Proctor and Gamble Business Strategy - Example

A Business strategy is a process that requires continuous activity. It needs to be reviewed continually on its objectives due to constant environmental changes to enhance the probability of prosperity and survival (Grant, 2013).

A good strategy is comprised of three stages; strategic analysis that examines an organizations internal environment on thorough analysis of internal structures and process to establish what the organization is good at as well as weaknesses. Secondly the analysis of the external environment that involves the micro and the macro environment, which is comprised, of the industry that the business competes and the entire industry at large consecutively. Lastly, it involves taking the chosen strategy and using it practically and this means implementing the business strategy in practice.

Financial analysis

This analysis utilizes the ideas of cash flow analysis, the common size analysis and lastly the financial ratio analysis. It involves the selection as the first step of the process, evaluation and eventually the interpretation of pertinent data and finance.

Since 2005 on the selected financial data, their income statement on long term trends on 12 months that ended on June 30,2015, their net income from 2005 to 2009 were on a continuous increasing growth consecutively, in 2005 net earnings attributable to Procter and Gamble was 7,257 and in 2009 they were at 13,436 USD in millions. From June 30.2010, they started incurring a drastic drop in net earnings from 12,075 to 7,036 in June 30,2015.

On assets, the selected items on long term trends from June 30,2015 their current were 20,329 and their total assets were at 61,527 which was increasing positively until June 30,2009 where their currents were 21,905 and their total assets were 134,833,from then their currents growth rate was inconsistent while the currents assets were following trend of inconsistency to a final current asset figure of 129,495 on June, 2015 which was at 62,419 USD million.

On liabilities and stockholders Equity, their current liabilities were 25,039 with their total liabilities being 44,050 which led to total debt of 24,329 on June 30,2005, moreover their shareholders equity attributable to Procter and Gamble was at 17,477. As at June 30,2015 their was an increase on shareholders equity attributable to Procter and Gamble.

On the Per Share Data, the diluted earning per share was at 2.66 as at June 30,2005 and 2.44 as at June 30,2015 which indicated a negative impact. The Dividend per Share as at June 30,2005 was at 1.03 and 2.59 as June 30,2015 that was an increase Per the Share Data.

On Financial Reporting Quality earnings decomposed into accruals and cash components were found to have less persistence compared to components of cash and these led to earning of higher accrual component reduced persistence to earnings with small earnings on accrual (Gowthorpe, 2008).

Competitive analysis

Procter and Gamble is actually the biggest producer and supplier of household products globally. Their major brand s are the likes of Pantene, Olay, Gillette, Head & Shoulders, and pampers but which face competition because of the increase in number of consumers. In the five Porters forces, there are three that are horizontally in nature: product substation easiness, rivals competitive intensity and many new entrants of similar products to the industry. There are those vertical to the supplier bargaining power and the bargaining power of the customers (Fleisher & Bensoussan, 2007).

On the horizontal forces, though its hard to compete with Procter and Gamble in the similar portfolio of products, Peers Unilever and a company named Estee Lauder have made large investment on comprehensive research for brands of beauty and the companies have developed different market strategies for promotion of particular products as distinct and potential. They are posing as threats in strong market portfolios of Procter and Gamble. Procter and Gamble focus has been on innovation and quality but many international brands like Colgate Palmolive are offering substitution products for Oral-B like Colgate.

On the vertical forces it relies on relationships with third parties to conduct some functions, these are contractors, suppliers, distributors, joint venture partners or even external partners. Procter and Gamble maintains pricing that is standard to their suppliers as they enjoy significant bargaining power with its customers.

Bargaining power –The consumer staple products usually experience low elasticity in demand as compared to the first moving goods that mitigate the bargaining power. Consumers are sensitive in prices and switch easily from overpriced products. For products such as Pampers, Gillette, and Olay the price is relatively inelastic leading to Proctor and Gamble to be the market leader.

Mission and Vision

Proctor and Gamble Mission statement is to provide a variety of branded products and services that are of superior quality with values that will eventually make comfortable lives of global consumers which as a feedback will reward Proctor and Gamble with creation of value, leadership sales, profit that will allow their people, community and shareholders prosperity (Christopher, 2009). Its vision statement is to get recognition globally as the best consumer services and products.

Five force analysis

Procter and Gamble has spent a lot of funds on development and research in completion through differentiation in their competition for creation of products that differ from competitors through spending heavily on advertisement since they want to emphasize on their brand. They have relationships with investors and retailers that help them learn about customers behaviors and this makes them aware of what customers want in products hence put much focus on development and research to improve the existing product and creation of new improved products. Strategically, the industry examines the industry segments instead of examining different market segments in the industry that requires various segments.

These are; Supplier Bargaining Power, which constitutes of Proctor and Gamble relationship with its suppliers, in order to attain the revenue averaged the company requires materials that are of quality for best priced products. The Buyer Bargaining power that they depend on, Wal Mart their last representative with 21% of firm’s revenue in 2009 that give s Wal Mart power to make negotiations with Proctor and Gamble for lowered prices while both are mutual and the low prices cant hinder Proctor and Gamble from profit generation. Threat of substitutes that create intense environment for competition and in order to keep up the firm needs to keep up with innovation of new products and brands to consumers. Threat of being substituted by other companies that producing products similar to Proctors and Gamble because it may reduce their impact on society hence losses. Threat of new entrants to the market affects people’s ability to enter a market and weaken the position of the already existing players in the industry when they have weak technology, few economies of scale in place, and fewer funds.

Strategic group mapping

Procter and Gambler were has brands that are strong for their company. They are estimated brands figure boasts at 24 billion dollar and as 50 leadership brands, which increase its sales and profit to 90%. It has opportunities of emerging more consumer markets in beauty and personal care and can largely benefit (Swindon, 2009). Weakness on market matures reliance since the company relies on mature markets heavily and continuously because the emerging markets are going to kick out the mature markets hence losses. Threats from companies like UniIever will continue to pose as major threat in those markets that are developing in categories such as shower and bath.

Resource and capabilities assessment

Procter and Gamble is company for consumer products whose success as contributed to model innovation, it is with goals of improving consumer living standards by recreation. Their first innovation was ivory in in early 1879 by the son of the founder, these was an inexpensive equal to high quality castile soap that was white and was introduced through a weekly newspaper globally (Sanchez & Heene, 2002). Scholars argued that for a resources or capabilities to be competitive, they had to fit in relevance and scarcity. In 2011 their CEO Robert McDonald said that he was with a mission that was to make Proctor and Gamble a technologically enabled business globally that it is to enable operations to be digitized everywhere that has eventually resulted to cost reduction, effort and time that has raised its profitability margin. For retailers they have a distinguished ordering application that retailers order via wired phones or mobile apps. Shelf photos are uploaded and they receive good arrangement of products at retailer’s shops (Kelly, 2008). Technology has brought understanding of behaviors of consumers to digitization and is achieved through understanding consumers deeply.

Business model analysis

Like many products for consumers in Proctor & Gamble, there is micromarketing. They started to use information technology in early 1981. It developed means of electronically exchanging orders with the largest customers and began to develop reorders (Williamson, 2004). They were to multiply new products for customers to have many choices and develop programs to market the product through retail marketing channels for consumers.

They used information systems that analyze and collect retail data sales using information for promotional campaigns. Proctor and Gamble developed 27 different types of promotion platforms to increase advertisements. The result of business models, marketing strategies and systems was to rise was meant for consumers and retail channels cost. Earnings fell and growth for sales dropped.

Company generic strategy

Generic strategies were used to achieve competitive benefits and are divided to cost leadership, differentiation and focus. Cost leadership states that low price of the product might gain advantage of competition to lead in adequacy in the market (Kearns, 2009). Differentiation makes them follow proper strategy with delivering of best quality products with efficient customer services. Focus strategy tends to put aim on small sectors for the achievement of competitive advantages (Moesgaard & Poulfelt, 2006).

International strategy, innovation model and social responsibility

Their social responsibility to save life every hour by giving out 3 billion water liters yearly and make the world a better place, disaster relief management, global programs and education for needy children through scholarships (Kaplan, 2012). Innovation models will have open innovators that will be the practice of tapping developed property intellectually and accelerate internal assets development that will help others not within the company.

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