Proctor & Gamble Powerpoint Strategic Overview

PROCTOR & GAMBLE Presented by Chris Collins & Ben Fournier

Company Overveiw World’s largest maker and distributer of household items and consumer goods Some of Proctor & Gamble’s “super brands”. Super brand means the product does more than $1 billions in sales in a year. P&G has 21 of these brands.

Product Line

Billion Dollar Brands Beauty Care – 23% of sales 

Always, Head & Shoulders

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Olay, Pantene, Wella

Fabric & Home Care – 28% 

Ariel, Dawn, Downey, Tide

Baby & Family Care – 16% 

Bounty, Charmin, Pampers

Health Care – 17% 

Actonel, Crest, Oral B

Pet Health & Snacks – 6% 

Iams, Pringles

Grooming – 10% 

Gillette, Mach 3

Batteries & Electrical Devices 

Braun, Duracell

Mission Statement To provide brandedproducts and services of superior quality and value that improve the lives of the world’s consumers. As a result, consumers will reward us with leadership sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper. Sustainability Video

Industry Pioneers Created the concept of "soap opera" by sponsoring radio and television dramas targeting women First Fluoride-based toothpaste, Crest Tide was a revolutionary synthetic detergent First disposable diaper, Pampers

General Business Level Strategy Product Differentiation – through the utilization of brand recognition and value, they maintain a competitive advantage. The products are of higher cost but also of higher quality and value.

Corporate Level Strategy Concentric Diversification Growth Strategy – continuous expansion into related but distinctively different areas. 

Constant focus on innovation and new product development

Acquisitions In 2005 Proctor & Gamble bought out Gillette for $57 billion, making it the biggest acquisition in company history. This enabled P&G to go from having 16 to 21 “super brands” They sold off their Folgers division in November 2008 for more than $3 billion in an effort to stay focused on the markets they are already in

External Environment Economic Adapted to the recession by lowering earning projections  Shed 15% of the management staff to help cope with the tough economy  Focus their greatest resources on the 43 best-selling brands 

Social Cultural 

Have to keep up with changing trends in consumer demand

External Environment Demographic Everybody will use most these products  Middle to upper class consumers due to the higher price of the brand name products 

Physical 

Global – in more than 80 countries

Legal / Regulatory 

Must meet industry regulations and standards in many different countries

External Environment Competition 

Three main competitors  Johnson & Johnson  Kimberly-Clark  Unilever

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Medium threat, hard to challenge brand value but relatively easy to enter the market

Internal Environment Human Resources Hire and retain some of the most talented people in the industry.  Rewarded and recognized for their contributions through financial compensation, promotions and freedom to influence project selection  Global training programs on managing the innovation process  Training for high-potential junior staff 

Internal Environment P&G operates in more than 80 countries worldwide

Internal Environment Location International operations are concentrated in Europe with a lesser presence in Asia and Latin America.  An opportunity is available in India, where Unilever dominates and P&G has a small footprint 

Internal Environment Marketing Constant emphasis on building brand recognition and brand value  In the 1880’s it was one of the first companies to advertise nationally.  In the 1930’s, P&G was the first firm to develop the idea of brand management. They would set up marketing teams for each brand and urge them to compete against each other.  In the 1930’s they used their own soap operas and radio programs to promote their products and appeal household women. 

Internal Environment Financial Analysis 

Liquidity  Current ratio: .792  Quick ratio: .52

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Leverage  Debt ratio: .52

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Asset turnover  Inventory turnover: 4.8 times  Days’ sales in inventory: 76 days  Total asset turnover: .58 times

Internal Environment Financial Analysis 

Profitability  Profit margin: 14.5%

Internal Environment Stock price growth from 1995 2009 P&G vs. Kimberly-Clark

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Internal Environment Research 

World class R&D organization, with more than 7,500 scientists working in 12 countries around the world. This includes 1,250 Ph.D. scientists. For perspective, this is larger than the combined science faculties at Harvard, Stanford & MIT.

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Invest 4% of sales back into research & development which is higher than most of their global competitors

Internal Enviroment Recently elected a new CEO, Bob McDonald, is going to start his duty on July 1st, 2009. Taking over for A.G. Lafley, who will now serve as Chairman of the Board of Directors. Lafley had an enormous impact on P&G, taking over in June 2000, in an attempt to turn a stalling company around.

Internal Environment Leadership 

A.G. Lafley states that the fundamental role of the CEO is to link the external world with the internal organization through four key tasks:

3. To define and interpret the meaningful outside (external environment). 4. To answer the two-part question, time and time again, “What business are we in and what business are we not in?” 5. To balance sufficient yield in the present with necessary investment in the future. 6. To shape the values and set the standards of the organization.

A.G. Lafley, CEO Comparable to GE’s CEO Jack Welch in some of his organizational leadership qualities Lafley wants to shift the focus back to the consumer. Let consumers needs dictate new products, rather than technology. Lafley began by breaking down the walls between management and employees. Moved senior executives from the 11th floor to the same floor as their staff  Exchanged a rectangular meeting table for a round one and allowed executives to sit where they want. 

A.G. Lafley, CEO Lafley began his term with P&G by stripping away the bureaucracy in order to speed up product development and build up well-known brands. “The assets of P&G are our people and our brands.”

P&G’s Value Chain Primary inputs A large majority of Proctor & Gamble’s products, about 90%, are made “in house”. They manufacture most of their products with their own plants, do research and development with their own team, and store and distribute their own products.  However, A.G. Lafley feels that they can cut the amount of workforce they have by almost 75% by doing less in house and outsourcing much more. 

 P&G currently employs about 110,000 people

Value Chain Nearly one half of the company’s employees work in its plants. A.G. Lafley feels that cutting back on operations is necessary and will undoubtedly create some hardships on employees Lafley feels outsourcing more activities may also create more flexibility for the firm in the long run If there are no clear benefits from doing something within the firm, it should be contracted out

Value Chain Wal-Mart provides about 15% of their total annual revenue. P&G is getting pinched by huge suppliers, Wal-Mart specifically, due to their buying power and ability to squeeze out lower prices. The power of these big-box buyers is only expected to increase.

Porter’s 5 Forces Threat of New Entrants Medium – can be easy to enter the market but hard to be successful, at least on a large scale  It can be difficult to obtain shelf space in stores 

Bargaining power of buyers High and increasing due to large retailers such as Wal-Mart  Wal-Mart could account for up to one third of global sales by the end of the decade 

Porter’s 5 Forces Bargaining of suppliers 

Low

Threat of substitute products 

Low

Intensity of rivalry 

High – many powerful competitors

Social Responsibility P&G is doing extensive research on where their products go after use and what affects they may have on the environment  Looking to see what impact their products have on

plants, animals, and bacteria

P&G embraces the UK government definition of sustainability, which says: "Sustainable Development is a very simple idea. It is about ensuring a better quality of life for everyone, now and for generations to come."

Social Responsibility P&G focuses on two areas they can make a difference 1. Water 2. Hygiene and health

These focus areas support ongoing work to understand issues concerning water availability, quality and quantity, and health, hygiene and nutritional issues.

Social Responsibility For 2007, P&G is ranked as the leading company in the consumer, non-cyclical market sector of the Dow Jones Sustainability Group Index. This is the seventh year in a row that P&G has been ranked first.