Organization Behavior International Development and Strategic Management

Organization Behavior

International Development and Strategic Management at Proctor & Gamble

International development

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

Introduction:

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).

Technological Factors:

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).

Competitive Analysis:

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 (Bamford & Forrester 2010).

5. Analysis of Buyers:

Every top competitor in consumer goods industry is always in a quest to find the best suppliers so that it can produce the best quality products among all other competitors (Kotler, Brown, Burton, Deans, & Armstrong 2010). Therefore, every competitor is ready to pay a higher price for the best quality raw material (Horovitz 2010). Since its inception, P&G has never compromised on the quality of its products, therefore it has made agreements with the top suppliers in all the target countries so that the quality of its products never changes and the consumers enjoy the same quality and reliability over the years (P&G 2012).

C. Multinational Organizational Model of P&G:

In its international operations, P&G has implemented a Decentralized Federation Model. That is, the core strategic decisions are made at the Headquarters but implemented by the Head Offices in each country with respect to the results of its sustainability analysis (Horovitz 2010). The key policies and plans are formulated by the Board of Directors sitting in Ohio, United States; but are conveyed to the Management teams in international locations so that they can set their own procedures to follow those policies and plans (Bamford & Forrester 2010). This Decentralized Federation Model helps the newly established business operations to be molded according to the economic and social patterns of the consumers in each target market (P&G 2012).

Multinational Mentality:

In addition to following a Decentralized Federation Model, P&G has implemented a Multinational mentality model in some locations (Kotler, Brown, Burton, Deans, & Armstrong 2010). This model enables the new businesses to be dealt independently; without the interference of Headquarters in key business operational areas. The newly established offices incorporate their procedures according to their own patterns but keeping them aligned with the mission and vision of set by the BOD in the Headquarters (P&G 2012).

D. Marketing Strategies:

Marketing Objectives and Constraints for International Operations:

The marketing objective of P&G for its international operations is to create brand awareness among general consumers and attract them towards its high quality products. The core objective of the marketing plan is to strengthen and expand the consumer base and gain a higher share by promoting the company's products to the prospective consumers in the potential markets (Kotler, Brown, Burton, Deans, & Armstrong 2010). The constraints in achieving these marketing objectives or implementing the marketing strategies effectively are the limitations put by the economic factors as well as the competition given by other consumer goods manufacturers (P&G 2012).

Efforts for Sustainability in International Markets:

P&G recognizes the value of being a socially responsible corporate citizen in the local as well as international markets. For the last few decades, P&G has been engaged in various sustainability efforts that make it unique in its competitors and contribute towards a stronger brand image in the eyes of key stakeholders (P&G 2012). Following are some sustainability efforts incorporated by P&G since 1980s:

Environmental and Water Sustainability:

The World climate is continuously changing. P&G believes that the impact of this changing climate on its business operations will further increase in coming decades. It has recognized the importance of keeping its business operations effectively aligned with this changing climate. It also believes that the World's resources are not endless and they may be totally consumed one day. So the World should use them in such a way to get the maximum benefit from the available resources. P&G is already exposed to a big challenge of availability of clean water (P&G 2012).

The Water and Environmental Sustainability Objectives of P&G:

As far as the water and environmental sustainability is concerned, P&G does not want to damage the beauties of Nature. Its objective is to manufacture highly nutritional food along with ensuring that they do not bring any negative impacts on the surroundings (Horovitz 2010). For this purpose it has implemented highly efficient operations in all its factories where the environmental policy is strictly adhered (Bamford & Forrester 2010).

P&G's Efforts towards Water and Environmental Sustainability:

P&G spends a lot of amount in achieving the aforesaid objectives. P&G's considerable efforts in this regard include:

1. Implementing new projects to ensure least possible use of water in its operations

2. Reducing dependence on non-renewable energy resources and improving the efficiency of existing operations to consume less energy than before (P&G 2012).

3. Making its Packaging processes more environmental friendly and making packaging of all the products lighter in weight than before (Kotler, Brown, Burton, Deans, & Armstrong 2010).

Relations with Supply Chain Members in the target markets:

P&G has maintained very strong relationships with all its supply chain members. It believes that these relationships are essential to ensure its sustainability in the industry. P&G arranges meetings and summits on a regular basis with its partners, supply chain members, and other related parties with a view to confer plans and strategies to make a stronger sustainable future in the international markets (P&G 2012).

Sustainability Aspects and Benchmarks followed by P&G since 1980s:

1. P&G mission since its incorporation has been to provide highest quality products through highly efficient business operations.

2. Its employees are highly dedicated and committed to their job responsibilities

3. P&G management consists of highly experienced and professional members from diverse fields of knowledge and industry. They have instituted best Corporate Governance principles at P&G offices and manufacturing units in international markets.

4. P&G regularly publishes Environmental policy, Sustainability policy, Nutritional and Diet plans, Daily recommended energy requirements, and other useful reports for its stakeholders. Through these publications, it proves to be a socially concerned manufacturer (Kotler, Brown, Burton, Deans, & Armstrong 2010).

5. The Human Resource Management principles at P&G are also aligned with the Corporate Business Principles which emphasize on respecting the employees' values and emotions at the work place. They are provided with the performance appraisals and other employee recognition rewards to motivate them and increase their loyalty (P&G 2012).

Globalization Dimensions for P&G:

Since 1980s, P&G has implemented a Pure Global Strategy for its international business operations. That is, the established manufacturing units and functional departments are fully operative in all the target countries of the world. P&G holds a big market share in every consumer goods market of the world. However, its products are not fully standardized in every market due to diverse social and cultural values shared by the target consumers in these markets (Bamford & Forrester 2010). Keeping in view the changing preferences and tastes of consumers, P&G has to customize its products according to the specifications and requirements of these consumers (P&G 2012).