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Procter and Gamble
Case Study about Procter and Gamble
Procter and Gamble (P&G) is a global American company specialized in consumer household and personal products. It has its headquarters at Cincinnati, Ohio, in the United States. Its founders are William Procter and James Gamble hence the name Procter and Gamble. The company was started in 1837 but fully incorporated in 1905. After its establishment, the company has grown to the extent that is controls a significant share in the global market share. Its brands are renowned and trade internationally currently ranked as the largest producer of consumer goods. The board of governors of eleven members runs the company, with A.G. Lefley being the board chairperson, president and CEO (Procter & Gamble, 2010).
P&G Market Strategy and Segments
Procter and Gamble Company (P&G) products and services have penetrated more than 180 countries and territories globally. Every multinational company has a strategy, which it approaches its market to promote its brands and maximize profit. The market penetration strategy is through grocery stores, drug stores, mass merchandisers, membership club stores, e-commerce, departmental stores, neighborhood stores, and high-frequency stores (Global Top 50 brands, 2013). Among its key stores to which it supplies its products include Wal-Mart stores and its affiliates, which also has global market recognition. These avenues serve all its customers at all levels in all its developing markets. This approach of the market has ensured that P&G's business remains relevant and at the top of its competitors. The approach has enabled it to accommodate all consumers from the low to the high classes because of the ease of accessibility of these products and services.
In order to enhance its market penetration, P&G structured the business into five segments running globally as of 2014. These segments include grooming, beauty, Healthcare, Fabric and home care, and baby and family care. The manufactured products are supplied to the global market through these segments. Under the beauty care segment, an assortment of products is offered from cosmetics to deodorants to skin care. Amongst the several brands available is the Olay brand, a worldwide facial skin care brand. Some of the brands available in the fragrances market include Gucci, Dolce & Gabbana, and Hugo Boss brands. In the grooming segment, its main products are shave care and appliances, which include pre- and post-shave products, blades, and razors. Some examples of products under this segment include Gillette, Fusion, Mach3, and Prestobarba (Global Top 50 brands, 2013).
In the healthcare sector, the products offered range from oral care to personal health care. Examples of products in oral care include toothpaste and toothbrush, among others, while products under personal healthcare include respiratory, gastrointestinal, and rapid diagnostics among others. Key sample brands in this segment are Oral-B, Always, Vicks, and Crest. In the fabric care segment, the products offered include fabric enhancers, and laundry additives and detergents. Some of the home care products include Dish Care, Air Care, Dawn, Ariel, Downy, Duracell, Tide, Febrze, and Gain. Finally, in the baby and family care division, some of the principal available products include baby diapers, wipes and pants, Feminine Care, paper towels, Incontinence, tissues and toilet paper. Some key brand examples are Bounty, Pampers, and Charmin.
The diversification of P&G's products has enabled it to penetrate a large global market and remain relevant. The approach enables it to manage losses: in case of a collapse one product, it still capitalizes on the other different products.
This section represents an evaluation of the market, which P&G's product brands have penetrated through the five different segments. It considers some statistics from the market using various parameters including stock price, revenue, and earnings.
Procter and Gamble is enlisted on New York Stock Exchange as an active trader in the stock market. Its stock price per share was at $84.33 million at the close of business on 25th of September 2014, according to the information provided by The Wall Street Journal. P&G's performance, as a multinational company, is quite commendable although it is a drop of -0.91 from the previous trade price, which is -1.07%. However, in comparison with its close competitors, it is performing dismally in the stock exchange trading. Some of its key competitors include Johnson & Johnson with a stock price listing of $107.10 and Unilever with several entities at €30.89, €30.80, €78.00 and 2,552.00p. Others include L'Oreal SA with a stock price of €123.90 and Kimberly Clark Corp with a stock price of $107.20. All these companies perform much better compared to P&G. Colgate-Palmolive Company, which has a stock price of $65.48, is the only company that P&G has beaten amongst its competitors (Appendix 4).
The above statistics show that, in the stock exchange market, P&G is performing poorly. Perhaps, many investors find this P&G share price unpredictable, which also reflects the performance of the company in comparison with its close competitors outside the stock market. The dwindling performance may be a red light to P&G that it may be likely losing on its market share as many of its customers. The once loyal consumers of its products could be shifting to its competitors' products. One of the characteristics of dropping companies rests on the competitors' stock market performance.
P&G has a Revenue Recognition Accounting Policy, which it relies upon to track and calculate its revenue earnings. The policy also assists investors to assess P&G's performance and prospects.
P&G's Revenue Recognition Accounting Policy
This policy states that the realization of income is a key indicator of sales recognition since the transactions in revenue represent inventory sales. The recorded revenue is given as the net of sales and other taxes collected for government authorities by P&G. The cost of shipping and handling are considered during income projections. Those costs are part of the price list that is given to the customer. P&G's policy is the recognition of income "when title to the product, ownership and risk of loss transfer to the customer, on the shipment or receipt date by the customer" (Procter & Gamble, 2010). The policy has provision for allowances of discounts in payment and return of products, which has been recorded as sales reduction during the revenue recognition period.
The system also allows for the offer of merchandising funds; trade promotions, which compose of allowance due to customer pricing; and customer coupons, to P&G's consumers and customers through various programs. This policy aims at encouraging consumption of P&G's products and hence increasing sales. The recording of sales is done as net of trade promotion spending during sale. Most of these arrangements in the policy are of one-year terms. The expected payout accruals under the programs are enlisted as accrued marketing and promotion in the Consolidated Balance Sheets under the line of Accrued and other liabilities.
Explanation of Revenue statistics
The income statement of revenues of P&G from 2009 to 2014 fiscal years is shown in the tables in appendix 1. The revenue from the beauty segment increased smoothly from $18,000 million in June 30, 2009 to $20,000 million in June 30, 2012. However, it decreased to $19,507 million in June 30, 2014. According to these statistics, beauty products had the best performance in 2012 than the other years while 2009 performed poorest. For the income from the grooming products, it increased from $7,543 million to $8,339 million before decreasing to $8,009 million. The grooming products also performed best in 2012 in comparison to the other fiscal years like the beauty products. However, comparing the two segments, in the year of the best performance, there was a whopping difference of $11,979 million. However, this segment performed poorest in 2009 in revenue collection (Appendix 1).
The revenue income from the healthcare segment increased smoothly from 2010 being at $11,493 million, which was a drop from the previous year at $13,623 million to 2013 being at $12,830 million. Thereafter, it dropped to $7,798 million in the following year. The healthcare performance was best in 2013 compared to the other years while 2014 performed the poorest. The fabric care and family care segment recording increasing revenue from 2009 being at 23,186 to 2013 being at $27,448 million before it dropped to $26,060 million in 2014. The year 2013 had the best revenue collection while 2009 had the poorest performance. Lastly, the Baby and Family Care segment listed as Baby, Feminine and Family Care in the table, had a uniformly increase in revenue from $14,103 million in 2009 to $16,790 million in 2013. Later, it shot drastically to $20,950 million. The margin between the 2013 and 2014 income was $4,160 million indicating that the sector performed best in 2014. An additional segment of Snacks and PetCare had a generally uniform revenue increase from 2009, at $3,114 million to 2011, at $3,156. No revenue was collected in the subsequent years (Appendix 1). The low performance from this segment, perhaps, caused its removal from P&G's market as an independent segment. Perhaps, the products in the segment were assimilated in different segments like healthcare, and…[continue]
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