Procter
and Gamble Case Study Report
Name
Institutional
Affiliation
Executive Summary
This report explores the
main challenge that afflicts the existence and the competitive edge of the
Procter and Gamble Company in the provision
of various consumer goods to her international customers. Currently, there are two intertwined challenges
that constitute a gigantic menace to the competitive edge of this company.
These include the strained growth in the stock of the company and concentration
on the wrong markets (Kramer, 2018). However, these two challenges are defined
further by other subset problems (discussed in the body) that culminate to a
reducing competitive advantage by the Procter and Gamble over her rising strong
competitors such as the Colgate-Palmolive and Unilever.
Strengths
·
Competitive consumer goods brands.
·
Economies of scale.
·
Efficient supply chain networks.
Weaknesses
·
Entry of strong competitors into the
market.
·
Limited online presence.
·
The limited
scope of business diversification.
Alternatively, the company has access to a large field
of technology and expertise, with the relevant innovation and creativity to
solve the internal threats and weakness. This is possible through:
·
Business diversification to mitigate risks
·
Product innovation to increase
competitiveness.
·
Development of an online presence.
·
Divesting from less lucrative brands and ones with a shrinking market share.
This paper recommends that the company should focus on
the developing a more defined and comprehensive online presence through
aggressive market research and consideration of the main contributors to the
menace of declining market share, which in other words is leading to a declining
competitive advantage.
Implementation
Implementing this strategic marketing plan, call for
the company to develop a strong R&D and a comprehensive study of the
incumbent and potential international markets for consumer goods. Thereafter,
the Board of Directors should plan for the development
of a customer-friendly e-commerce store for both retailing and wholesale
buyers, unlike the vague present company authority website that just describes her profile.
Introduction
Procter
and Gamble have been in the consumer goods market for about 180
years since its formation and thus it is evident that the company has built
trust and positioned itself well in developed markets across the world. However, the Board of Directors in this
company have been inclined their faith in the developed markets to an
underestimated the potential of incumbent firms and the developing potential international
markets. Currently, the major challenge facing this company is the reducing
stock value and focus on the wrong markets ("Our Brands | P&G",
2018).
Alluding
to Porter’s value chain, which encapsulates that an organization’s existence is
determined by the value it creates to its customers. Procter and Gamble provide value through the provision of consumer goods from a number of
her strong brands such as Ariel, Gilette, Bounty, Always, Pampers among others.
Maintaining an elusive competitive position in the provision of consumer goods becomes a great hassle to the company
since most of what the company produces is highly imitable. This explains the
cause of a highly fragmented international market share between P&G and her
competitors such as the Unilever, Colgate-Palmolive, and Estee Lauder ("Our
Brands | P&G", 2018).
No Growth and Overvalued Stock
According
to Kramer (2017), the company only managed to get a 9 percent share rise in
2017, a figure below S&P 500 index by almost 5 percent. Comparing the
previous 5 years progress of the company’s stock price rise to S&P 500, the
rise was 32 percent and 76 percent respectively, which is a bad impression to
investors bearing in mind that the company shares are quite expensive, at 20.5
times one-year forward earnings. The figure below illustrates the 5-year
performance of the company shares.
There is a higher risk of
decline in the performance of the shares in the stock market. Analysts reveal
that the company expects only 1 percent revenue growth for the first-quarter of
2018 fiscal year, which is quite minimal comparing to estimated revenue growth
of other competitive companies such as Unilever.
P&G Company expects a
minimal three-year revenue shift from $67.15 to in 2018 to $71.76 by 2020.
However, the company strategies to get there are not well defined and this call
for the Board of Directors to revise the action plan. Analysts attribute the
stagnation of stock growth to it being overvalued.
Wrong Markets
Kramer’s
report reveals that a huge percent of P&G’s revenue originates from the
developed markets with about 45 percent coming from North America and about 23
percent from Europe. On average, about 65 percent of the company’s revenue
comes from developed markets. Conversely, its rival Unilever concentrates more
on emerging markets, with more 58 percent of its income coming from these
markets, and the rest from the developed markets. In fact, this is the major
problem affecting P&G Company: concentrating on sluggishly growing markets
and expecting to raise the stock value.
Emerging
markets may have disappointed the expectations of the analyst for Unilever due
to a small weakness that developed in the market, registering a sales decline
by 2.3 percent and volume growth fall by 1.9 percent. However, lately emerging
markets are picking, with a sales growth of about 6.3 percent and volume growth
of 1.8 percent. Placing P&G on the same scale brings out a more delicate
position since its strength on emerging markets is not so well established
(Kramer, 2017).
SWOT Analysis
A clear SWOT analysis is
significant in providing a clear baseline for development of a stronger
competitive advantage to Procter and Gamble Company. The Board of Directors
should also be keen on the market mix elements and Porter’s five market forces
while developing strategic plans to implement in the competitive consumer goods
market.
1. Internal Analysis
1.1 Strengths
The company’s strengths position it in quite a distinguished
competitive edge as compared to its competitors such as Unilever, and other
consumer goods firms. The strengths normally depict the internal strategic
factor that spearheads the company’s
competitive advantages efforts to achieve business growth and expansion.
Procter and Gamble reap a number of
internal merits such as possession of strong of consumer goods brands that
include Pampers, Ariel, Bounty, Gilette, Luvs, etc.
Secondly, the company
enjoys a number of economies of scale due to its decentralized global nature of
the operation, making it cheap to
outsource human resources, simplifying logistics and high level of sharing of
technologies between its subsidiary firms across the world.
Thirdly, the company has
a powerful, reliable and efficient product distribution network. The channels
encompass company-owned facilities and a
vast number of loyal wholesalers and retailers. This particular strength as
emphasized by the company’s Generic strategy and intensive growth strategies
favors it in market penetration, especially when launching new products (Dalal
& Malik, 2015).
1.2 Weaknesses
Based
on its organization’s weaknesses, Procter and Gamble encounters a number of
drawbacks and obstacles in its expansion program and struggle to raise its
revenue. Very many weaknesses are likely to retard or slow down the primary
activities (Michael Porter's value chain)
of the organization rendering its functions ineffective. Currently, Procter and
Gamble are faced with a number of
weaknesses that encompass production of imitable products, inadequate online
presence, and restricted scope of business diversification.
Producing
its products using a highly replicable technology is the spearheading weakness
of this company. Typically, this is a problem facing all firms in the consumer
goods industry. Their products are closely similar to each other, to a point of
confusing the customers. Apparently, many emergent companies leading to the
present market splitting have duplicated the production technology. Moreover,
there is a significantly high usage and migration into the digital market, whereby both small and large-scale
manufacturers, wholesale and retailers are hugely depending on online
e-commerce websites to market and sell their products mainly in the developed
markets. The present P&G online shop fails
to span all the nations targeted by the company’s products and merely focuses
on the United States Market. Improving the online presence helps lower
dependency on e-commerce retailers such
as the Walmart, Amazon and eBay and other suppliers on the company products. Furthermore,
the absence of wide scope to diversify
its products limits the company to the provision
of just consumer commodities, thus limiting the company to a vulnerability in only consumer goods market
risks.These weaknesses reveal that the
Board of Directors for Procter and Gamble Company puts little emphasis on the
4P’s or the marketing mix (Leigh, 2006).
2. External Analysis
2.1 Opportunities
Opportunities
refer to the possible exploitable gateways for the growth of a company.
However, it takes the right strategies to utilize available strategies for the
benefit of the company. Some of the opportunities present to Procter and Gamble
could be turning all the potential risks into competitive growth gateways. For
instance, the company directors can decide to revolutionize its marketing
campaigns by increasing the company’s
online presence. Online marketing is a vital and instrumental strategy for reaching and exploiting new product
markets, especially with the current growth of mobile technology where many
customers are purchasing products at their doorstep.
In addition to that, product innovation
strategies should be laid into the company’s strategies to achieve a
sustainable competitive advantage. In the world today, many countries and
organizations are campaigns on the production and manufacturing that is
eco-friendly. Bering in mind that most of
the products from the Procter and Gamble Company are disposable, developing a
technology that will produce products of less harm to the environment will be a
perfect gesture to its promotion campaigns. For instance, the Ariel brand that
concentrates on the provision of soap and
detergents should focus on minimization
of non-biodegradable elements that act as pollutants to the water systems and
land to gain favor in the international markets (Jackson, 2003).
2.2 Threats
This
company is faced with a number of external threats that encompass stiff global
and local competition, imitations or counterfeiting of products, and trade
restrictions and barriers in some nations such as Cuba and North Korea. The
first two threats are possibly due to the cheaply adaptable production
technology, and the readily available consumer staples market (Haile, 2016).
Recommendations
From
the analysis above, it's apparent that
the major problem afflicting Procter and Gamble company is declining level of
revenue. Therefore, the Board of Directors should adopt a strategic action that is responsive to this menace in order
to avoid accompanying challenges such as the company being declared bankrupt,
unnecessary divestitures, or even loss of stakeholders’ support.
As
an investment consultant, I would recommend that adoption of online marketing
and e-commerce investment to Procter and Gamble Company. Technology has made it
easy for customers to access the commodities on the mobile phones, and this
will help the company cut down the promotion expenses, create further awareness
and reach new markets. The company should also maintain databases and records
of online buyers for updates on future changes.
References
Dalal, G., & Malik, S. (2015). Online Marketing: A
SWOT Analysis. The International Journal of Business & Management, 3(7),
12.
Haile, M., & Krupka, J. (2016). Fuzzy Evaluation
of SWOT Analysis. International Journal of Supply Chain Management, 5(3),
172-179.
Jackson, S. E., Joshi, A., & Erhardt, N. L. (2003).
Recent research on team and organizational diversity: SWOT analysis and
implications. Journal of Management, 29(6), 801-830.
Leigh, D., & Pershing, A. J. (2006). SWOT
analysis. The Handbook of Human Performance Technology, 1089-1108.
Kramer, M. (2017). Proctor & Gamble
Continues To Have Two Big Problems. Investopedia. Retrieved 8
February 2018, from https://www.investopedia.com/news/procter-gamble-continues-have-two-big-problems/
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