Procter & Gamble in

the 21 Century:
st

Becoming Truly Global

GROUP 5, SFRLO, IIM Kozhikode

 Global Expansion and birth of PVP

The Grand
The Grand Vision
Visionforfor
Expansion
Croma D Purpose
Asset-light Value
People-light Principle
Finance-light

Organizational Culture was the guidepost Provide branded • Respect all

during International expansion in the 20th products and services • Integrity individuals
Century. Would culture make it easier or of superior quality and • Leadership

Be Right
• Innovation is the
harder to manage big mergers in the value that improve the • Ownership cornerstone of
lives of the world’s • Passion for winning success
future?
consumers, now and • Trust • Externally focused
for generations to • Seek to be the best
Adopt a strategy that is Quick, Light & Right
come
PROBLEMS

• Silos between managers in the US and
Europe
• Silos between R&D centers
• Lack of Standardization (cost and slow
innovation take-up)
• Pampers launched in 1961 reached the
French market only in 1978
• Redesigned its global organization due to Acquisition of Richardson-Vicks
• Created the Purpose, Values and Principles(PVP) document
• Translation of PVP to local languages was necessary
• Global Matrix Structure was setup to drive future growth
• In 2000, annual sales was $40 billion with more than 50% coming from
outside the US
• P&G faced difficulty in communicating its PVP in other countries
 New organization for the new millenium
A global team of 16 was setup in 1997 to work on HR-2005, a project which sought to
determine what P&G needed to do to succeed in the year 2005
New organizational paradigm • In 1998, CEO John Pepper stepped down to allow his number two, Durk Jager to lead
established the change
• Global Matrix was supposed to be setup in 18 months
• Reorganization would cost about $2 billion but would enable the company to realize
faster growth
Organizational • In 2000, P&G’s stock fell due to talks of acquisition of Warner-Lambert and forecasted
entities
loss in Jan-March quarter
• Challenges were both internal and external
• AG Lafley took over as CEO in June 2000

Objectives of the re-organization

• Make the company more streamlined and global
• Reduce hierarchical layers from 13 to 7
• Enable faster decision making(From months/weeks to days)
Corporat • P&L responsibility was split between the GBUs and the
Global
business
e MDOs
Function • Incentive system was revamped – stock options were
unit s
Market Global
awarded based on performance
Developm Busines
ent s
Organizat Service
 A PVP-led Turn Around

PROBLEMSProblems
TO FACE to face Values to focus
VALUES TO FOCUS

• Stock fell • Stretch, Innovation, Speed

• Tendency to become myopic, insular and internally • Improve consumers’ lives
competitive • Leadership, ownership, integrity, trust, passion for winning
• Critical customer relationship

Reconstruction guidelines for an

organic growth
• Focus on consumers
• Leadership: promote open mindedness and diversity in
managers
• 3 new strategic pillars
• Cutting cost:
• 3 GBUs instead of 7
• Clarified relationship between GBU and MDO
• Outsource GBS process to third-parties
• Divestment of non-strategic and underperforming
products
Minding the PVP – A Value driven network PVPs as guide of policies:

Becoming more collaborative and external Purpose

Values
focused (global market framework and
Principles
external partnership)

Changes in office layout: the

environment must be open,
collaborative and mutually supporting Company
Policy
Emphasizing the value of trust and the Statements’
principles of respect, external focused
and mutual interdependency Operating Worldwide
Policies Business
Consensus-driven mode of decision- Procedures Conduct
Practices Standards
making and new procedure to guide the
initiative launch process
Implementing
Systems &
For general managers, lead the values at Internal
work as well as at home Controls

Yes

D
Sub-Distributors
INNOVATION
Philippines was first P&G subsidiary to use
exclusive distributors
• Perfected a distributor model which was
extended to China and abroad
• In China, major logistical and managerial
conundrum was set up
• The focus was on individual profits and
not that of the supply chain
• Model was created with distributor
efficiency, investing in sales force, systems
and service levels of select distributor
Innovation as Lifeblood
• Making employees to collaborate better to attend to
responsive local and global markets
• New Venture Managers: Handling innovation teams and
streamline process to bring products to market quicker
• But still growth was very thin, losing focus on core brands
• Innovation based on organic growth and from its core
businesses
Diversity
Innovation directly proportional to diversity
• Promotion was young leaders in place of turnovers
• Obelisk is an example, empowering the Egyptian GBU to develop a model used across the
organization
• Factors: Gender in Japan, Sexual orientation in US, Age in UK and Europe

Connect and Develop
More society oriented, tapping knowledge
beyond company boundaries
• Identifying the need
• Ideate product and combine with P&G’s
capabilities
• Culture of openness and collaboration to
realize the company’s purpose
• Success depended on the seamless flow
of information, ideas and decisions
Innovation as Lifeblood
Basico
Reaching the large base of lower-income consumers in emerging markets
• Focused on organic growth, on core brands; on beauty, health, and personal care products
and emerging markets
• Solution from Egyptian born regional GBU, backward design method called Obelisk
• Value for money, best utility at the lowest price possible
• Extended the Obelisk to Diapers unit and the Basico concept was extended to fabric
• Was termed as identifying the Value Sweet Spot
 PVP in Action : Integrated Communication

Bringing the technical function into public affairs communications function

Breakthrough
Initially thought this integration cannot happen
Because the technical team and integration team doesn’t talk to each other
Post integration

Post Integration, the public affairs assumed a new strategic role

Stake holder relations are improved
Processes turned out more robust than earlier
Global sustainability

A sustainability group was created to oversee energy, materials and waste

management with idea central to PVP
 Globalisation with Focus

 LLT initiative as a way to integrate corporate citizenship programs

 P&G recognized the need to identify a focus and globalize its efforts
 Cause-Related Marketing efforts were put in to achieve a win-win situation
 Business units, country subsidiaries and external NGO’s were bought together to find ways to contribute to community development

 Project Hope: “Hope” schools were started in China once the sales started to kick off
 Worked hugely on employee contribution
 Teamed up with business partners to build additional schools

Testing the Values: PuR Case

 It is a major signal for P&G’s commitment to societal goals and PVP

 Initially a failure which led to spending of huge amount in various places

 Head office decided to pull the plug off
 Was given one more chance for it’s launch in Pakistan which too failed

 2004 Tsunami: In 2004, Tsunami has badly hit the areas of Indonesia and Srilanka
 P&G was able to sell at cost all the packets in 48 hours
 Donated additional packets during the season totalling up to two billion safe drinking water

Yes
 Lebanon case
Principles Values

P&G warehouse hit, 100 workers not in

-------PVP ECOSYSTEM------- P&G – restructured
July 12, 2006 – Military campaign on Lebanese-Israeli border

safety + 15 separated from family organization. – Backed data-

reshuffle responsibilities

People orientation helped the company fnd success

Employees offered hotels, re- Obj – Contain Lebanon
location to Cairo – Free of cost damage – encourage
because People Safety First other countries

Short term finances vs 14 Aug – UN ceasefire

long term employee Principles Values - Mil Lebanese n .5 mil
loyalty incomparable Israelis displaced

Employees wanted to give Sept 2006, employees

back – Best way – ensure returned- resumed
business fine operations - devoted

3 family members + extended on Issues faced – Ppl fled to other

payment - 55 relocated – highlighted countries (2-4 l) , supported
people values internally displaced people
 Gillette’s acquisition

"P&G and Gillette can grow together at levels that neither could sustain on its own.
The reason is that consumer products is, in the end, a scale business. The more scale a
company can create, the more opportunities there are to grow margins and invest in
brand innovation.“

– A.G. Lafley, Chairman and CEO, P&G

Reasons for acquisition Handling the acquisition

• Market leader in segments like blades and razors, oral care

• The PVP was the most important document in P&G and
and batteries
would help win over the employees of Gillette
• Strong in emerging markets like Brazil and India which aligns
• Both Gillette and P&G had many shared values and focused
with P&G’s strategy of entering emerging markets
on innovation
• Organizational structure similarities
• Knowledge gained from prior acquisitions would come in
• Strong lineup of brands
handy while dealing with Gillette acquisition
• Increased bargaining power with retailers
• Since it was an extremely large acquisition there would be
• Gillette did well in the men’s segment while P&G was strong
many new challenges for P&G
in the women’s segment

Yes
 Thank you

GROUP 5, SFRLO, IIM Kozhikode