Parker and Gamble company analysis

Procter & Gamble

Procter and Gamble

This paper presents an analysis of the general business environment of the world's leading consumer packaged goods company, Procter & Gamble. The analysis is done using SWOT, STEP, and key success factors. A critical evaluation of the company's strategic approach has been undertaken in order to assess its sustainability in the long run. A number of alternative strategic directions have been evaluated in a view to recommend one strategic option which can give the maximum benefits to P&G in the next 3 to 5 years period.

ANALYSIS of the Business ENVIRONMENT for PROCTER & GAMBLE

The business environment for Procter & Gamble can be assessed using SWOT and STEP Analysis. The SWOT analysis is used for assessing the internal environment (strength and weaknesses) and the external environment (opportunities and threats) of a company; whereas STEP analysis gives an appraisal of the general environmental forces which affect an industry and its participants in a positive or negative way. The social, cultural, and demographical forces, technological forces, economic forces, and political and legal forces are the part of STEP analysis (Frederic, Agnes, & John 2011).

1. SWOT ANALYSIS

i. Strengths:

P&G is the world's leading consumer packaged goods company with a wide range of billion-dollar brands. Most of its top brands are the market leaders in their respective product categories. P&G enjoys a sound financial position with a sales figure of $84 billion and net earnings of more than $10 billion. Its products are considered the most innovative and of the highest quality among all the available competitors brands (Procter & Gamble 2013). One of the biggest strengths of P&G is its focus on continuous growth strategy for its worldwide operations. It promotes and distributes its products in all the corners of the world. Therefore, it has a huge customer base and strong brand appreciation. These strengths have enabled P&G to win the market leadership position in the Global consumer packaged goods industry.

ii. Weaknesses:

Most of the P&G products are premium-priced. Therefore, many competitors are able to attract potential consumers by offering similar quality products at lower prices. The sales performance of the company is not satisfactory in the under-developed and developing countries due to their poor economic conditions and low rate of industrial growth. Moreover, the company's costs of operations have always been showing an increasing trend due to its heavy expenditures on productivity, Research and Development, technology, and marketing campaigns.

iii. Opportunities:

P&G can improve its sales revenues in the under-developed countries by offering products according to the life styles and preferences of the general consumers. It can reduce the prices of its premium products by controlling its heavy manufacturing and administrative costs. P&G can also enter new geographical locations where it can find attractive opportunities to grow in a competitive way. Moreover, P&G can introduce innovative products in the market and take the advantage of first mover against its top industry rivals. Similarly, it can bring improvements in the existing products through value addition and quality enhancement techniques.

iv. Threats:

P&G has to face a number of threats from its industry. The biggest threat among all is its next-largest competitors like Unilever, Nestle, Kraft, General Mills, etc. These competitors are recognized for their top quality products and extensive product lines. Therefore, they are a direct threat for the sales and profitability of P&G in the Global market. The second big threat for the company is the uncertain economic and environmental conditions of its target countries. Factors like inflation, political instability, and industry patterns can turn in favor or against the company's strategies at any point in time. The day by day increasing costs of production, research and development, technological equipments, and marketing efforts are also posing big threats for the company.

STEP ANALYSIS

i. Social, Demographical, and Cultural Forces:

The strongest environmental force in the consumer packaged goods industry is the social, cultural, and demographical patterns. These forces determine the way general consumers evaluate, select, purchase, and use the products offered by different competitors in the same industry (Frederic, Agnes, & John 2011). In order to deal with this force in an effective way, the companies operating in the consumer packaged goods industry have to manufacture and promote the products that best match the general consumers' life style, income levels, and cultural values. P&G manufactures products that meet the day-to-day requirements for all age groups and societal classes.

P&G is recognized for the quality and variety of its products; however, not all the income classes can afford to buy them due to premium pricing by the company. Another demographical force that impacts the P&G's operations is the effect of marketing campaigns on the consumers' mind. Some low quality brands promote their products through price-cuts and different other types of promotional offers in order to establish their presence in the market. Therefore, P&G also has to compete with these companies and struggle more intensively to maintain its market share.

ii. Technological Forces:

Technological forces are an indirect environmental force in the consumer packaged goods industry. The companies operating in this industry also have to keep an eye on the changing technological trends and adopt them in order to improve their manufacturing capabilities. P&G deals with this force by implementing the most advanced plants and machineries at its production units. It makes heavy expenditures on its Research and Development section in order to bring innovation in its product lines and stay competitive among its industry rivals.

iii. Economic Forces:

Economic forces are one of the strongest forces in this industry. P&G takes different types of economic impacts from its industry on its operations and strategies. For example, the rate of industrial growth, inflationary pressures, consistent supply of raw material at reasonable prices, and the overall earning and consumption patterns of individuals, business entities, and governmental bodies in the industry directly impact Procter & Gamble in one way or another.

iv. Political, Legal, and Governmental Forces:

Being a multinational corporation, P&G has to deal with different types of political environments and governmental behaviors in its target countries. In order to operate in the most effective and lawful way, it has to adhere to the policies and regulations imposed by the governments and regulatory authorities of these countries (Perreault & McCarthy 2002). Moreover, the company has to operate under sound ethical boundaries in order to avoid legal consequences and criticism by its stakeholders.

Key Success Factors for Procter & Gamble:

The most significant factor which has contributed to the success of P&G in the global consumer packaged goods industry is the quality of its products. P&G has 25 billion-dollar brands which are highly appreciated by consumers all over the world. These brands give marvelous sales performance every year and help P&G in maintaining its market share and leadership in its industry (Procter & Gamble 2013). The second key success factor is the financial strength of the company which enables it to expend heavily on productivity, innovation through research and development, and advertising and promotional campaigns. Moreover, the strong brand equity plays an important role in keeping the company's sales at the highest level as compared to its top-notch competitors.

Q. 2: STRATEGIC APPROACH and SUSTAINABILITY

Since its incorporation, Procter & Gamble has always focused on continuous growth strategy for its worldwide operations. In its history of 175 years, P&G has achieved a number of milestones in order to keep itself in the row of the most successful consumer goods companies. The company's strategic approach directs its policies and operations towards value-creation through product innovation and customer services efficiency. The company's aims is to become the most liked consumer goods brand in the world by offering a wide range of innovative products at competitive prices. The first strategic approach, i.e. value creation is executed by investing huge amount on research and development section. The company has implemented the most advanced manufacturing plants, machineries, and equipments in all the large scale markets of the world. These advanced plants help it in improving its manufacturing capabilities and add value to its existing product lines (Procter & Gamble 2013).

Secondly, the company's focus on delivering the most efficient customer services also gives it strategic advantages. In addition to providing the highest quality products at competitive prices, P&G also aims to build and maintain strong customer relationships. It makes every effort to keep its customers satisfied with its products and after-sale services. There is an independent department in the company which is responsible to get the consumers' feedback, resolve their issues related to quality, pricing, and availability, and answer all types of queries.

Hitt, Ireland, & Hoskisson (2011) believe that a company cannot achieve competitiveness in its industry if it ignores the quality of its products or efficiency in its customer services. They position these two strategic approaches as the most significant for an organization in the course of achieving sustainability in the industry. Therefore, P&G can compete with its top industry rivals if it keeps focusing and investing on these two areas in the long run. The company also wishes to expand its business operations to new potential markets in the short run. However, it will first have to analyze its internal strengths and weaknesses in order to evaluate its own capabilities to penetrate in that market in an effective way (Perreault & McCarthy 2002). On the basis of this analysis, it can be recommended that P&G should first focus on improving its existing products and customer services in the already targeted markets before entering into new markets. Reason being, a dual strategy will bring critical challenges for the company which may become unmanageable in the short run and take the company into serious financial problems and competitive challenges (Ferrell & Hartline 2011). Conversely, if it chooses to improve its existing products and services in the near future and target new markets as a second strategy after some passage of time, it can reap benefits from both these strategies in a more effective way.

Q. 3: STRATEGIC DIRECTION

i. Product Development Options:

Keeping in view the internal strengths, core competencies, and resources of the company, the first strategic option in the next 3 to 5 years is to introduce new products that are not yet offered by its major competitors. It can invest in R&D to bring something unique which can not only attract potential customers, but also increase the company's competitiveness in its industry (Yale School of Management 2011).