Procter & Gamble Strategy and BCG Matrix Analysis

Introduction

Procter & Gamble, considered the biggest consumer goods company in the world, is the subject of this analysis. P&G is renowned for its ability to market products while simultaneously building brand recognition. The company has been able to build brand names that gain recognition in every market in which its products are used. Currently, P&G markets over 300 branded products in more than 160 countries around the world. The company is the number one U.S. consumer manufacturer and ranks among the top three consumer producers anywhere in the world.

The company has three major categories of products: global beauty care; global health, baby, and family care; and global household care. Some of the company's major billion-dollar brands include Actonel, Always/Whisper, Ariel, Bounty, Charmin, Crest, Downy/Lenor, Folgers, Head & Shoulders, Iams, Olay, Pampers, Pantene, Pringles, Tide, and Wella. In 2001, P&G purchased Clairol. In 2005, the company moved to acquire Gillette, a former rival and significant player in the consumer product industry (Yahoo.com, 2005).

Discussion: Market Environment and Strategy

P&G has adopted a new trend that is revolutionizing the consumer product industry. By leading a strategy to reinvigorate established brands by placing them inside innovative new delivery devices, the company has been able to improve brand image while simultaneously boosting pricing on the products being sold (Berner and Symonds, 2005). S.C. Johnson & Sons, Kimberly-Clark Corp, Unilever Group, and Colgate-Palmolive are among P&G's chief industry rivals. P&G competes with these companies in almost all the markets in which it operates, and it is committed to researching and developing new products in order to maintain its position as market leader.

Most P&G products traditionally targeted women — home products, cleaning supplies, and beauty products. By purchasing Gillette, however, the company now also has an extensive range of products targeting the male consumer. By diversifying into new products and markets, the company constantly ensures it has the necessary product range to attract new customers. Any consumer product company is greatly affected by the macro- and microenvironments of the industry and market in which it operates. There are many factors and variables, both dependent and independent, that affect strategies and, consequently, the sales of any product in the market (Kotler and Armstrong, 2001). Many external factors may be common to all markets, while a few may be specific to a local or regional market. The ability of any company to understand these external factors and use that knowledge to attain marketing success is critical in the current environment.

In recent times, most companies have grown as a result of mergers and acquisitions of related or unrelated organizations. Chandler observed this trend of growth through mergers and acquisitions as far back as the turn of the 20th century in organizations such as Sears and DuPont (Pearce and Robinson, 2003).

P&G, when establishing manufacturing plants in regional markets, selects countries that enjoy political stability and possess the infrastructure and logistical capabilities for business. Depending on the stability of the market and the purchasing power of the population, the company markets different brands to satisfy local needs. Brands are also marketed based on the specific culture and values of the region. For example, the infrastructure for logistics and transportation is well developed in countries like the United States and Western Europe; however, countries such as Russia and the Eastern Bloc nations, which are still developing their market infrastructure, face these challenges.

Cultures and societies also play an important role in the way products are accepted in the market. Some societies — such as those of the United States and Western Europe — place great emphasis on clean and sanitized homes and constantly search for products that provide these features. Other societies may use indigenous products to satisfy these needs and may be less likely to purchase a commercial product. Increasing the company's position in these new markets requires the ability to effectively create the need for these products within the local population.

The company actively investigates the use of technology for reducing product or process failures, improving packaging and distribution networks, and optimizing facility production. Technology required for the consumer product market has also been evolving, keeping pace with developments in the manufacturing sector overall. The volume and scope of this market ensure that even small savings or efficiency gains can significantly impact overall profitability. In more advanced markets, P&G constantly invests in research and development to ensure that product upgrades and improvements are well received. P&G has also helped small manufacturers develop devices that can be used in conjunction with its products, entering into profit-sharing arrangements. Profits on these devices have helped the company offset some of the cost of rising raw materials (Berner and Symonds, 2005).

Advertising, Consumer Behavior, and Brand Building

Advertisement and marketing play an important role in establishing a consumer product in the market. Product knowledge and the terminology used have a significant impact on the success of any marketing and advertising strategy (Tellis, 2004).

Buying trends have also changed. Many customers now comparison-shop, largely due to the advent of the Internet. Buying habits have changed with the use of this medium (Court and Dayal, 2002). Potential customers have the option to purchase their requirements from a wide variety of sellers offering diverse products at competitive prices. Buyers in this new environment can collect tremendous amounts of information and use that knowledge during the purchasing process. In the past, such knowledge transfer was only possible by visiting various sellers and receiving product information in person.

Companies that have successful advertising campaigns are able to either "invent" a problem or "identify" an existing one. Listerine, for example, invented the "disease" called "halitosis" — commonly known as bad breath. Lifebuoy (a Unilever bathing soap) identified the negative effects of body odor. Head & Shoulders pointed out the obvious social consequences of dandruff for people wearing dark clothing. (Levinson, 1994.) The ability of these companies to identify a target market, associate a social stigma with a common condition, and then offer a remedy is a powerful marketing strategy — one that transforms a situation society had long accepted into a perceived problem demanding a commercial solution.

Highly trained personnel are among the primary advantages enjoyed by a large corporation. The ability to identify and develop new products from ideas can help establish strong product lines and markets. Consumers are also the driving force behind any organization. Consumer products that are not properly researched and developed, or that are managed through poor marketing and sales strategies, can cause significant public relations issues. From its inception, P&G has kept its finger on the pulse of the market and created products that are well received. The company has reacted quickly to trends and changes, and by understanding how brands integrate with their products, it has been able to stay ahead of competition through innovative packaging and design. The company has successfully developed brand loyalty among its customers through the constant use of new and innovative technology.

The company is a multinational corporation with branches worldwide, and this scale can pose organizational challenges. Centralized control structures and varying laws and regulations across different markets can complicate the manner in which brands are advertised, marketed, or sold. Not many entirely new products are generated; rather, many existing products are repackaged into new formats and relaunched. In recent years, P&G has also been aggressively acquiring companies that complement its range of products for different markets and demographics. The constant organizational changes produced by mergers and acquisitions have created a diversified workforce, and the shifting cultures can pose internal challenges.

Opportunities for the company are tremendous. P&G deals with products that enjoy a large consumer market, which has helped the company maintain good profit margins. Threats are also real, however. There are many competitors in the consumer product market, keeping profit margins low. All companies are constantly striving to create products appealing to customers, and it can be difficult to distinguish P&G's product lines from those of competitors — even though the company has succeeded in creating strong brand recognition. Customer loyalty of the past cannot always be relied upon to sustain profitability.

Marketing strategy at P&G differs considerably across product lines. The financial culture within the organization also affects marketing decisions. Peter Drucker stated that markets are not passive entities beyond the control of the entrepreneur or organization; rather, they are interlinked and can be influenced (Drucker, 1954).

Conclusion

Strategy management for any organization can pose a challenge. The key components responsible for the success or failure of an organization are its organizational goals and objectives (Morgan, 1997). Strategy should be aligned with the structure and the values of the company. Organizational structures are built over years. P&G is an old and well-established company in most markets, and the various product lines and the markets it serves also often define its strategy. P&G's successes are largely the result of the company identifying existing needs and, in some cases, creating new needs for existing products. Marketing and advertising have always been important aspects of the company's product management process.

Based on the research undertaken, it is clear that P&G defines specific strategies based on the type of product, the life cycle of the product, and the processes involved in marketing. Strategy is the determination of basic long-term goals and objectives and the adoption of courses of action and resource allocations necessary for carrying out those goals. P&G has realized that growth without structural adjustment can lead only to economic inefficiency. It has therefore made every effort to identify the structural adjustments needed to survive in this competitive industry.

Promoting open and free communication — both vertically and horizontally — across all product lines and product families can also help management at individual departments identify trends and changes in market behavior. In the modern economy, aligning the company's direction with its strategy is proving more effective in increasing profitability and return on investment. Leadership is essential to ensure that effective strategy techniques are implemented properly, while remaining sufficiently flexible to absorb market variations. If the company's strategy must be redefined, understanding why and how to implement the change is also important. Knowing when to cut losses and abandon failing projects is equally essential. A good leader knows when to retreat, evaluate losses, understand the root cause of problems, regroup, and implement either an adjusted version of a past strategy or a new one.

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