Procter and Gamble was established in 1837 and has grown to be one of the fortune 500 companies by William Procter a candle maker and James Gamble who was a soap maker. The two were emigrants from England and Ireland and had settled in Cincinnati in the state of Ohio where the head office of the corporation still sits today. The company as five key divisions, which are categorized by products. These are food and beverage, beauty care, health care, paper product and laundry and cleaning.
In the first quarter of 2007, the corporation was the 18th largest by profit and in the top 50 largest by revenue. Moreover, the company is amongst the top 20 most admired companies in the world. With a work force of more than 140,000, the company has been able to live its motto of “touching lives, improving life”. Being the world’s largest consumer goods corporation with the presence in more than 180 countries and a brand portfolio of about 300 it can be referred as a global corporation.
It has managed to remain as the market leader through innovation and being aggressive by clearly designing policies and implementing them. This is what helped it win the heavy competition it was experiencing in the last three decades (Davila, Epstein, & Shelton, 2006). By ensuring high-quality products P&G as ensured a large customer royalty worldwide. The strategy has been to create a conducive environment for fast and quality innovations.
The management planned to fast track the commercialization of new products so as to accelerate growth and widen their margins. The play to win strategy adopted by the company through the 80s enabled it to be aggressive and acquisition of its local and foreign competitors was the driving force. After the acquisitions of these companies, they were re-structured to fit into the corporation’s processes and they contributed to an increase in profits (Davila, 2006).
The companies acquired included but not limited to Noxell, forger’s coffee , shultons old spice and Richardson-Vicks. The dominance of P & G in the consumer goods market is as a result of its keen interest to promote talent. Through empowerment programs, the company strengthens employee morale. Employees are united by the company’s values, culture and goals.
The mid management is empowered so as to make it easier for it to customize products based on their immediate environment and consumer needs. This has been a powerful tool to optimize resources as well as encouraging decentralized decision-making. The management can implement projects without seeking approval and funding from head office. This participatory and empowerment kind of leadership is key to the success of this global corporation.
The SWOT Analysis.
The strengths of the corporation include a large high quality brand portfolio. P & G as about 300 different high quality brands, which are extremely hard to match or beat. All these come at a reasonable and intensely competitive price, which makes them the choice of every consumer. They come as cost savers without compromising on the quality and improving on the consumer’s standard of living. With the company’s policy of working back from the consumers needs to come up with a new product it has seen successful fast tracked commercialization of new products. There are cases where the corporations offer multiple products competing hand in hand with other brands from the same company.
Another significant strength of the corporation is its solid financial books. With the company being in the fortune 500 and top 50 largest companies by revenue it as enough funds to enable innovative and subsequent commercialization of new products. This puts it on the lead among its competitors such as Unilever and Johnson & Johnson. With the sound financial position, the corporation marketing budget is hard to beat making its brands visible to consumers.
With a workforce of close to 140,000, it has one of the most dynamic and skilled labor pools. In the past the corporate director of innovation capability stated, “Procter and gamble has 9,000 research and development associates including 1,100 PhDs”. This kind of a research team is immense in terms of innovation hence the success of the corporation. With the corporation having 27,000 patents in over 40 product categories. The manufacturing and engineering teams also have the best in the industry giving it the best manufacturing processes with a total quality management.
A global presence in over 180 countries gives it an edge in marketing in these diverse regions. Its extensive presence brings in the benefit of understanding the market dynamics much better than a competitor who tries to venture into a new market giving it the chance to have the best marketing team. The vast and well-established distribution systems are also a significant strength. The corporation’s size enables it to have strong bargaining position with its distributors.
The big investment in research and development with close to $2 billion annually builds strong processes and promotes innovation on products. With the end consumer contributions being taken exceedingly carefully during fact-finding researches. This contributes to the corporation having a gross profit margin close to 15 times the industry margin.
The weaknesses of the corporation include ineffective distribution systems in some market segments. This makes it challenging in penetration in these market frontiers as well as inhibited brand visibility. High cost of inputs and related taxes in some countries poses a challenge in manufacturing of the company’s products. The recruitment of local based management in foreign countries, which is not acquitted with international business practices, undermines the corporation’s policy of doing business globally as well as correspondence with the head office.
The great focus on new products has undermined the expansion of already existing brands, which is a weakness of management and strategists. Consequently top brand are losing markets share in the health and beauty women only the fact that the corporation does not divest its loss making brands is a weakness.
Such a business is the Clairol, which it acquired in 2001 and since it has been unable to grow this business into profitability since the Clairol herbal essence brand did not perform well in the market due to more innovative products in the market. The large size of the corporation hinders production of private-label products and insists on production of products from their research and development division only as well as making the culture heavy and processes slow.
Opportunities for the corporation range from a wide range of divisions, which include utilizing online social networks for marketing and brand promotion. Establishing more eco-friendly products and practice like adopting green offices and green manufacturing bases. Since the company has doubled its environmental goals for this year this is an opportunity to entice the environment concern consumers. P & G as an opportunity to expand in productivity hence increasing profit margins as well as coming up with designs placed at giving the consumers a better product experience.
There is still much more acquisition opportunities to diversify the corporations already leading brand size. With a kind of research and development division that the corporation has it can give some focus on emerging markets o get to know their specific needs and there after pushing their products into those markets. The removal of trade barriers in some of these countries comes as an added advantage since it enables fair and healthy competition between foreign and local companies.
There has been a significant surge in innovations in the manufacturing systems division. The new manufacturing technology offers an exciting opportunity to the corporation to increase its productivity. With the acquisition of Gillette complete, the company has a growth opportunity in the men health and beauty segment.
The corporation however has a series of threats, which include: the intense competition in these fast moving consumer goods from companies like Johnson & Johnson and Unilever is a threat to its market share in the industry. After the leading companies, slow incorporation of private label the sector is now thriving on its own and these private labels are eating into the company’s market share. Many cheap substitutes for P & G are now available and they are also eating into its market share.
The recession has reduced the consumer’s disposable income causing a deep in consumer spending and this has adversely influenced the corporation’s revenues growth globally. Prices for raw materials have also increased hence an upturn in the cost of production. In some developing countries, trade barriers and violent takeovers are a serious threat. Unfavorable business laws and political interference is a problem in unstable and undemocratic governments, which have an issue with foreign investors repatriating their profits.
The ability of converting weaknesses and threats into strengths is the single most challenge that a large corporation likes P & G experiences with such a large work force of close 140,000. Being a global entity with the presence in all continents it is rather challenging to be able to carry out an all-inclusive study. The geographical challenge of accessing all the enterprises information with its greatest resource being the human resource, which is the single largest source of crucial data, and information.
Though the corporation in late 90s introduced a portal for some of its employees dubbed innovation net and later in 2001 the askme enterprise knowledge sharing was introduced in the research and development ,engineering and sales marketing segments I feel these are not enough to enable optimization of the human resource.
From studies done in the past it is evident that close to 90 percent of corporations solutions lay within its work force but the challenge is efficiently organizing and accessing these solutions. Having a platform where employees can select professionals, submit situations to them and get solutions from their colleagues wherever they might be located in order to ensure efficiency within the corporation.
Since these problems might be repetitive in different geographical position and time, the specific solutions should be stored in a database for subsequent use. This saves on repetitive and overlapping of solutions while having the best interest of the employees at hand since there is no alienation or intimidation.
If participatory decision-making is involved in organization, everyone takes responsibility of whatever is being implemented. This improves employee morale and everyone will be willing to accept and work diligently. The success of any project wholly depends on the support of everyone even when there is a negative environment towards making it right (Dooley & Sullivan, 2001). Encouraging this in a multicultural and diverse corporation is hard but if it is possible to align goals and actions with such culture then it will be possible to convert weaknesses into strengths. With the portal stressing the importance of everyone’s’ opinion the organization problem solving will be easy.
Such a platform also encourages a corporate culture that brings out the best leadership practices since it pushes people from the top of the corporate ladder through mid management to the bottom to be innovative and be part of the solutions not the problems. A good kind of leadership, which creatively taps ideas from within or outside the corporation, will stimulate growth in all aspects.
Customers on their part will be more satisfied since solutions will be given quicker while still having their interest at hand. P & g diversity will now be strength and not a weakness. Its global presence will be a source of global solutions. The management must take full responsibility to see that the flow of information across the platform is efficient since the process of innovation is challenged by existing problems that have not yet been solved (Dominic, 2007).
For the platform to be a key driver of innovation a system for innovation should be strengthened where there is total collaborations of experts within the corporation to ensure what is captured in the database is universally accepted. The fact that ideas are fueled by passion is particularly significant. Passion is only possible if there is motivation and a reward system while still encouraging teamwork.
Converting differences such as language, culture and race, which might be considered as weakness into strengths, is possible by incorporating a translation tool into the platform. By having sensitivity training programs to train the management and experts on those differences encourages the flow of information from diverse locations. This encourages innovation and more solutions to current problems.
Implementation of innovative ideas across the world is also possible since there is a flow of information from those regions even if there is a language barrier. Whenever the right and most informed decisions are made, it is to the advantage of every one that is a win-win situation for all those involved: the leadership, experts, contributors and the organization at large. Conflicts are opportunities in disguise if a strong conflict resolution system is in place and the management motivates the involved parties to come up with a solution that is of the organizations best interest.
Davila, T., Epstein, Major, & Shelton, R. (2006). Making innovation work. Upper saddle river, NJ, Wharton publishing.
Dooley, L, & Sullivan, D (2001). Structuring innovation: a conceptual model and implementation methodology. Enterprise an innovation management studies.
Dominic, a (2007). Center for creative innovation: five principle of innovation. April 10, 2011. http://www.bussinessinnovation.com/2010/04/
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