.
These results allow P&G’s people, shareholders, and the communities in which they live and work
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to prosper. P&G’s primary goal is to provide products of superior quality and be recognized as the
best consumer products and services company in the world.
P&G’s vision is to be, and be recognized as, the best consumer products and services
company in the world.
P&G’s core values are its people and the values by which they live. P&G prides itself on
attracting and recruiting the finest people in the world, building its organization from within,
promoting and rewarding its people without regard to any difference unrelated to performance.
The company acts on the conviction that the men and women of Procter & Gamble will always be
its most important asset. The company places the greatest vale on integrity, leadership, ownership,
and trust.
P&G’s most important stakeholders are its shareholders, customers, and employees. The
shareholders are considered to be the people who back the company financially and P&G rewards
their loyalty by consistently pursuing initiatives which succeed in creating shareholder value. This
is reflected in the dividends per common share and the overall profitability of the company. P&G’s
customers were the ones that ultimately use their products, and given the way in which the industry
is highly customer-demand driven, these customers are critical for driving P&G’s product
innovation. The employees and the company are considered as one unit, interdependent, and the
employees are considered the most highly prized asset of P&G.
Brief History
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Procter's trade, candle making, both required use of lye, which was made from animal fat and
wood ashes.
Procter & Gamble's operations were heavily dependent upon rosin--derived from pine sap-
-which was supplied from the South. In 1860, on the brink of the Civil War, two young cousins,
James Norris Gamble and William Alexander Procter (sons of the founders), traveled to New
Orleans to buy as much rosin as they could, procuring a large supply at the bargain price of $1 a
barrel. When wartime shortages forced competitors to cut production, Procter & Gamble
prospered. The company supplied the Union Army with soap and candles, and the moon and stars
became a familiar symbol with Union soldiers.
In 1890 The Procter & Gamble Company was incorporated, with William Alexander
Procter as its first president. Two years later the company implemented an employee stock-
purchase program, which in 1903 was tied to the profit-sharing plan. By 1915 about 61 percent of
the company's employees were participating. The company introduced a revolutionary sickness-
disability program for its workers in 1915, and implemented an eight-hour workday in 1918.
Procter & Gamble has been recognized as a leader in employee-benefit programs ever since.
Procter & Gamble soon began experimenting with a hydrogenation process which combined liquid
cottonseed oil with solid cottonseed oil. After several years of research, Procter & Gamble patented
the procedure, and in 1911 Crisco was introduced to the public. Backed by a strong advertising
budget, Crisco sales took off.
During the 1920s the flurry of new products continued. Ivory Flakes came out in 1919.
Chipso soap flakes for industrial laundry machines were introduced in 1921. In 1926 Camay was
introduced and three years later Oxydol joined the P&G line of cleaning products. The company's
market research became more sophisticated when P&G chemist F.W. Blair began a six-month tour
of U.S. kitchens and laundry rooms to assess the effectiveness of Procter & Gamble's products in
practical use and to recommend improvements. After Blair returned, the economic-research
department under D. Paul Smelser began a careful study of consumer behavior. Market research
complemented Procter & Gamble's laboratories and home economics department in bringing new
technology to market. Soon after Richard R. Deupree became president of the company in 1930,
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synthetic soap products hit the market. In 1933 Dreft, the first synthetic detergent for home use,
was introduced, followed by the first synthetic hair shampoo, Drene, in 1934.
In 1931 Neil McElroy, a former promotions manager who had spent time in England and
had an up-close view of Procter & Gamble's rival Unilever, suggested a system of "one man--one
brand." In effect, each brand would operate as a separate business, competing with the products of
other firms as well as those of Procter & Gamble. The system would include a brand assistant who
would execute the policies of the brand manager and would be primed for the top job. Brand
management became a fixture at Procter & Gamble, and was widely copied by other companies.
After World War II the availability of raw materials and new consumer attitudes set the
stage for unprecedented growth. Procter & Gamble's postwar miracle was Tide, a synthetic
detergent that, together with home automatic washing machines, revolutionized the way people
washed their clothes. The company was not ready for the consumer demand for heavy-duty
detergent when it introduced the product in 1946; within two years Tide, backed by a $21 million
advertising budget, was the number one laundry detergent, outselling even the company's own
Oxydol and Duz. Despite its premium price, Tide remained the number one laundry detergent into
the 21st century. In 1950 Cheer was introduced as bluing detergent, and over the years other
laundry products were also marketed: Dash in 1954, Downy in 1960, Bold in 1965, Ariel (an
overseas brand) in 1967, Era in 1972, and Solo in 1979.
Morgens oversaw Procter & Gamble's full-scale entry into the paper-goods markets. A new
process developed in the late 1950s for drying wood pulp led to the introduction of White Cloud
toilet paper in 1958, and Puffs tissues in 1960. Procter & Gamble's Charmin brand of toilet paper
was also made softer.
In 1981 John G. Smale became CEO of Procter & Gamble. He had been president since
1974. Smale led the company further into the grocery business through a number of acquisitions,
including Ben Hill Griffin citrus products. The company also entered the over-the-counter (OTC)
drug market with the 1982 purchase of Norwich-Eaton Pharmaceuticals. The company completed
its biggest purchase in 1985, with the acquisition of the Richardson-Vicks Company and the
motion-sickness treatment Dramamine and the laxative Metamucil.
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In September 1988 Procter & Gamble made its first move into the cosmetics business with
the purchase of Noxell Corporation. Procter & Gamble also planned to further develop its
international operations. In 1988 the company acquired Blendax. The Bain de Soleil sun care-
product line was also purchased that year.Early in 2000 Procter & Gamble placed itself in the
middle of a major takeover battle in the pharmaceutical industry.
This study seeks to provide possible alternative courses of action to help the company
achieve the following objectives:
1. To provide the P&G with strategy that increases their sales on their products.
2. To become a leading brand in beauty and grooming, health and well-being, and
house care
3. To maximize their workforce to gain more sale
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4. To know how to get their products on the different market or geographies that suit
their need of their consumer
5. To
6. To have other strategies to sell their products on a decent price rather than a
expensive one
7. To have a brand that can provide a superior and quality products that can help their
consummation
8. To have a survey which products that need more improving to suit the consumer
need
From the past two years, P&G continuously leaves the pharmaceutical industry since this
does not contribute to the company’s strength and branding was inherently difficult and less
relevant. Through exiting this industry, P&G can able to focus more on consumer-oriented health
care and to strengthen P&G’s portfolio of business which is both advantage to the consumers and
the to the company as well. It is primarily because by exiting several lines, it allows the company
to reinvest the significant amount of the removed brand line to the popular brands which is most
needed and wanted by consumers and at the same time the consumers can attain several products
that they use in their everyday living. Negotiations among several companies continue to progress
by the end of this calendar year. The company had closed the acquisition of Ambi Pur through
successful integration of the Febreze brand. With these, Air Care product category have massively
grown from 17 markets to 90 markets. P&G truly strengthens its business portfolio from several
negotiations and cutting brandlines; also, strengthening business portfolio is an ongoing process
that the company continuously evaluate through assessing three dimensions that is- industry
competitiveness, competitive position and portfolio fit. Based on this evaluation, the company’s
current portfolio will remain the powerful as it has been for so many years and provides a platform
for market leadership and sustainable growth.
Through innovation that improves every people‘s lives powered by productivity through
reinvesting a significant amount of the productivity savings back into a business portfolio that is
intentionally designed for growth. Although P&G had executed several growth strategy these past
years, it cannot be avoided that the company face two of the possible headwinds in succeeding
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years. First, P&G are facing rapid and significant increases in commodity costs which causes gross
margin to decline because of unpredictable factors or variable which the possible raw materials
used in products or production are subjected to. Second, materials and energy costs were up to
$1.8 billion before tax for fiscal year which might produce a great reduction in gross margin
because it consumed all the possible budget that will be used for significant product that brought
success to the company. In these growth challenges, the company take a step through a holistic
approach towards these cost increases. It is through turning dial on our productivity and cost-
saving initiatives, as indicated previously. Also, by creating alternative product formulations and
developing materials that use renewable feedstocks. By reducing our dependency on commodity
and energy costs through our own and our suppliers’ sustainability efforts. And by increasing the
prices when necessary, coupled with innovation where possible, to deliver the best consumer
value.
SWOT Analysis
Strengths Weaknesses
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Successful cost-cutting yet with no
downside on research and development
spending.
Opportunities Threats
External Analysis
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2. Potential development of substitute products (High)
There are considerable substitute for all of P&G’s product offerings, creating an intense
competitive environment.
The scale of products that are distributed under P&G’s name creates a challenge for new
entrants. Since the company has a significant amount of many market shares around the world, a
company without the capital for heavy marketing or research and development, would hardly be
able to compete.
A co- dependent relationship exists between P&G and its suppliers. In order to generate
above average revenues, the company needs various quality materials for product production at
the best prices available. Suppliers of these materials also need key customers like P&G for
profitable revenue generation but will most likely have little bargaining power because of its size.
P&G faces weak buyer power because customers are fragmented and have little influence
on price. But if considering the buyer of P&G products as retailers, rather than individuals, then
P&G faces very strong buyer power. Retailers like Wal-Mart are able to negotiate for pricing with
P&G because they purchase and sell much of P&G’s products.
Internal Analysis
Internal Strengths
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Internal Weaknesses
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P&G Balance Sheet (000 omitted)
Period Ending Jun.30,2010 Jun.30,2009 Jun.30,2008
ASSETS
Current Assets
Cash $2,879,000 $4,781,000 $3,313,000
Short- Term Investments 228,000
Net Receivables 6,325,000 7,045,000 8,773,000
Inventory 6,384,000 6,880,000 8,416,000
Other Current Assets 3,194,000 3,199,000 3,785,000
Total Current Assets 18,782,000 21,905,000 24,515,000
Property Plant/Plant/Equipment 19,224,000 19,462,000 20,640,000
Goodwill 54,012,000 56,512,000 59,767,000
Intangible Assets 31,636,000 32,606,000 34,233,000
Other Assets 4,498,000 134,833,000 143,992,000
$128,172,00 $134,833,00 $143,992,00
Total Assets 0 0 0
LIABILITIES
Current Liabilities
Accounts Payable $15,810,000 $14,581,000 $7,977,000
Short- term Debt 8,472,000 16,320,000 13,084,000
Other Current Liabilities 7,768,000 9,897,000
Total Current Liabilities 24,282,000 30,901,000 30,958,000
Long-Term Debt 21,360,000 20,652,000 23,581,000
Other Liabilities 10,189,000 9,146,000 8,154,000
Deferred Long-term Liability 10,902,000 10,752,000 11,805,000
Minority Interest 324,000 283,000
Total Liabilities $67,057,000 $71,734,000 $74,498,000
STOCKHOLDER'S EQUITY
Preferred Stock $1,277,000 $1,324,000 $1,366,000
Common Stock 4,008,000 4,007,000 4,002,000
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Retained Earnings 64,614,000 57,309,000 48,986,000
Treasury Stock -61,309,000 -55,961,000 -47,588,000
Capital Surplus 61,697,000 61,118,000 60,307,000
Other Stockholder's Equity -9,172,000 -4,698,000 2,421,000
Total Stockholder's Equity $61,439,000 $63,382,000 $69,494,000
$128,172,00 $134,833,00 $143,992,00
Total Liabilities and Stockholder's Equity 0 0 0
Liquidity ratios
Leverage ratios
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Activity ratios
Profitability ratios
Advantages:
P&G can able to save more money through to partnership with the existing businesses in
these countries.
Reduce the risks through capital and resource sharing.
Give smaller companies the chance to work with P&G to develop, manufacture, and market
new products.
Give P&G the opportunity to increase sales, gain access to wider markets, and enhance
technological capabilities through research and development.
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Disadvantages:
Advantages:
Obtaining quality staff or additional skill, knowledge and other business intelligence.
Accessing funds or valuable assets for new development.
Accessing a wider customer base and increase market share.
Control of inputs, leading to continuity and improved quality.
Provide movement away from declining activities.
Disadvantages:
3. ACA 3: Market to Lower- income consumers in both developed and emerging markets (expand
and build beauty segment strictly aimed at low- income consumers).
Advantages:
Highly attractive given that the company is constantly innovating ways to reach more
consumers and the low- income consumers group is one that the company covets.
Helps shield the company from economic downturns in mature markets such as USA and
Canada.
Huge numbers of low- income consumers in markets such as Africa, Asia and South
America, as well as Eastern Europe and India that increase the company’s sales.
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The company is strong in products tailored to meet the needs of this market segment,
especially in brand recognition, market presence and brand loyalty.
Gives competitive advantage through mass distribution system which other competitors do
not offer.
Disadvantages:
Does not create new revolutionary products for mature and developed markets.
Altering product to suit the low- income segment means a lack of enough prestigious
products.
This course of action do not address to those consumers who desire products that contain
natural and organic ingredients.
4. Given the maturity of the North American/ Western European markets, combined with the
emerging popularity and demands for natural and organic ingredient products, P&G should look
to create new natural products and products tailored to the male market, not just skin care (Expand
and build beauty segment).
Advantages:
This would help fulfill product proliferation, as the company constantly seeks to fill all the
niches, especially in mature markets.
The emerging men’s market is a key market segment, and one which is constantly gaining
momentum.
The beauty market in general is expanding as more and more consumers look to take care
better of themselves.
Disadvantages:
Assuming these natural ingredients products are competitively priced, the company still
lacks presence in the more prestigious, premium- brand products that competitors operate
in.
This can increase the expenses of the company which can bring a significant loss to the
company’s comprehensive income.
Developing male products is a game of bet that may or may not patronize by this type of
market because ever since the company is known mostly in producing female products.
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5. P&G should allow the total compensation of the original products to be utilized as a fund for a
new innovations in the future.
Advantages:
This lessens the cost of the company through utilizing the amount received in the original
products in creating a new innovations.
The revolving fund will be maintained, at the same time there is an increase in profit.
There is a greater possibility that the capital and spending fund of research and
development area will not be drastically cut since the fund of the original product will be
used.
Disadvantages:
STRATEGIC ALTERNATIVES
1
Product 2
3
Development Market
Retrenchment
and/or Related Penetration
Diversification
Key Factors Weight AS TAS AS TAS AS TAS
Opportunities
1. Current/developing market 0.14 4 0.56 4 0.56 4 0.56
expansion
2. Try other business ventures 0.08 3 0.24 3 0.24 3 0.24
or new market segments
3. Capitalize on social media 0.10 2 0.20 2 0.20 4 0.40
Where:
● Weight
○ 0.0 = not important
○ 1.0 = all important
● AS = Attractiveness Score
○ 1 = not attractive
○ 2 = somewhat attractive
○ 3 = reasonably attractive
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○ 4 = highly attractive
● TAS = Total Attractiveness Score = Weight x AS
The sum total attractiveness score of 5.57 versus 5.33 versus 4.21 shows that the first
course of action (Product Development and/or Related Diversification) is the most attractive.
Recommendation
The recommended alternative courses of actions are ACA 3 and 4. Through introducing
products which caters the needs of low- income segment and natural-seeker consumers, the
company has a great opportunity to enter to these specific market which greatly contributes for the
company’s growth. In these actions, the business will be known for its flexibility in terms of
offering products that accustomed to the consumers’ needs. This a kind of strategy facilitates
P&G’s need to capture a greater share of the low- income consumer market both in developed and
developing markets, which also capturing a greater share of the organic seeker market and the
growing men’s market. P&G can advocate new natural ingredient product development in multiple
segments, and not just confined to the skin care segment of the beauty/ feminine care segment.
Such a combined strategy will require the creation of new products and the expansion of existing
ones.
Conclusion
Based on the findings and recommendations made, P&G should take a significant step to
align the company’s products to the needs and standards of the consumers.
References
Book:
Websites:
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Procter & Gamble Annual Report 2011. (2011). Retrieved from P&G:
http://www.pg.com/annualreport2011/index.shtml
Morgan, P. (2015, July 8). Procter & Gamble: Your Guide to the Largest Consumer Staples
Firm. Retrieved August 22, 2016, from Market Realist: http://marketrealist.com/2015/07/procter-
gamble-global-giant-household-personal-products/
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Bibliography
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