International Development and Strategic Management at Proctor & Gamble
International Development and Strategic Management at Procter & Gamble
Every organization wishes to keep its operations on a continuous growing pace in its industry (Barnes, Blake, & Pinder 2009). As a part of its business expansion strategies, it can also aim to target international markets if it possesses the core competencies and financial resources to meet the requirements of this expansion (Bamford & Forrester 2010). International development strategies require business organizations to strategize their policies and procedures in such a way that they not only enable them to compete with the top level competitors, but also ensure a high sales volume and profitability (Kotler, Brown, Burton, Deans, & Armstrong 2010).
To do business in an international market successfully, an organization needs to analysis that market from all the environmental perspectives (Ryals 2008). A situational analysis can be performed to assess the impacts of economic, social, political, and technological forces while Five Forces Model can be used to analyze the competition in the market (Kotler, Brown, Burton, Deans, & Armstrong 2010). Moreover, the organization needs to make efforts to prove itself as a socially responsible corporate citizen in the international market. It strengthens its public image and contributes towards a sustainable future in the industry (Bamford & Forrester 2010). A company should also define the measures for its competitiveness and core competencies so that they can be utilized to operate in the industry in the most profitable way (Hill & Jones 2007).
PROCTER & GAMBLE
Procter & Gamble is an American multinational corporation mainly engaged in the manufacturing, marketing, and selling of a large number of consumer goods. Headquartered in Ohio, United States, P & G. has been serving more than 4 billion customers worldwide with its highest quality products and exceptional customer services (Horovitz 2010). It was established in 1837 by Procter and James Gamble as a manufacturer of products related to personal care; but emerged as one of the leading brands in various product categories over time (P&G 2012).
The most highly appreciated products offered by P & G. include Head & Shoulders, Ariel, Gillette, Olay, Pantene, Wella, Crest, Dawn, etc. These products have been regarded as the most competitive products in the worldwide consumer market with a very high contribution to the sales volume of the Company (P&G 2012).
P & G. has been pursuing an international expansion strategy since its establishment (Horovitz 2010). However, it has seen tremendous changes in its international business operations in the last three to four decades (P&G 2012). The following sections discuss the international development and expansion strategies of Procter & Gamble since year 1980. The discussion covers all the strategic business decisions which P & G. has made to establish its strong presence in the international markets.
PROCTER & GAMBLE -- INTERNATIONAL DEVELOPMENT STRATEGIES
P & G. is present all over the world with an established brand image and high level of acceptability for its products. Before entering into any new market, P & G. formulates effective business expansion strategies and implements them in a well-organized manner.
1. Situational Analysis:
To ensure the success of its international expansion strategies and compete with the top notch market leaders present in the target market, P & G. performs a careful Situational Analysis of that market (Kotler, Brown, Burton, Deans, & Armstrong 2010). This analysis constitutes the following components:
A. Environmental Scanning
Environmental scan of P & G. can be explained by finding an impact of economic, cultural, social, political, legal, and technological forces on this business. P & G. sells its products in various markets (Bamford & Forrester 2010). Therefore, it is exposed to diverse environmental factors (P&G 2012). The following section explains these factors in detail:
Economic Conditions & Trends:
The most important analysis in implementing international expansion strategies is the analysis of economic conditions and trends in the target market (Horovitz 2010). This analysis helps in ensuring that whether the company's business will be profitable in the short run and long run or not (Bamford & Forrester 2010). There are some unfavorable economic factors that are posing a big threat for P & G. In its international operations (Kotler, Brown, Burton, Deans, & Armstrong 2010). These factors include day by day increasing raw material prices, fuel prices, and inflation which directly affect the profitability of the business (Hill & Jones 2007).
Political and Legal Issues:
Since 1980s, P & G. has seen a rapid growth in its international operations. During this period, it has to face both favorable and unfavorable behavior of governments of the target countries (P&G 2012). For example, some governments continuously keep on amending the laws and regulations on manufacturing and trade businesses for international corporations while show a little control on the increasing raw material and fuel prices in their country (Bamford & Forrester 2010).
For P & G, it is not a healthy sign as it increases its costs of production (Horovitz 2010). Lack of support from the local regulatory authorities also makes it difficult for P & G. To encounter the monster of inflation and manage its selling, distribution, administrative, and promotional costs (P&G 2012). Moreover, political conditions in target country can also become unstable any time, which is also a threat for its international business (Hill & Jones 2007).
As P & G. operates in the manufacturing industry of the world, it is also exposed to high technological costs. For example; the production plant, equipments, and machinery are the major technological costs associated with this business (Horovitz 2010). Moreover, the packaging and labeling for products and printing on their wrappers are also performed by expensive machines and printers (Hill & Jones 2007). These costs put a heavy burden on the business and take a significant portion of the profits as re-investment in the business (Kotler, Brown, Burton, Deans, & Armstrong 2010). For the last few decades, rapid advancements in the technology field have put heavy financial burdens on the profitability of P & G's international business (P&G 2012).
Although there are many competitors of P & G. In the local and international markets, but the biggest competitor which provides the same high quality personal care and consumer products is Nestle (Horovitz 2010). Nestle is a leading worldwide brand currently engaged in the manufacturing, packaging, selling, and marketing of various consumer products, Since 1980s, this company has given a stiff competition to P & G. In its international operations (Hill & Jones 2007).
Nestle distributes and promotes its products to a wider range of locations than P & G. around the Globe (Thull 2006). Other major competitors of P & G. include Unilever and Amway which have also been giving a strong competition since 1980s (P&G 2012).
B. Industry Analysis:
1. Analysis of Potential New Entrants:
Consumer goods industry has not gone mature and it never will. If any new manufacturer comes and tries to penetrate in the market, it has to snatch market share for itself from existing competitors as well as make its own customers (Thull 2006). For the last few decades, many new competitors have entered this industry, but P&G has successfully managed to keep its brand loyalty intact among its customers (Barnes, Blake, & Pinder 2009). As a part of its international expansion strategies, P&G never wishes to give room to new entrants to snatch its market share in the countries other than its home country (P&G 2012).
2. Analysis of Existing Competitors:
The consumer goods industry of the world is composed of some large manufacturing companies and numerous small scale manufacturers (Horovitz 2010). P&G also has a few direct top competitors that are producing the same high quality products, but it is also facing a strong competition from small scale manufacturers that are offering lower quality products at cheaper rates (Hill & Jones 2007).
3. Analysis of Substitute Products:
P&G offers a wide range of products; all of which have substitute products in markets. Some substitute products are readily available in the markets and are much cheaper in price than the ones manufactured by the top manufacturers like P&G (Barnes, Blake, & Pinder 2009). These substitute products are a big threat for P&G as they account for nine-tenth part of the overall consumer market of the world (P&G 2012). To tackle this threat and ensure a sustainable future in the consumer goods industry, P&G keeps on introducing new products and bringing improvements in the existing product ranges (Kotler, Brown, Burton, Deans, & Armstrong 2010).
4. Analysis of Suppliers:
P&G has maintained good business relations with all the supply chain members. To ensure the best quality and reliability of its products, P&G has strictly asked them to provide the high quality raw material. Taking P&G as a strong brand, the suppliers are on a bargaining edge and demand a good price for their supplies as they know that brand image is more important for P&G than saving costs by reducing quality of products…
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