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External Analysis on Proctor & Gamble Company
Proctor &Gamble Company is one of the oldest companies in the world yet very successful. It mainly deals with products and brands which can be categorized into five segments namely Health Care; Baby Care and Family Care; Beauty; Grooming and Fabric Care and Home Care. These products command a large market share which is both favored by several strengths and opportunities and also challenged by equally substantial threats and weaknesses. Both of these contribute a lot to the success of the organization when handled well but when mishandled to lead to the downfall of the company. P&G Company’s multidivisional structure is an efficient tool that the company uses to ensure a growing performance and internal competition. The main aim of this paper is to analyze the external, internal environments of the P&G Company as well as its competitive scope of business strategy.
P &G Company has several opportunities and threats which when tapped on will thrust the economic excellence and gain of market share to incredible heights or bring down the business. On the opportunities, first, it is capable of acquiring a brand from other companies which can be a good fueling endeavor for future growth. Secondly, the observable exponential growth of the middle class in a good number of emerging markets namely India and China are expected to act as a catalyst for growth since an increasing number of people will tend to buy greater quantities of products hence leading to more sales. Thirdly, non-cyclical products which include toothpaste and diapers are sold by P&G and as a result of this, the company benefits if the number of people to purchase them more, consequently, an expected increase in world population in the future, P&G looks forward to an increase in the number of customers into the future. The brand name of the company and its products provides an opportunity for the company to possibly win a larger market share against its competitors which can easily be achieved through carrying out efficient advertising campaigns.
The company faces tough threats which if not handled well will hinder the company from achieving its vision, mission, and objectives. The main source of the threat facing P&G Company, just as in any other business organization, is competition. This is an ever-prevailing source of threat for any company to overcome for it to achieve its targeted success. Church & Dwight and Colgate-Palmolive are two of the main publically traded competitors that bargain for the market share for the common product brands they put to the market.
Colgate-Palmolive is highly diversified, just like P&G Company, and competes for toothpaste market, pet food market, and personal care market with P&G. On the other hand, Church & Dwight, although, a much smaller company than the other two, is a key player in the competition since it commands a large market share for household goods and personal care and markets. In addition, there is always fierce competition to offer its best products at the lowest possible prices, a factor which has proven disadvantageous to margins in every industry.
Nevertheless, P&G does not face as many threats as other companies and therefore suffers less harm to its business. This is because P&G is known to be a wide-moat company due to its strongly built defense for its business. Therefore, for any company to manage coming close to or being equal to P&G’s famous and distinguished brands and characterized by the incredible system the company distribution built by the company, much time and money will be required (Guenette, 2012).
Business strategy: Competitive Scope
The CEO for P&G Company, Bob McDonald, while addressing an analyst meeting recently singled out some key measures the must be undertaken by the company which will enable it to win the market share for its products from their key competitors such as Colgate-Palmolive Co., Unilever, and Clorox and in businesses dealing with consumer products and companies like Estee Lauder, L’Oreal and Avon which are involved with cosmetics and beauty. The company is mainly focusing on India and China, which are the world's most populated countries in the world, as one of the strategies of realizing this goal of making a win of the market share over the competitors. This ambition is also coupled with a target of hitting one billion consumers in addition to those it has currently by the year 2014-15. Another idea is the launch of global premium brands’ lower-priced product extensions, for instance, targeting the Tide and Gillette at low-disposable income consumers within these economies and later had its distribution network expanded which enabled the company to cover previously inaccessible areas (Team, 2010).
P&G Company has several strengths and weaknesses. Strengths benefit from several strengths which promote it and its brands above strong competitors. For instance, it has a market value of $191.47 billion in a recent analyst report and sells its products in over 180 countries. The company is therefore and expected to command a large market share at least for quite some time. Its broad portfolio of brands is, Olay, Crest, Old Spice, Puffs, Downy, and Pampers, whereby approximately 25 brands are worth billions of dollars. A lot of P&G’s products must be purchased regardless of the economic conditions in the market since they are taken to be non-cyclical, for example, toothpaste or diapers. Currently, the company can pay out $0.56 as quarterly dividends, which when annualized yields 3.24%. This capability of the company adds to its long and proven track record having managed to consistently payout as well as raising dividends since 1987. For this company, growth in sales is predictable and very stable and is estimated to hit the mid to high single-digit range in the coming years. For a long time, Consumers have always proven their willingness to pay a bit more for a brand name.
On the other hand, the company has several weaknesses that bring its business down in the market. There is not much substantial gain for the company’s business from pickups experienced in the economy as a result of the necessity label that accorded the majority of products of the company. These products are already accessible in almost all countries in the world and for this reason, there is not much room remaining for the company’s growth forcing the company to depend on the growing populations as a way of getting a larger market for its product. Since the company has constantly remained on a single-digit growth, the earnings ratio of 22.66 carried by stock’s price makes it appear exceedingly pricy. As much as this is a possible strength for long-term investors such as P & G company, the stock’s volatility with a Beta ratio of just 0.44 hence quite negligible. In addition, the company is currently facing implausible competition in every sector it operates in (Guenette, 2012).
Organizational structure and Culture
The organizational structure of the P & G Company can be described as a multidivisional structure since the company is a comparatively large organization with its business operating in over 180 countries, therefore, making it an international company. In this structure, there are operating divisions, each being representative of a particular business. The top corporate officer in these divisions delegates responsibilities for the division managers under him or her for the daily business-unit strategy and operations. The divisions are self-contained, distinct businesses with a functional hierarchy at their command. According to an earlier designed M-form, the structure is beneficial to the company in three ways.
First, the corporate officers were able to carry out accurate monitoring of the company performance of each of businesses as conducted in the divisions and this made the control problem easier. Secondly, the multidivisional structure makes it possible to compare the performance between the different divisions thus improving the process of allocating resources. Third, it stimulated better performance in the divisions by encouraging or compelling the respective managers in charge of those divisions to find ways of improving their business. The M-form’s result of active performance monitoring leads to rising in the chances that the decisions made at the individual business units by their respective managers will best fit into the interests of shareholders.
P&G Company is founded on three major factors: Purpose, Values, and Principles which form the basis of the company’s unique culture. Since the company started 174 years ago, the elements have endured and will continue to pass down the generations despite the growth and evolution the undergone experienced before and that is to come. The purpose serves to unite the company stakeholders in a common cause as well as in the growth strategy of making the consumers’ lives better through small but meaningful ways each day. This purpose serves to inspire the people in P&G to ensure their daily contribution to the company and the people are positive. The company’s values play an important role in reflecting how people work together and also with the partners of the company. Lastly, the company principles are important in expressing the company’s unique approach on how work is carried out on daily basis (P&G Purpose, Value, and Principle, n.d).
Proctor and Gamble have made big progress in maintaining big progress in upholding its independence and culture. Concerning the company’s bought New Chapter, the external relations manager of the company, Elizabeth Ming addressing the natural ingredients-USA that the company is concerned with its determination to preserve growth at the New Culture. The growth she was referring to was the success aimed at in their current channels, promotion, and sale of great brands, products, and consumer ratings (Schultz, 2012).
Previously in Organization 2005, there was a need to move from P&G's culture of being conservative, bureaucratic behemoth, and slow-moving to become a bit modern, Internet-savvy and fast-moving organization. The main reason for this intended transformation is to enable the company to set more aggressive sales goals make better and faster decisions, and wring costs out of systems and procedures, cut red tape, fuel innovation, and nearly double its revenue. For all these to be achieved, the company needs to make a quick change to IT and dispose of its legacy of secrecy.
Some of the changes that have already been in place have lead to a huge number of customers turning to P&G as well as investors and job-seekers barely a year ago. There is now a lot of information about the products of the company on the consumer-friendly portal
The company stresses its hope of gaining from the ambitions laid down in its restructuring plan shortly. According to the CEO, the restructuring will address the manufacturers’, wholesalers’, and retailers’ issues as at the beginning of the 21st century. Some of the issues include the consolidation and internationalization of retailing, category management, the potential effects of the Euro currency consumer loyalty and retention, and dramatic advances in information technology (Procter & Gamble: Overview, n.d.).
P&G company has endured many hurdles for over 174 years during which it has experienced continuous growth and overcome many markets as well as economic challenges that would have caused its fall. Some of the opportunities that the company benefits from including its capability to acquire a brand from other companies and the growth of the middle class in a good number of emerging markets namely India and China are expected to act as a catalyst for growth since an increasing number of people will tend to buy greater quantities of products hence leading to more sales. It also experiences a few threats such as competition from companies such as Church & Dwight and Colgate-Palmolive which it has to overcome to be successful.
In addition, the company has benefited from some strengths such as its huge market value of $191.47 billion in a recent analyst report and sells its products in over 180 countries. The company is therefore and expected to command a large market share at least for quite some time. It also has a broad portfolio of brands. Some of the weaknesses of the company include frequent pickups and relying on an increase in population to be certain of commanding a market share for its products. Generally, this company's management and performance provide essential information necessary to enable any business to grow.