PG StraMa

UNIVERSITY OF CALOOCAN CITY
Biglang Awa St. Cor. 11th Ave. Cattleya, Brgy. 100, Caloocan City, 1400
Metro Manila
INTRODUCTION
Procter & Gamble Co. (P&G) is an American multi-national consumer goods
corporation headquartered in downtown Cincinnati, Ohio, founded in 1837 by British
American William Procter and Irish American James Gamble. It primarily specializes in
a wide range of cleaning agents and personal care and hygienic products. Before the
sale of Pringles to the Kellogg Company, its product portfolio also included foods,
snacks and beverages. In 2014, P&G recorded $83.1 billion in sales. On August 1,
2014, P&G announced it was streamlining the company, dropping and selling off around
100 brands from its product portfolio in order to focus on the remaining 65 brands,
which produced 95% of the company’s profits. A.G. Lafley- the company’s chairman,
president, and CEO until October 31, 2015 – said the future P&G would be “a much
simple, much less complex company of leading brands that’s easier to manage and
operate.”
The Procter & Gamble Company (P&G) is a leading firm in the consumer goods
market, directly competing against Unilever, which is also a major player in the global
industry. A firm’s vision statement describes the target future situation of the business.
In the case of Procter & Gamble, the corporate vision statement emphasizes leadership
in the global market. On the other hand, a company’s mission statement specifies the
strategic approach to fulfill the vision. Procter & Gamble’s corporate mission statement
highlights quality and value as the foundation for ensuring business success. The
company’s growth path and strategies in the consumer goods industry are based on this
strategic approach to reach the corporate vision. As a dominant firm in the market,
Myla R. Albarico Page 1 of 79

Jamaica A. Dela Cruz
Mykhaellah Eunice O. Ting Strategic Management
Jhonalyn M. Victoriano Mr. Roy Valencia
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Procter & Gamble needs to ensure that its vision statement and mission statement are
fulfilled. It is also necessary to consider possible adjustments to these statements to
address changes in market conditions and Procter & Gamble’s business needs over
time.
VISION
To be recognized as the best consumer products and services company in the
world.
MISSION
We will provide branded products and services of superior quality and value that
improve the lives of the world’s consumers. As a result, consumer will reward us with
leadership sales, profit and value creation, allowing our people, our shareholders and
the communication in which we live and work to prosper.
GOALS
Our goals charting a course to a more sustainable future, when we set a goal, our
employees will give their all to achieve it. We have established 2020 goals to make sure
we stay on track to deliver our long-term vision.
We are working toward our long-term vision of:
 Powering all our plants with 100% renewable energy
 Using 100% renewable or recycled materials for all products and packaging
 Having zero consumer and manufacturing waste go to landfills
 Designing products that delight consumers while maximizing the conservation of
resources

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 We have established specific goals to demonstrate we are making progress
against our long-term vision. The table below updates progress against our
goals.
CLIMATE
 Reduce energy use at P&G facilities by 20% per unit of production by 2020.
ACHIEVED
 Reduce absolute greenhouse gas emissions by 2020 by 30%.
 Ensure 70% of all washing machine loads are low energy cycles.
 Reduce truck transportation kilometers by 20% per unit of production.
ACHIEVED
 Double use of recycled resin in plastic packaging.
 Ensure plants are powered by 30% renewable energy.
 Create technologies by 2020 to substitute top petroleum-derived raw materials
with renewable materials, as cost and scale permit.
 Ensure traceability of palm oil and palm kernel oil to our supplier mills by
December 31, 2015, and to plantations by 2020 to ensure zero deforestation in
our palm oil supply chain, with a commitment to working with small farmers.
WASTE
 Have 100% of the virgin wood fiber used in our tissue/towel and absorbent
hygiene products be third-party certified by 2015. ACHIEVED
 Have 100% of our paper packaging contain either recycled or third-party-certified
virgin content by 2020.
 Reduce packaging by 20% per consumer use.

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 Conduct pilot studies in both the developed and developing world to understand
how to eliminate landfilled/dumped solid waste.
 Zero Manufacturing Waste to Landfill.
 Ensure 90% of product packaging is either recyclable or programs are in place to
create the ability to recycle it.
WATER
 Provide 15 billion liters of clean drinking water by 2020.
 Reduce water use in manufacturing facilities by 20% per unit of production.
ACHIEVED
 Provide 1 billion people access to water-efficient products.
OBJECTIVES
We have set a long term vision to power all our plants with 100% renewable energy,
use 100% renewable or recycled materials for all products and packaging, have zero
manufacturing and consumer waste go to landfills and design products that delight
consumers while maximizing the conservation of resources. We have set a series of
short-term goals to ensure we are on track to deliver against our long-term vision. For
detailed information about this progress, check out latest citizenship report here.
We want people who choose P&G brands to know that our products are created with a
commitment to sustainability. From formulation, to manufacturing, to package design
and shipment, out products are made responsibly and without tradeoffs in performance
or value.

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We believe in action speaking louder than words, which is why we consistently deliver
products and programs that demonstrate progress on our citizenship efforts in:
Compacted laundry detergents, less bulky diaper, and products that reduce materials,
energy usage and waste
Manufacturing operations with zero waste to landfills and Iess energy and water usage
Cold water washing that conserves energy, reduces CO2 emissions
The P&G Children’s Safe Drinking Water program that has delivered more than 11
billion liters of clean, safe drinking water
Brand programs that provide essential products to help thousands of people in need
when disaster strikes around the world
Brand programs that inspire and empower women and girls so they realize their full
potential
Ensuring that our employee base represents the diverse group of consumers we serve
These efforts are helping us meet consumer needs and make a positive environmental
and social impact.
Climate, Water, Waste
Our strategy is to make a positive impact by focusing on three core areas:
CLIMATE
Climate change poses complex challenges that will require a wide range of strategies
and solutions that reduce greenhouse gas emissions. For P&G, this means we are
striving to reduce energy consumption associated with our plants and products, use less

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carbon intense raw materials and energy, and ensure that sourcing of key commodities
like palm and pulp are not contributing to deforestation.
WATER
With the current water situation in the world today, we have an obligation not only to
reduce the water we use in the manufacturing phase but also to help educate
consumers about water consumption when they use out products. We achieved out
short-term goal of a 20% water reduction in our manufacturing sites and are focusing
our conservation efforts in water stressed regions.
WASTE
We are committed to reducing waste in our manufacturing sites. More than half our sites
are zero waste to landfill, and we continue to look for ways to improve our packaging to
reduce waste and ensure it can be recycled.
EXTERNAL ANALYSIS
*General Environment
Economic Development
The Procter & Gamble Company’s performance in the consumer goods industry is
directly based on the economies where the business operates. The effects of economic
trends and issues on the remote or macro-environment are determined in this element

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of the PESTEL/PESTLE Analysis framework. The following economic external factors
are most notable in the case of Procter & Gamble:
1. High growth rate of developing markets (opportunity)
2. Improving disposable income levels (opportunity)
3. Economic stability of the majority of developed markets (opportunity)
The opportunity linked to the high growth rate of developing markets supports Procter &
Gamble’s potential growth. For example, increasing penetration into developing
countries can drive the company’s overall global growth. Procter & Gamble’s marketing
mix or 4Ps should reflect the corresponding changes. The company also has the
opportunity to grow based on improving disposable income levels. This economic
external factor corresponds to customers’ rising purchasing capacity for consumer
goods from firms like Procter & Gamble. Moreover, the stability of the majority of
developed markets contributes to the considerable stability of P&G’s remote or macro-
environment. These conditions indicate that the Procter & Gamble Company has growth
opportunities based on this element of the PESTEL/PESTLE analysis.
Socio cultural Demographic Lifestyle Changes
Social trends and changes affect Procter & Gamble in terms of the behaviors of
customers and workers, among other considerations. This element of the
PESTEL/PESTLE Analysis framework deals with the influence of sociocultural
conditions on business opportunities and threats in the remote or macro-environment of
firms. Procter & Gamble must include the following sociocultural external factors in its
strategic formulation for the consumer goods market:

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1. Increasing preference for high-quality consumer goods (opportunity)
2. Increasing preference for healthful products (opportunity)
3. Declining population growth rate in developed countries (threat)
As countries develop, consumers are increasing their preference for high-quality
products from firms like Procter & Gamble. This social external factor creates
opportunity for business growth in the remote or macro-environment of the consumer
goods industry. For example, P&G can expect potential revenue increase by enhancing
the quality of its products. On the other hand, the increasing preference for healthful
products presents another growth opportunity for Procter & Gamble. The company can
improve the health impact of its consumer goods accordingly. Despite such
opportunities, Procter & Gamble experiences the threat of a declining population growth
rate in many developed countries. This sociocultural external factor reduces long-term
business growth potential in developed markets. In this element of the
PESTEL/PESTLE analysis of Procter & Gamble, strategies must account for growth
opportunities, especially in developing countries.
Technological Development
The Procter & Gamble Company depends on technologies to support its consumer
goods business. Also, technological advancements affect consumers’ behaviors and
purchases decisions. Such effects of technological tools, changes and trends are
identified in this element of the PESTEL/PESTLE Analysis framework. The following

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technological external factors are significant in Procter & Gamble’s remote or macro-
environment:
1. Growing online market (opportunity)
2. Business automation (opportunity)
3. Increasing fuel efficiency in transportation (opportunity)
Procter & Gamble has opportunity to increase its revenues from online sales, based on
a growing global online market. In addition, the company can improve its business
efficiencies through automation. This technological external factor should influence
strategic decisions in Procter & Gamble’s operations management. For example, the
company’s operations managers can include business automation in solutions to
maximize productivity. On the other hand, the increasing fuel efficiency in transportation
supports Procter & Gamble’s efforts to minimize the costs involved in its supply chain
and consumer goods distribution network. This external factor promotes cost-
effectiveness in P&G’s remote or macro-environment. Based on this element of the
PESTEL/PESTLE analysis, technological trends can support Procter & Gamble’s
growth.
Political, Legal, & Government Aspect
Procter & Gamble’s strategies include measures to ensure legal compliance of its
consumer goods business. The impact of rules and regulations on firms and the remote
or macro-environment are evaluated in this element of the PESTEL/PESTLE Analysis

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framework. The following legal external factors shape the strategies of Procter &
Gamble:
1. Increasing product safety regulations (opportunity)
2. Expansion of environmental protection regulations (threat & opportunity)
3. Increasing business sustainability regulations (threat & opportunity)
Procter & Gamble has the opportunity to grow by addressing increasing product
regulations relevant to the consumer goods industry. For example, the company can
enhance its product safety standards, leading to higher quality output. On the other
hand, the expansion of environmental protection regulations is a threat that could
impact P&G’s supply chain and business practices. However, this legal external factor
also makes the remote or macro-environment more supportive of Procter & Gamble’s
efforts to contribute to environmental protection. In relation, the company has the
opportunity to strengthen its corporate and brand image by improving its business
sustainability status, addressing increasing business sustainability regulations.
Nonetheless, this legal external factor is also a threat to Procter & Gamble in terms of
potential restrictions on business operations. Thus, the company must continue its
sustainability initiatives. In this element of the PESTEL/PESTLE analysis of Procter &
Gamble, a proactive approach to compliance can address opportunities and threats.
*Market Demand and Opportunities
Types of Products and Services
Brands by product type

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Dishwashing
Dawn dishwashing liquid
Joy dishwashing liquid
Gain dishwashing liquid
Ivory dishwashing liquid
Salvo dishwashing liquid
Menstrual hygiene
Always menstrual hygiene products
Naturally menstrual hygiene products
Tampax tampons
Whisper menstrual hygiene products
Haircare
Head & Shoulders shampoo
Ascend hair care products
Aussie haircare (shampoo/ Conditioners/styling aids)
Balsam hair coloring (Part of Clairol) sold to Coty Inc. on October 1, 2016
Braun hair care and grooming products
Clairol personal products division of Procter & Gamble that makes hair coloring, hair
spray, shampoo, hair conditioner, and styling products
Frederic Fekkai hair care products sold
Hair food hair care products
Herbal essences hair care products (Part of Clairol)
Head & shoulder shampoo

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Natural Instincts hair coloring (Part of Clairol) sold to Coty Inc. October 1, 2016
Nicky Clarke hair products
Pantene hair care products (purchased Haffmann – La Roche in 1985)
Perfect lights hair coloring (Part of Clairol) sold to Coty Inc. on October 1, 2016
Rejoice haircare products
Sebastian Professional hair products sold to Coty Inc. on October 1, 2016
Vidal Sassoon haircare products (Purchased in 1984 Vidal Sassoon)
Wash & Go hair care sold to Conter S.r.l. Effective June 30, 2015
Healthcare products
Align probiotics
Crest toothpaste
Fiber sure supplements
Fixodent denture adhesive
Scope mouthwash
Metamucil laxative/ fiber supplement (acquired G. D. Searle & Company in 1985)
New Chapter dietary supplements
Pepto-Bismol over- the- counter drug for minor digestive system upset (acquired as part
of Norwich Eaton Pharmaceuticals in 1982)
Prilosec OTC
Vicks cough and cold products
Swisse
Vidovit (children & Pregnancy vitamins)
Household

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Ace stain remover liquid
Bounce fabric- softener sheet for dryers. This commercial features a musical soundtrack
to the tune of the Outfield’s Love.
Cascade dishwasher detergent
Fairy dishwashing liquid, toilet soap, household soap, laundry detergent and dishwasher
detergent
Febreze odor control
Flash cleaning product
Infacare baby wash, sold to Ceuta Healthcare limited affective March 1, 2012
Jar dishwashing liquid and dishwasher detergent
Mr. Clean household cleaners
Puffs tissues
Luvs disposable diapers
A bar of Safeguard soap
Safeguard antibacterial soap brand (4) marketed by Procter & Gamble, introduced circa
1965. Safeguard soap is marketed under the brand name escudo in Mexico. (5)
Tide detergents
Viakal cleaning products
Vizir Laundry detergent
Swiffer cleaning products
Zevo insect control
Laundry detergents

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Ariel laundry detergent
Bold laundry detergent
Bonux laundry detergent
Cheer laundry detergent
Daz laundry detergent
Downy laundry detergent
Era laundry detergent
Dreft laundry detergent
Gain laundry detergent
Ola laundry soap
PMC laundry detergent
Skin care
INTENSITY COMPETITION
Procter’s and Gamble FIVE FORCES ANALYSIS
This Porter’s Five Forces analysis of Procter & Gamble shows that competition or
competitive rivalry has the highest intensity among the five forces. As a result, the
company must prioritize competition in strategic formulation. The force of the threat of
new entry comes second in intensity and impact on Procter & Gamble and the
consumer goods industry environment. The forces of the threat of substitution, the
bargaining power of P&G’s suppliers and the bargaining power of consumers or

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customers have the lowest intensities among the five forces. Procter & Gamble’s
strategic decision-making must address the five forces based on their intensities, as
follows:
1. Competitive rivalry or competition (strong force)
2. Bargaining power of buyers or customers (weak force)
3. Bargaining power of suppliers (weak force)
4. Threat of substitutes or substitution (weak force)
5. Threat of new entrants or new entry (moderate force)
Recommendations.
Procter & Gamble needs to improve its competitive advantage. One recommendation is
to increase the company’s online presence. This step addresses the external factors
responsible for the strong intensity of competitive rivalry that Procter & Gamble
experiences. For example, expanding P&G Shop’s operations to more countries could
improve sales revenues and increase the company’s competitiveness in the global
consumer goods market. Moreover, increasing online presence will address the
company’s weakness of having a limited online presence. As shown in the SWOT
analysis of the Procter & Gamble Company, the online market presents growth
opportunities. In addition, it is recommended that the company invest more in
technologies to improve efficiencies. Such efficiencies could add to Procter & Gamble’s
competitive advantage. These actions are intended to bolster the company’s ability to
withstand competition. Also, based on this Porter’s Five Forces analysis of Procter &

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Gamble, another recommendation is to expand the organization’s distribution network.
A more extensive distribution network could address potential new entrants in the
industry environment. The expansion could also support Procter & Gamble’s further
growth in the global consumer goods market.
Competitive Rivalry or Competition (Strong Force)
Competitive rivalry determines the benefits of Procter & Gamble’s competitive
advantage and how the business develops its competitiveness in the consumer goods
market. This element of Porter’s Five Forces Analysis identifies the influence of
competition on the industry environment. The following external factors contribute to the
strong intensity of the force of competition on Procter & Gamble:
 Large number of firms (strong force)
 High variety of firms (strong force)
 Low switching costs (strong force)
There are many firms operating in the consumer goods industry. This condition imposes
a strong force on Procter & Gamble, which needs to compete against many firms to
ensure its success. On the other hand, the high variety of firm makes it difficult to
compete in the industry environment. This external factor strengthens the intensity of
competitive rivalry that Procter & Gamble experiences. The force of competition is
further intensified because of the low switching costs, which corresponds to the low
level of negative consequence of moving from P&G’s brands to other firms’ brands. For
example, consumers can easily choose to move from Procter & Gamble’s Tide laundry

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detergent products to Surf laundry detergent products. Such movement has minimal
consequence on consumer experience regarding product effectiveness, among other
factors. The external factors in this element of the Five Forces Analysis point out the
strong force of competition against Procter & Gamble.
Bargaining Power of Procter & Gamble’s Customers/Buyers (Weak Force)
The Procter & Gamble Company aims to satisfy consumers’ preferences and needs to
attract them to its consumer goods. Such satisfaction determines how customers or
buyers impact firms and the industry environment, as considered in this element of the
Porter’s Five Forces Analysis model. Procter & Gamble must address these external
factors that cause the moderate intensity of the bargaining power of customers or
buyers:
 Low availability of substitutes (weak force)
 High overall market demand (weak force)
Procter & Gamble faces low switching costs, as consumers can easily move away from
one consumer goods brand to another. However, the low availability of substitutes limits
the intensity of the bargaining power of P&G’s consumers. For example, it is difficult for
consumers to find natural or homemade substitutes to many of Procter & Gamble’s
personal care products. Moreover, the high overall market demand minimizes the effect
of individual consumer purchase decisions on the company’s business performance and
the condition of the consumer goods industry environment. Based on these external

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factors, the bargaining power of customers or buyers is weak in affecting Procter &
Gamble. This element of the Five Forces analysis indicates that the bargaining power of
consumers is a low-priority strategic consideration in the Procter & Gamble Company’s
decisions.
Bargaining Power of P&G’s Suppliers (Weak Force)
Suppliers support firms through the availability of raw or intermediary materials needed
for Procter & Gamble’s business operations. This element of Porter’s Five Forces
Analysis deals with the influence of suppliers on the condition of the industry
environment. The following external factors are the determinants of the weak intensity of
the bargaining power of suppliers on Procter & Gamble and the consumer goods
industry:
 Moderate degree of forward integration (moderate force)
 High overall level of supply (weak force)
 High population of suppliers (weak force)
The moderate degree of forward integration refers to suppliers’ considerable but limited
control of the distribution and sales of their products to firms like Procter & Gamble. For
example, many third-party intermediary firms control the flow of materials from suppliers
to P&G’s facilities. This external factor imposes a moderate force on Procter &
Gamble’s consumer goods business. On the other hand, the high overall level of supply
limits the influence of individual suppliers on the company. In relation, the high
population of suppliers further reduces the intensity of individual suppliers’ influence on

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Procter & Gamble and the industry environment. These external factors highlight the
relatively weak position of suppliers, especially when compared to large global
consumer goods firms. In this Five Forces Analysis of Procter & Gamble, the bargaining
power of suppliers is a minor issue in strategic decisions.
Threat of Substitutes or Substitution against the Procter & Gamble Company
(Weak Force)
Some products in the market can function as substitutes for products from the Procter &
Gamble Company. The effects of substitution on firms and the industry environment are
considered in this element of Porter’s Five Forces Analysis. The following external
factors are responsible for the moderate intensity of the threat of substitutes against
Procter & Gamble:
 Low availability of substitutes (weak force)
 Low variety of substitutes (weak force)
The intensity of the threat of substitution against Procter & Gamble is strengthened
through low switching costs. This external factor refers to the negative consequences of
consumers’ movement away from P&G’s brands to other companies’ brands. However,
the low availability of substitutes weakens such threat. Moreover, the low variety of
substitutes further reduces their impact on Procter & Gamble. For example, homemade
personal care items are typically available in only one or a few variants. The
combination of these external factors imposes a weak force on Procter & Gamble and

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the industry environment. Thus, this element of the Five Forces analysis indicates that
the threat of substitution is a minor concern in the consumer goods business. The other
forces have a more significant impact on Procter & Gamble.
Threat of New Entrants or New Entry against Procter & Gamble (Moderate Force)
Procter & Gamble’s performance is partially based on the presence or absence of new
firms or new entrants in the consumer goods market. This element of Porter’s Five
Forces Analysis evaluates how new entry influences firms and the industry
environment. Procter & Gamble’s strategies must consider these external factors that
lead to the moderate intensity of the threat of new entrants:
 Moderate capital costs (moderate force)
 Moderate economies of scale (moderate force)
The Procter & Gamble Company’s consumers can easily move to other consumer good
brands, based on the low switching costs. This external factor enables new entrants to
exert a strong-intensity force against the company. However, the moderate capital costs
limit this threat against Procter & Gamble. New firms find it difficult to directly compete,
considering the company’s organizational size and capitalization. Also, the moderate
economies of scale limit the effects of new entry on Procter & Gamble. For example,
typical new entrants cannot easily match P&G’s strengths linked to its global scale of
operations. Based on this element of the Five Forces analysis of Procter & Gamble,

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new entry is a considerable strategic issue, based on external factors in the consumer
goods industry environment.
SUPPLIES AND DISTRIBUTION
Supply Network Operation
In Supply Network Operation at P&G, we are uniquely positioned to see the Supply
Chain from end-to-end- starting without materials through the touch point of our brands
with shoppers in the market. We are both the ‘voice of the customers” for supply and the
integrator across the company’s disciplines. You can start your career in one of 15
different diverse work areas within P&G that comprise our end-to-end operation – plan
the demand and / supply into the market, work to create or execute the physical design
of our supply networks around the world, serve as the vital daily interface with our
customers and suppliers; or lead the efforts to define and deliver new breakthroughs in
value creation with these partners.
What will you doing SNO?
We offer a diversity of roles as entry points into the Company’s operation as a Process
Engineer or Planner across our work systems. . Our work spans the length of the supply
system and requires you to be responsible for leading planning, process or projects that
will reduce cost, improve service, and remove time from the supply chain. These are
critical activities that keep us leading the marketplace in logistics services by managing
logistics information, customer orders, and the prompt distribution of finished products
to our trade customers and shoppers of our brands around the world.

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Areas Include
Market/Supply Chain planning
You will be responsible for forecasting demand for our products and managing their
supply to the customer. This includes managing the logistics for new product initiatives
and promotions for one or more of our brands. You will be a key player within one of our
multi-functional business teams. Who will look to you as the supply chain expert to
deliver breakthrough results in product shelf availability, inventory management and
demand forecast accuracy.
Customer Service operations
You will be responsible for the first line contact with our customers, dealing with their
supply needs and ensuring our products are always shipped and delivered perfectly.
This involves working externally with your logistics counterparts at our customers and
also internally with other functions. You will create mutual and competitive advantage
that can be commercialized and help our brands to win with consumers and shoppers
and may also be responsible for leading a small team of people.
Distribution
You will be responsible for the physical distribution of P&G products and their timely
delivery to our customers, collaborating closely with our manufacturing plants,
distribution centers and external logistics partners (including 3rd party distribution
center.) by analyzing and optimizing our organization, work processes and transport,
you will balance the challenge of reducing physical distribution cost while maintaining
and improving competitive service levels to our customers and may also be responsible
for leading a small team of people:

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COST OF DOING BUSINESS
One of the world's biggest advertising spenders is reducing its ad budgets and cutting
the number of agencies it works with by 50 percent, and plans to bring more media
planning and buying in-house.
Procter & Gamble's Chief Financial Officer Jon Moeller said the company had already
reduced ad agency and production costs by $750 million and expected to save another
$400 million "in the next phase."
Speaking on the company's second-quarter earnings call Tuesday, Moeller added that
P&G currently works with 2,500 agencies and plans to reduce this to 1,250.
"We need the contribution of creative talent and are prepared to pay for that. We don't
need some of the other components of the cost. We will move to more 'fixed and flow'
arrangements with more open sourcing of creative talent and production capability,
driving greater local relevance, speed, and quality at lower costs," he stated.

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Procter and Gamble shares fall despite earnings beat 11:02 AM ET Tue, 23 Jan 2018 |
01:54
Last April, P&G's Chief Brand Officer Marc Pritchard said the business wanted to run fewer ad
campaigns. "We've cut the amount of work we do, but we can go much further by focusing on
fewer and better ideas that last longer. We get tired of ads a lot faster than consumers do," he
told an industry conference.
Pritchard has previously warned the media planning and buying industry to clean up its
act or risk losing P&G's business. On Tuesday's earnings call, Moeller said improving
"media transparency" had led to it reducing wasted advertising while increasing the
number of people it reaches.
"There is more opportunity to eliminate waste by reducing excess frequency within and
across channels, eliminating non-viewable ads, and stopping ads served to bots or

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adjacent to inappropriate content. Through these efforts, we've been able to eliminate
waste and cut losses, while simultaneously increasing reach the number of consumers
we're actually connecting with by about 10 percent," he said.
Total net sales for the quarter were $17.4 billion, a 3 percent increase year-over-year,
but P&G said it is dealing with retailers buying fewer products and discounting them. Its
baby, feminine and family care division, including Pampers diapers, dropped 1 percent.
Competitor Kimberly-Clark, which makes Huggies diapers and Kleenex, said Tuesday it
will cut around 5,000 jobs globally.
INDUSTRY AND COMPETITION ANALYSIS
Market information
Operation/ production aspects
1. Design of Goods and Services. Operations managers are concerned about product
specifications, which determine other strategic decision areas of operations. Procter
&Gamble’s objective in this area is to develop products within organizational
capabilities, while supporting goals for innovation. Innovation is a main factor in the
company’s intensive growth strategies (Read: Procter & Gamble’s Generic Strategy &
Intensive Growth Strategies). In applying this approach, the company’s operations
managers focus on cost minimization without sacrificing product quality. In this way,
Procter & Gamble’s vision statement and mission statement are satisfied in terms of
ensuring quality and value of consumer goods. For example, cost minimization is
possible through high quality P&G products designed for high operational productivity

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levels. Thus, Procter & Gamble maintains high quality standards while keeping flexibility
in other related factors for this strategic decision area of operations management.
2. Quality Management. Quality management’s objective is to implement quality
standards based on the expectations of target customers or consumers. In this case,
the Procter & Gamble Company’s goal for this strategic decision area is to apply high
quality standards in OM. These standards support leadership in OM, and business
leadership in the consumer goods industry. High quality standards address issues
linked to competitive rivalry shown in the Porter’s Five Forces Analysis of Procter &
Gamble. For example, products of higher quality are more likely to succeed in the
saturated market of consumer goods. At Procter & Gamble, operations managers use
current market data to determine the suitability of quality standards. Operational
specifications and productivity measures are adjusted according to changes in data
pertaining to P&G consumer expectations. Thus, in this strategic decision area of
operations management, Procter & Gamble’s dynamic quality standards are used to
match market expectations.
3. Process and Capacity Design. The strategic decision in the area of process and
capacity design considers the specifications and requirements in Procter & Gamble’s
production processes. The company’s objective is to maintain adequate capacity and
productivity. In this regard, the operations management approach used at Procter &
Gamble involves maximization of automation in production. For example, automation
increases productivity and capacity through higher operational efficiency. The resulting
condition contributes to the benefits of economies of scale, which is one of the strengths
identifiable in the SWOT Analysis of the Procter & Gamble Company. In this strategic

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decision area of operations management, designs are also based on regular reviews of
P&G’s processes. The resulting data allow Procter & Gamble’s operations managers to
develop solutions to ensure that the consumer goods business remains highly
productive.
4. Location Strategy. Optimal distances from resources and target markets are the
operations management objective in this strategic decision area. Procter & Gamble
uses an approach that prioritizes proximity to target markets. For example, facilities are
located where it is easy to transport P&G’s consumer goods to retailers. In this
condition, Procter & Gamble’s operations managers maximize the benefits of high
productivity. For instance, high operational productivity in manufacturing and distribution
facilities supports effective market reach through retailers.
5. Layout Design and Strategy. The Procter & Gamble Company addresses layout
design and strategy through real-time data. The objective in this strategic decision area
of operations management is to optimize the flow of resources and information to
support the consumer goods business. In this case, Procter & Gamble’s organizational
structure also determines the layout design and strategy. For example, internal
business processes are grouped according to the divisions in the corporate structure.
Moreover, operations managers are concerned about layouts that suit internal business
processes in Procter & Gamble’s corporate offices. The aim is to support P&G
employees’ productivity. Understandably, Procter & Gamble’s operations management
approach for this strategic decision area adapts to available spaces, considering
variations in facilities and regulations.

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6. Job Design and Human Resources. Operations managers are involved in efforts to
ensure the adequacy of human resources. To address this objective, Procter & Gamble
implements employee training programs for innovation and productivity. Employees are
among the main stakeholders of the company (Read: Procter & Gamble’s Corporate
Social Responsibility Strategy & Stakeholders). The approach used for this strategic
decision area also supports leadership and passion for winning as a way to enhance
employee morale and career development. Aligned with Procter & Gamble’s
organizational culture, these factors and operations management efforts ensure
effective and adequate human resources. Adequate HR supports consistency and
effective capacity in P&G’s consumer goods business. For example, the strategically
developed human resources and its culture make it easier for Procter & Gamble’s
operations managers to address operational issues.
7. Supply Chain Management. This strategic decision area of operations management
has the objective of strategically aligning an effective supply chain that supports Procter
& Gamble’s consumer goods business. The condition of the supply chain determines
the capabilities of the company in terms of productivity and capacity. In this regard,
Procter & Gamble’s operations managers prioritize external and internal factors that
significantly influence the supply chain. The company aims to minimize the negative
operational effects of these factors on productivity. For example, the PESTEL/PESTLE
analysis of the Procter & Gamble Company shows that ecological factors can create
challenges in maintaining an adequate supply chain for P&G. Thus, the company uses
data on external conditions and internal conditions to address such challenges and to
fulfill the operations management objectives in this strategic decision area.

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8. Inventory Management. For inventory management, Procter & Gamble’s operations
management team focuses on the objective of matching inventory and organizational
needs. At the same time, the company considers consumers, suppliers, and business
productivity in this strategic decision area. Moreover, Procter & Gamble’s marketing mix
(4Ps) imposes requirements on inventory management activities. For example, the
activities of retailers influence P&G’s operations management decisions in this strategic
area. The methods that Procter & Gamble applies for inventory management include
the periodic method and the first in, first out (FIFO) method. FIFO minimizes spoilage of
raw materials and consumer goods. Procter & Gamble’s operations managers also use
buffer inventory to address sudden fluctuations in market demand.
9. Scheduling. In this strategic decision area, Procter & Gamble’s objective is to
develop and implement short-term and intermediate operational schedules for optimum
utilization of resources to support business needs. In this regard, the approach to OM
involves fixed schedules for most of P&G’s corporate offices, and rotating variable
schedules in some facilities. For example, Procter & Gamble’s corporate office
employees adhere to their fixed schedules for data processing and analysis. On the
other hand, operations managers apply rotating schedules for manufacturing processes.
Some of these rotating schedules are variable to enable Procter & Gamble to
correspondingly vary its productivity as a way of addressing changes in market demand
for consumer goods.
10. Maintenance. P&G has the objective of maintaining effective and adequate
processes in this strategic decision area of operations management, in consideration of
productivity and capacity, demand, and resources. Procter & Gamble’s operations

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managers maintain dedicated personnel for each process. For example, for problems
involving the supply chain, the company has a dedicated team that specializes in supply
chain management. This operational approach ensures continuity in Procter & Gamble’s
operations management policies and strategies, leading to consistency in productivity
and output of the consumer goods business.
Productions
Procter & Gamble produced and sponsored the first radio serial dramas in the 1930s.
As the company was known for detergents, the serials became known as "soap
operas". With the rise of television in the 1950s and 1960s, most of the new serials were
sponsored and produced by the company (including The Guiding Light, which had
begun in 1937 as a radio serial, and made the transition to television in 1952). Though
the last P&G-produced show, As the World Turns, left the air in 2010, The Young and
the Restless, produced by Sony Pictures Television and broadcast on CBS, is still
partially sponsored by Procter & Gamble; as of 2017, it is the only remaining daytime
drama that is partially sponsored by Procter & Gamble.
These past serials were produced by Procter & Gamble:
 Another World  Guiding Light
 As the World Turns  Lovers and Friends / For Richer, for
 The Brighter Day Poorer
 The Catlins  Our Private World
 The Edge of Night  Search for Tomorrow

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 The First Hundred Years  Somerset
 From These Roots  Texas
 Young Doctor Malone
Procter & Gamble also was the first company to produce and sponsor a prime-time
serial, a 1965 spin-off of As the World Turns called Our Private World. In 1979, PGP
produced Shirley, a prime-time NBC series starring Shirley Jones, which lasted 13
episodes. They also produced TBS' first original comedy series, Down to Earth, which
ran from 1984 to 1987 (110 episodes were produced). They also distributed the
syndicated comedy series Throb. In 1985, they produced a game-show pilot called The
Buck Stops Here with Taft Entertainment Television in 1985, hosted by Jim Peck; it was
not picked up. Procter & Gamble Productions originally co-produced Dawson's
Creek with Sony Pictures Television but withdrew before the series premiere due to
early press reviews. They also produced the 1991 TV movie A Triumph of the Heart:
The Ricky Bell Story, which was co-produced by The Landsburg Company, and
continue to produce the People's Choice Awards.
In 2013, PGP rebranded itself as Procter & Gamble Entertainment (PGE) with a new
logo and an emphasis on multiple-platform entertainment production.

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COMPETITORS ANALYSIS
Major competitors
Procter & Gamble (PG) is a multinational consumer goods company that was founded
in 1837. The company has five revenue segments: beauty, hair and personal care;
grooming; health care; fabric care and home care; and baby, feminine and family care.
In the beauty, hair and personal care segment, Avon is a major competitor to Procter
and Gamble as are Colgate-Palmolive (CL), Estee Lauder, Revlon (REV), Coty (COTY),
Elizabeth Arden (RDEN), Inter Parfums Inc (IPAR), and Unilever. This segment
accounts for 23% of Procter & Gamble's net earnings.
In the grooming segment, Procter & Gamble's Gillette brand is the dominant market
player. Bic is a major competitor with a large international presence. This segment
accounts for 17% of Procter & Gamble's net earnings.
In the health care segment, major competitors include CCA Industries, Colgate-
Palmolive, Church and Dwight Co. (CHD), Ecolab (ECL), Stepan Company (SCL) and
United Guardian (UG). This segment accounts for 9% of Procter & Gamble's net
earnings.
In the fabric care and home care segment, major competitors include Colgate-
Palmolive, Unilever (UL), and Church and Dwight Co. This segment accounts for 26%
of Procter & Gamble's net earnings.

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In the baby, feminine and family care segment, major competitors include Colgate-
Palmolive, Unilever, and Church and Dwight Co. This segment accounts for 25% of
Procter & Gamble's net earnings.
Procter & Gamble also competes with countless smaller companies in all the segments
in which it reports revenue. The company has a market capitalization of $239.34 billion
with total revenue of $83 billion for its fiscal year 2014. The company is headquartered
in Cincinnati, Ohio.
Competitor profile
Unilever Philippines, Inc. is the Philippine subsidiary of
Dutch multinational company, Unilever. It is based in Bonifacio Global City
in Taguig since 2016. It is a manufacturer of laundry detergents and soaps, shampoos
and hair conditioners, toothpastes, deodorants, skin care products, household cleaners,
and toilet soaps with an annual sales of over 40 billion pesos. It employs over 1,000
people nationally.
Aside from Unilever Philippines, other Unilever subsidiaries in the country include
Unilever RFM Ice Cream, Inc. (formerly, Selecta Walls, Inc.) and California
Manufacturing Company (Unilever Bestfoods).
Unilever Philippines serves as part of Unilever Group N.V./plc to produce, manufacture
and supervise Unilever brands (like Surf, Close-Up, Clear, among others) in the
Philippine market. To maintain the needs of mass production of most of the products,

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the company also imports Unilever products from neighboring countries such as
Malaysia, Indonesia, and Vietnam
Johnson & Johnson is an American multinational medical devices, pharmaceutical
and consumer packaged goods manufacturing company founded in 1886. Its common
stock is a component of the Dow Jones Industrial Average and the company is listed
among the Fortune 500.
Johnson & Johnson is headquartered in New Brunswick, New Jersey, the consumer
division being located in Skillman, New Jersey. The corporation includes some 250
subsidiary companies with operations in 60 countries and products sold in over 175
countries. Johnson & Johnson had worldwide sales of $70.1 billion during calendar year
2015.[3] The company has made the 3rd largest pharmaceutical settlement with the U.S.
Department of Justice.
Johnson & Johnson's brands include numerous household names of medications
and first aid supplies. Among its well-known consumer products are the Band-Aid Brand
line of bandages, Tylenol medications, Johnson's baby products, Neutrogena skin and
beauty products, Clean & Clear facial wash and Acuvue contact lenses.

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Summary and conclusion
Competitive Profile Matrix Weight Rating Rated Score of P&G, Unilever and Johnson &
Johnson
P&G 1. Advertising 0.1 3 0.3 2. Product Quality 0.13 3 0.39 3. Price Competitiveness
0.12 3 0.36 4. Market Share 0.14 3 0.42 5. Global Expansion 0.15 2 0.36 6. Consumer
Loyalty 0.12 3 0.36 7. Cost 0.13 3 0.39 8. Financial Position 0.11 3 0.33 Unilever1.
Advertising 0.1 4 0.4 2. Product Quality 0.13 3 0.39 3. Price Competitiveness 0.12 3 2
0.24 4. Market Share 0.14 3 0.42 5. Global Expansion 0.15 4 0.6 6. Consumer Loyalty
0.12 3 0.36 7. Cost 0.13 3 0.39 8. Financial Position 0.11 4 0.44 Johnson & Johnson
1. Advertising 0.1 2 0.2 2. Product Quality 0.13 3 0.39 3. Price Competitiveness 0.12 3 2
0.24 4. Market Share 0.14 2 0.28 5. Global Expansion 0.15 3 0.45 6. Consumer Loyalty
0.12 3 0.36 7. Cost 0.13 4 0.52 8. Financial Position 0.11 3 0.33

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External factor evaluation (EFE) Matrix
EFE MATRIX
OPPORTUNITIES WEIGHT RATING RATED
SCORE
1. Higher Demand for higher- priced products such as 0.09 3 0.27
prestige cosmetics and Fragrances.
2. Younger customers are attracted by social media 0.07 2 0.14
advertising.
3. Social media advertising is more cost effective 0.07 2 0.14
than traditional advertising.
4. The beauty and cosmetics industry is expected to 0.08 3 0.24
increase globally especially in the emerging
market.
5. There is an endless possibility to ‘celebrities’ 0.06 2 0.12
endorsing fragrances, these products are
successful because many are persuaded by fame of

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the celebrity.
6. Men are increasingly concerned with their 0.08 3 0.24
appearance; this provides opening to grab a new
branch of consumers.
7. Increasing in online purchasing. 0.08 3 0.24
8. Being a leader in some of the most demanding 0.09 3 0.27
product in the market
EFE Matrix Opportunities Weight Rating Rated Score 1. Higher demand for
higher-priced products such as prestige cosmetics and fragrances. 0.09 3 0.27 2.
Younger customers are attracted by social media advertising. 0.07 2 0.14 3. Social
media advertising is more cost effective than traditional advertising. 0.07 2 0.14 4. The
beauty and cosmetics in industry is expected to increase globally especially in the
emerging market 0.08 3 0.24 5. There is an endless possibility to celebrities’ endorsing
fragrances, these products are successful because many are persuaded by fame of the
celebrity. 0.06 2 0.12 6. Men are increasingly concerned with their appearance; this
provides opening to grab a new branch of consumers. 0.08 3 0.24 7. Increase in online
purchasing. 0.08 3 0.24 8. Being a leader in some of the most demanding product in the
market. 0.09 3 0.27

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EFE Matrix Threats Weight Rating Rated Score 1 Volatile foreign exchange
rates 0.04 4 0.16 2. Subject to anti-investigation in Europe 0.04 3 0.12 3. Increase in
competitor expansion globally from Colgate- Palmolive, Unilever, and Clorox. 0.09 4
0.36 4. Regulations are increasing due to voicing of different groups about harmful
chemical ingredients in cosmetic products. 0.07 3 0.12 5. The Unilever companies ranks
number two in personal care and household companies. 0.09 3 0.27 6. Considerable
Investment is necessary to bring new products to the market and to maintain their high
profile 0.05 4 0.20 TOTAL 1.00 2.98
EFE MATRIX
RATED
THREATS WEIGHT RATING
SCORE
1. Volatile foreign exchange rates 0.04 4 0.16
2. Subject to anti-trust investigation in Europe. 0.04 3 0.12
3. Increase in competitor expansion globally 0.09 4 0.36
from Colgate, Palmolive, Unilever, and Clorox.
4. Regulations are increasing due to the voicing 0.07 3 0.21
of different groups about harmful chemical

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ingredients in cosmetic products.
5. The Unilever companies’ ranks number two in 0.09 3 0.27
personal care and household companies.
6. Considerable investment is necessary to bring 0.05 4 0.20
new products to the market and to maintain
their high profile.
TOTAL 1.00 2.98
INTERNAL ANALYSIS
Revenue sales for past 3 years
Comparisons as a percentage of Basis Point Basis Point
net sales; Years ended June 30 2017 Change 2016 Change 2015
Gross margin 50.0% 40 49.6% 200 47.6%
Selling, general and administrative
expense 28.5% (50 ) 29.0% (10 ) 29.1%
Operating margin 21.5% 90 20.6% 500 15.6%
Earnings from continuing
operations before income taxes 20.4% (10 ) 20.5% 490 15.6%
Net earnings from continuing 15.7% 30 15.4% 370 11.7%

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operations
Net earnings attributable to
Procter & Gamble 23.6% 750 16.1% 620 9.9 %
Fiscal year 2017 compared with fiscal year 2016
Gross margin increased 40 basis points (bps) to 50.0% of net sales in 2017. Gross
margin increased primarily due to:
• a 230 basis-point positive impact from total manufacturing cost savings (210 basis
points net of product and packaging reinvestments),
• a 20 basis-point benefit from lower restructuring charges and
• A 10 basis-point benefit from positive scale impacts due to higher volume.
These impacts were partially offset by:
• a 90 basis-point decrease from unfavorable product mix between segments (caused
primarily by the lower relative proportion of sales in Grooming, which has higher than
company-average gross margins) and within segments (due to disproportionate
growth of lower margin products, forms and package sizes in certain businesses),
• a 40 basis-point negative impact from unfavorable foreign exchange and
• A combined 70 basis-point impact due to higher commodities and other costs.
Total SG&A decreased 2% to $18.6 billion as increased overhead and advertising
spending were more than offset by a reduction in other operating expenses, primarily
due to a reduction in net foreign exchange transactional costs and gains on real estate

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sales. SG&A as a percentage of net sales decreased 50 basis points to 28.5% as a
result of the decline in other operating expenses.
• Marketing spending as a percentage of net sales increased 10 basis points due to
an increase in marketing activities, partially offset by productivity savings.
• Overhead costs as a percentage of net sales increased 20 basis points, primarily
driven by wage inflation and increased sales personnel in certain businesses,
partially offset by 20 basis points of productivity savings.
•Other operating expenses as a percent of net sales declined 80 basis points. Lower
foreign exchange transactional charges reduced SG&A as a percentage of net sales by
approximately 20 basis points. The balance of the reduction is primarily driven by gains
on sales of real estate.
Gross margin increased 200 basis points to 49.6% of net sales in 2016. Gross margin
increased primarily due to:
• a 210 basis-point positive impact from manufacturing cost savings,
• a 110 basis-point benefit from lower commodity costs and
• a 70 basis-point benefit of higher pricing.
These impacts were partially offset by:
• a 70 basis-point negative impact from unfavorable foreign exchange,
• a 70 basis-point decrease due to unfavorable product mix caused by the
disproportionate decline of higher margin segments like Beauty and by product form
mix within the segments,

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• a 20 basis-point decrease from negative scale impacts due to lower volume and
• a 20 basis-point decline due to incremental restructuring activity.
Total SG&A decreased 8% to $18.9 billion in 2016 primarily due to reduced overhead
spending and a decrease in foreign exchange transaction charges. SG&A as a
percentage of net sales declined 10 basis points to 29.0%, as negative scale impacts of
lower net sales and inflationary impacts were more than offset by cost savings efforts,
mainly in overhead spending, and lower foreign exchange transactional charges.
• Marketing spending as a percentage of net sales increased 90 basis points due to
the negative scale impacts from reduced sales.
• Overhead costs as a percentage of net sales decreased 20 basis points, as 90 basis
points of productivity savings were partially offset by wage inflation, increased sales
personnel in certain businesses and investments in research and development.
• Lower foreign exchange transactional charges reduced SG&A as a percentage of
net sales by approximately 70 basis points. A pre-deconsolidation balance sheet
measurement charge in Venezuela in fiscal year 2015 drove 20 basis points of this
decline. The balance of the reduction relates to lower transactional charges from
revaluing receivables and payables from transactions denominated in a currency
other than a local entity’s functional currency.
In addition to the gross margin expansion and decrease in SG&A as a percent of net
sales discussed above, operating margin also increased by 290 basis points in 2016
due to a $2.0 billion charge in 2015 related to the deconsolidation of the Company's
Venezuelan subsidiaries.
Non-Operating Items

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• Interest expense was $465 million in 2017, a decrease of $114 million versus the
prior year due to a decrease in weighted average interest rates.
• Interest income was $171 million in 2017, comparable to 2016.
• Other non-operating income/(expense), which consists primarily of divestiture gains,
investment income, and other non-operating items, was a net expense of $404
million in 2017 versus a net income of $325 million in 2016, a $729 million year-
over-year decrease. This change is due to a $543 million current-year charge
related to early extinguishment of long-term debt and a reduction in gains on minor
brand divestitures. In 2017, we had approximately $110 million in minor brand
divestiture gains, including Hypoglossal (a baby care brand sold primarily in Brazil)
and other minor brands. The prior year divestiture activities included approximately
$300 million in minor brand divestiture gains, including Escudo and certain hair care
brands in Europe and IMEA.
• Interest expense was $579 million in 2016, a decrease of $47 million versus the
prior year due to lower average debt balances.
• Interest income was $182 million in 2016, an increase of $33 million versus the prior
year primarily due to increasing cash, cash equivalents and investment securities
balances.
• Other non-operating income, which primarily includes divestiture gains and

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investment income, decreased $115 million to $325 million in 2016, due primarily to
lower gains on minor brand divestitures. In 2016, we had approximately $300 million
in minor brand divestiture gains, including Escudo and certain hair care brands in
Europe and IMEA. The prior year acquisition and divestiture activities included
approximately $450 million in divestiture gains, including Zest, Camay, Fekkai and
Wash & Go hair care brands and Vaposteam.
Income Taxes
The effective tax rate on continuing operations decreased 190 basis points to 23.1%.
The rate declined due to:
• a 130 basis-points impact from excess tax benefits associated with share-based
payments due to the adoption of FASB Accounting Standards Update (ASU) 2016-
09 Improvements to Employee Share-based Payment Accounting in 2017,
• a 150 basis-point benefit from discrete impacts related to uncertain income tax
positions (which netted to approximately 205 basis points in the current year versus
55 basis points in the prior year),
• a 50 basis-point benefit from the tax impact of the early extinguishment of long-term
debt, and
• a 130 basis-point benefit from the prior year establishment of a valuation allowance
on deferred tax assets related to net operating loss carry forwards.
These benefits were partially offset by a 230 basis-point increase from unfavourable
geographic mix, primarily due to a greater proportion of total income taxed in the U.S.
and a 40 basis-point increase due to the impact of minor brand divestitures.

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Company growth
Profitability, other relevant performance indicator
This report provides the last five years net profit and net margin of Procter & Gamble Co
(PG) from 2012 to 2016. P&G reported a total net income of $10.5 billion during 2016.
P&G generated a total of $65.3 billion revenues during 2016. P&G net profit margin was
16.1% during 2016. The net profit and the net profit margin correspond to the fiscal year
ending in June.
P&G NET PROFIT FROM 2012 TO 2016
Here are the net profit and the net profit margin details of P&G during the last five years:
P&G reported a total net profit of $10.8 billion and a net profit margin of 13.1% during
2012.
2013.
2014.
P&G reported a total net profit of $7 billion and a net profit margin of 9.9% during 2015.
2016.

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Strength
Procter & Gamble’s strengths enable the business to maintain its market position
despite high levels of competition with other consumer goods firms, such as Unilever
(Read: SWOT Analysis of Unilever). This element of the SWOT Analysis deals with
internal strategic factors that support business growth and expansion. Such factors
enable Procter & Gamble to counteract the negative effects of competition. The
company must build on its current strengths, while also developing more capabilities to
further strengthen the business. The case of this SWOT analysis of Procter & Gamble
highlights the following strengths:
1. Strong consumer goods brands
2. Economies of scale
3. Efficient product distribution network
Strong consumer goods brands ensure Procter & Gamble’s competitive advantage. For
example, Tide and Pampers are household names that contribute to consumer loyalty
and P&G’s stable market share. On the other hand, economies of scale are a strength
based on Procter & Gamble’s global scale of operations. As one of the biggest firms in
the market, the company benefits from high process efficiencies and high cost
effectiveness based on its organizational size. In relation, Procter & Gamble maintains a
high-efficiency global product distribution network. This network involves company-
owned facilities as well as third-party service providers. The strengths shown in this
element of the SWOT analysis support market penetration and product
competitiveness, which are emphasized in Procter & Gamble’s generic strategy and
intensive growth strategies.

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Weaknesses
Despite its prominent market position, Procter & Gamble experiences barriers based on
organizational weaknesses. In this element of the SWOT Analysis, internal strategic
factors that limit business improvement are identified. These factors create difficulties in
implementing Procter & Gamble’s strategies. For example, the company encounters
challenges in enhancing its competitive advantage because of weaknesses in internal
processes. Procter & Gamble must address the following weaknesses to minimize
such challenges in its consumer goods business:
1. Imitable products
2. Limited online presence
3. Limited degree of business diversification
One of Procter & Gamble’s main weaknesses is the imitable nature of its products. This
weakness is typical in the consumer goods market, where products from different
companies have considerable similarities. Having imitable products is a weakness
because it makes Procter & Gamble susceptible to imitation, which could reduce market
share. Limited online presence is another weakness of the company. Retail companies
and manufacturers are continuously increasing their online operations. For example,
many small and large consumer goods firms are using their respective e-commerce
websites to sell products online. However, Procter & Gamble’s e-commerce website,
the P&G Shop, has limited presence that operates mainly in the United States. This
condition limits the benefits that the company gets from the global online market. Thus,

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improving online presence can enhance Procter & Gamble’s marketing mix or 4Ps,
while boosting competitive advantage. The limited degree of diversification refers to the
company’s operations primarily in the consumer goods industry. This condition makes
Procter & Gamble highly dependent on the consumer goods market. As a result, such
limited diversification is a weakness that maximizes the company’s exposure to market
risks. In this element of the SWOT analysis of Procter & Gamble, strategic reform for e-
commerce, product development, and business diversification are emphasize
IFE Matrix
Strength Weight Rate Score
Diverse range of 0.3 4 0.12
business segments
Large amount of 0.4 2 0.8
customer based
Most Products are 0.2 3 0.6
not highly seasonal
Internal factor evaluation
A summary step in conducting an internal strategic-management audit is to construct
an Internal Factor Evaluation (IFE) Matrix. This strategy-formulation tool summarizes

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and evaluates major strengths and weaknesses in the functional areas of a business,
and it also provides a basis for identifying and evaluating relationships among those
areas. Intuitive judgments are required in developing an IFE Matrix, so the appearance
of a scientific approach should not be interpreted to mean this is an all-powerful
technique. A thorough understanding of the factors included is more important than the
actual numbers. Similar to the EFE Matrix and CPM described Chapter 3, an IFE Matrix
can be developed in five steps:
List key internal factors as identified in the internal-audit process. Use a total of 20
internal factors, including both strengths and weaknesses. List strengths first and then
weaknesses be as specific as possible, using percentages, ratios, and comparative
numbers. Recall Edward Deming said: "In God we trust. Everyone else bring data."
factors that can provide insight regarding strategies to pursue. For example, the factor "
Quick Ratio is 2.1 vs. industry average of 1.8" is not actionable, whereas the factor "our
chocolate division's ROI increased from 8 to 15 percent in South America" is actionable-
Assign a weight that ranges from 0.0 (not important) to 1.0 (all-important) to each factor.
The weight assigned to a given factor indicates the relative importance of the factor to
successful in the firm's industry. Regardless of whether a key factor is an internal
strength or weakness, factors considered to have the greatest effect on organizational
performance should be assigned the highest weights. The sum of all weights must
equal 1.0.
Assign a I-to-4 rating to each factor to indicate whether that factor represents a major
weakness (rating — 1), a minor weakness (rating = 2) a minor strength (rating — 3), or
a major strength (rating = 4). Note that strengths must receive a 3 or 4 rating and

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weaknesses must receive a 1 or 2 rating. Ratings are thus company-based, whereas
the weights in step 2 are industry-based.
Multiply each factor's weight by its rating to determine a weighted score for each
variable.
Sum the weighted scores for each variable to determine the total weighted score for the
organization.
Regardless of how many factors are included in an IFE Matrix, the total weighted score
can range from a low of 1.0 to a high of 4.0, with the average score being 2.5. Total
weighted scores well below 2.5 characterize organizations that are weak internally,
whereas scores significantly above 2.5 indicate a strong internal position. Like the EFE
Matrix, an IFE Matrix should include 20 key factors. The number of factors has no effect
on the range of total weighted scores because the weights always sum to 1.0.
When a key internal factor is both a strength and a weakness, the factor may be
included twice in the IFE Matrix, and a weight and rating assigned to each statement.
For example, the Playboy logo both helps and hurts Playboy Enterprises; the logo
attracts customers to Playboy magazine, but it keeps the Playboy cable channel out of
many markets. Be as quantitative as possible when stating factors. Use monetary
amounts, percentages, numbers, and ratios to the extent possible.
An example IFE Matrix is provided in Table 4-10 for a retail computer store. Note that
the two most important factors to be successful in the retail computer store business are
"revenues from repair/service in the store" and "location of the store." Also note that the
store is doing best on 'average customer purchase amount" and "in-store technical

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support." The store is having major problems with its carpet, bathroom, paint, and
checkout procedures. Note also that the matrix contains substantial quantitative data
rather than vague statements; this is excellent.
Summary and conclusion
Therefore, over the past 5 years, P&G enables their business to maintain their
market position despite of having high level of competitors in the industry that also have
the same consumer goods. Also, P&G enables to counter act the negative effects of
competition by having strong consumer goods brand that ensure their competitive
advantage on the other brand which contributes loyalty and stable market share. In
relation to this, P&G maintains a high-efficiency global product distribution network
which makes them the strongest brand in the world. And P&G’s market position helps
ensure resilience in spite of organizational weakness and despite threats in their
environment.
Despite its profitable and strong market position, the Procter & Gamble (P&G)
company must develop measures to overcome its weakness and address external
threats. P&G can also exploit opportunities for growth and expansion in the global
consumer goods industry and in other industries. In this case, P&G must take
appropriate strategic action to ensure that the business benefits from the most
significant opportunities: Given this factors, the company must strengthen its
competitive advantage and business capabilities in the consumer goods market.

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STRATEGY FORMULATION
SWOT Matrix
Strength Weakness

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-Diverse range of business segments -Price paid for commodities for the
products subject to fluctuation

-Large amount of customer based.
-Previous CEO has focused the
-Most products are not highly
strategy on innovation without concern
seasonal
the customer demands
Opportunities Threats
-Research and development efforts to -A material change in consumer
develop technology demand or products have a significant
impact on business
-Capturing market share from
competitors through advertising -Business is subject to legislation,
regulation as well as enforcement in

-Accelerate its growth in developing
the U.S and abroad
markets such as brazil and India

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Space Matrix

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Situation
As the result of our space, it shows that Procter & Gamble is facing a problem
that needs to improve their determinants of their organization in terms of their
Competitive Advantage (CA).
Problem
The Problem of Procter & Gamble is that Coca-Cola focused on home
consumer product goods for health and beauty, Coca-Cola is a recognized category
killer and In addition of Kimberly-Clark, Johnson & Johnson is a trouble creating
competitor.
Alternative
Procter & Gamble needs to improve its competitive advantage. First they need to
increase the company’s online presence. This step addresses the external factors
responsible for the strong intensity of competitive rivalry that Procter & Gamble
experiences. In addition, it is recommended that the company must invest more in
technologies to improve efficiencies. Such efficiencies could add to Procter & Gamble’s
competitive advantage. These actions are intended to bolster the company’s ability to
withstand competition.

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Decision
Our decision for the problem of Procter & Gamble is that they should have Strong
product line and Market presence.
Execution
P&G’s success is achieved because to implement this strategy, P&G must have
a strong presence with the large number of brands within each product categories such
as healthcare, beauty and fabric care, and home care products. Since P&G sells its
product in more than 180 countries through its fully owned business units or joint
ventures. Company’s distribution network has been successful in making its products
available to areas of the regions. Lastly, P&G should focus on what strategies will they
use to stay competitive in the market.
OBJECTIVES STRATEGIES RECOMMENDATION AND PLANS
Strategic and financial objectives
In waving the flag on top of business success will only mean one thing – that is a
financial strategy. In the struggle of business competition, each company is armed with
their personalized investment strategy.
Having a financial strategy will guide the company on how it will steer the wheel of the
company in order to ensure that it will land on top of the Competition.

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There is no such thing as a matter of luck in the field of business. Financial Strategy can
delineate the mark between success and failure. Financial analysts and strategists are
being employed in order for them to draft a Financial Strategy that can ensure the
success of the company on the tough competition in the materialistic world.
In this world of commercialism, the core value of a financial strategy is more on the
acquisition of financial resources and money. It will be on the idea of impossibility that a
company can embark on the policy of touching human lives.
Reality will give us a hint that companies had developed financial strategy based on
how a company can maintain a large cash balance without giving appropriate
consideration on the concept of improving the quality of human lives.
Procter & Gamble’s market position helps ensure resilience in spite of organizational
weaknesses, and despite threats in the external environment. For example, this SWOT
analysis highlights the strengths in economies of scale and strong brands. Such
strengths make it difficult for other firms to directly compete against Procter & Gamble.
The company also has high competitiveness based on the global scale of its operations.
These conditions lead to capabilities in exploiting the opportunities available for Procter
& Gamble in the consumer goods industry.
Recommendation Business Strategy
Despite its profitable and strong market position, the Procter & Gamble Company must
develop measures to overcome its weaknesses and address external threats.

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Competitive rivalry is the most significant of these threats. On the other hand, limited
online presence and limited business diversification are the most significant
weaknesses of Procter & Gamble. Given these factors, the company must strengthen
its competitive advantage and business capabilities in the consumer goods market.
Based on the results of this SWOT analysis, the following are recommendations to
address such issues facing Procter & Gamble:
1. Develop P&G’s competitive advantage through innovation and technology.
2. Expand e-commerce operations to exploit online market growth.
3. Diversify by entering new industries to minimize Procter & Gamble’s market-based risk
exposure.
Recommendation Organizational Strategies
STRATEGY IMPLEMENTATION
Department Action Plans and Programs
Procter and Gamble Company (P&G) is US's leading maker of household consumer
products. With its headquarters in Downtown Cincinnati Ohio, P&G is also a Fortune
500 American multinational corporation highly recognized for a chain of business
innovations (Katrina, 1999.p.146). P&G for instance has been admired for effective
brand management and the soap operas. The company has operations representation
in at least 80 countries internationally providing a range of products in diverse
categories including; beauty care, health care, baby care, beverages, home care, and

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snacks among others (Griffin, 2006.p.138). Corporate strategy is every company's tool
for competitive advantage attainment. This paper undertakes to evaluate how corporate
strategy and other structural changes impacted on P&G's competitive advantage since
the 1990s. Specific focus is directed toward the key changes that occurred in the
company in the 1990s and the contribution made by Al Lafley in his nine year tenure at
P&G.
P&G company was formed with intention of providing quality branded products and
services for the consumers in the international market. As a profit company, it aimed at
winning consumers in the competitive market environment through exploiting excellent
leadership, quality and value service provision. P&G started in 1837 as a partnership
between William Procter and James Gamble to manufacture and sell candles and soap.
Today, P&G has over 300 brands marketed and sold in over 160counties across the
globe. P&G has 16 of her key products producing revenue in excess of $1 billion per
year. These products include; "Ariel, Downy, and Tide (laundry products); Actonel (for
osteoporosis treatment); Always (feminine protection); Bounty (paper towels); Charmin
(bathroom tissue); Crest (toothpaste); Folgers (coffee); Iams (pet food); Olay (skin care
product); Pampers (diapers); Pringles (snacks); and Head & Shoulders, Pantene, and
Wella (hair care products)" (Katrina, 1999.p.146).
Reading P&G's company history, the company had performed quite well over the ears
since its inception, overcoming market challenges (social, economic and political)
through tactful brand management and innovative strategies until brand equity
challenges emerged in the late 1980s and early 1990s. Some of the earlier successes

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of P&G Company included; rapid growth and expansion during the 1850s amid strong
competition, prosperity during the civil war period during which her competitors outputs
plummeted, the introduction of innovative employee benefits in 1903 hence becoming a
renowned employee-benefit programs leader, and the "one man one brand" brand
management debut of 1931 which made brand management at P&G become a fixture
to be replicated by other companies (Boyer, 2009.p.494).
P&G Company was also able to successfully circumvent around the Great depression
to emerge virtually unscathed. With radio playing a key role to deliver P&G information
into homes at the time, P&G began sponsorship of radio's serials in 1933 which were
later referred to as "soap operas" Her fame for packaging expertise earned P&G a
military application by government to oversee Ordinance plants' construction and
operations. Talking of the successes at P&G can not be complete without mentioning
the Company's post World War II growth "miracle" that was fueled by the introduction of
a synthetic detergent (Tide) in 1946 which brought a complete shift in the cloth washing
trends at the time. Investing in further research and the tapping into acquisition strategy
made P&G to remain on profit making axis over years since the 1950s (Redmond,
2010.p.162).
In the late 1980s and early 1990s, the weakening of economy coupled with the resulting
consumer value bias started to weaken the brand equity for P&G. These occurrences
favored performance of private labels in both health and beauty lines. P&G responded
to this threat by launching "Every Day Low Pricing" (EDLP) strategy to induce
consumers while implementing promotional kickbacks for wholesalers. The EDLP

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covered 50-60%of the company's product range which included; pampers and Luvs
diapers, Cascade dish soap, and Jif peanut butter. Although the Company strategy was
met by mixed reactions with some retailers rejecting it, many others supported the
Companies value-conscious positioning efforts. With this support, P&G actually made
good savings from trade promotions which were then ploughed back into direct
marketing activities meant to reach out to some target groups for narrow market base
brands through the coupon and sample programs. The target products for the program
included Pampers, Clearasil, and Oil of Olay (Harmon, 2003.p.352).
P&G also joined the "green bandwagon of environmental marketing" by adoption of
reduced packaging strategy which saw the company provide concentrated product
formulations in relatively smaller packages, as well as refill packs applied for 38 of the
company's brands across 17 countries in the 1990s. In July 1991, P&G acquired the
international Max Factor and Betrix lines from Revlon, Inc., thus expanding P&G's
presence in cosmetics and fragrances. As part of her strategy to attain meaningful
growth, P&G also divested her holdings in those areas the company considered to have
outgrown. For instance, in 1992, P&G sold almost 50% of her cellulose and specialties
pulp trade to Weyerhaeuser Company (Katrina, 1999.p.147).
Vertical integration had been observed to have helped P&G develop her paper products
in the past. However, with time, things had change and he 1990s saw unprofitable and
distracting forest trade. Therefore in 1992, P&G decided to sell off the Italian coffee
business to allow more focus on the core European brands. The Company's strategy
was to tap into the well-established regional markets through introduction of pan-

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European packaged, branded and advertised products. In the next section, this paper
explores P&G's major restructurings and Acquisitions pursued in mid to late 1990s
period (Griffin, 2006.p.138).
The main objectives of P&G at this time were to enhance its competitive advantage in
the market through various designed strategies and policy options. Specific goals for the
company included; ensuring that her brand-name products became more price-
competitive so that they could effectively compete the private label and generic brands
in the market; enhancing efficiency so that products reach the market aster, and
increasing the company's profit margins. To achieve, these, P&G pursued a number of
cost cutting policy measures including winding up of 30 of her international plants and
laying off 12% of her total workforce (13000 jobs). The estimated cost of the
restructuring program was $2.4 billion and the estimated accrued savings for the
company were to a tune of over $600 million. Together with these, the program raised
the company's net income margins from 7.3% to 10.2% in 1994 and 1998 respectively
(Dana, 1997.p.D1).
The restructuring period was to reach its culmination in 1997. But in the course of the
restructuring process, P&G increased its pace for acquisitions, making a considerable
number of acquisitions in the period, some of which were quite successful, while some
became a big failure. These acquisitions included: the 1994 purchase of
VereinigtePapierwerkeSchickedanz AG's European tissue unit with aim to venture into
European tissue and towel trade. P&G also acquired Giorgio Beverly Hills, Inc's prestige
fragrance business. During the same year 1994, when the US lifted the existing

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sanctions, P&G ventured back into the South African market and subsequently changed
its geographic management framework in 1995; apportioning its operations into two
(namely- US and International) with four regions in total (i.e. Asia, North America, Latin
America, and Europe/Middle East/Africa). At the same time, IN July 1995, the company
leadership (CEO) changed hands from Artzt to Pepper. Durk I. Jager (Harmon, 2003.
p.352).
It was during 1996 that P&G bought the Eagle Snacks brand that that was before then a
property of Anheuser-Busch. Other brands purchased the same year included; the Latin
American brands Lavan San household cleaner and Magia Blanca bleach and Baby
Fresh of US. Perhaps the most memorable event of 1996 for this company was the
receiving of approval from the U.S Food & Drug Administration (FDA) to use "the
controversial olestra" (Boyer, 2009.p.494).
Olestra was a fat substitute to be applied in snacks and crackers. P&G had spent about
$250 million to conduct research about olestra and by the time FDA was approving the
product, a stipulation had already been circulated by FDA that a label must be attached
to any food with these substance in it to warn the public of possible gastrointestinal side
effects. This impacted heavily on the product's ability to gain market, and even with
concerted test marketing efforts, products with olestra never ever caught on in the
market. In the long run, Olestra was declared one of P&G's biggest product failures in
the company's history (Boyer, 2009.p.494).

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After acquisition of Tambrands, Inc. and the Tampax tampons line in 1997, P&G
launched a new restructuring plan in 1998 and named it Organization 2005. This was
after P&G had failed to realize the 1996 set goals of doubling profits to $70 billion by
2005 from the then $35 billion. The calculated growth rate had to be 7& annually, but
the actual realized growth rate was only 4% hence profits had stagnated around $37.5
billion figure. P&G therefore aimed to make a structural shift from the 1995 Organization
centered model (of four regions) to a one centered model with seven business units
defined on product line basis. The product lines were as follows; Tissues & Towels,
Baby Care, Fabric & Home Care, Beauty Care, Feminine Protection, , Health Care &
Corporate New Ventures, and Food & Beverage (Katrina, 1999.p.146).
These changes were important to P&G since they aimed at attaining higher innovation
and speed through the deliberate strategy and profit responsibility positioning of brands
internationally as opposed to centering on geographic locations. These events
coincided with the scheduled takeover of Jager as the company's president and he
subsequently was given the mantle to lead the strategy implementation.
Aiming at enhanced innovation and high revenue and profit levels, Jager introduced
new initiatives in 1999 to extend those introduced in 1995. These included resolve to
continue with more acquisitions, cut down the number of workers by 15000 by year
2005, close down at least 10 factories, and spent an estimated $1.9 billion on
restructuring by the year 2005. It is during this period that P&G acquired the Iams
Company, marking P&G's biggest deal that cost $2.22 billion in cash. Iams Company
was among the leading manufacturer of premium pet food in the US with established

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global yearly sales estimated at $800 million. Next to acquire was the Recovery
Engineering, Inc. at an estimated cost of $265 million. This newly acquired company
was based in Minneapolis and produced the water-filter brand PUR that had been on a
fast growth path. Attempts by Jager to join the company with the Warner-Lambert
company into "a risky" drug business in 2000 flopped Jager's intention to take over
Gillette (razor making) company was rebuffed very quickly in the same year (Dana,
1997.p.D1)
While this was happening, P&G had by June 2000 issued a 3rd profit warning in a year.
These developments forced Jager to resign and subsequently A.G. Lafley assumed the
company leadership in capacity of the President and CEO of P&G in June 2000 (Dyer,
2004.P.496). The new CEO, A.G. Lafley had joined P&G in June 1977, starting as a
brand assistant for Joy product. Before his promotion to CEO position, he had been
heading the global beauty care unit. What a time t be promoted to the top seat! In the
next section, this paper considers Lafley's contribution to the company during his entire
9 year tenure. Having made his first impression at P&G "simplifying life in the laundry
room" as he led colleagues in launching liquid Tide, Lafley's strategy applied Drucker's
back-to-basics formula to overhaul and clean up the entire P&G House (Redmond,
2010.p.162).
Right from the beginning of his tenure of the top job A.G. Lafley became famous for his
four word business winning principle "The consumer is boss". In what would perhaps
appear like a fool's errand to attempt at narrowing down the matching orders that
govern an estimated 138000 employees in over80 nations to simple chestnut, Lafley's

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keep it simple strategy would emerge to speak a lot for itself through the four word
phrase "The consumer is boss", as the business mantra which he kept on singing to his
team (Redmond, 2010.p.163).
Lafley started off by slowing down the existing rush to send products into markets. He
did this purposely to ensure that the products would be given adequate marketing
support before getting into the competitive arena. Lafley then re-focused the company's
resources towards shoring up P&G's top brands that could earn the company global
revenue of at least $1 billion annually. These were just about a dozen products. He
immediately re-branded the Oil of Olay to be simply called Olay. This was aimed at allay
the notion that "Oil of Olay" was greasy. Focused on a small number of key brands, the
company sold of Clearasil (the acne-treatment brand) for an estimated $340 million to
Boots PLC. In the same period FDA gave approval to P&G for Actonel brand
(prescription treatment for osteoporosis), which was later marketed and attained a
remarkable $1billion yearly sales for the trade year 2004 (Boyer, 2009.p.494).
Lafley changed the traditional Company approach which tended to favor externally
sourced product ideas. He significantly reduced development projects, promoted culture
of collaboration with external world as opposed to self-centered tradition initially
pursued, and went ahead to outsource P&G's including manufacturing of oldest brands
in the company such as Ivory bar soap. Lafley also significantly restructured the
company's workforce through focusing on top-priority countries, advocating for
enhanced collaboration within the company divisions, and considerable reduction in

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number of the total company workforce (by an estimated 20,000 jobs) which included
significant number of top level management staff (about 50%) (Harmon, 2003.p.352)
A.G. Lafley entrenched some goal winning principles in the remaining team, which he
referred to as "two consumer moments of truth"- first, buying P&G products and then,
liking them so much that it's "memorable-at least satisfying and ideally delighting."
Lafley argued that since more than 50% of P&G's workforce did not have English as
their native language, he need to make use of simple slogans which when repeated
again and again would keep everyone at pace with current state of affairs in the
company. Therefore he maintained "Human beings don't want to stay focused, so my
job is to get them to focus their creativity around the focus; focus their productivity
around the focus; focus their efficiency or effectiveness around the focus" (Griffin,
2006.p.138).
In summary, aside from the simple effective strategies he pursued to turn around P&G,
Lafley's 9 year tenure left took the company to the top, more than doubling the sales
and significantly expanding the company's range of top brands (those with sales
between $500million to $1billion annually) fivefold. Lafley is recognized for shaping P&G
into a more externally focused and consumer-driven alongside developing a more
advanced innovations and employee relations culture at Procter and Gamble
(Redmond, 2010.p.163).
Financial Projection and over all Evaluation of the Strategies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Nature of Operations
The Procter & Gamble Company's (the "Company," "Procter & Gamble," "we" or "us")
business is focused on providing branded consumer packaged goods of superior quality
and value. Our products are sold in more than 180 countries and territories primarily
through mass merchandisers, grocery stores, membership club stores, drug stores,
department stores, distributors, baby stores, specialty beauty stores, e-commerce, high-
frequency stores and pharmacies. We have on-the-ground operations in approximately
70 countries.
Basis of Presentation
The Consolidated Financial Statements include the Company and its controlled
subsidiaries. Intercompany transactions are eliminated.
There are a number of currency and other operating controls and restrictions in
Venezuela, which have evolved over time and may continue to evolve in the future.
These evolving conditions resulted in an other-than-temporary lack of exchangeability
between the Venezuelan bolivar and U.S. dollar and restricted our Venezuelan
operations’ ability to pay dividends and satisfy certain other obligations denominated in
U.S. dollars. For accounting purposes, this resulted in a lack of control over our
Venezuelan subsidiaries. Therefore, in accordance with the applicable accounting
standards for consolidation, effective June 30, 2015, we deconsolidated our Venezuelan
subsidiaries and began accounting for our investment in those subsidiaries using the
cost method of accounting. This resulted in a write-off of all of the net assets of our
Venezuelan subsidiaries, along with Venezuela related assets held by other
subsidiaries. Beginning with the first quarter of fiscal 2016, our financial results only

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include sales of finished goods to our Venezuelan subsidiaries to the extent we receive
payments from Venezuela. Accordingly, we no longer include the results of our
Venezuelan subsidiaries’ operations in our financial results.
Use of Estimates
Preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America (U.S. GAAP) requires management to make
estimates and assumptions that affect the amounts reported in the Consolidated
Financial Statements and accompanying disclosures. These estimates are based on
management's best knowledge of current events and actions the Company may
undertake in the future. Estimates are used in accounting for, among other items,
consumer and trade promotion accruals, restructuring reserves, pensions, post-
employment benefits, stock options, valuation of acquired intangible assets, useful lives
for depreciation and amortization of long-lived assets, future cash flows associated with
impairment testing for goodwill, indefinite-lived intangible assets and other long-lived
assets, deferred tax assets and liabilities, uncertain income tax positions and
contingencies. Actual results may ultimately differ from estimates, although
management does not generally believe such differences would materially affect the
financial statements in any individual year. However, in regard to ongoing impairment
testing of goodwill and indefinite-lived intangible assets, significant deterioration in
future cash flow projections or other assumptions used in estimating fair values versus

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those anticipated at the time of the initial valuations, could result in impairment charges
that materially affect the financial statements in a given year.
Revenue Recognition
Sales are recognized when revenue is realized or realizable and has been earned.
Revenue transactions represent sales of inventory. The revenue recorded is presented
net of sales and other taxes we collect on behalf of governmental authorities. The
revenue includes shipping and handling costs, which generally are included in the list
price to the customer. Our policy is to recognize revenue when title to the product,
ownership and risk of loss transfer to the customer, which can be on the date of
shipment or the date of receipt by the customer. A provision for payment discounts and
product return allowances is recorded as a reduction of sales in the same period the
revenue is recognized.
Trade promotions, consisting primarily of customer pricing allowances, merchandising
funds and consumer coupons, are offered through various programs to customers and
consumers. Sales are recorded net of trade promotion spending, which is recognized as
incurred, generally at the time of the sale. Most of these arrangements have terms of
approximately one year. Accruals for expected payouts under these programs are
included as accrued marketing and promotion in the Accrued and other liabilities line
item in the Consolidated Balance Sheets.
Cost of Products Sold

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Cost of products sold is primarily comprised of direct materials and supplies consumed
in the manufacturing of product, as well as manufacturing labor, depreciation expense
and direct overhead expense necessary to acquire and convert the purchased materials
and supplies into finished product. Cost of products sold also includes the cost to
distribute products to customers, inbound freight costs, internal transfer costs,
warehousing costs and other shipping and handling activity.
Selling, General and Administrative Expense
Selling, general and administrative expense (SG&A) is primarily comprised of marketing
expenses, selling expenses, research and development costs, administrative and other
indirect overhead costs, depreciation and amortization expense on non-manufacturing
assets and other miscellaneous operating items. Research and development costs are
charged to expense as incurred and were $1.9 billion in 2017, $1.9 billion in 2016 and
$2.0 billion in 2015 (reported in Net earnings from continuing operations). Advertising
costs, charged to expense as incurred, include worldwide television, print, radio, internet
and in-store advertising expenses and were $7.1 billion in 2017, $7.2 billion in 2016 and
$7.2 billion in 2015 (reported in Net earnings from continuing operations). Non-
advertising related components of the Company's total
Amounts in millions of dollars except per share amounts or as otherwise specified.
42 The Procter & Gamble Company marketing spending reported in SG&A include
costs associated with consumer promotions, product sampling and sales aids.

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Other Non-Operating Income/(Expense), Net
Other non-operating income/(expense), net, primarily includes net acquisition and
divestiture gains, investment income and other non-operating items.
Currency Translation
Financial statements of operating subsidiaries outside the U.S. generally are measured
using the local currency as the functional currency. Adjustments to translate those
statements into U.S. dollars are recorded in other comprehensive income (OCI). For
subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional
currency. Re-measurement adjustments for financial statements in highly inflationary
economies and other transactional exchange gains and losses are reflected in earnings.
Cash Flow Presentation
The Consolidated Statements of Cash Flows are prepared using the indirect method,
which reconciles net earnings to cash flow from operating activities. Cash flows from
foreign currency transactions and operations are translated at an average exchange
rate for the period. Cash flows from hedging activities are included in the same category
as the items being hedged. Cash flows from derivative instruments designated as net
investment hedges are classified as financing activities. Realized gains and losses from
non-qualifying derivative instruments used to hedge currency exposures resulting from
intercompany financing transactions are also classified as financing activities. Cash
flows from other derivative instruments used to manage interest, commodity or other
currency exposures are classified as operating activities. Cash payments related to
income taxes are classified as operating activities. Cash flows from the Company's

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discontinued operations are included in the Consolidated Statements of Cash Flows.
See Note 13 for significant cash flow items related to discontinued operations.
Investments
Investment securities consist of readily marketable debt and equity securities.
Unrealized gains or losses from investments classified as trading, if any, are charged to
earnings. Unrealized gains or losses on securities classified as available-for-sale are
generally recorded in OCI. If an available-for-sale security is other than temporarily
impaired, the loss is charged to either earnings or OCI depending on our intent and
ability to retain the security until we recover the full cost basis and the extent of the loss
attributable to the creditworthiness of the issuer. Investment securities are included as
Available-for-sale investment securities and Other noncurrent assets in the
Consolidated Balance Sheets.
Investments in certain companies over which we exert significant influence, but do not
control the financial and operating decisions, are accounted for as equity method
investments. Other investments that are not controlled, and over which we do not have
the ability to exercise significant influence, are accounted for under the cost method.
Both equity
and cost method investments are included as Other noncurrent assets in the
Consolidated Balance Sheets.
Inventory Valuation

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Inventories are valued at the lower of cost or market value. Product-related inventories
are maintained on the first-in, first-out method. The cost of spare part inventories is
maintained using the average-cost method.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost reduced by accumulated
depreciation. Depreciation expense is recognized over the assets' estimated useful lives
using the straight-line method. Machinery and equipment includes office furniture and
fixtures (15-year life), computer equipment and capitalized software (3- to 5-year lives)
and manufacturing equipment (3- to 20-year lives). Buildings are depreciated over an
estimated useful life of 40 years. Estimated useful lives are periodically reviewed and,
when appropriate, changes are made prospectively. When certain events or changes in
operating conditions occur, asset lives may be adjusted and an impairment assessment
may be performed on the recoverability of the carrying amounts.
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for
impairment annually or more often if indicators of a potential impairment are present.
Our annual impairment testing of goodwill is performed separately from our impairment
testing of indefinite-lived intangible assets.
We have acquired brands that have been determined to have indefinite lives. Those
assets are evaluated annually for impairment. We evaluate a number of factors to
determine whether an indefinite life is appropriate, including the competitive
environment, market share, brand history, product life cycles, operating plans and the
macroeconomic environment of the countries in which the brands are sold. In addition,

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when certain events or changes in operating conditions occur, an additional impairment
assessment is performed and indefinite-lived assets may be adjusted to a determinable
life.
The cost of intangible assets with determinable useful lives is amortized to reflect the
pattern of economic benefits consumed, either on a straight-line or accelerated basis
over the estimated periods benefited. Patents, technology and other intangible assets
with contractual terms are generally amortized over their respective legal or contractual
lives. Customer relationships, brands and other non-contractual intangible assets with
determinable lives are amortized over periods generally ranging from 5 to 30 years.
When certain events or changes in operating conditions occur, an impairment
assessment is performed and remaining lives of intangible assets with determinable
lives may be adjusted.
For additional details on goodwill and intangible assets see Note 4.
Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 43
Fair Values of Financial Instruments
Certain financial instruments are required to be recorded at fair value. Changes in
assumptions or estimation methods could affect the fair value estimates; however, we
do not believe any such changes would have a material impact on our financial
condition, results of operations or cash flows. Other financial instruments, including

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cash equivalents, certain investments and short-term debt, are recorded at cost, which
approximates fair value. The fair values of long-term debt and financial instruments are
disclosed in Note 9.
New Accounting Pronouncements and Policies
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers
(Topic 606).” This guidance outlines a single, comprehensive model for accounting for
revenue from contracts with customers. We plan to adopt the standard on July 1, 2018.
While we are currently assessing the impact of the new standard, our revenue is
primarily generated from the sale of finished product to customers. Those sales
predominantly contain a single delivery element and revenue is recognized at a single
point in time when ownership, risks and rewards transfer. The timing of revenue
recognition is not impacted by the new standard. The provisions of the new standard
may impact the classification of certain payments to customers, moving an immaterial
amount of such payments from expense to a deduction from net sales. The impact
would reduce net sales by less than 1%. We are still assessing the impact on financial
disclosures related to the new standard. We do not expect this new guidance to have
any other material impacts on our Consolidated Financial Statements.
In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740):
Balance Sheet Classification of Deferred Taxes." This guidance simplifies the
presentation of deferred taxes on the balance sheet by requiring that all deferred tax
assets and liabilities be classified as non-current. The new standard is effective for us
beginning July 1, 2017, with early adoption permitted. We elected to early adopt the

Metro Manila
new guidance on a prospective basis in the first quarter of fiscal year 2017. The impact
was not significant.
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." The standard
requires lessees to recognize lease assets and lease liabilities on the balance sheet
and requires expanded disclosures about leasing arrangements. We plan to adopt the
standard on July 1, 2019. We are currently assessing the impact that the new standard
will have on our Consolidated Financial Statements, which will consist primarily of a
balance sheet gross up of our operating leases to show equal and offsetting lease
assets and lease liabilities. For additional details on operating leases, see Note 12.
In March 2016, the FASB issued ASU 2016-09, "Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting," which changes the
accounting for certain aspects of share-based payments to employees. The new
guidance requires excess tax benefits (which represent the excess of actual tax benefits
received at vest or settlement over the benefits recognized at issuance of share-based
payments) and tax deficiencies (which represent the amount by which actual tax
benefits received at vest or settlement is lower than
the benefits recognized at issuance of share-based payments) to be recorded in the
income statement when the awards vest or are settled. The amended guidance also
requires excess tax benefits to be classified as an operating activity in the statement of
cash flows, rather than a financing activity. The standard further provides an accounting
policy election to account for forfeitures as they occur rather than utilizing the estimated
amount of forfeitures at the time of issuance. The new standard is effective for us

Metro Manila
beginning July 1, 2017, with early adoption permitted. We elected to early adopt the
new guidance on a prospective basis in the first quarter of fiscal year 2017. The primary
impact of adoption was the recognition of excess tax benefits in our Income taxes on
continuing operations rather than in Additional paid-in capital for fiscal year 2017. As a
result, we recognized excess tax benefits of $169 in Income taxes on continuing
operations during fiscal year 2017. We also elected to adopt the cash flow presentation
of the excess tax benefits prospectively commencing in the first quarter of fiscal 2017.
We have elected to continue to estimate forfeitures expected to occur to determine the
amount of compensation cost to be recognized in each period. The adoption of this
amended guidance did not have a material impact on our Consolidated Financial
Statements.
In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other
(Topic 350): Simplifying the Test for Goodwill Impairment.” The standard simplifies the
accounting for goodwill impairment by requiring a goodwill impairment to be measured
using a single step impairment model, whereby the impairment equals the difference
between the carrying amount and the fair value of the specified reporting units in their
entirety. This eliminates the second step of the current impairment model that requires
companies to first estimate the fair value of all assets in a reporting unit and measure
impairments based on those fair values and a residual measurement approach. It also
specifies that any loss recognized should not exceed the total amount of goodwill
allocated to that reporting unit. We will adopt the standard no later than July 1, 2020.
The impact of the new standard will be dependent on the specific facts and
circumstances of future individual impairments, if any.

Metro Manila
In March 2017, the FASB issued ASU 2017-07, "Compensation-Retirement Benefits:
Improving the Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost (Topic 715).” This guidance requires an entity to
disaggregate the current service cost component from the other components of net
benefit costs in the face of the income statement. It requires the service cost
component to be presented with other current compensation costs for the related
employees in the operating section of the income statement, with other components of
net benefit cost presented outside of income from operations. We will adopt the
standard retrospectively no later than July 1, 2018. The adoption of ASU 2017-07 is not
expected to have a material impact on our Consolidated Financial Statements. We
currently classify all net periodic pension costs within operating costs (as part of Cost of
products sold and Selling, general and administrative expense). Had this standard
been effective and adopted during fiscal 2017, Cost of products sold.


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UNIVERSITY OF CALOOCAN CITY

Procter & Gamble Co. (P&G) is an American multi-national consumer goods

corporation headquartered in downtown Cincinnati, Ohio, founded in 1837 by British

Myla R. Albarico Page 1 of 79

fulfilled. It is also necessary to consider possible adjustments to these statements to

To be recognized as the best consumer products and services company in the

the communication in which we live and work to prosper.

we stay on track to deliver our long-term vision.

We are working toward our long-term vision of:

 Powering all our plants with 100% renewable energy

 Having zero consumer and manufacturing waste go to landfills

 Designing products that delight consumers while maximizing the conservation of

Myla R. Albarico Page 2 of 79

 Reduce absolute greenhouse gas emissions by 2020 by 30%.

 Reduce truck transportation kilometers by 20% per unit of production.

 Double use of recycled resin in plastic packaging.

 Ensure plants are powered by 30% renewable energy.

 Create technologies by 2020 to substitute top petroleum-derived raw materials

with renewable materials, as cost and scale permit.

December 31, 2015, and to plantations by 2020 to ensure zero deforestation in

hygiene products be third-party certified by 2015. ACHIEVED

 Have 100% of our paper packaging contain either recycled or third-party-certified

virgin content by 2020.

 Reduce packaging by 20% per consumer use.

Myla R. Albarico Page 3 of 79

how to eliminate landfilled/dumped solid waste.

 Zero Manufacturing Waste to Landfill.

 Ensure 90% of product packaging is either recyclable or programs are in place to

create the ability to recycle it.

 Provide 15 billion liters of clean drinking water by 2020.

 Reduce water use in manufacturing facilities by 20% per unit of production.

 Provide 1 billion people access to water-efficient products.

consumers while maximizing the conservation of resources. We have set a series of

commitment to sustainability. From formulation, to manufacturing, to package design

Myla R. Albarico Page 4 of 79

energy usage and waste

Cold water washing that conserves energy, reduces CO2 emissions

billion liters of clean, safe drinking water

when disaster strikes around the world

and social impact.

Climate, Water, Waste

Our strategy is to make a positive impact by focusing on three core areas:

Myla R. Albarico Page 5 of 79

like palm and pulp are not contributing to deforestation.

our conservation efforts in water stressed regions.

reduce waste and ensure it can be recycled.

Myla R. Albarico Page 6 of 79

are most notable in the case of Procter & Gamble:

1. High growth rate of developing markets (opportunity)

2. Improving disposable income levels (opportunity)

3. Economic stability of the majority of developed markets (opportunity)

Gamble’s potential growth. For example, increasing penetration into developing

opportunity to grow based on improving disposable income levels. This economic

external factor corresponds to customers’ rising purchasing capacity for consumer

developed markets contributes to the considerable stability of P&G’s remote or macro-

opportunities based on this element of the PESTEL/PESTLE analysis.

Socio cultural Demographic Lifestyle Changes

customers and workers, among other considerations. This element of the

PESTEL/PESTLE Analysis framework deals with the influence of sociocultural

conditions on business opportunities and threats in the remote or macro-environment of

strategic formulation for the consumer goods market:

Myla R. Albarico Page 7 of 79

2. Increasing preference for healthful products (opportunity)