Procter Gamble: Organisation And Development

Procter Gamble Organisation And DevelopmentINTRODUCTIONProcter Gamble was created in 1837 by William Procter who was a candle maker and James Gamble who was a soap maker. Since then the company was emergence bigger and bigger as years past by. Nowadays, Procter Gamble is a multinational organization operating in more than than 180 countries and producing over 300 products. Firstly, at this report, the strategic stimulatement of PG will be clearly evaluated and it will be followed by the rating of its resources and competences. Then, the evaluation of the companys external environment will be analyzed through the use of swot abstract, pest summary and 5 forces abbreviation. Subsequently, a strategic group analysis of the industry that PG is engaged to will be carried out to illustrate their variediate characteristics from different companies. Finally, the longer term system of PG will be clearly show with some future recommendations that could be supportive.Pattern of st rategic readingSince 1837 when Procter Gamble was founded, the company continued to grow and following the changes at the external environment, the collective strategy of PG was changing as well. From 1945 to 2020, PG has three stages of corporal strategy, which argon Product diversification strategy (1945-1980), Globalization strategy (1980-2003), and Sustainable Development Strategy (2003-2020).Product diversification strategy (1945-1980)In 1946, PG introduced Tide washing powder. Tides performance was better than the similar products in the market and so it soon got as a big success. Subsequently, PG launched a lot of new products. The first fluoride toothpaste Crest Obtained certification by American Association of Dental Prevention, then it became the leading toothpaste brand quickly. In 1961, PG introduced Pampers which is disposable bungle diapers, it is still one of the top product that PG sells (Ifeng Finance, 2010 ).The disadvantage of this strategy is that it is too difficult for the company to control and manage so some products and the company whitethorn over pursuit the market share and might not pay attention to develop the star products which confine core competitiveness. As a result, the master core competitiveness is weakening and the company does not mystify its own characteristics, the concept of the companys image and product become blurred.Globalization strategy (1980-2003)Through the achievement of Norwich Eaton pharmaceutical company 1982 and Rechardson-Vicks company1985PG is active in personal care products industry. In the late 80s, early 90s, through the acquisition of NoxellMax Factorand Ellen Betrix, PG plays an primal role in cosmetics and fragrances industry (Ifeng Finance, 2010 ). These acquisition activities have accelerated the process of PG globalization.Moreover, Pampers, Whisper, Pantene, Tide, Ariel, Crest, and Olay and some other brands has become a world-renowned brands. However, the biggest problem when a c ompany involved into other countries, is the cultural differences which will lead to different reactions on product on the consumers, thus the marketing strategies need to be changed accordingly. Also, the different national legal systems and the eminence in consumers budgets is also greatly affecting the conduct of globalization strategy.Sustainable Development Strategy (2003-2020)At the current stage, the te top of PGs organization strategy is sustainability which way of emotional state improving peoples life quality. In order to achieve this strategy, PG to start work from the following aspectsProductsPG positive and sold sustainable innovation products which can significantly subvert environmental pollution. In 2007, PG replaced the packaging of purifying as half of the originals, and adjusted the solution to double concentrated formula. The method saved the use of packaging materials and cut wastes. PGs purpose is to make the environment a better place (Adweek, 2007).Ope rationsPG established the sustainable development team in the offices. Through green recycle box, the company recycled more than 4800 kilograms of waste paper, and in exchanged for 69,000 new pieces of paper, moreover, the companys tycoon consumption dropped by 10%, saving 17 million kWh which is equivalent to 560 families a months electricity consumption. In addition, in some factories and distribution centers, PG also installed solar power and rainwater collection and processing device, to further reduce energy consumption. (21ST degree centigrade BUSINESS HERALD, 2009) friendly ResponsibilityIn 2009, PG signed United Nations Framework Convention on Climate Change and developed a global diminution in carbon footprint by 2012, and that will be published the results of carbon reduction stage. (21ST CENTURY BUSINESS HERALD, 2009)So far, all of the efforts which PG has done are win-win situation of condescension and environment. When the company set up the environmental value chai n, it will get financial gains from using energy efficiency and reducing wastes.Resources and CompetencesPG as we know it, is one of the worlds largest consumer products company but what does makes PG so successful while it competes in the huge consumer products industry? This part of the report is mainly focuses on the PGs resources and competences and how the resources and competences whole shebang together creating a competitive advantages for the firm.ResourcesTangible resourceThe tangible resource is easy to be identified by looking at the financial report. Their net sale was $ 78. 9 one thousand thousand in 2010, which is markedly stable by compared with the last two years net sales ($ 76.7million in 2009 and $79.3 in2008 respectively). The net meshing were $ 12. 7 billion and net operating income was $16 billion in 2010. This illustrates that PG has enjoyed a stable and healthy profits.Intangible resourcesThe intangible resources are the brand equity, corporate purificati on and human resources. PG is the 6th Most Admired Company in Fortunes 2010 list it was also one of the most valuable brands in the world. The corporate culture is unique, tough lives and improve life e real(prenominal) day is PGs philosophy which encourages the PGners engaging to improve consumers life.PG is also actually good at research develop. PG has invested $2 billion in consumer research over the last decade in order to understand consumers needs and to improve customers satisfaction. Additionally, at the same time RD increases the product innovation.Competences marketing strategyProduct differentiation each product has different brands, for example shampoo has Rejoice, Pantene, and Head Shoulders. Only one product has more than three brands and detergent has as many as more than nine brands. Product differentiation can lower risk in case if one brand goes wrong. various(a) functions one product has different functions and different packaging, for example, some of deterg ents have fragrance and others with the function of strong cleaning. This strategy will increase the market share for PG, such as in china along, the market share increased from 30% to 40% in 2010.Advertising PG tends to use celebrities to advertise its products in order to draw young customers. Localization is another strategy that PG has adopted, for example in china, the company sells shampoo by suing Chinese girl who has black long hear, because this can even off the Chinese culture.Consumer understandingPG is a company that did most investigations in consumers and market research. More than 15,000 researches has been conducted each year. PG invested $350 million a year in consumer understanding in order to improve the customer needs. PG is the first company to focus on customer feedback.InnovationPG is the Innovation leader in the consumer products industry. Over the past 15 years, 125 PG innovations have earned a spot on the top 25 Pacesetters list more than six largest co mpetitors combined.Innovation program connect develop (C+D) PG is always seeking the opportunity to collaborate with people or company who has innovative ideas.The VRIO framework evaluates the competitive advantage from four aspects valuable, rare, inimitable, and organized. From the evidence above the corporate culture was the Competitive parity. Because each organization has its unique cultures, it is inimitable. Human resources are the short term competitive advantage of the company. People are not frigid assets of one company, they can go to other company as well if they wish to. PGs competitive advantages are its brand equity, RD, marketing strategy, consumer understanding and innovation.External business environmentAt this part of the report, the evaluation of PGs external environment will take place. This evaluation will be contacted through the SWOT analysis, PEST analysis and Porters Five forces analysis.SWOT Analysis (Opportunities and Threats)SWOT analysis is a way to a nalyse an organisation and its environment. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are the internal factors, Opportunities and Threats are the external factors. At this report we are only consider about the external factors.OpportunitiesThe increasing demand for the section of male health and beauty goods is one of the biggest opportunities of PG and with the acquirement of Gillette, PG is growing rapidly at this particular market. Moreover, PG has a huge opportunity with its reaction to the enormous technological growth of the internet by utilizing different marketing techniques and online mixer networks. What is more, taking into consideration their long-term aims, they have been disconnected from some products such as the oral-care toothpaste of Gillette, Zest brand have been acquired by Brynwood Partners, etc. so PG will pay their full attention at brands of their interest. PG is persistently growing into more and more countri es so at the moment operates in 80 countries and now collectable to the recession it is easier to acquire any smaller firms because of their financial problems (Canadian argumentation 2011, Worldlingo 2011).ThreatsPG as a global giant company have a lot of competitors equivalent Kimberly Clark, Unilever, Johnsons Johnsons, etc. who in various countries causes large threat at the market share. Moreover, the competitors of PG are increasing their goods range through getting hold of other smaller firms. As a result of the recession, the consumers budget has been decrease and therefore their spending power is limited as well. Also, raw materials prices are rising thus the proceeds exist is rising and the different currency rate place a huge threat on PG.PEST AnalysisPEST analysis stands for Political, Economical, Social and Technological factors and it is used by the analysers to identify the external factors that may affect the organisation in an opportunity or as a threat.Polit ical FactorsProcterGamble have created the PG Political Action Committee (PG PAC), which is a scheme that it was created to give the opportunity to the employees of PG to support candidates at the federal, state and local level who contribute to the quality of life at the communities. Moreover, PG by base on ballsing economic support contributes in the political process (Procter Gamble 2011).Economical FactorsPG is designed to go through any quality of economy as they are very capable and they have a commitment to the consumers. Subsequently, even at the time of the recession PG had margins to reduce costs and offer products to consumers ( art Week 2011).Social FactorsWith the creation of Live Learn and Thrive Program, PG helps children in need to drink clean water so it helps them to have a healthy beginning in life. Moreover, it is making places, tools and programs purchasable to them for better learning (Procter Gamble 2011).Technological FactorsPG as a big organisation an d as it is condition in a lot of different markets, they are focusing on more sophisticate technology and they have managed to reduce any unwanted errors. PG have managed to create new products and further improve their existing products (Procter Gamble 2011).Porters Five Forces Model(SlideShare INC. 2011)Porters five forces model is a framework that was created by Michael E. Porter in 1979 and it is consider with the buyers power, supplier power, the treat of new entrants, the treat of substitute and the rivalry of a firm.Buyer PowerConsumers are well informed for all different brands of a specific product that are available mostly through advertising. Brand name is very important but consumers are very perceptive with price level as well. Thus, buyers power is high so PG organisation must remain competitive to keep being successful.Supplier PowerThe power of the suppliers to PG organisation can be low because the raw materials are easy to be find from different suppliers and wha t is more, such big firms have the opportunity to realise their own raw materials.Threat of New EntrantsThe threat of new entrants is very low since PG and their well known competitors are already huge global firms with very famous brand names and consumers will not just change their brand goods as easily. Moreover, setting up this kind of firm will cost millions.Threat of SubstitutesThe threat of substitutes that PG have to face is high. That can be seen from the retailers shops and sometimes the substitutes have cheaper prices and same performance.Degree of RivalryThe variety of the goods between different companies started to be similar to each other so the firms must begin a differentiation with offers, vouchers or even better/cooler advertises.Strategic group analysisPG is one of biggest multiple customer goods company in the world. Thus each product could have its own competitors. However, the main competitors of PG are Kimberly-Clark Co, Johnson Johnson and Unilever.Net sa le of PG and UnileverThe graph above illustrates the net sale of PG and Unilever in the last six years. As it can be seen, Unilever has about 10 billion more sales than PG in 2005. Interestingly, as it can be seen from 2006 to 2010, the net sale of PG is considerably more than Unilever. Furthermore, in 2008, PG reaches the peak showing 20 billion Net Sales more than UnileverPG official website 2010, Unilever official website 2009Product range and geographicalal scopeProcter Gamble, Johnson Johnson, Unilever and Kimberly-Clark are the major international companies that sells their products all over the world. But as regard their geographic scope we can see huge differences. PG has been selling its products in more than 180 countries. Johnson Johnson is almost the same as Unilever, and they are both over 170countries. However, Kimberly-Clark has been developed up to 150 different countries. The product range of PG holds into 5 main product categories which are Personal Beauty, Ho use Home, Baby Family, Health Wellbeing and fondle Nutrition. Although the categories of PG are very similar with Unileverthe food product of Unilever (Hearbrand, Lipton, sim-fast) gained an advantage over the other three companies. However, Johnson Johnson focuses its products on paramedical such as baby care, accidental injury care and vision. In addition, Kimberly-Clark specializes in Health care products (PG official website 2010, Unilever official website 2009, Johnson Johnson official website 2010, Kimberly-Clark official website 2010)Market share of shampoo in ChinaWith the development of shampoo market, the organization of PG became the leader of shampoo in Chinas market. PG basically owns five main shampoo brands which are Rejoice, Head Shoulders, PanteneSassoonand Clairol With these brands PG became the dominant position in many countries. Take china market as an example, PG take up nearly 60% shampoo market share in 2010. However, Unilever only accounted for 23%. The house servant brand C-bon only had 6.3% until 2010 (Bai Du website 2010).Successful factorsPG adopts multi-brand strategy. When PG entered the China market, it launched Rejoice, Head Shoulders, Pantene, Sassoon and Clairol successively. What is more, each of these brands has its traits for instance, the function of Head Shoulder should emphasis getting rid of surf and the function of walk on air is to soften the hair.Adopting the multi-brand strategy could have two advantages Firstly, multi brand strategy can focus on different target market. Secondly, brand management can became very independent. In addition, at the same time it can reduce the risks. Supposing that one brand of PG frails, it will not affect the reputation of PG too much. On the other hand Unilever adopts the Monolithic Brand Strategy which with this method can save money on many advertisement fees, it lost the market share.PG always build the brand image with a massive advertising campaign. It is not only in newspaper, magazines, but also on major television channels. The advertisement of PG is very pertinence, because each of their brands are emphasizing its unique function (Bai Du website 2010).Long term strategy development of the organizationReferencesBai Du website (2010Brand of shampoo strategy in China. online available from 20 January 2011Bai Du website (2010marketing analysis of PG and Unilever onlineavailable from 20 January 2011Bai Du website (2010PG took up more 60%market share in China. onlineavailable from 21 January 2011Business Week (2011) PG is up online available from 19 December 2010Canadian Business (2011) Brynwood Partners online available from 7 January 2011Docstock (2010) PG Analysis online available from 29 December 2010Ifeng Finance. (2010) Procter and Gamble Profile Online Available from 10 January 2011Johnson Johnson. (2010) official website onlineavailable from 16 January 2011Kai, H. (2009) Procter Gamble Environmental Friendly Promoting Innovation . Newspaper of 21st Century Business Herald, 26Kenneth R. Andrews. (1980) The Concept of Corporate Strategy. Richard D. Irwin, IncKimberly-Clark2010 Official website online available from 18 January 2011PG (2010) Official Website online available from 5 January 2011SlideShare INC. (2011) Fluff Pulp Fiction online available from 5 January 2011Sustainable Packaging Coalition. (2007) PG Canada Liquid laundry Concentrate Online Available from 8 January 2010Unilever (2009) Official Website online available from 14 January 2011Worldlingo (2011) List of Procter Gamble brands online available from 6 January 2011