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Procter & Gamble

Ares | Berry | Ilma | Silvi

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Over View

•The Procter & Gamble

Company, (P&G), is an
American multinational
consumer goods company
headquartered in downtown
Cincinnati, Ohio, USA.

•Its products include pet foods,

cleaning agents and personal
care products.

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Over View

• Founded in 1837
• Sales of $ 68.2 billion
• Nearly 300 brands in more than 160 countries
• 25 global brands with sales of over $ 1 billion
• Worldwide workforce of 135,000
• 140 plants and 25 R&D centers globally
• Spend nearly $ 2 billion a year on R&D

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Case’s
Actors

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• Introduced new product that never caught on

• Try to change P&G culture
• Share price slid 52%

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• Breaking down the walls between management and employees: moving all 5
division presidents to the same floors as their staff

• Develop HRD system: career stages & development, Weekly meeting with
head of HRD, Maintain Comprehensive data review 130.000 employees

• Consumer Focus

• Innovation of Product: Connect and Develop, 50% innovation ideas from

outside the firm

• Acquisitions of Clairol, Wella, Gillate

• Riskiest moves: expansion to services: car washes (Mr. Clean) & dry cleaning
(Tide)

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•Recession situation (2008): product become too expensive for middle class

• Lafley’s design: complex matrix organizational system

•Replaced motto: “costumer is a boss” to “purpose inspired growth”

•Showing less interest of specific details of trouble unit

•Trying too address all the problem all the time

•On June 2012: firm’s focus 40/20/10: 40 biggest category, 20 country

combination, 10 most developing market

•January 2013: sales rises 3%

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 Traditional Forms of
Organizational Structure

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 Simple Structure
Organization

an organizational form in which the owner-manager makes most of the decisions and controls activities, and the staff serves as
an extension of the top executive

Advantage Disadvantage

Highly informal and coordination of a Employees may not clearly understand

tasks is accomplished by direct their responsibilities
supervision
Decision making is highly centralized Employees may take advantage of the
lack regulations
Owner-manager is intimately involved Limit opportunity for upward mobility

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 Functional Organizational Structure

an organizational form in which the major functions of the firm, such as production, marketing, R&D, and accounting, are grouped
internally

Advantage Disadvantage
Pooling of specialists enhance coordiantion Differences in functional area orientation
and control impede communication and coordination

Efficient use of managerial and technical Functional area conflict may overburden top-
talent level decision makers
Facilitate career paths and professional Difficult to establish uniform performance
development in specialized area standards
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 Divisional Organizational
Structure
an organizational form in which products, projects, or product markets are grouped internally
Advantage
Quick response to environmental changes
Increases focus on products and markets
Minimizes problems associated with sharing
resources across functional areas
Disadvantage
Difficult to maintain uniform corporate image
Increased costs incurred through duplication
of personnel, operantions, and investment.
Overemphasis on short-term performance
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 Matrix Organizational Structure

an organizational form in which there are multiple lines of authority and some individuals report to at least two managers

Advantages Disadvantages
Allows more efficient utilization of resources Dual-reporting relationships can result in
uncertainty regarding accountability
Improves flexibility, coordination, Intense power struggles may lead to
communication increased levels of conflicts
increase professional development through a Working relationships may be more
broader range of responsibility complicated and human resources
duplicated a new challenge everyday
 Boundaryless
Organizational Designs

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 The Barrier-Free Organization
An organizational designs in which firms bridge real differences in culture, function, and goals to find common ground that
facilitates information sharing and other forms of cooperative behavior

Pros Cons
Leverages the talents of all employees Difficult to overcome political and authority
boundaries inside and outside
Enhance cooperation, coordination, and Lacks strong leadership and common
information sharing among functions, vision, which can lead to coordination
divisions, SBUs, and external problems
constituencies
Enables a quicker response to market Time-consuming and difficult-to-manage-
changes through a single-goal focus democratic processes
Can lead to coordinated win-win initiatives Lack high levels of trust, which can imped
with key suppliers, customers, and alliance performance
partners
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 The Modular Organization
An organization in which nonvital functions are outsourced, which uses the knowledge and expertise of outside suppliers
while retaining strategic control

Pros Cons
Directs a firm’s managerial and technical talent Inhibits common vision through reliance on
to the most critical activities outsiders

Maintains full strategic control over most Leads to an erosion of cross functional skills
critical activities and core competencies

Leverages core competencies by outsourcing Decreases operational control and potential

with smaller capital commitment loss of control over a supplier

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 The Virtual Organization
A continually evolving network of independent companies that are linked together to share
skills, costs, and access to one another’s market

Pros Cons
Enables the sharing of costs and skills Harder to determine where one company
ends and another begins
Enhances access to global market Leads to potential loss of operational
control among partners
Increases market responsiveness Result in loss of strategic control over
emerging technology

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CASE ANALYSIS

Changes of organization structure

Divisional Structure
Matrix Organizational Structure
Global Business Strategy

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Divisional Structure

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Divisional Structure

 The structure divide into 4 product-based global business unit: Baby,

Health, Beauty, and Food.
 Each division has a functional support, such as: R&D, accounting,
marketing, customer service, and manufacturing
 Individual operating system
 Decentralized authority to brand manager
 Speed, innovation, and expedition of management decision-making
 High skilled human resources, complex technology and multifaceted
strategies required
 Research and development based on product could boost new ideas,
focusing on what customers want in each product.
 Moved from conservative goal-setting plan to quick-moving and
internet-saving organization

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Matrix Organizational Structure

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Matrix Organizational Structure
 The group divide into three executive: Executives in charge of functions,
Executives overseeing different geographic region, and Executives for various
product
 Functional SVP managed function accross all regions
 President region responsible for the sales of the company, president product
category respaonsible for the manufacturing, purchasing, engineering, and
distribution which managed the supply chain from beginning to end.
 Global Presidents of each category reporting directly to CEO
 Allowed for the creation of global technical centers in different regions, with a
core competencies in a specific product category.
 Function of the dotted line:
− Country GM Product Category report to President Product Category
− R&D SVP were given direct responsibility a fully globalised corporate R&D
function
 The creation of global functions permitted pooling of knowledge, transfer of
best practices, elimination of redundancies, and standardization of activities

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The Problem of Matrix Organizational Structure

 Management by functional conflict led to poor
strategic alignments throughout the company.
 There was tension between product category &
regional management though regional managers
had responsibility to the financial result.
 R&D SVP leader hard to globalize new tehcnology
and brand innovation quickly

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P&G Current Structure: Global Business
Services (GBS)
The company structure is
categorized into four Sectors
and five Selling & Market
Organizations (SMOs).
Sector Product
Beauty Care
Baby, Feminine, and Family
Care
Fabric and Home Care
Health and Grooming
SMOs
Asia
Europe
India, the Middle East, and
Africa (IMEA)
Latin America
North America

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P&G Current Structure

Sector Product
 Combines global scale benefits with local focus
 Target focus is to win retail customers in each
country.
SMO’s
 Focus on superior, effective and efficient
selling, distribution, shelving, pricing execution
and merchandising in every store.
 Target on consumers, channel, customer
market that P&G served

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