The marketing channels decisions in international markets of P&G

I. INTRODUCTION
1. P&G:
https://www.youtube.com/watch?v=z251wmzHpoA
2. INTERNATIONAL ACTIVITIES:
There are 7.4 billion people on the planet—and over 5 billion of them in 180
countries use P&G products. Their international presence is great news for your
career because “no matter where you are in the world, you’re never too far from
finding a role with us”. It also means that your work will reach more communities and
make more lives better, from the begining.

P&G has operations in more than 80 countries. Its nearly 300 brands are sold in
more than 160 countries.

The company’s global scale enables competitive advantage through knowledge

sharing, common systems and processes, and best-practice reapplication. P&G
views its global scale as one of its five core strengths, seeing scale as a way to drive
efficiency and consumer value.

To deliver local agility, P&G’s global operations are divided into five regions. This
structure delivers the benefits of scale while leveraging local focus, letting the
company respond faster to local consumer needs and dynamic market demands.
Those five regions are:

ASIA

One of the fastest growing economies in the world, Asia is home to over three billion
consumers, more than half of the world’s population. P&G Asia includes: China,
Japan, Korea, Hong Kong, India, Australia, New Zealand, Indonesia, Philippines,
Singapore, Taiwan, Vietnam, Thailand, Sri Lanka, Malaysia, Bangladesh.

Innovation is a key focus for P&G Asia, employing about 800 scientists in four
technical centers in Bangalore, India; Beijing, China; Kobe, Japan and Singapore.

Asia Regional Headquarters

Singapore

CENTRAL & EASTERN EUROPE, MIDDLE EAST AND AFRICA (CEEMEA)

CEEMEA is P&G’s largest geographic region, stretching from the western edges of
Turkey to the far eastern regions of Russia and including nearly all of Africa. P&G
CEEMEA includes: The Balkans, Central Europe North, Central Europe South,
Eastern Europe, Middle East, Sub Sahara, Turkey/ Caucasia & the Central Asian
Republics.

CEEMEA Regional Headquarters

Geneva, Switzerland

LATIN AMERICA
Procter & Gamble’s presence in Latin America dates back more than

60 years with the opening of the Mexican subsidiary in 1948. We employ people
across 14 countries, including 19 manufacturing sites, 12 distributions centers and a
service center. We have leadership market positions in detergents, diapers, feminine
hygiene, health and personal care, batteries, razors & blades products.
Their largest markets are in Mexico, Brazil, Venezuela and Argentina.

Latin America Regional Headquarters

Panama City

NORTH AMERICA

Their North America region operates in Canada, Puerto Rico and the United States.

The average American consumer spends $110 per year on P&G products, where
sales make up more than 40% of the company’s total. Nearly every family in the U.S.
has at least one P&G product in their home. They have more than 35 manufacturing
plants handling production for products around the world.

North America Regional Headquarters

Cincinnati, Ohio, USA

WESTERN EUROPE

Our European business dates back to 1930 when we opened

a subsidiary in the UK. Today, P&G has a presence in every country in Western
Europe; the region represents about a quarter of P&G’s

total business.

We have about 35 manufacturing plants handling production for products around the
world. In Western Europe, P&G markets over 100 brands and has a clear leadership
position in 5 top categories: Blades & Razors, Diapers, Feminine Care, Laundry,
Oral Care, Home Care,

and Shampoos.

P&G Western Europe employs about 3,000 scientists working in nine Innovation
Centers in the UK (London, Newcastle, Reading), Belgium (Brussels), Germany
(Kronberg, Schwalbach, Darmstadt), and a combined innovation center in Italy
(Pescara and Pomezia).

Western Europe Regional Headquarters

Geneva, Switzerland

3. Value chain: Value Chain Analysis describes the activities that take place in a
business and relates them to an analysis of the competitive strength of the
 business. Value Chain Analysis is one way of identifying which activities are
best undertaken by a business and which are best outsourced. It suggests
that the activities of a business could be grouped under two headings: primary
activities and supporting activities.

PRIMARY ACTIVITIES

- Inbound logistics: It could be implied that P&G’s raw materials are sourced
and/or procured from all over the world, wherever it would be cost-effective. It
is thus no surprise that for a number of years it had focused on ways to
improve supply chain efficiency and costs. It now has a powerful industrial
network linking electronically to major suppliers and customers. This is to the
extent that it changed companies when efforts to reduce inventory levels only
produced marginal improvements. This led to the introduction of agent-based
modelling.
- Operations: P&G’s operations had four business units: health and beauty,
babies, snacks and beverages, and fabric and home care. It offered more
than 300 products including major brands like Tide. It has been aggressively
using product lifecycle management software since 2000 for new product
development. The company uses MatrixOne software for mechanising and
automating the knowledge components, and flow components, within the
bringing-a-product-to market phases. In addition, the company is planning to
expand its use of agent-based modelling to actually run important aspects of
its operations so that end-to-end replenishment cycle for products could be
shortened drastically.
- Outbound logistics: P&G’s largest customer was Wal-Mart that had a
reputation for requiring suppliers to coordinate their supply chain processes
with its powerful just-in-time continuous inventory replenishment system. A
database is used to hold information about work processes vital for creating,
reviewing, approving, and distributing products. This enabled the company to
lower its costs on item such as pigments and chemicals, and to reduce
development time.
- Sales and customer service: Wal-Mart was P&G’s largest customer,
accounting for nearly 20 percent of its sales and could be responsible for one-
third of P&G global sales by 2010. Wal-Mart capitalised on this position to
force P&G to sell wares to them at the cheapest prices possible. With the
coming of a new CEO in 2000, the company began to find new ways of selling
its major brands in more flexible, innovative and cost-conscious ways. This
was apparently because they were not meeting sales targets, and had to rely
on price increase to do so.

SUPPORT ACTIVITIES

- Human resources (HR) management: P&G began to use information systems

to support how learning occurred within the company. It created an intranet
through which new employees could network with experts, learn from projects
and receive answers to pertinent questions. This system encouraged experts
to share their knowledge with ‘newbies’ through an implicit compensation or
reward system. Further, human resource was provided with tools they needed
 to enhance their trade. For example, marketing personnel were given a
platform where they could access data, marketing principles and tools in order
to make sound judgement about a situation.
- Marketing and Advertising: The company employed the use of knowledge
systems to manage marketing. It also uses a very small information
technology group called Virtual Learning @ Procter and Gamble to develop
the marketing for potential new products. Further, it works with marketing
company called Cre8 to put together virtual presentations that demonstrate
new concepts to rapidly prototype new features for current products, and even
test how consumers react to alternative shelf-space designs. Using
information technology in marketing had been ignored in the past because
they saw it as complex. P&G’s various brands, product lines, customers, and
even different marketing groups each used their own independent software for
some functions, including email and marketing campaign management.
Currently, using zTelligence, P&G does much of its market research and
surveying online.
- Research and Development: P&G came to be seen as unimaginative, even
stodgy. It seemed weak in developing new products, and had developed just
one product in 15 years. This gave the chance for traditional competitors and
makers of generic versions of their branded products to grab market share. It
established an Intranet called InnovationNet, which was used to bring people
together who are working on similar problems in order to generate synergy for
new product ideas and product development. Using the same intranet, P&G
allows outsiders like research scientists and entrepreneurs to search for new,
innovative products worldwide. Further, it uses a very small information
technology group called Virtual Learning @ Procter and Gamble to develop
the concepts, designs, and packaging for potential new products.
- Facilities and Management: It can be clearly seen that the introduction of
several information technology services and systems for the various
departments of the company.
1. MatrixOne; used to manage and integrate other IT systems and work
processes.
2. InnovationNet, and intranet which is used to provide access to published
information such as documents, reports, charts and videos.
3. zTelligence; to conduct market research and online surveys.
4. Marketing resource management software to enable marketers “focus on
creative results-oriented marketing”.

II. SUPPY CHAIN

The past 30 years have been a massive change in P&G’s supply chain operations.
Without a doubt, digital technology is being one of the biggest drivers of such
transformation. According to Supply Chain 4.0 in Consumer Goods, the focus of the
supply chain management role has altered to “advanced planning processes” based
more on the actual demand from end consumers enabled by digital analytical
forecasting and integrating operations planning. Such demand-driven model, in
which sensing and responding to demand as quickly as possible, requires
manufactures to reconsider its production to shipment network design. In order to
meet such demand, P&G integrated data-driven production flow of operations that
significantly improved responsiveness as well as transparency. As a result, the
digital pieces of the supply chain that used to be discrete individual steps now
become more holistic, real-time management of the entire ecosystem.

P&G has leveraged large-scale application of advanced analytics and digital

technology to excel in its ability to manage complicated global supply chain with
more than 130 manufacturing sites serving over 180 countries. One of the key
drivers is an “end-to-end model” that connected the siloed steps from suppliers to
retailers to provide the most value to the end consumers, “with faster-than-ever
response times”. The concept of integrating the whole value chain allow every
stakeholders of its eco chain to minimize the unnecessary inventory as well as to
speed up the system.

P&G integrates its supply chain software with its suppliers, distributors and retailers
with a notion of joint business planning with key stakeholders. To fully integrate
different parts of the chain, understanding that digital automation of workflows that
allows high visibility of any movement in each step is a key to enable end-to-end
model. Digital automation of workflows empowered by use of algorithm-driven tools
to reduce exceptions, enables end-to-end planning, connecting headquarters,
manufacturing plants, distributor, and retailers.

One highlight in logistics capability, called “Distributor Connect” connects P&G with
distributors. Digitally enabled operational program, it allows all the transportation,
from raw materials from suppliers to finished goods to retailers, be accessible in one
source of data, on their laptop or mobile, for the supply managers to track the status
of the delivery. With enhanced real time visibility of where things move, Distributor
Connect significantly reduces inventory across the ecosystem and the ‘deadhead,’
trucks not optimally utilized, by about 15%.

Similarly, not only does P&G support with mobile-phone applications that enable
retailers to check the status and order more products, it fully incorporates “GDSN,”
Global Data Synchronization Network with the operation with retailers. GDSN
enables 100% automated commerce without human intervention. [6] This capability
significantly improves the human error between retailers and companies and save
cost for all the parties.
RECOMMENDATION

These ‘end-to-end’ approach, enabled by digital capabilities, allow the company to

accelerate the time to deliver its products to the market. However, the implications of
rising digitalization trend do not just start from manufacturing. It goes back into
product innovation. If we look at different industries, for example apparel industries,
digital landscape has pushed each brand to take advantage of latest technology
such as AI to realize real-time personalization.

To truly accelerate the cycle of innovation, the company should consider the
following:

● Unlocking insights through Advanced Analytics– If we can quickly identify

the insights from the big data, could we capture primary demand for the
manufacture without sequential researches to ‘qualify’ the products? AI will
enable the company to better understand and interpret individual customers’
preferences. This will allow us to shorten the lead-time to explore different
options of formulations. This approach will also significantly reduce finished
goods inventory with more precise demand forecast while offering the better
value proposition to the end consumers.
● Direct to Consumer –one way to shorten the lead time from manufacturing to
consumers is to cut some phases of the supply chain. Rather than moving the
products from factories to retailers, P&G should accelerate the development
of direct to consumer supply chain from the manufacturing plants.

III. CHANNEL DESIGN: 5 MAIN FACTORS

(customer/product/middlemen/company/competiton)

1. CUSTOMER
- Who are the potential customers?
+ Individual customers:
People with fixed budget for household things and look for economical choice

Women at the age of 18-54, escepecially housewives.

+ Group customers: Supermarkets, shops, retailers, wholesalers,...
+ Middle class family
- Where customer can buy product?
+ Direct Distribution: Online stores of P&G, Subsidiaries
+ Indirect Distribution: Retail shops, supermarkets, online shopping
websites, …

Middlemen
- Customers can easily assess by the intensive distribution
- Sold in many kinds of stores (supermarkets, convenience stores, …) ->
Extensive distribution.
COMPANY

- 80 major brand and hundreds small brands in 180 countries

- 101 000 employees in 2021
- Revenue: 46.88 US dollars in 2020 -> Strong financial resource
- Brand has a high recall, high visibility due to great marketing campaigns
- Excellent distribution through supermarkets, groceries, online store, …

Product:
Tide
- Strong marketing push through public media
- Usually sold through retailers, supermarkets, convenience stores, …
- Present in almost distribution medium -> Gain considerable market share
across the world
- Has peomience in the self of the shops. -> Better visibility
COMPETITION
- Simple Green is the top competitor of Tide. Simple Green is headquartered in
Huntington Beach, California, and was founded in 1979. Simple Green
competes in the Household Products field. Simple Green generates 26% the
revenue of Tide. Lysol is perceived as one of Tide’s biggest rivals. Lysol was
founded in Parsippany, New Jersey} in 1889.
- Others in the top of Tide competitors:
1. Rin
2. Persil
3. Uniliver’s Purex
IV. COMPLEXITIES IN DESIGNING MARKETING CHANNELS IN GLOBAL
CONTEXT

In the 1970s and 1980s, P&G developed products in the Japanese market in
the same way that they did and are doing business in the US market. They
don't care about local market and cultural characteristics. P&G's marketing
strategy is carried out according to the method of marketing from the parent
company in the US to subsidiaries in other countries around the world such as
Japan. Products for the Japanese market are still produced according to the
needs of the US market. There is no price discrimination across countries,
although there are income differences between the countries in which P&G
trades its products. P&G's advertisements in these new markets are the
advertisements P&G uses in the US market. Products are mass-produced
from major factories and distributed globally. For example, P&G introduced
the Cheer detergent to the Japanese market. Developed in the US, Cheer
was promoted in Japan with a marketing message from the US - Cheer
washes effectively in all temperatures and produces lots of foam. Subsidiaries
established in Japan only deal in a few key products, the company structure is
hierarchical by product, with brand managers. The key positions of these
companies are sent by people from the parent company, local workers are
hired only a few and in insignificant positions. The image of the subsidiary in
Japan is associated with the image of the parent company in the US.
In the 1990s, in the Polish market, P&G advertised regularly and aggressively
for Wash&Go products, but it was not successful because Poles were used to
thinking that advertising goods were caused by poor goods. Quality is not for
sale. Or when launching a new washing powder product in Mexico, many of
P&G's customers in Mexico are manual workers and are very sensitive to the
smell of sweat when they ride the bus home from work. What makes them
believe that their clothes are washed is the sight of soap bubbles – something
this new product does not have.

=> The stereotype in developing marketing in the international market

according to the method of the domestic market can be costly and backfire
due to differences in consumption cultures between countries. Failure to do
local market research can lead to loss of competitive advantage in the long
run. The company may be exposed to exchange rate risk. Because products
are exported to other countries.

Different countries lead to the use of many foreign currencies in payment and
conversion. Any change in the exchange rate, even the smallest, will more or
less affect the company's cost, revenue and profit.

Realizing the difficulties and disadvantages when applying the

internationalization strategy, P&G has gradually shifted to a multi-market
strategy , seeing each country as a market.

P&G has restructured its organization into a multinational corporation, which

is a combination of subsidiaries that operate relatively independently. Each
subsidiary focuses on specific market in each country. These subsidiaries are
free to customize their products products, marketing campaigns, and
operational techniques to respond well needs of local customers.
At this time, the orientation of the subsidiary is decided by each company in
order to meet the local specific needs and in line with the general orientation
of the company . Business plans, marketing strategies, product pricing are set
up and implemented by the subsidiaries in each country to suit the business
realities in each locality. Product manufacturing may be made directly at the
local P&G plant or may be ordered from another P&G plant located in another
country, but the product is designed to cater to individual countries. .

For example, in early 1990, P&G acquired Max Factor, Alen Betrix cosmetics
and perfume production line from Revlon. But the result they achieved was
the level low growth of 2 to 3%/year, at that time, aromatherapy has become a
business activity. The business was not as attractive as P&G had hoped.
However, they saw an opportunity for a change, they started to define
customers in one region clearly and more careful. They use images of famous
figures in the markets to promote their product image in that market. By 2007,
P&G had become become the largest perfume company in the world with
revenue of more than 2.5 billion, up 25 times for 15 years thanks to a suitable
multi-market strategy.

=> P&G's activities to promote marketing, promotion, introduction, and

research on new products have achieved positive feedbacks from consumers,
but the revenue cannot offset the huge costs from these activities.

- The economic recession in the 1990s made people's income relatively

reduced, consumption decreased significantly. However, P&G always spends
some of its revenue on researching new, higher-quality products, so the price
is also higher. Although the product is successful, it is still not enough to make
up for the cost that the company has spent.
- Developing many new products with the same brand inadvertently reduces
the brand and competitiveness significantly.

P&G's Crest toothpaste brand has released too many variations of this
product line such as anti-tartar, more fluoride... making customers more
confused when choosing to buy toothpaste because there are 52 versions of
Crest with the same product. time in the market. Or like Head & Shoulders
shampoo brand, there are 31 different versions of anti-dandruff shampoos.

- The development and research of new products not only does not make
consumers feel comfortable, but also creates objections and affects the image
that has been built up in the hearts of customers for a long time. This is due to
the precise identification of market needs and product suitability.

V. CHANNEL CONFLICTS

Channel conflict can be defined as competing options in the channel for customer
fulfillment, whether that be individual or business customers of the company. This
channel conflict can occur due to the presence of multiple options in a channel and can
cause conflict between the different channel sources. The main issue that could arise
from Procter & Gamble's special arrangements with Amazon is the impact from Procter
and Gamble attempting to sell products on their own internet site in contrast to only using
Amazon as the online source for their products. This could cause channel conflict
because Procter and Gamble can make more money by selling their own products
directly to customers on their website, but this would take business away from Amazon,
thus causing conflict between the two companies, irregardless of their special
arrangement.

VI. ADD VALUE TO CUSTOMERS VIA MAJOR LOGISTICS FUNCTIONS

 - By marrying the tools of inventory optimization with the people in
P&G’s horizontal planning networks, P&G has defined an inventory
management pro-cess that has significantly reduced its total inventory
investment. The work began with single-stage inventory models
designed by P&G’s OR group and implemented in spreadsheets that
planners can use directly. To this day, these spreadsheet tools drive 60
percent of P&G’s business. For more complex supply chain networks,
multiechelon inventory models have replaced the single-stage models,
producing additional average inventory reductions of 7 percent. These
multiechelon models now drive 30 percent of P&G’s business. P&G’s
work on inventory optimization is not standing idle. We assume that
another 40 percent of the single-stage models will migrate to
multiechelon models in the next three years. Beauty Care has also
spearheaded a closed loop of inventory optimization in which tactical
inventory models are used to generate more rigorous strategic analysis
that can then feed the next-generation design of the supply chain.
Furthermore, P&G continues to work in related areas, such as
improving the forecast through point-of-sale-based demand sensing.

=> THEY CAN DELIVERY TO CUSTOMER AS FAST AS POSSIBLE WITH

LOWER COST.

- P&G use “Digital Supply Chain Transformation”:

+ P&G annually consolidates billions of consumer data points
related to thousands of SKUs across hundreds of retail
customers. That repository enables data-driven supply chain
agility. Schulten emphasized, “The strength of our supply chains
is mainly driven by the flexibility that we can create. Strong
supplier partnerships around the globe allow us to shift sourcing,
if we need to, from one supplier to another either because of
[either] supply or freight lanes not being available.” In addition to
logistics support, data analytics aid production. “We have an
ability to reformulate some of our products, which we're doing
actively, without impacting the superiority of the product or any
noticeable impact to the consumer, and that gives us flexibility to
adjust again to material availability or cost,” Schulten added.
“We also have an organization that anticipates potential
bottlenecks and then chooses to build inventories either on
materials or finished products to then be able to withdraw from
those inventories on a global basis.”
In an industry highly sensitive to supply chain disruption, rival
consumer packaged goods (CPG) brands have struggled to
maintain availability and margins. Yet, P&G delivered record-
high sales, profits and operating cash flows in FY 2021 — that’s
very compelling evidence that its productivity investments are
delivering.

+ As companies seek to modernize IT infrastructure and

drive digital transformation, P&G’s supply chain resilience
demonstrates that technology must be well-funded —
long before market turmoil requires it. Otherwise,
investment procrastination’s hefty price may be too steep
to pay.