EXECUTIVE SUMMARY Juliana Azevedo Schahin, a local marketing director for Procter & Gamble in Sao Paulo, had

worked closely with Tarek Fahahat, a regional executive based in Caracas, to solve the growth and profitability problems of P&G Brazil. They did so through the creation of lower-cost versions of two premium products which reached BOP (bottom of the pyramid) consumers--an approach not considered then as a company strategy. The case follows Azevedo and Farahat through their steps in helping to conceive the change, sell it to senior management, and implement it. The true test comes when the subsidiary wants to extend the model to its third and largest category, laundry care, which had also struggled. But Azevedo did not oversee that business in Brazil, and Farahat worked in another category in Caracas. Her country colleagues go to her to learn more about the success of the first two products. Now the question is whether this is a one-time wonder or an innovation that should be diffused to other products and geographies. MACRO ENVIRONMENT ANALYSIS: POLITICAL ASSESSMENT:Historically, a colonial transition to independence, followed by civil wars & now following a evolving political system with Industrialization & labour unions.Latin Americas largest economy had the regions worst wage inequality. Inflation was a concern, causing currency devaluation & reducing consumer purchasing power. ECONOMIC: The country is currently facing current account deficit, real estate bubble and also the same problem of Brazil in huge external debt.Federal & State taxes cut 50~60% from shelf costs. Transportation costs are high though infrastructure exists. The emerging economy had a large number of populations in the lower income segment, upper & middle income segment was small. SOCIAL/CULTURAL: In the workplace, stereotype Brazilians are generally not time-conscious causing to their frequent lateness. This may affect the operations of the energy firm. They have class and racial issues, but seem to be coping with them far better than many other countries. Thus, professionalism is disrupted by this value. TECHNOLOGICAL FACTORS: Its power generating capacity confronts historical problem from 1960-1980 level of 10% growth to only 3% for today. IT facilities, road transport & other infrastructure are available. Generally, technology required for P&G operations is available, including technically skilled manpower. Brazil technological prowess is exemplified by its well known aircraft manufacturer Embraer. LEGAL: Brazils legal system is expensive, but, generally companies can expect fair resolutions of disputes but it is slow.The majority of international contracts entered into in Brazil have a provision relating to arbitration procedures. Porters Five Forces: Threat of Substitutes: The intensity of threat of substitutes is high as the switching cost for the products of P &G is low and people in Brazil expect value for money as majority population of Brazil is under low income group. Intensity of Rivalry: The intensity of rivalry is very high as there are similar products produced by the rival companies who provide the same solution for the customers. The competitors for P & G in Brazil are Unilever, Johnson and Johnson, and Kimberly-Clerk who are ahead of P&G in feminine products in Brazil. In Brazil, the competitors compete with price.

Threat of New Entrants: The threat of new entrants is low as there is a high cost involved in the establishment to produce the products. There is a cost barrier for the new entrants who want to enter the industry.

Bargaining power of buyers: The power of buyers is high as the switching cost is low and the buyer has alternatives to choose other products. P&G products are the premium products with high price and the low income group cannot afford it and can switch for an alternative. There is a large population of low income group in Brazil.

Bargaining power of suppliers: Raw materials are primarily commodities, and are readily available from multiple sources. The number of suppliers available is large and moreover their size is not very large.Also the services provided by them are also not very unique.Therefore their bargaining power is low

ENVIRONMENTAL FACTORS: -

They are cursed with oil, doubly cursed in that they have had to deal with corruption for quite a while (67% of managers say corruption in Brazil is a major business constraint).

SWOTAnalysis: Strengths: Diversification: Product diversification with about 300 products. The diverse product mix includes personal and beauty items, household products, health and wellness, Baby and family and pet care and nutrition. Research and development: P&G invests 3 - 4 % of Net outside Sales in research and development (R&D). This amount easily exceeds their leading competitors, among consumer products companies. Innovation: In fiscal year 2004-05, P&G was granted 27,000 patents globally. P&G has produced a number of new products like diapers; shampoo and conditioner in one; toothpaste that prevents osteoporosis. Its diversified product mix helps in connecting technology across categories and brings innovation to the product. Strong brands: P&G has 13 Billion-Dollar Sales Brands such as: Always, Ariel, Bounty, Charmin, Crest, Downy/Lenor, Folgers, Iams, Pampers, Pantene, Pringle's and Tide. The total sales of these thirteen billion dollar brands taken together, would make a Fortune 100 company in itself. Leading market position: P&G is the world's largest consumer products company. P&G is the global leader in all its 5 broad business segments. Weaknesses: Non-profitable products: Running products which may not be profitable but still had to do it because of keeping up with the market presence strategy. Few such products are Crest as toothpaste, Always hygiene pads, Dawn dishwashing bar. Inadequate quality control: With large number of product profile, the quality control of all the products has deteriorated. Mass appeal products at premium price: Some mass appeal products like Pringles are priced very high as compared to its competitors products. Opportunity: Developing markets: The company currently competes in only about 10 of its top 25 categories in most developing countries. This provides P&G with an opportunity to enhance its market share as well as expand its presence in other categories. Changing consumer preference: With the consumer preferences and choices, P&G because of its huge R&D base and Connect + Develop program is well placed to come up with new and innovative products that may suit the customer needs. P&Gs opportunities include: Well defined market niche, just in time manufacturing technology, wide range of demography, and the removal of trade barriers in Brazil. Threats: New regulations: Due to increasing public pressure,it may lead to imposit ofion stringent quality norms on products. New regulations may delay launch of new products and result in higher product development expenditure. These regulations may impose new liabilities or increase operating expenses, either of which could result in a decline in profitability. Competition from local low cost players: P&G faces competition from local, low-cost manufacturers. Customer concentration: A significant portion of the revenues from the sale of products is derived from a few customers. Sales to Wal-Mart Stores, Inc. represent approximately 15% of its total revenue in 2007. The company gets more than billions of dollars from seven retail customers. The loss of any of these customers will lead to a sharp decline in its revenues. COMPETITIVE ADVANTAGES AND GROWTH P & G has several advantages of being one of the largest FMCG companies . This provides them with economies of scale. For a company like P & G to operate in a company they should tap into mass market in order to meet their scales and continuous innovation is required for the segment they operate.One of the major competitive advantage of P & g was they pushed towards innovation in enhancing their existing brands and coming up with new products. P & G offers a great value proposition for its customers based on their needs. It has various marketing strategies and maintains good relationship with distributors. P&g segmentation Demographic segmentation: It segmented its customers based on demographic segmentation i.e women,babies and Households based on the product .the customer base, targeted is mass consumers. Positioning First P&G products were launched or positioned as a global premium products with higher prices. The fastest growing segment of the population was low-income consumers,so gradually P&G targeted them to serve the world better.

Marketing mix Product: Always Basico and pampers Basica are launched using the new backward design process of Obelisk. These products helped P&G to reach low income consumers. The Ariel is for premium tier and Ace and Pop are under mid tier and low tier respectively. The portfolio of P&G including pert plus,phebo,pampers,feminine care of which all are targeting low income consumers of Brazil. Price: Pricing strategies of P&G are decided by the purchasing power of target consumers. The marketing mix variable price is very sensitive one and is to be decided carefully if the Industry in which a firm lies is price sensitive. P&G has carefully priced its products based on the consumer behaviour in Brazil and also concerning about costs incurred and quality to be delivered. This technique helped P&G to gain market share in Brazil. Place: Brazil, is a developing economy where a large number of people earn very less The distribution and advertising costs are also high in Brazil so the company has to plan its costs to reach expected outcome. Promotion: Due to high advertising costs, P&G adopted new innovative ideas like soap opers for promoting ivory brand soap, featuring visuals of drawing of young woman in jeans and t-shirt. Advertising ran for only limited period i.e till a buzz is created in the market. Massive advertising of products on tv,radio,print and out door media that the price has slashed.First packaging is small as they understood that the people lacked the cash flow to buy value packs. Conclusions and lessons learnt The company recognizes its diversity as a unique characteristic and strength and its been able to maximize the talents and creativity from these people.For instance, when babies were wearing cloth diapers, they were very leaky and labor intensive to wash; at that time, mothers needed an innovative product on the market to help fix the labor intensive part of washing the cloth diapers as well as the leakage. Leading with values is important for the new generation of employees, for finding innovations in underserved markets, and for getting respect from the public and favorable treatment from government.