Restructuring P&G-

Case Study
International Business Strategy
Section B
Divyanshu Joshi (69) |
Ishaan Dhawan (74) |
Kaveti Hruday Kiran (76) |
Krunal Chakravorty (77)
Restructuring P&G: Introduction
6 year long organization
Established in 1837 by William In the 90s, P&G faced restructuring exercise that
Procter and James Gamble P&G CEO Durk Jager
stagnant revenues & aligned towards a
launched Organization
profitability, with a non- common goal & drive
2005 to resolve this issue
optimal product strategy organization by stretch,
innovation & speed

Spic and
Span in
1945 Features of Organisation 2005

Duncan
MaxFactor A new system with mixture of interdependent
Hines in organization eliminating the old matrix system
in 1991
1956
Jager focused on
Focus on cost saving by laying-off 15,000 developing new
Organization 2005
products &
employees estimated to achieve a cost saving was planned well
completely ignored
of $900m after tax annually but executed poorly
P&Gs well-
established brands
ACQUISITIONS
Chairman Formal and standardized processes globally Jager had made
Noxell in (making P&G more centralized)
Paper Mills efforts in January Selling P&Gs
1989 2000 to acquire products under the
in 1957 Warner-Lambert and same name globally
American Home ( E.g.: Fairy & Dawn)
Products
Leaner organization with less employees and
fewer management layers

Folgers Clorox in
coffee in 1957 but Some of the tasks/decisions were assigned to
individuals, previously being decided upon by Acquisition failed as Durk Jager was forced to exit the
1963 sold in 1968 the committee to reduce the time taken. deal due to negative sentiment from the market.
P&Gs Organizational Structure under ‘Organization 2005’
Global Business Unit Market Development Organisation

Ten product categories got divided into five segments:

• Beauty 8 regional MDO’S  with primary task to maximise business potential.
• Grooming
• Health Care
• Fabric & Home Care MDOs were tasked with customising global programs to adapt to local circumstances
• Baby, Feminine & Family Care. and design market strategies

• The GBUs are responsible for developing overall brand

strategy, new product upgrades and innovations and Additionally, collaborate with other companies and build relationship between
marketing customer and retailers.

Corporate Functions Global Business Services

Provides technology, processes and

Also gives centralized GBS is responsible for providing world-
standard data tools to enable all other
functional support like class solutions at a low cost and with
CF provides company- portfolio analysis, functions to better understand the
minimal capital investment.
level strategy and treasury, tax, external business and better serve consumers.
functional capabilities of relations,
operations governance,human
resources and legal
support
Marketing Strategies undertaken by P&G
Customized Global Programs

• Customized global programs to cater to the local markets and designed marketing strategies based on the
specialized knowledge MDO had about local consumers

Web Order Management

• P&G launched an Internet distribution system called ‘Web Order Management,’ which made it possible for the
consumers to place orders directly with P&G.

Interactive Marketing
• P&G started a new division ‘P&G Interactive Marketing,’ that aimed at understanding consumer needs by
facilitating more interaction and feedback from them through the Internet and also devise strategies for marketing
P&G’s products online.

Same Brand Name Globally

• P&G’s strategy of selling P&G’s products under the same name globally which backfired it

P&G Advisors Program

• P&G started a new P&G created “P&G Advisors” program to collaborate with customers in developing new
products

Focus on Local Market Sentiments

• Collaborating with other local companies and maintaining better long-term relationships between customers and
retailers.
Merits & Demerits of Organization ‘2005’ program
MERITS DEMERITS

Change of organizational Structure Too much focus on diversification rather

than gaining market share on top selling
brands in the earlier stages of the program

Standardization of work process:

Rebranding/ renaming of product lines led
to losses in some of the regions like
• Undertook Several IT
Germany (Dish washing detergent :”Fairy”
initiatives
was changed to “Dawn”)
• Came up with new initiatives
and program

New corporate culture also failed to yield

Revamping the corporate culture: desired results

• Moved from conservative goal-

setting plan to stretch goal plan
• Discarded old dressing code Sudden transition took a toll on profit & cost
• Took measures to reduce hierarchy
• Effective use of company’s IT tools
Was the program fundamentally correct?
Yes, fundamentally the program correct.

Aimed at changing the Improved the standing of the Focus aspects of improvement:
organizational structure P&G portfolio globally Revenue, costs and market share.

FUTURE PROSPECTS

Changing the culture to Streamlining supply chain Cost savings allows

Aligned with the goal of
being employee & and costs to reach more outsourcing some of their
establishing an innovative
customer centric customers while creating production and thus
brand image
organization localized products reinvest in other areas
Turnaround for P&G
George Lafley was appointed the new CEO in June 2000 who
Effects of change in strategy
implemented a slightly charge

Fabric, baby & home care, all gained revenue & market
share in the midst of stiff competition.
Enabled by brands like Cheer reducing its package size
Product People Global and price to compete with Unilever’s Wisk.

P&G acquired Clairol in 2001 for 5 billion helping achieve

Introduction of 16% ($1 billion) growth in net earnings in Q1 FY’01
Assigned senior
product Focused more on
positions and
extensions for major markets &
higher roles to Lafley launched complementary program to Organization
higher growth leading brands
women 2005 involving streamlining of P&G’s cost structure to
E.g.: Tampax
boost long term growth
High potential
Dropped brands
brands like Crest Transferred 30 like Clearsil that
P&G outsourced manufacturing of bar soaps to Canada
& ThermaCare senior most contrary to traditional P&G strategy of production in-
didn’t fit global
heat wrap still got officers strategy house
attention

Heavy investments were made in Product Innovation to

ensure maximum value for consumers and optimized
pricing.