Where would the world be without Procter & Gamble? No Ivory soap, no Oil of Olay, no Jif peanut butter, no Tide detergent, no Crest toothpaste. Though there would probably still be soap, skin conditioner, peanut butter and toothpaste, we'd be bereft of the brands that have earned our love and loyalty over the years. And for Procter ; Gamble, loyalty is what it's all about.
P&G is a company that trades on loyalty, thrives on loyal customers and strives to put out products that merit that devotion.Procter & Gamble is the world’s largest manufacturer of household products in the areas of beauty care; health, baby, and family care; and household care, with a substantial presence in pet food and water filters. Founded in 1837 by James Gamble, a soap maker, and William Procter, a candle maker, joined forces at the suggestion of their mutual father-in-law, Alexander Norris, who was also a candle maker. Procter & Gamble (P&G) is one of today’s fortune 500 companies; P&G is based in Cincinnati, OH which manufactures a wide range of consumer goods.P&G is currently the 10th “Most admired Companies list” and they are also the 25th largest US Company by revenue.
Procter and Gamble created one of its first products in the late1880’s which begin Procter and Gamble’s road to a new product market. The item that was created was a bar of soap which was inexpensive and floats in water. The soap the floats in water is what we now call soap Ivory which is still in used today. Procter and Gamble also became known for its environmental work in the late nineteenth century.The grandson of Procter establish a profit-sharing program in hopes that the workforces would less likely to go on strike and from their company began to focus most of its time on producing more soap items by 1890 P&G had thirty different soaps.
During this time electricity became more popular and candle were becoming obsolete and P&G discontinued manufacturing candles in the early 1900s. [pic] Famous Products from Procter & Gamble The company began to build factories in other locations in the United States, because the demand for products had outgrown the capacity of the Cincinnati facilities.The company's leaders began to diversify its products as well and, in 1911, began producing Crisco, a shortening made of vegetable oils rather than animal fats. In the early 1900s, Procter ; Gamble also became known for its research laboratories, where scientists worked to create new products.
Company leadership also pioneered in the area of market research, investigating consumer needs and product appeal. As radio became more popular in the 1920s and 1930s, the company sponsored a number of radio programs.As a result, these shows often became commonly known as “Soap Operas”. P;G’s businesses are organized into three product based segments which includes 1) Household Care 2) Health, Baby ; Family Care and 3) Beauty Care. They had 10 billion dollar (in sales) products.
Over the second half of the twentieth century, Procter ; Gamble acquired a number of other companies that diversified its product line and increased profits significantly.These acquisitions included Folgers Coffee, Norwich Eaton Pharmaceuticals, Richardson-Vicks, Noxell, Shulton's Old Spice, Max Factor, and the IAMS Company, among others. In 1994, the company made headlines for big losses resulting from leveraged positions in interest rate derivatives, and subsequently sued Bankers Trust for fraud; this placed their management in the unusual position of testifying in court that they had entered into transactions they were not capable of understanding. In 1996, Procter & Gamble again made headlines when the Food and Drug Administration approved a new product developed by the company, Olestra.Also known by its brand name Olean, Olestra is a substitute for fat in cooking potato chips and other snacks that is known to have caused anal leakage and gastro-intestinal difficulties in humans. Procter & Gamble has expanded dramatically throughout its history, but its headquarters still remains in Cincinnati.
The history of shaving dates back to at least 3000 BC when the first copper-bladed razors were fashioned. The razor of the 21st century can be traced to the efforts of King C Gillette and William Nickerson, who collaborated to invent the first razor with a safe, inexpensive, disposable blade.The invention led to the founding of the Gillette Company in 1901. P&G announced the acquisition of Gillette in January 2005 which made P&G the largest consumer goods company. This acquisition would place P&G second to Anglo- Dutch Unilever. With this acquisition P&G acquired such names as Gillette razors, Duracell Batteries, Braun and Oral-B.
The acquisition was with conditions to a spinoff of certain overlapping brands. P&G has agreed to sell its Spin Brush battery-operated business to Church & Dwight. It also divested Gillette's oral-care toothpaste line which Rembrandt was a part of.The deodorant brands such as Right Guard, Soft ; Dri and Dry Idea were all sold to the Dial Corporation.
P;G was officially merged w/ Gillette on October 1, 2005 which made P;G leader in consumer products. With the merger, their number of billion dollar product changed from 10 to 16. Problem Identification P;G has not been very successful in late nineties. ‘Annual sales growth has been slowing over the years, from 5 percent in 1996 to 2. 6 percent in 1999’. The company stumbled badly in 2000 missing analysts’ profit expectations and causing its famously reliable stock to plummet from $103 in January 2000 to $64 in June 2001.
CEO Durk Jager identified the problems due to the change in P;G's culture from a conservative, slow-moving, bureaucratic behemoth to that of a modern, fast-moving, internet-savvy organization. P&G also identified to make faster and better decisions, cut red tape, reducing costs out of systems and procedures, fuel innovation, set more aggressive sales goals. The catalyst for all this change is IT. P&G has to address the issues facing by manufacturers, retailers and wholesalers at the outset of the 21st century.Examples of these issues are the Globalization and consolidation of retailing, consumer loyalty and retention, category management, the potential effects of the Euro currency and dramatic advances in information technology. P&G also need to reorganize the company's corporate structure global business units based upon product categories.
Acquisition of Gillette also raised the few questions by analyst for P;G which includes 1) 20% purchase-price premium to Gillette 2) Acquisition price was high compared to other consumer industry factor 3) Dilution of P;G’s EPS for next three years and 4) Share exchange ratio to Gillette was overly generous.Internal Strategic Management Techniques Used – SWOT Analysis In 1999, CEO Durk Jager kicked off Organization 2005 in order to forge better performance. Organization 2005 includes cutting 17,000 workers over the next three years and reorganizing the company's corporate structure from four geographic business units to seven global business units based on product categories. P&G stresses the company will pick the fruits of the ambitious restructuring plan in the near future. Durk Jager took advantage of the SWOT analysis by changing his strategy based upon the current economical and business conditions.P&G invested over $1.
7 billion in research and development at 19 technical centers and nearly 100 universities around the world. ‘P&G credits its success in product innovation to deeply understanding consumer needs and desires and bringing these to reality through leading edge science and technology. Above all, P&G spends billions of dollars a year using focus groups and testing markets. ‘Before rolling out a new product, the company typically spends several months and millions of dollars to conduct field tests in a handful of midsize, middle-American cities.External Strategic Management Techniques Used – New Alliances One of P&G's new strategies is linking up with other companies to extract as much value from its brands as possible. February 2001 Coke and P;G announced a $4 billion alliance.
The alliance would involve the union of some 40 consumer products including Sunny Delight, Pringles and Minute Maid under the umbrella of a Coke-P;G joint venture. P;G was hoping Coke’s far-reaching distribution network could give the company a boost. Also P;G successfully tied up with chewing gum giant the Wrigley Company.The deal will allow P;G to cash in on the global gum, mint, and breath-freshener market. This is bigger than the toothpaste market and equal in size to the shampoo or skincare sectors.
‘We will soon be able to sweeten our mouths with Crest gum, Crest mints and Crest breathes freshener’. Strategic Technique - Marketing P;G aggressively markets its products to the public, using clever marketing strategies, including advertising. P;G is one of the world’s biggest advertisers and was the first company advertising directly to consumers on a national scale.Most of P;G’s product lines are the premium brands that cost a bit more than competitors –and much more than generics (generics are cheaper than any branded product). ‘P;G isn’t trying to compete with generics’. Therefore marketing is of great importance in order to tie consumers (including children) up to P;G’s brands (in other words, to forge so-called ‘product loyalty’), to capture new markets and expand market shares.
Sharpening marketing techniques in order to lure consumers are more effective.Marketing is still gaining importance, as is reflected in a restructuring of P;G’s relations with suppliers and retailers. The company wants to ‘act as one; targeting consumers with integrated marketing strategies. ‘Expanding the relationship with customers from a purely transactional buying/selling relationship to a co-marketing relationship is being considered a huge opportunity. Creating demand is a big part of the game.
‘In creating demand P;G have seen major success with shopper research. The company has developed a Europe-wide Shopper Research Programs involving interviews with over 30,000 shoppers.When this is combined with other research data and retailers' shopper data, there is a powerful combination of information available to shape mutually beneficial business plans. Basically, giants like P&G try to hook up as many consumers worldwide with as many products as possible, through aggressive promotion of consumerism, at tremendous environmental and social costs. Strategic Technique - Location P&G was highly successful by launching of Sunny Delight fruit juice, where a key element was the combination of the right kind of in-store support (e. g.
put the fruit juice in the freezer to give the impression of freshness) and joint co-marketing with customers to shoppers with kids. Likewise, with Febreze, the right in-store distribution, shelving and focusing of co-marketing support to different consumer groups like pet owners and smokers is delivering outstanding results.Strategic Technique - Internet Reach more consumers at higher speed. P&G has turned the Internet into a device for selling more of its products and reaching more consumers. P&G is experimenting with new marketing techniques in order to boosts its sales. The company is no longer solely focusing its test-market programs on cities where the ‘average’ US household (white, two parents, and two kids) is disproportionately common.
Using the Website, P&G is broadening the demographic reach of its research to include people of color (for example, P&G has launched its own beauty-line for black women), people form non-traditional families, and people in major urban areas. Benefits and/or Drawbacks P&G and Gillette management agreed that a merger between the two companies had offer four key benefits:1. The companies had complementary strengths in product innovation and selling activities 2. The merger had result in a stronger lineup of brands 3. A merged company had generated additional opportunities for scale of economies 4.
A strong lineup of brands had enhanced relationships and bargaining power with retail buyers. P&G elected to use a strategic alliance as an entry point into the consumer goods company market. To gain better control, P&G acquired Gillette in January 2005 which gave P&G full competitive leverage in the onsumer goods market.Although this was a great marketing move for P&G, the acquisition did not truly address the issues of applying the P&G business model to Gillette.
The one component of the business model that made P&G source of power was its reliable products. This was one component Gillette struggled with in the consumer product market. To fully transfer P&G’s core competency to a new consumer market, P&G considered selling its spin brush battery operated business and to divested Gillette's oral-care toothpaste line.Acquiring a buyer whose potential could possibly develop them to be the next P;G and boost consumer confidence in consumer products like one’s that P;G have developed and acquired.
Due to environmental changes Proctor ; Gamble will have to reduce solid waste and other forms of pollution. The complete eliminating phosphates from detergents in the Started in 1970s, using recycled plastic packaging, marketing detergent refill units, reducing deodorant packaging, combining shampoo and conditioner products, and composting disposable diapers will soon again change on how products are brought, marketed due to ongoing environment concerns.P;G will learn to develop and markets its products, and how according to environmental concerns which should be currently part of the decision making process for marketing all products. Another opportunity for P;G is to take a more aggressive marketing approach by selling their deodorant brands such as Right Guard, Soft ; Dri and Dry Idea to a brand name company such as Dial Corporation. P;G has no limit to marketing potential in consumer goods.
P;G approach to consumer product is a nice however it does not address the younger consumer.In this area, P;G should work closely with advertising firms to understand how younger consumers drive the field of product marketing. Based on the numbers from P;G before the 2005 merger, their number of billion dollar product changed from 10 to 16. In order to ensure and keep market success P;G may want to utilize a marketing firm to understand the needs of the customer, what lures customers to actually trade name P;G versus other brands. The overall goal of P;G is to ultimately maximize profits from all consumer products under the P ; S label. Mega-mergers” often fail, even when the companies are in the same industry.
Both Gillette and P;G are delivering strong top- and bottom-line growth. They have combined the Gillette’s and P;G’s healthy brand franchises and core strengths. They have come together at a time when there are abundant opportunities for even more growth. Mergers often bring the cuts in the overlapping area. It as very common to see key talented people often let go due to duplicate positions or not agreeing with the newer management. This company represents industry best practices in several areas of environmental practice.
6 percent of the facilities owned by Gillette, are ISO 14001 certified.Corporate environmental performance is excellent, as shown by the company’s CO2 emissions, which have decreased due to more energy-efficient projects and less reliance on coal. Acquisition of Gillette has increased the Environmental goal of the company. As we can see from the stock performance chart (Picture 2) that P;G has done ok. The price changes from around $64 to $72 after almost 3 years of merger.
P;G has not been to able deliver the stock performance as it used to before merger.
