Business-Level and Corporate-Level Strategies into Procter & Gamble Company - Essay Example

? Procter & Gamble of the of the Introduction The study deals with choosing an industry and a public company operating in that industry. The chosen industry is consumer goods industry and the company that has been selected is Procter & Gamble. Procter & Gamble is a renowned multinational company in the consumer goods industry (Procter & Gamble, 2013). The company’s headquarter is located at Ohio, USA. It was founded in the year 1837 by William Procter & James Gamble and has been named after them. The company is well known for establishing product leadership in various grounds like skin care, house care etc. It employs almost 125000 employs and sells almost two hundred brands or more across the globe. Procter & Gamble has developed greater than 28 technical centers around the world (PG-Global, 2012). The company has included market research procedure for taking strategic decision while expanding its business in the market (Kotler, 2009; Silverstein, 1997). It has been successful in extending business operations extensively and achieved high revenue in this time period. The study will perform Procter & Gamble’s strategic analysis in the following manner: 1) Analyzing the business level strategy of the company. 2) Analyzing the corporate level strategy of the company. 3) Analyzing its competitive environment. 1) Analyze the business-level strategies for the corporation you chose to determine the business-level strategy you think is most important to the long-term success of the firm and whether or not you judge this to be a good choice. Justify your opinion. The SWOT analysis of Procter & Gamble will help in understanding its business level strategy (Graul, et al., 2006). It will help in realizing the alignment related to the organizational issues (Ansoff, 1965; Dickson, 2002; Valentin, 2001; Panagiotou, 2003). This will help to formulate different strategies for overcoming the threats and weaknesses (Porter, 1991). Strengths The company utilizes the economies of scale for reducing the production cost and offering competitive prices, for the products, to its customers. Procter & Gamble has high brand reputation among the customers because of the prolonged business operations in the industry. The company makes high investment in the research and development for developing quality products. Weaknesses The financial statement analysis of Procter & Gamble shows that the cash flow of the company is shrinking. Its domestic market is saturated due to the existence of a large number of competitors. The biggest competitor of Procter & Gamble i.e. Unilever is competing highly in the detergent segment because of which the company is being forced to maintain competitive pricing strategy. The company’s cost structure is increasing because of increasing operating structure. The company adopted retrenchment strategy in order to perform cost minimization. Opportunities There is huge scope or opportunity of the company to extend its product line by expansion of its portfolio in the beauty and health segment. The expansion of its product portfolio will help in increasing its market share as well as number of customers. Procter & Gamble has low market share in the developing countries like India, China, and Brazil etc. It has the opportunity to perform market penetration in these regions. Its domestic retail market has an increasing growth trend from past few years which provides opportunity to the company to cater the needs and demands of the customers here. Threats In the developing market sector of the business operations of Procter & Gamble the local players are giving tough competition to the company and the developed market segment is being saturated gradually because of the existence and entry of large number of multinational companies. The cost associated with the value chain has increased gradually which has made it tough for the company to achieve economies of scale. Recommended Strategy for long term success Procter & Gamble should plan for the expansion of its portfolio in order to increase the market share as well as the brand reputation in the recent and long term period. It should also discuss the efforts for strengthening its innovation ability by developing new categories or new brands. It should plan for various productivity plans but in such a manner which includes low production cost. The cost savings objective of Procter & Gamble should be achieved for increasing the revenue. It should target for productivity improvement in the manufacturing process. 2) Analyze the corporate-level strategies for the corporation you chose to determine the corporate-level strategy you think is most important to the long-term success of the firm and whether or not you judge this to be a good choice. Justify your opinion. Procter & Gamble has understood the necessity of globalization for surviving in this competitive market (Weiner, 2006). It has shifted its sole focus of delivering its products to only the American customers. It has established strategic business unit (SBU) internationally. It has increased its level of the plant capacity for achieving economies of scale and delivering its product mix in very cost effective manner (Lofgren, 2005). The globalization strategy that has been adopted by the company has helped it to achieve product diversification and high return on investment. A. G. Lafley has played an important role in changing strategies in compliance with the global perspective. The hybrid product portfolio model focuses on alteration of the product category in compliance with the changes in the demand in the domestic market. This model also emphasizes on the redesigning of the value chain process based on the changes in the product specifications. The model that has been adopted by Procter & Gamble is recognized as ‘Front Back Hybrid Matrix’ by the industry insiders. The company was not only successful in changing its product portfolio in accordance with the changing demand of the customers but also changed its marketing mix including pricing strategy, promotion strategy and its distribution channels. In the Front Back Hybrid Matrix, the strategic business units (SBU) performed their operations in the supervision of the Global Business Unit (GBU). It has also changed the present management functions and integrated its applications like Oracle, ERP in the information delivery system (Shang and Seddon, 2000). Procter & Gamble has almost six years for successfully implementing the global business model. The company has made an investment of more than 2million US dollars for the overall restructuring phase. The model of Procter & Gamble can be shown with the following diagram: (Source: Dyer, Dalzell, and Olegario, 2008, p. 295) Recommended Strategy The company has a high scope of developing competency in ground of the value chain management. Procter & Gamble needs to follow Walmart’s value chain integration for increasing the efficiency in the supply chain management. It needs enhancement of expertise in the technology associated with radio frequency identification for enhancing the supply chain management capability. The technology integration will not only help in decreasing the cost associated with the value chain but also in increasing the process management efficiency. The implementation of a sustainable strategic model will help in achieving success in the global market segment. 3) Analyze the competitive environment to determine the corporation's most significant competitor. Compare their strategies at each level and evaluate which company you think is most likely to be successful in the long term. Justify your choice. Procter & Gamble faces high competition from the global giants like Johnson and Johnson and Unilever. There are regional competitors also providing high competitive threat to the company. However, the most remarkable competitor of Procter & Gamble is Unilever which provides high competition in detergent and other segments. The North American as well as European market is being saturated gradually because of the presence of large numbers of global and local players. Procter & Gamble Vs Unilever Both the companies i.e. Procter & Gamble and Unilever are world’s biggest suppliers of the consumer goods. Both of them own almost more than 100 popular brands in almost more than dozens of the product markets across the world. The business strategy of Unilever focuses on the welfare of the customers by utilizing its products and achieving long term business success for itself. Unilever calls its business strategy as ‘the Compass’ for setting a constant path in the long term operations. This strategy lays out the ambitious vision of the company and helps in achieving success by means of increased brand reputation, innovation and continuous improving performance. The differentiation in its business model is because of the goal or target of sustainable living and USLP. The output related to its business model is obtained through three folds: growth sustainability, lower environment impact and finally positive impact on the social environment. The ambition of the company is to include innovation and strong brands for strengthening the connection in between the consumers and the products that they are buying. The superior product quality preference of the customers will drive the profitable growth of the company (Unilever, 2013). Both the companies have unique business strategies in their own way for gaining the customer loyalty. However, in recent times it can be seen that the market operations of Unilever is higher than that of Procter & Gamble. Although this does not mean that in the context of long term success Unilever will exceed the performance of Procter & Gamble. It is expected that Procter & Gamble will soon increase its business operations internationally by implementing successful and innovative business strategies. 4) Determine whether your choice from Question 3 would differ in slow-cycle and fast-cycle markets. The fast cycle markets are those market segments where the company’s ability which have contributed in gaining competitive advantage are having high risk of getting imitated. The competition in the fast cycle markets is high as the companies adapt to the changing environment very quickly by adapting new strategic decisions. It is likely that Procter & Gamble will have to face tough competition from the competitors in the fast cycle markets and Unilever having high market share has higher chances of achieving long term success. In the slow cycle market, Procter & Gamble has a high scope of proving its excellence and achieving success. Conclusion Procter & Gamble is successfully running its business operations in the domestic market as well as the international market. The internationalization needs to be performed with effective strategic decisions in order to ensure that performance does not deteriorate with the changing conditions in the operational market. Performing product differentiation would increase the brand loyalty of the customers. The company needs to implement innovative strategies but in a cost effective manner for improving its performance in the domestic and international market. References Ansoff, H.I. (1965). Corporate strategy. New York: McGraw-Hill. Dickson, P.R. (2002). Dynamic versus static SWOT analysis. American Marketing Association, 48(2), 257-79. Dyer, D., Dalzell, F., & Olegario, R. (2008). Rising Tide: Lessons from 165 Years of Brand Building at Procter & Gamble. Harvard: Harvard Business Press. Graul, L. A., Henricks, S., Olp, S., & Strohecker, C. (2006). Procter & Gamble, Unilever and the Personal Products Industry. Retrieved from http://info.umuc.edu/mba/ep/Presentation/EP_Olp/data/GSA.pdf Kotler, P. (2009). Marketing management. Upper Saddle River, New Jersey: Pearson Education. Lofgren, M. (2005). Winning at the first and second moments of truth: An exploratory study. Managing Service Quality, (15.1), 102-115. Retrieved from Proquest Database. Panagiotou, G. (2003). 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Procter & Gamble's Clay Street Think Tank. The Futurist, 40(5). ISSN: 0016331. Retrieved from: Proquest Database. Read More