The procter and gamble company overview free essay sample

1) Description of the Company The Procter and Gamble Company, also known as PG, was founded in 1837 in Cincinnati, Ohio, where it still has its headquarters, by William Procter and James Gamble (â€Å"Procter meets gamble,† 2012). It is an American multinational company operating in consumer packaged goods industry and it is a publicly traded, Fortune 500 company which is the largest in its industry throughout the world (â€Å"About PG,† n. We will write a custom essay sample on The procter and gamble company overview or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page d. ). Products include personal care, household care, health care, pet care and cosmetics products. The company has 50 leadership brands, which represent 90% of sales profits and 25 of these brands generate more than $1 billion each annually (â€Å"Leadership brands,† n. d. ). Some of the most well known brands are Always, Ariel, Bounty, Charmin, Crest, Downy, Duracell, Gillette, Olay, Oral-B, Pampers, Pantene and Tide. PG is a global company with 126. 000 employees. Although the company operates in 75 countries (â€Å"About PG,† n. d. ), the products are sold in more than 180 countries. Primary sales channels are supermarkets, club stores, drug stores, department stores and neighborhood stores which serve many consumers around the world (PG Annual Report, 2012, p. 15). It has 10 innovation centers on five continents (â€Å"Global Structure and,† n. d). Net Sales for 2012 is more than $83 billion with almost $11 billion net earnings. Growth rate is 3,2% over 2011 (â€Å"NYSE global market,† 2013). 2) Purpose, Values and Principles Purpose, Values and Principles are the core elements of PG’s culture since its foundation. These elements have endured for 175 years of company history and passed down to new markets that the company started to operate in (â€Å"About PG†, n. d. ). So these PVP elements are valid in all countries that PG operates in. Purpose: Continuously providing superior quality branded products and services, which improve the lives of consumers, in order to be rewarded with leadership sales, profit and value creation (PVP brochure, 2007). Values: Integrity: Do the right thing, be honest straightforward, operate within law, uphold the values and principles in every action, be data-based and intellectually honest (PVP brochure, 2007). Leadership: Be the leader of area of responsibility, have a clear vision of where the company is going, focus resources to achieve leadership objectives, develop the capability to deliver strategies and eliminate organizational barriers (PVP brochure, 2007). Ownership: Accept personal accountability to meet the business needs, improve the systems, and help others improve their effectiveness (PVP brochure, 2007). Passion for Winning: Be determined to be the best, have a healthy dissatisfaction with the status quo, and have a compelling desire to improve and to win in the marketplace (PVP brochure, 2007). Trust: Respect PG colleagues, customers and consumers, have confidence in each other’s capabilities and intentions, believe that people work best when there is a foundation of trust (PVP brochure, 2007). Principles: Show Respect for All Individuals The Interests of The Company and The Individual Are Inseparable Be Strategically Focused in Work Innovation Is The Cornerstone of Success Be Externally Focused Value Personal Mastery Seek to Be The Best Mutual Interdependency Is a Way of Life (PVP brochure, 2007) 3) Global Organizational Structure PG organizational structure consists of Global Business Units (GBUs), Global Operations, Global Business Services and Corporate Functions (PG Annual Report, 2012, p. 26). GBUs were organized into two units, Beauty Grooming and Household Care and these GBUs have five segments; Beauty, Grooming, Health Care, Fabric Home Care and Baby Family Care (â€Å"NYSE global market,† 2013). GBUs develop brand strategies, product upgrades, innovations and marketing plans (PG Annual Report, 2012, p. 26). Global Operations is responsible for developing go-to-market plans locally. It is organized in five geographic regions; North America, Western Europe, Central Eastern Europe/Middle East/Africa (CEEMEA), Latin America and Asia which consists of Japan, Greater China and ASEAN/Australia/India/Korea (PG Annual Report, 2012, p. 27). Among these countries, CEEMEA, Latin America, AAIK (ASEAN, Australia, India and Korea) and Greater China are defined as Developing Markets. The remaining North America, Western Europe and Japan are considered as Developed Markets (PG Annual Report, 2012, p. 27). With this organizational structure, PG integrated the benefits of being a global company with the benefits of local focus in the countries they operate in (â€Å"About PG,† n. d. ). 4) Company Strategy PG strategy is based on long-term financial targets of the company. The Procter and Gamble Company reveal its long-term targets as (â€Å"PG Company Strategy,† 2013): Grow organic sales 1% to 2% faster than market growth in the categories and geographies in which PG compete, Deliver earnings per share (EPS) growth of high single digits to low double digits, and Generate free cash flow productivity of 90% or greater. According to PG Company Strategy (2013) document, company strategies which are prioritized based on these targets are: Strengthening Core Business: Identify the Top 40 business that generates the highest sales and profit, allocate resources to these businesses. Identify Top 20 innovations that have the highest growth potential and allocate resources accordingly. Identify Top 10 developing markets that have the highest growth opportunity and allocate resources accordingly. Improving Productivity and Creating a Cost Savings Culture: A five-year program which targets $10 billion cost saving was launched in February 2012. Reducing non-manufacturing overhead positions. $1. 2 billion savings in cost of goods Increase efficiency in marketing expenses to save $1 billion over the five year period. Strengthening Upstream Innovation Program and Pipeline: Innovation is the lifeblood of PG. It is the path to beat competitors and win consumers around the world. RD resources and development plans are dedicated to innovation plans to meet the needs of differing consumer segments as well as different regions. These strategies show us that PG is operating in a global manner instead of a multi-domestic manner. Strategies are first developed for the global targets and then brought down to regions. 5) External and Internal Condition External Condition: Company’s Key Customers are supermarkets, club stores, drug stores, department stores and neighborhood stores. 14% of total sales come from Wal-Mart Stores and 31% of sales come from Top 10 customers (PG Annual Report, 2012, p. 15). PG operates in highly competitive markets. Competitor products include branded products of large and small companies as well as private label products of retailers (PG Annual Report, 2012, p.  16). Although PG still sells more than the competitors, it lost share in 49% of the markets it operates in (Jopson,2013). The main competitors are Johnson Johnson, Kimberly Clark Corporation, Unilever and Colgate Palmolive (â€Å"Direct competitor comparison,† 2013 and Jopson, 2013). PG product strategy is innovative and value added, premium products with higher prices. But consumers became more cost-consciou s in North America and Europe. And economies of developing markets have slowed down. So the company should adapt their strategy of premium products to today’s environment and it should be innovative on good products at affordable prices (Jopson, 2013). Internal Condition: PG Business Model depends on supporting existing brands and developing new brands through innovations. Growth is one of the main targets of PG and one of the paths to growth is the innovation of new products and operations. It is also vital to keep up with competition’s innovations and consumers’ changing needs and demands (PG Annual Report, 2012, p. 17). PG operates in 75 countries and its products are sold to 180 countries. There are manufacturing facilities in more than 40 countries. As of 2012, 39% of net sales comes from North America, 19% from Western Europe, 18% from Asia, 10% from Latin America and 14% comes from CEEMEA (Central and Eastern Europe, Middle East and Africa) (PG Annual Report, 2012, p. 16). Developing Markets account for 38% of company sales (behind Colgate 53% and Unilever 57%) with a $32 billion business and 14% growth over the last decade (Jopson, 2013 and PG Annual Report, 2013). Developed markets growth is not that high due to slower market growth and declining market shares. The reason for declining market shares is â€Å"a combination of price increases taken to recover higher commodity costs, which our competitors did not take, and increased promotional activity by competitors† as mentioned in PG Annual Report (2012). Although the company is still more profitable than most of its competitors, it is not as profitable as it should be (Jopson, 2013). 6) SWOT Analysis Strengths: Leading market position and strong brand portfolio PG is the world’s largest manufacturer of packaged consumer goods. It is one of the largest Top 50 companies in US in terms of revenues and profits (â€Å"About PG,† n. d. and Marketline, 2013). PG is the market leader or has considerable market shares with most of its brands in relative product categories. Some of its brands, like Gillette and Pampers, are considered as some of the top 100 world’s most valuable brands in 2012 (Marketline, 2013). Economies of scale competitive advantage Since PG has a strong market position and brand portfolio, it has higher bargaining power with suppliers as well as lower costs and distribution advantage. Also the company financial growth is more stable (Economics A to Z, n. d. and Marketline, 2013). Continuous innovations and RD investment PG investment on RD in 2012 was $2 billion, which was almost twice of Unilever (Marketline, 2013). Innovation efforts lead to extensive consumer insight studies and PG became the company that invested most money in market research (Core strengths, n.d. ) with 20. 000 studies each year and $400 million annual spending on consumer research (Marketline, 2013). With these studies, company touches more that 5 million consumers each year around the world (Marketline, 2013). Almost all organic growth of PG came from the sales of these innovations over the last decade (Core strengths, n. d. ). Strong marketing investment Innovations would not bring such huge successes, if there were no marketing investm ent after those products. PG is the leader of brand-building in consumer goods industry. Among the 50 leadership brands that the company created, 25 generate more than $1 billion each year (Core strengths, n. d. ). PG is one of the world’s biggest advertisers with $9. 3 billion investment in advertising (Marketline, 2013). Extensions through successful acquisitions During the past years, PG acquired companies like Natura Pet Products, Ambi Pur air care products and New Chapter vitamin company. Each of these acquisitions were important for PG to either enter into new categories or to grow within existing categories (Marketline, 2013). Weaknesses: Increasing product quality problems For the last few years, PG experienced quite a lot product recall instances due to some quality problems. Instances like the recall of: Natura dry pet foods in December 2011 and March 2013 due to a possible contamination, Oral-B Tooth and Gum Care Alcohol Free Mouth Rinse product in 2011 due to the difference between actual microbial levels and specs, Scope Original Mint and Scope Peppermint mouthwash in 2010 due to malfunctioning child-resistant caps, 4-Hour Decongestant Nasal Spray in 2010 due to a possible deviation in expiration dates, Iams canned cat food in 2010 due to insufficient levels of thiamine. These recalls had negative impact on both the company image and financials (Marketline, 2013). Competition with low quality or unbranded products PG invests a lot of money into innovations and develops value added products. With those products they are competing with an increasing trend of private label products or lower quality, lower priced products. Company should increase its focus on good products at affordable prices (Jopson, 2013). Opportunities: Growth in grooming, personal care and home care markets Men’s grooming market is growing and this brings new opportunities for this segment. Men’s facial skincare market grew by 11% in 2011 vs previous year. And a study found that 90% of men over 18 years of age use grooming products like body and facial skincare products, shaving products and tools, hair care products, and fragrances (Marketline, 2013). Men’s grooming segment is also expected to grow in developing markets like China and India and expected growth rates are 20% and 32% respectively (Marketline, 2013). As found in MarketLine research (2013), â€Å"Global personal hygiene market grew by 4. 6% in 2012 to reach a value of $42. 9 billion. By 2017, this market is expected to reach a value of $55. 3 billion, an increase of 28. 9% since 2012. The increase in this market is primarily attributable to increasing product innovations, rising disposable incomes of consumers, and market penetration strategies of companies. Similarly, the global homecare products market is expected to grow at compound annual growth rate of nearly 5% during 2012–17, according to industry estimates. Focusing on these businesses which offer a  great potential would provide steady revenues for the company in near term. † This fact was also mentioned in Jopson’s article (2013) in Financial Times. Cost savings to adjust pricing strategy and profitability PG initiated a $10 billion cost savings program which will increase profitability and creates the environment to adjust pricing in developing markets (PG Annual Report, 2012, p. 38). Improving productivity PG is a big, global company which operates in many regions and it has a variety of products and brands in different categories. Integration through multi-category plans for developing markets, multi-brand programs in all markets and integrated supply chain plans are some of the actions that can be taken to improve productivity. MarketLine report (2013) states that â€Å"The multi-category plans bring together multiple categories and multifunctional capabilities which would, in turn, reduce barriers, as well as increase the speed of entering new markets. These multi-category plans have been launched in several markets, including the BRIC countries (Brazil, Russia, India, and China). This resulted in increased growth rates. † Another way to improve productivity is simplification. Simplifying manufacturing and business processes will lead to decreased number of manufacturing sites with simplified production technologies, which in turn increase the ability of PG to reach more markets with lower costs (Marketline, 2013). Threats: Market risks Since PG is operating worldwide in many regions and offer a variety of diverse products, there are some market risks like changes in interest rates, currency exchange rates and commodity prices (PG Annual Report, 2012, p. 43). Change in consumer demands Unforeseen negative economic conditions or political events, changes in consumer trends and habits, or negative consumer responses to pricing actions may lead to decreased demand of products, lower market growth rates in either developed or developing markets. And any of these unexpected conditions may lead to changes in company strategies, plans and targets (PG Annual Report, 2012, p. 17). Ability to compete with competitors Consumer goods industry is one of the most competitive industries in all markets. There are both local and global strong competitors. If PG loses the ability to compete with these competitors in terms of changing market dynamics, pricing, promotional incentives and trade terms, it will lose market share and the company results will be negatively affected (PG Annual Report, 2012, p. 17). Inherent risks in global manufacturing If some uncontrolled incidents like labor disputes, loss or impairment of key manufacturing sites, natural disasters, acts of war or terrorism, and some other external events occurs, these may lead to negative impact on PG businesses (PG Annual Report, 2012, p. 17). International operation risks According to PG Annual Report (2012), international operations carry the risks of: compliance with U. S. laws affecting operations outside of the United States, such as the Foreign Corrupt Practices Act; compliance with a variety of local regulations and laws; changes in tax laws and the interpretation of those laws; sudden changes in foreign currency exchange controls; discriminatory or conflicting fiscal policies; difficulties enforcing intellectual property and contractual rights in certain jurisdictions; greater risk of uncollectible accounts and longer collection cycles; effective and immediate implementation of control environment processes across our diverse operations and employee base; and imposition of more or new tariffs, quotas, trade barriers and similar restrictions on our sales outside the United States. 7) Human Resources Management Purpose, values and principles (PVP) are the core of the company’s success drivers. And these success drivers are based on three ideas (Pollitt, 2011): 1. The power of PG minds, which centers on curiosity and innovation 2. The power of PG people, which concerns employees’ ability to discover and make use of the difference 3. The power of PG agility, which deals with people’s ability to meet change head-on Recruitment Process After the candidate applies to a vacancy online, he/she is asked to fill in an online questionnaire and complete a reasoning test. The next step is the interviews. And after the candidate is chosen for a job, he/she attends to various seminars and trainings. New people have ‘buddy’ to support them in their first months (Pollitt, 2011). Internal Communications Sharing information by senior managers to employees is important in PG and there are various ways that senior manager communicate with employees. They can share information through one-to-one manager-employee discussions, meetings, town hall meetings, senior management reviews and prearranged lunches with senior management (Pollitt, 2011). To support easy communications between managers and employees, PG prefers an open space workplace with a relaxed and informal environment. With this plan employees can easily approach to managers (Pollitt, 2011). Employee opinions are highly valued within PG, so the company gives local feedback surveys to employees each quarter. In addition to these surveys, each team has an HR account representative and they can discuss anything with those representatives (Pollitt, 2011). Reward and Recognition Programs Rewarding and recognition is very important in PG. Company gives PG stocks as a financial recognition for extraordinary employee performance. Another program to reward individual or team performance is ‘power of you’ program which offers merchant gift certificates. On-the-spot recognition is strongly encouraged in company culture, which can be a personal thank you or a note to the employee (Pollitt, 2011). Employee Development Trainings are highly valued within PG. The company has a strong training program with both business and functional trainings. Any employee can attend any training in any PG location throughout the world. Both in-house and external trainings are conducted. Many PG sites have on-site learning centers. Online trainings are a new way of enhancing employee development and PG has an online system for that (Pollitt, 2011). Employee Benefits In addition to salary, insurance and common benefits, PG offers a lot of benefits to employees. If an employee stays away from home due to unexpected business, company will provide help to take of dependants. Since PG is a global company many employees have to take responsibilities in other regions and in such cases employee will have the opportunity to work home based. When employee has difficult situations that affect his business, he/she can have the option of working fewer days/week or fewer hours/day. In such situations employees can take up to three months off or take unpaid leave to take care of a family member. There is an employee-assistance program to which an employee can consult for any problems like legal, personal or financial (Pollitt, 2011). Salaries Salary ranges for employment levels are decided through benchmarking other leading global and local companies like 3M, Coca-Cola, Colgate, DuPont, Exxon Mobil, Henkel, HSBC, IBM, JJ, Kimberly Clark, Kraft, Loreal, Nestle, Pfizer, Pepsi and Unilever (Pollitt, 2011). 8) Market Entry Recommendation for PG PG has operations in 75 countries, but its products reach almost 180 countries (â€Å"About PG,† n. d. ), which means that the products are consumed in almost all countries. So it is almost impossible to find a specific country where PG products are not sold, but I will pick Uzbekistan, where PG does not have offices and direct operations. Information about Uzbekistan Uzbekistan is located in Central Asia, neighboring Afghanistan, Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan. It is the 57th largest country in terms of area. It has a climate which is mostly long, hot summers and mild winters. The country has a lot of natural resources like natural gas, petroleum, coal, gold, uranium, silver, copper, lead and zinc, tungsten, molybdenum (The World Factbook:, 2013). Based on 1996 estimates, ethnic groups that live in Uzbekistan are Uzbek 80%, Russian 5. 5%, Tajik 5%, Kazakh 3%, Karakalpak 2. 5%, Tatar 1. 5%, others 2. 5% and the languages spoken are Uzbek (official) 74. 3%, Russian 14. 2%, Tajik 4. 4%, others 7. 1%. 88% of the society is Muslims and 9% are Eastern Orthodox. It is the 44th country in the world in terms of population with 28,661,637 people. 46. 4% of the population is below 25 years old and 42. 5% is between 25-54 years old. So it is a relatively young population. Major urban city is Tashkent with more than 2 Mil population (The World Factbook:, 2013). Government type in Uzbekistan is republic; authoritarian presidential rule, with little power outside the executive branch and the legal system is a civil law system. there are no significant opposition political parties or pressure groups, which means that government is the sole force in the country (The World Factbook:, 2013). Uzbekistan is a growing economy ranking 18th in the world, with more than 8% for several years consecutively. 2012 GDP per capita is $3,600. Main GDP composition by end use is household consumption with 55. 7% share. Imports made $15. 53 billion in 2012 and main imports were machinery and equipment, foodstuffs, chemicals, ferrous and nonferrous metals. Main import partners are Russia 20. 6%, China 16. 5%, South Korea 16. 3%, Kazakhstan 12. 8%, Germany 4. 6% and Turkey 4. 2% (2012) (The World Factbook:, 2013). Market Entry Motivation for entering Uzbekistan Uzbekistan is a growing economy with a young population. The country’s main end use in terms of GDP composition is household consumption. Consumer lifestyles are changing due to urbanization and to increasing disposable income (Home care in, 2013). These facts show us that Uzbekistan might be a good market to increase PG’s market share. PG products are already sold in Uzbekistan through distributors, so there is a base to build company operations and increase market share. Environment There are both local and international competitors active in Uzbekistan. And domestic companies have some price advantages over international ones (Home care in, 2013). So establishing a warehouse and continue with bulk shipments can provide a price advantage to PG. Also with its economies of scale advantage they can compete with domestic companies (Economics A to Z, n. d. and Marketline, 2013). As PG is world’s one of ht e biggest advertisers, they can also get a competitive advantage with strong brand building activities (Marketline, 2013). There are some issues between Uzbekistani government and US companies. In the past, government sued some major US and international organizations due to violation of tax laws. So there are some sensitivities between the government and foreign companies (The World Factbook:, 2013). As mentioned in The World Factbook (2013), one of the biggest issues that Uzbekistan is facing is â€Å"intensive production of white gold (cotton) and grain led to overuse of agrochemicals and the depletion of water supplies, which have left the land degraded and the Aral Sea and certain rivers half dry†. But the agricultural income still depends largely on cotton (The World Factbook:, 2013). So the country has environmental issues. Entering Uzbekistan Establishing offices and start with importing seems to be the fastest and safest way to enter into this market. Turkey is already one of the biggest importing partners of Uzbekistan and it is the regional center of Caucasus and Central Asian countries in PG operations. So Turkey PG has adequate resources to supply to these countries. It is already exporting products to 25 countries (PG Turkiye, 2012). PG can have distribution alliances with one of the existing distributors in the initial phase. And they can manage functions like marketing and sales agreements with leading retailers. Corporate and Organizational Structure As PG is a global company, corporate structure will be the same with other countries. Which means PG in Uzbekistan would operate with 4 main divisions, Global Business Units (GBUs), Global Operations, Global Business Services and Corporate Functions. And GBUs will be divided into two units, Beauty Grooming and Household Care. Organizational structure will also be parallel to other countries. As a functional level strategy, I would propose that for the initial phase, they will outsource the sales team and logistics from an existing distributor. For the future, they might build up their own distribution operations with more investment. Other functions like marketing, HR and finance should be within the PG office for better control and evaluation. Human resources management will apply the same recruitment processes, reward and recognition programs, employee development programs and employee benefits salary strategies. The only difference might the benchmarking. As each country, Uzbekistan PG will benchmark the other active players in Uzbekistan.