P&G Strategic Plan Essay
P&G Strategic Plan
Our Procter & Gamble Strategic Plan makes available an investigation and assessment of the current and prospective opportunities for the company based on in-depth market and company research. Analyses are based on standard business strategy analysis tools, which are: Strengths, Weaknesses, Opportunities & Threats (SWOT) analysis, External and Internal Factors Evaluation (EFE/IFE) Matrices, and standard financial analyses including competitive comparison with Procter & Gamble’s industry. Strategic alternatives were evaluated with the use of the Internal-External (IE) Matrix and the Grand Strategy Matrix which fed into the Quantitative Strategic Planning Matrix (QSPM). The results of the QSPM validated the best strategy to pursue.
The best strategy for Procter & Gamble is the production of less expensive, yet same quality consumer goods, which we plan to implement without compromising our belief in quality and effectiveness.
In order to begin a strategic plan for a company it is important to understand what that business does. Since 1837, P&G has built a rich heritage of touching consumers’ lives with brands that make life a little better every day (“Company Heritage,” 2011). P&G believes that innovation will sustain them. They have a broad range of brands and are known as the world’s leading branded consumer company since their products are sold in 180 countries (“Global Structure & Governance,” 2011). Buhovac, Epstien, and Yuthas, in their book Implementing Sustainability: the role of leadership and organizational culture, wrote: “P&G managers have widened
their organizational perspective to see the broader picture and capture benefits beyond a particular issue or cost. They strive to create products that enable consumers to be more environmentally sustainable. Improving efficiency of the entire product life cycle from cradle to grave is a major focus of P&G’s sustainability efforts” ( p. 44.). A brief look at the history of P&G and their mission/ vision statements will provide a better understanding of what type of company P&G is and wants to be. History
According to Procter and Gamble’s website, P&G was created on October 31, 1837 by brother-n-laws, William Procter and James Gamble. Each one had their own skills; William made candles and James produced soap. They formed Procter and Gamble to make and sell candles and soap (“P&G: A Company History,” 2006). The two entrepreneurs were successful in making it through the financial difficulties of the time. The largest impact on the company at this time was the civil war in which the government contracted the company to supply soldiers with soap and candles (“P&G: A Company History,” 2006).
Edison’s light bulb invention caused the demand for candles to weaken and the company began to focus on making soap by opening up their first research lab. The research lab came up with Ivory flakes which served as soap to wash clothes and dishes. Chipso was the first soap designed for washing machines. Dreft was the first synthetic house-hold cleaner and Crisco, which is still around today, was an all-vegetable shortening (“P&G: A Company History,” 2006). From that time on, P&G has continued to be innovative and create new products for consumers and in 2011 ranked number 26 on the Fortune 500 list (“Fortune 500,” 2011). Mission and Vision Statement
Procter and Gamble has created a mission statement to tell what their business is. “Sometimes called a creed statement, a statement of purpose, a statement of philosophy, a statement of beliefs, a statement of principles, or a statement ‘defining our business,’ a mission statement reveals what an organization wants to be and whom it wants to serve” (David, 2011, p. 44).
P&G’s mission statement says, “Procter & Gamble will provide branded products and services of superior quality and value that improve the lives of the world’s consumers. As a result consumers will reward us with industry leadership in sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper” (David, 2011, p.46). P&G has also created a vision statement that states, “Procter & Gamble’s vision is to be, and be recognized as, the best consumer products company in the world” (David, 2011, p. 44).
Proctor & Gamble’s mission and vision statements explain their dedication and importance of selling high quality products in order to improve people’s lives around the world while providing jobs and stimulating the economy (“Purpose and People,” 2011). The objectives the company would like to uphold in living up to the mission statement are building existing businesses into stronger global leaders, expand to reach more markets, increase higher margins with global leadership potential, and produce more products in order to satisfy all consumers’ needs and wants. P & G believes they can improve everyone’s lives in ways that enable them to thrive, to increase the quality of living, and over time make them loyal buyers (“Purpose and People,” 2011). STRATEGIC ASSESSMENT
One of the most important parts of the strategic formulation stage of the strategic management process is the assessment of a company, both externally and internally, and where that company stands in their industry. The results of these assessments will produce information that can be analyzed to determine the best strategic plans for evaluation based on the company’s present situation.
The external assessment looks at forces beyond a company’s control; opportunities that can enhance and threats that can hurt their operations. The internal assessment looks at forces from within that are either strengths that can be capitalized on or weaknesses that must be offset, or both, for success. Financial and operational analysis, using the Dun and Bradstreet business ratios, looks at a company’s financial and operational success, or failure, as compared to competition within their industry.
External Forces Evaluation (EFE) Matrix
The following analysis is an external evaluation of the opportunities and threats that can affect Procter & Gamble. The External Factors Evaluation
matrix, Figure A-1, and this supporting summary draw data from published reports, news articles, and blogs to ensure as complete a picture as possible is presented. The following opportunities and threats discussed refer back to Figure A-1.
Opportunities. As Procter and Gamble is looking to find ways to bring in customers, they have used a method of observation to see what people are concerned about and what they want (Silverman, 2011). By spending $2 billion annually on R&D, Procter and Gamble have brought upon the company an opportunity, as they think about Future Growth plans with a focus on increasing concentration on its core attractive business and enhancing its customer base.
Also, Procter & Gamble has been applying for and being assigned patents for “fabric care compositions and systems comprising organ silicone micro emulsions and methods employing same… assigned Patent for Automatic Dishwashing Detergent Composition…and Process for Treating a Hard Surface using an EO/PO Trisiloxane” (“Targeted News Source”, 2011). As more women want the natural look, there is a movement towards the use of herbal cosmetics (“The Procter & Gamble company – Financial and strategic analysis review,” 2011).
As the manufacturer of cosmetics, Procter & Gamble have an opportunity to capitalize on this opportunity by shifting their production and purchase from synthetic cosmetics towards natural, herbal cosmetics. As the producer of Herbal Essences, the opportunity to increase a line of “herbal” cosmetics and healthcare products is wide open for the taking.
Procter & Gamble have a great opportunity to take advantage of the emerging economies of countries like China, Kuwait, and India (“The Procter & Gamble company – Financial and strategic analysis review”, 2011). With increased employment and the growing desire for affluence, there is an increase in disposable income available for the purchase of known brands into a market that has little penetration from other organized retailers (“The Procter & Gamble company – Financial and strategic analysis review”, 2011). Another opportunity Procter & Gamble has developed is to branch out and invest in manufacturing in developing countries such as its chemical company, Procter & Gamble SA. “It is one of the newest P&G subsidiaries…in South Africa principally into production of cleaning products and beauty care products.
P&G uses its South African base to export to neighboring SADC countries,” (“Procter & Gamble SA – Strategic SWOT Analysis Review,” 2011). This opportunity can help to offset a slowing economy in the United States where Procter & Gamble presently generate 41% of their 2011 sales (Hoovers, 2011).
As the producer of Iams and Eukanuba pet foods, Procter & Gamble has a prime opportunity to capitalize on the growing trend of humanization of pets worldwide (“The Procter & Gamble company – Financial and strategic analysis review”, 2011). Procter & Gamble’s market share of pet food and personal pet care products can be increased through an increase in their line of high-quality food and luxury products (“The Procter & Gamble company – Financial and strategic analysis review”, 2011).
With the decline in the market and rising government debt, Jonathan Chevreau published on his Financial Post Blog Wealthy boomer a letter written by Robert Smith, CFA, CFP where Robert wrote that investors should be moving towards purchasing stocks from “solid dividend-paying companies” ( 2011). Procter & Gamble were cited as one of the companies that are a sure bet because of the diversity and necessity of their products. Procter & Gamble can capitalize on this by continuing to provide a dividend on their stocks which should attract more investors. There is a new trend advancing in the baby diaper industry. Competitor Kimberly-Clark has jumped into the trend with Huggies jeans; a diaper that looks like it is jeans material. Now they are producing a camouflage design diaper for Wal-Mart that will support Military families.
Procter and Gamble has recognized the new trend by introducing floral prints for girls. John Brase, head of North American baby care marketing at Procter and Gamble is stated in an article by Bruce Horovitz (2011) as saying, “You have a group of moms focused on fashion who think of the diaper as an extension of clothing.” Another opportunity for Procter and Gamble is the demand for environmentally friendly products. In recent years there has been an increased focus on saving the earth through green choices. This opportunity has prompted Procter and Gamble to become publicly committed to long-term goals of reducing energy consumption, converting to entirely renewable energy sources, using 100% renewable or recycled materials, and eliminating disposal of consumer and manufacturing waste in landfills (Pandis, 2011).