A Case Analysis

P&G Corporate Video (1).mp4

Case Abstract
Procter & Gamble (P&G) is a comprehensive strategic management case that includes the
company’s year-end 2010 financial statements, organizational chart, competitor information
and more. The case time setting is the year 2011. Sufficient internal and external data are
provided to enable evaluation of current strategies and recommend a strategic plan for the
company.

Business Legends_ Procter & Gamble.mp4

Brief History

William Procter (Candle Maker) James Gamble (Soap Maker)

P&G Facts
• Headquartered in Cincinnati, Ohio, P&G is the world's largest household products company.

• The firm is divided into three global units: 1) Beauty & Grooming 2) Health and Well-Being
and 3) Household Care.

•To grow, P&G has historically acquired many smaller businesses and even reduce some of its
products in their business units.

• Many P&G's products are billion-dollar sellers, including Febreze, Fusion, Always/Whisper,
Braun, Bounty, Charmin, Crest, Downy, Gillette, Mach3, Iams, Olay, Pampers, Pantene, Tide,
Gain, and Wella, among others.

• Currently, P&G has 250 brand products with Pampers and Tide as the top 1 and top 2
products respectively.
Company Products and Brands
Main Objectives
• Focus on beauty and personal care products – Sold Pringles

• In more parts of the world:

P&G desires to accelerate its growth in developing market such as Brazil & India – ”walled cities”
(Emerging Market).

• More consumers:

Price conscious customers; Focus on “Affordability, accessibility and brand awareness.”

• More completely:

Improve existing product lines by focusing on consumer needs.

Vision and Mission Statement
• No Vision

• Mission

“ We will provide branded products and services of superior quality and value
that improve the lives of the world’s consumers, now and for generations to
come. As a result, consumers will reward us with leadership sales, profit and
value creation, allowing our people, our stakeholders and the communities in
which we live and work to prosper.”
The Five Forces Analysis
Substitutes

●Since the products that the P&G offers are personal products, the threat of substitute
products is permanently present. There are possible substitutes available for every type
of product in the personal and household products. Customers can buy home brand
products or can go to home made products. That’s why there is a mild threat of
substitute products. However, most of the consumers are loyal to the products that
they constantly used.
The Five Forces Analysis
Suppliers

●The case did not mention any suppliers.

The Five Forces Analysis
Competitive Rivalry

●There is a tough competition in the personal and household industry. This industry is a growing
industry since the products is a necessity which includes from personal hygiene, beauty and
health, and household products. As of now, Procter & Gamble’s major competitors are Johnson &
Johnson, Kimberly-Clark Corp, Colgate-Palmolive Co., Unilever and Clorox.

●Johnson & Johnson is the biggest competitor of P&G, operating in over 60 countries. They offer
three different segments: consumer, medical devices and diagnostics and pharmaceutical.
Unilever is another significant competitor. It markets more than 400 brands which categorizes to
food and beverage, home and personal divisions. Their soap product which is Dove is a close
competition to Olay. Kimberley-Clark is one of the closest competitor of the P&G that operates
four business segments: personal care, consumer tissue, K-C Professional & Other, and Health
Care.
The Five Forces Analysis
Competitive Rivalry

●Despite of the competition, P&G ranked number one in the Soaps and Cosmetic industry
in Fortune’s Most Admired Company rankings. Their products are sold in almost 180
different countries around the world.
The Five Forces Analysis
Buyers

●Procter and Gamble has a wide range of personal and household products. Their products
are in demand since it is used in everyday life of consumers. P&G also reports that 99% of
U.S and Canadian households use at least one of its products. The company is the leading
the Soaps and Cosmetic industry.
Porter’s Five-Forces Analysis
Threat of New Entrant

●Since most of the companies in the industry are established, it is hard for the new entrant
to compete. A big capital investment and strong marketing strategy is needed in order to
succeed in the industry. Also, most of the consumers are loyal to the products that they
used to, so it is very difficult to enter the industry because of the strong branding of other
companies. These large companies including P&G have a huge competitive advantage over
new entrants because of their knowledge and experience in the industry. The potential new
entrants are not a big threat.
External Audit
Opportunities

● Higher demand for higher-priced products such as prestige cosmetics and fragrances.

●Younger customers are attracted by social media advertising.

●Social media advertising is more cost effective than traditional advertising.

●The beauty and cosmetics industry is expected to increase globally by 8.5 per cent in 2014
according to recent research from Euro Monitor International.

●There is an endless possibility to `celebrities’ endorsing fragrances, these products are successful
because many are persuaded by fame of the celebrity.
External Audit
Opportunities

●Men are increasingly concerned with their appearance, this provides an opening to grab a new
branch of consumers.

●Increase in online purchasing, average monthly visits in the U.S. to beauty-related websites
topped 60 million and grew 94 percent over past three years.

●Consumers are interested in products that are made with all natural products.

●Research shows that by 2015, global women’s purchasing power is expected to increase by $5
trillion and beauty is the category these consumers are most likely to purchase.
External Audit
Threats

● Volatile foreign exchange rates.

●Subject to anti-trust investigation in Europe.

●Increase in competitor expansion globally from Colgate-Palmolive, Unilever, and Clorox.

●Regulations are increasing due to the voicing of different groups about harmful chemical
ingredients in cosmetic products.

●Diamond foods struggling financially, may not be able to purchase Pringles.

External Audit
Threats

●Premium cosmetics are a prime target for counterfeiters. 9%, according to the Global Congress
on combating counterfeiting, of all the world trade comprises counterfeit goods.

●Discounting premium cosmetics can damage its prestige image for the consumers who purchase
these products.

●The Estée Lauder companies ranks number one in prestige skin care and number two in
makeup in the channel.

●Considerable investment is necessary to bring new products to the market and to maintain their
high profile.
External Audit
Threats

●Premium cosmetics are a prime target for counterfeiters. 9%, according to the Global Congress
on combating counterfeiting, of all the world trade comprises counterfeit goods.

●Discounting premium cosmetics can damage its prestige image for the consumers who purchase
these products.

●The Estée Lauder companies ranks number one in prestige skin care and number two in
makeup in the channel.

●Considerable investment is necessary to bring new products to the market and to maintain their
high profile.
 EFE Matrix
Opportunities Weight Rating Weighted Score
1. Higher demand for higher-priced products such as prestige 0.08 3 0.24
cosmetics and fragrances.
2. Younger customers are attracted by social media advertising. 0.06 2 0.12
3. Social media advertising is more cost effective than traditional 0.06 2 0.12
advertising.
4. The beauty and cosmetics industry is expected to increase 0.06 3 0.18
globally by 8.5 per cent in 2014 according to recent research from
Euro Monitor International.
5. There is an endless possibility to `celebrities’ endorsing 0.04 2 0.08
fragrances, these products are successful because many are
persuaded by fame of the celebrity.
6. Men are increasingly concerned with their appearance, this 0.08 3 0.24
provides a opening to grab a new branch of consumers.
7. Increase in online purchasing, average monthly visits in the U.S. 0.06 3 0.18
to beauty-related websites topped 60 million and grew 94 percent
over past three years.
8. Consumers are interested in products that are made with all 0.03 2 0.06
natural products.
9. Research shows that by 2015, global women’s purchasing power 0.05 3 0.15
is expected to increase by $5 trillion and beauty is the category
these consumers are most likely to purchase.
 EFE Matrix
Threats Weight Rating Weighted Score
1. Volatile foreign exchange rates. 0.02 4 0.08
2. Subject to anti-trust investigation in Europe. 0.03 3 0.09
3. Increase in competitor expansion globally from Colgate-
0.08 4 0.32
Palmolive, Unilever, and Clorox.
4. Regulations are increasing due to the voicing of different groups
0.07 3 0.21
about harmful chemical ingredients in cosmetic products.
5. Diamond foods struggling financially, may not be able to
0.08 2 0.16
purchase Pringles.
6. Premium cosmetics are a prime target for counterfeiters. 9%,
according to the Global Congress on combating counterfeiting, 0.04 2 0.08
of all the world trade comprises counterfeit goods.
7. Discounting premium cosmetics can damage its prestige image
0.04 3 0.12
for the consumers who purchase these products.
8. The Estée Lauder companies ranks number one in prestige skin
0.07 3 0.21
care and number two in makeup in the channel.
9. Considerable investment is necessary to bring new products to
0.05 4 0.20
the market and to maintain their high profile.
TOTALS 1.00 2.84
Internal Audit
Strengths

● Proposed sale of Pringles line of snacks in 2011 for $1.5 billion.

●P&G is focused solely on the beauty and personal-care products business.

●In 2011, Fortune ranked P&G the number one soap and cosmetic in the world.

●New CEO, Mr. McDonald focuses on lower end products aimed at price sensitive customers.

●P&G operates under a SBU structure.

●23 P&G brands routinely earn over $1 billion in revenue per year.
Internal Audit
Strengths

●Braun, bounty, Charmin, Crest, Downy, Gillette, Pampers are all top brands owned by P&G.

●Invested over $2 billion in R&D in 2010.

●Market share grew in 14 of top 17 countries in 2010.

●EPS is 3.94.
Internal Audit
Weaknesses

●No published vision statement.

●$57 billion in goodwill on balance sheet.

●Profits declined 5% in 2011 yet revenues increased 2.9%.

●Weak profitability ratios.

●Not operating as efficiently as Johnson & Johnson.

●Spent $772 million in advertising to Johnson & Johnson’s $366 million.

●Consumers may not associate all of our brands with P&G rather view them as their own distinct
companies.
Internal Audit
Weaknesses

●No published vision statement.

●$57 billion in goodwill on balance sheet.

●Profits declined 5% in 2011 yet revenues increased 2.9%.

●Weak profitability ratios.

●Not operating as efficiently as Johnson & Johnson.

●Spent $772 million in advertising to Johnson & Johnson’s $366 million.

●Consumers may not associate all of our brands with P&G rather view them as their own distinct
companies.
 IFE Matrix
Strengths Weight Rating Weighted Score
1. Proposed sale of Pringles line of snacks in 2011 for $1.5 billion. 0.12 4 0.48
2. P&G is focused solely on the beauty and personal-care products
0.08 4 0.32
business.
3. In 2011, Fortune ranked P&G the number one soap and cosmetic
0.04 4 0.16
in the world.
4. New CEO, Mr. McDonald focuses on lower end products aimed
0.07 4 0.28
at price sensitive customers.
5. P&G operates under a SBU structure. 0.05 4 0.20
6. 23 P&G brands routinely earn over $1 billion in revenue per year. 0.10 4 0.40
7. Braun, bounty, Charmin, Crest, Downy, Gillette, Pampers are all
0.10 4 0.40
top brands owned by P&G.
8. Invested over $2 billion in R&D in 2010. 0.05 4 0.20
9. Market share grew in 14 of top 17 countries in 2010. 0.07 4 0.28
10. EPS is 3.94. 0.05 4 0.20
 IFE Matrix
Weaknesses Weight Rating Weighted Score
1. No published vision statement. 0.02 1 0.02
2. $57 billion in goodwill on balance sheet. 0.04 1 0.04
3. Profits declined 5% in 2011 yet revenues increased 2.9%. 0.03 2 0.06
4. Weak profitability ratios. 0.03 2 0.06
5. Not operating as efficiently as Johnson & Johnson. 0.05 1 0.05
6. Spent $772 million in advertising to Johnson & Johnson’s $366
0.07 1 0.07
million.
7. Consumers may not associate all of our brands with P&G rather
0.03 1 0.03
view them as their own distinct companies.
TOTALS 1.00 3.25
 Growth Rate Percent P&G Industry

Financial Sales (Qtr vs year ago qtr) 8.90 10.40

Profitability Ratios

Return On Equity 18.3 32.6

Ratio Net Income (YTD vs YTD) NA NA Return On Assets 8.7 11.1

Return On Capital 11.0 15.4

Analysis Net Income (Qtr vs year ago qtr) -1.90 4.00

Sales (5-Year Annual Avg.) 5.09 5.47 Return On Equity (5-Year Avg.) 16.7 32.2

Net Income (5-Year Annual Avg.) 7.54 7.90

Return On Assets (5-Year Avg.) 8.0 10.0
Dividends (5-Year Annual Avg.) 11.37 10.67

Return On Capital (5-Year

Profit Margin Percent 10.1 13.9
Avg.)
Gross Margin 50.0 53.3
Pre-Tax Margin 17.8 16.3
Net Profit Margin 13.9 12.4
Efficiency Ratios
5Yr Gross Margin (5-Year Avg.) 50.8 53.7
Income/Employee 91,008 70,194

Liquidity Ratios Revenue/Employee 653,907 537,057

Debt/Equity Ratio 0.52 0.80 Receivable Turnover 13.3 12.5
Current Ratio 0.8 1.0
Quick Ratio 0.5 0.7 Inventory Turnover 5.5 4.9
Recommendation
●Product Development

Spend $400 million in R&D to produce 3 new lines of higher end fragrances.

●Market Penetration and Focused Differentiation

Allocate $100 million for advertising and promoting male skin care products using celebrities as
spokesmen.

Increase social medial advertising targeting teenagers by $100M.

●Engage in talks with Pepsi to purchase Pringles if the deal with Diamond Foods is
not completed.