Report on strategic analysis of P&G

5/21/2018 Report on strategic analysis of P&G

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2014

Strategic Management


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Mission Statement (Actual)We will provide branded products and services of superior quality and value that

improve the lives of the worlds consumers, now and for generations to come. As a

result, consumers will reward us with leadership sales, profit and value creation, allowing

out people, our shareholders, and the communities in which we live and work to

prosper.

Mission Statement (Proposed)We will provide branded products and services of superior quality and value that

improve the lives of our consumers around the world and the environment we live in,

now and for generations to come. By giving best opportunities to our employees and

providing them best resources, we will go for innovations. As a result, consumers will

reward us with leadership sales, profit and value creation, allowing out people, ourshareholders, and the communities in which we live and work to prosper.


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oEXTERNAL FACTOR EVALUATIONAn external factor evaluation (efe) is the strategic tool used to evaluate firm existing

strategies, efe matrix can be defined as the strategic tool to evaluate external environment

or macro environment of the firm include economic, social, technological, government,

political, legal and competitive information. Matrix includes both opportunities and

threats. Following are the opportunities and threats of p&g.

OPPORTUNITIES: Growth of global market. Customers in developing markets are increasingly willing and able to purchase

expensive items. Growth in the use of advertising Population growth Increased demand of beauty and health products for customers. Supplier diversity in the market Increased amount of customers (male) Increased effectiveness in social media and internet marketing

THREATS: Local consumer goods producers. Cheaper brands in market Increase in global industry regulations Rising costs of raw material & labor Customer unwillingness to try new products New and competitive consumer products are constantly being introduced.

Rating:1.

Poor.

2.Average.3.Above average.4. Superior.


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oINPUT STAGEoEFE MATRIX

INTERPRETATION:Companys total score is 2.54; its very near to average. It does not shows very good

performance of company but still it is able to avail opportunities and avoid threats.

OPPORTUNITIESWeight Rating Weighted

score

1. Growth of global market.0.1 4 .4

2. Customers in developing markets areincreasingly willing and able to purchase

pricey items0.1 3 0.3

3. Growth in the use of advertising 0.05 3 0.154. Population growth 0.05 1 0.055. Increased demand of beauty and health

products for customers. .1 4 .4

6. Supplier diversity in the market 0.05 3 .157. Increased amount of customers (male)

0.08 1 .08

8. Increased effectiveness in social mediaand internet marketing 0.05 3 .15THREATS

1. Local consumer goods producers. 0.08 2 0.162. Cheaper brands in market 0.08 3 0.243. Increase in global industry regulations 0.04 2 .084. Rising costs of raw material & labor 0.08 2 0.165. Customer unwillingness to try new

products. 0.06 1 0.06

6. New and competitive consumer productsare constantly being introduced.

0.08 2 .16

TOTAL 1 2.54


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oINTERNAL FACTOR EVALUATIONThe internal factor evaluation matrix is a popular strategic management tool for auditing

or evaluating major internal strengths and internal weaknesses in functional areas of an

organization or a business..

Listed below are the strength and weaknesses of P&G.

STRENGTHS: High market share Strong reputable brand name Customer brand awareness High quality products Strong research and development.Worldwide distribution of products Profitable acquisition of competitor brand companies Diversification of product line

WEAKNESSES: P&Gs weak balance sheet, highly leverage 73.3% and low liquidity ratio. Lack of product variety of green products that are environmental friendly. Business ethics lack of women leadership in the executive board.

WEIGHT ASSIGN:4. Major strength.

3. Minor strength.

2. Minor weakness

1. Major weakness.


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oIFE MATRIXSTRENGTHS

Weight Rating Weightedscore

1. High market share 0.08 4 .322. Strong reputable brand name 0.1 4 0.43. Customer brand awareness 0.07 3 0.214. High quality products 0.08 3 0.245. Strong research and development. 0.13 4 0.526.Worldwide distribution of products 0.1 4 0.47. Profitable acquisition of competitor brand

companies0.08 3 .24

8. Diversification of product line 0.1 3 .3WEAKNESSES

1. P&Gs weak balance sheet, highly leverage73.3% and low liquidity ratio.

0.1 4 .4

2. Lack of product variety of green products thatare environmental friendly.

0.08 3 0.24

3. Business ethics lack of women leadership in theexecutive board.

0.08 2 0.16

TOTAL 1 3.43

INTERPRETATION:Companys total score is 3.43, it shows that it is trying to retain its strengths and

overcome its weaknesses.


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oCOMPETITIVE PROFILE MATRIX (CPM):

The Competitive Profile Matrix (CPM) is a tool that compares the firm and its rivalsand reveals their relative strengths and weaknesses.

In order to better understand the external environment and the competition in a

particular industry, firms often use CPM. The matrix identifies the firms key

competitors and compares them using industrys critical success factors. The analysis

also reveals companys relative strengths and weaknesses against its competitors, so the

company would know which areas it should improve and which areas to protect.

WEIGHT ASSIGN:4 = Major strength.

3 = Minor strength.

2 = Minor weakness.

1 = Major weakness.


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oCPM MATRIX

INTERPRETATION:Unilever and Johnson & Johnsons total scores are approx equal while score of p&g is

significantly higher than both. The factor having highest weight is advertisement for

which unilever is rated only 1,while for some other factors having lowers weights

unilever is rated highest such as; customer loyalty. This may be the reason of unilevers

lowest score.

P&G is having highest score among its competitors, however, Johnson &Johnson has

better financial position and unilever is having better customer loyalty than both. P&G is

rated 4 for most of the factors comparatively of higher weight and the factors for which it

is rated less than 4 are weighted 0.1 only. This is the reason P&G has got the highest

rating.

Johnson &

Johnson

Procter &

Gamble

Unilever

Critical Success

Factors

Weights RatesWeighted

score

RatesWeighted

score

RatesWeighted

score

Advertising .2 2 .4 4 .8 1 .2

Product quality .1 2 .2 4 .4 3 .3

Price

competitiveness

0.1 1 0.1 3 0.3 2 0.2

Management 0.1 3 0.3 4 0.4 2 0.2

Financial position 0.15 4 0.6 3 0.45 2 0.3

Customer loyalty 0.1 3 0.3 3 0.3 4 0.4

Global expansion 0.15 2 0.3 4 0.6 3 0.45

Market share 0.1 3 0.3 4 0.4 2 0.2

Total 1 19 2.5 29 3.65 18 2.25


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oMATCHING STAGEoSWOT MATRIX

SWOTANALYSIS

STRENGTHS1. High market share.2. Strong reputable brand

name.3. Customer brand awareness4. High quality products.5. Strong research and

development.6. Worldwide distribution of

products.7. Profitable acquisition of

competitor brand

companies.8. Diversification of productline.

WEAKNESSES1. P&Gs weak balance sheet,

highly leverage 73.3% andlow liquidity ratio.

2. Lack of product variety ofgreen products that areenvironmental friendly.

3. Business ethics lack ofwomen leadership in theexecutive board.

OPPORTUNITIES1. Growth of global market.2. Customers in developing markets

are increasingly willing and able topurchase expensive items.

3. Growth in the use of advertisement.4. Population growth.5. Increased demand of beauty and

health products for customers.6. Supplier diversity in the market.7. Increased amount of customers

(male).8. Increased effectiveness in socialmedia and internet marketing.

SO Strategies1. Go for market development.

(S5,O2,O5,)

2. Introduce new products formen. (S2, S5, S6, O7).

3. Introduce new beauty andhealth products. (S2, S4, S5,O5, )

WO Strategies1. Develop new herbal

products and create a newproduct line of greenproducts. (W2, O2, O5).

2. Consider recruitment ofwomen to be an equalopportunity provider.(W3, O1).

THREATS1. Local consumer goods producers.2. Cheaper brands in market Increase

in global industry regulations.3. Rising costs of raw material & labor.4. Customer unwillingness to try new

products.5. New and competitive consumer

products are constantly beingintroduced.

ST Strategies1. Reduce ineffective and

inefficient workforce to

minimize cost. (S2, T2)

WT Strategies1. Undergo a cost effective

control system to increase

profit and to generate more

cash inflows.(W1,T2,T3).


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oSPACE MATRIX

Factors of SPACE Matrix :

o Competitive PositionFACTORS Rating -6=Low ; 0=High

Market share -4

Product quality -1

Customer loyalty -3

Control over distributors and suppliers -2

Promotional activities -1

Product price -3

TECHNICAL KNOW-HOW -1

TOTAL -15

Average -2.14=-2

o Industry PositionFACTORS Rating 0=Low ;+6=High

Growth potential 5

Profit potential 3.5

Financial stability 4

Technological know how 5

Resources utilization 2.5

EASE OF ENTRY INTO MARKET 4

TOTAL 24

Average 4
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o Environmental PositionFACTORS Rating -6=Low ; 0=High

Technological changes -3

Rate of inflation -2

Barriers to entry into market -3

Competitive pressure -1

Demand variability -5

Price elasticity of demand -3

Total -17

Average -2.83=-3

o Financial PositionFACTORS Rating 0=Low ;+6=High

ROI 5

Financial and Operating leverage 2.5

Inventory turnover 4

Cash flow 5

Working capital 5

Liquidity ratios 2.5

TOTAL 24

Average 4
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o Score on X axis

Competitive Position= -2Industrial Position= +4Total Score on x-axis = -2 + (+4) =+2

oScore on Y axisFinancial Position= +5

Environmental Position= -3Total Score on y-axis = -3 + (+5) = +2

Coordinates (+2;+2)

INTERPRETATION:Financial position of company seems to be good but not so strong, competitive position

is however very strong. Company has acquired many of its competitors successfully and

is able to maintain its position. Company is operating in stable market and industrial

position is also good. Here company should focus on integration, intensiveand

diversificationstrategies.


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oGSM Matrixo INTERPRETATION:

As industry has rapid growth and company has strong competitive position so

here it should first focus on intensivestrategies then should go for integrationandthen for related diversificationstrategies.

Weak Competitive Position Strong Competitive Positive

Slow Market Growth

Rapid Market Growth

Procter Gamble


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oIE MatrixDivision

Sales /Revenue

($ millions)%

Profit

($ millions)% IFE EFE

1 Beauty 19,491 24 2,712 23 3.4 3

2Grooming

7,631 10 1,477 13 1.2 2.8

3Health Care

11,493 14 1,860 16 1.6 2

4

Snacks and

Pet Care 3,135 4 326 3 2.9 1.6

5

Fabric Care/

Home Care 23,805 30 3,339 28 3.5 3

6

Baby Care/

Family Care 14,736 18 2,049 17 3.8 4

Total

80,291 100 11,763 100

3

3 2

1

2


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o INTERPRETATION

Division IThis division has highest sales among all; its IF and EF both are strong so company

needs to hold and maintain this division. Most effective strategies for here would be

integration and intensive strategies.

Division IIIF of this division are weak, while, its EF are medium, company should byretrenchment reduce cost or should divestthis division.

Division IIIThis division is also in 6thcell, so, here also company should either go for retrenchment

or for divestiture. Division IV

IF of this division are average, while, its EF are low, here also company should either

go for retrenchment or for divestiture.

Division VIF of this division are strong and its EF are also high, it show s company is performing

well in this division, so for its growth company should focus on integration and

intensive strategies.

Division VIAccording to IFE and EFE this is companys strongest division, here also integration

and intensive strategies would grow and build this division.


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o BCG Matrix

Division

Sales

/Revenue ($

millions)

%Profit

($ millions)%

Market

share

%Industry

Growth

1Beauty

19,491 24 2,712 23 60 142

Grooming7,631 10 1,477 13 20 13

3Health Care

11,493 14 1,860 16 30 12

4

Snacks and

Pet Care 3,135 4 326 3 10 5

5

Fabric Care/

Home Care 23,805 30 3,339 28 80 3

6

Baby Care/

Family Care 14,736 18 2,049 17 40 10Total 80,291 100 11,763 100


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oInterpretationDivision Io Stars

As this division is in star it so, most effective strategies for it would beintensive and integration.

Division IIo Question mark

This SBU is a question mark for company, so if company wants to

turn it as star SBU Company can go for intensivestrategy to increase

its market share.

Division III , IV VIo Question mark

For health care division also company should increase its market share

through intensivestrategies.

Division Vo Stars

Because of high market share companies home care SBU is its star

unit and for its maintenance company should focus on integrationstrategy.


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DECISION STAGEoQSPM MATRIX:

KEY INTERNAL FACTORS Weights INTENSIVE STRATEGIESMARKETDEVELOPMENT

MARKETPENETRATION

PRODUCTDEVELOPMENT

STRENGTHS AS TAS AS TAS AS TASHigh market share 0.08 2 .16 3 .24 4 .32

Strong reputable brand name 0.1 4 .4 2 .2 3 .3

Customer brand awareness 0.07 - - -High quality products 0.08 2 .16 3 .24 4 .32Strong research and development. 0.13 2 .26 1 .13 3 .39

Worldwide distribution of products 0.1 - - -

Profitable acquisition of competitor brandcompanies

0.08-

- -

Diversification of product line 0.1 4 .4 2 .2 3 .3WEAKNESSESP&Gs weak balance sheet, highly leverage

73.3% and low liquidity ratio. 0.1-

- -

Lack of product variety of green productsthat are environmental friendly. 0.08 2 1 .08 4 .32

Business ethics lack of women leadershipin the executive board. 0.08

- - -

SUM TOTAL 1.00OPPORTUNITIESGrowth of global market. 0.1 4 .4 3 .3 2 .2Population growth 0.1 - - -Customers in developing markets areincreasingly willing and able to purchasepricey items.

0.05 4 .2 3 .15 2 .1

Growth in the use of advertising 0.05 - - -Increased demand of beauty and healthproducts for customers. .1 3 .3 2 .2 4 .4

Supplier diversity in the market 0.05 - - -

Increased amount of customers (male) 0.08 2 .16 1 .08 4 .32Increased effectiveness in social media andinternet marketing 0.05 - - -

THREATSLocal consumer goods producers. 0.08 4 .32 3 .24 2 .16Cheaper brands in market 0.08 - - -Increase in global industry regulations 0.04 - - -Rising costs of raw material & labor 0.08 - - -Customer unwillingness to try new

products. 0.06-

- -New and competitive consumer productsare constantly being introduced.

0.08 4 .32 2 .16 3 .24

SUMTOTAL 1TOTAL ATTRACTIVENESS SCORE 3.08 2.22 3.37


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KEY INTERNAL FACTORS Weights INTEGRATION STRATEGIESFORWARDINTEGRATION

HORIZONTALINTEGRATION

STRENGTHS AS TAS AS TASHigh market share 0.08 - -

Strong reputable brand name 0.1 - -

Customer brand awareness 0.07 - -

High quality products 0.08 - -

Strong research and development. 0.13 - -

Worldwide distribution of products 0.1 - -

Profitable acquisition of competitor brandcompanies

0.08 1 .08 3 .24

Diversification of product line 0.1 - -

WEAKNESSESP&Gs weak balance sheet, highly leverage

73.3% and low liquidity ratio.0.1 3 .3 1 .1

Lack of product variety of green products thatare environmental friendly.

0.08 - -

Business ethics lack of women leadership inthe executive board.

0.08 - -

SUM TOTAL 1.00OPPORTUNITIESGrowth of global market. 0.1 - -

Population growth. 0.1 - -

Customers in developing markets areincreasingly willing and able to purchase priceyitems.

0.05 - -

Growth in the use of advertising. 0.05 - -Increased demand of beauty and healthproducts for customers. .1 3 .3 1 .1

Supplier diversity in the market. 0.05 - -

Increased amount of customers (male). 0.08 - -

Increased effectiveness in social media andinternet marketing. 0.05 - -

THREATSLocal consumer goods producers. 0.08 - -

Cheaper brands in market. 0.08 3 .24 4 .32

Increase in global industry regulations. 0.04 - -

Rising costs of raw material & labor. 0.08 4 .32 2 .16

Customer unwillingness to try new products. 0.06 - -

New and competitive consumer products areconstantly being introduced.

0.08 3 .24 4 .32

SUM TOTAL 1TOTAL ATTRACTIVENESS SCORE 1.48 1.24


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KEY INTERNAL FACTORS Weights DIVERSIFICATION STRATEGIESRELATED

DIVERSIFICATIONUN-RELATED

DIVERSIFICATIONSTRENGTHS AS TAS AS TASHigh market share. 0.08 4 .32 2 .16

Strong reputable brand name. 0.1 2 .2 3 .3

Customer brand awareness. 0.07 3 .21 2 .14

High quality products. 0.08 3 .24 4 .32

Strong research and development. 0.13 3 .39 2 .26

Worldwide distribution of products. 0.1 - -

Profitable acquisition of competitor brandcompanies.

0.08 - -

Diversification of product line. 0.1 3 .3 4 .4

WEAKNESSESP&Gs weak balance sheet, highly leverage 73.3%

and low liquidity ratio.0.1 - -

Lack of product variety of green products thatare environmental friendly.

0.08 1 .08 4 .32

Business ethics lack of women leadership in theexecutive board.

0.08 - -

SUM TOTAL 1.00OPPORTUNITIESGrowth of global market. 0.1 - -

Population growth. 0.1 - -

Customers in developing markets areincreasingly willing and able to purchase priceyitems.

0.05 2 .1 3 .15

Growth in the use of advertising. 0.05 - -Increased demand of beauty and health productsfor customers. .1 4 .4 2 .2

Supplier diversity in the market. 0.05 - -

Increased amount of customers (male). 0.08 2 .16 3 .24Increased effectiveness in social media andinternet marketing.

0.05 - -

THREATSLocal consumer goods producers. 0.08 - -

Cheaper brands in market. 0.08 3 .24 2 .16

Increase in global industry regulations. 0.04 - -

Rising costs of raw material & labor. 0.08 - -

Customer unwillingness to try new products. 0.06 - -

New and competitive consumer products areconstantly being introduced.

0.08 3 .24 4 .32

SUM TOTAL 1TOTAL ATTRACTIVENESS SCORE 2.88 2.97


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o Interpretation: Intensive strategiesFrom the intensive strategy the product development have high score that is 3.37.

Integration strategiesFrom the integration strategy the forward integration have high score that is 2.97.

Diversification strategiesFrom the diversification strategy the unrelated diversification have high score that is 2.97.

o IMPLEMENTATION:From the result of QSPM, it is concluded that P&G should prefer product development as it

have the highest score of 3.37 among all strategies.

RECOMMENDATION:Procter & Gamble (P&G): a widely revered innovation star that invests US$2 billion in R&D

annually, 50 percent more than its largest peer. It spends another $400 million each year on

what it calls foundational consumer research to uncover opportunities for innovation across

nearly 100 countries.

PRODUCT DEVELOPMENT STRATEGY:

It describes to develop new products or modify the existing products with respect to size, color,

packaging, etc. Safeguard is a well-perceived product among the customers, and at this moment,

it is available in two sizes; 75gm and 125gm, which cannot satisfy the demand of every segment.

While the products of the competitors are available in multiple sizes which provide abundant

choices for purchases to customers for example Lifebuoy Gold has 140gm and95gm and

Medicare has 80gm soap available in the market. This provides an opportunity to the customer

to have multiple choices. It can be a threat for the market share of safeguard. On the other

hand, in case of safeguard the choice to customer is very limited. This is what they have

analyzed through market survey. Therefore, it is necessary that safeguard should be available inmaximum possible sizes to meet the selection criteria of the customer. As far as launching of

new product is concerned, it is not necessary for P&G at this moment, but in future, they will

require taking this step as well because they have some other soap like ivory, and zest which are

very famous in international market.

Each company didand still doesproduce plenty of product and service innovation. But these

companies didnt invent the automobile, steel, airlines, carbonated beverages, movie rental

services, and online search. What made these companies greatand what will keep them great

in the futureis innovation of the way raw inputs become products and services that customersvalue.

Report on strategic analysis of P&G

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