SWOT ANALYSIS P&G is the world’s largest consumer goods company that markets more than 300 brands in over 180 countries. Many of its products are non-discretionary; however, some are considered premium purchases and their sales suffered during the recession as cheaper, generic purchases rose. P has some of the strongest brands in the world that usually provide it a significant competitve advantage. It cut prices up to 10% on a wide swath of products to blunt any potential loss of market share.
Below is a summary of the company’s competitive position. P&G focuses on its core businesses and leading billion-dollar brands for growth. Nearly 80% of sales and growth this decade has come from 10 businesses, including baby care, blades and razors, fabric care, family care, feminine care, home care, oral care, prestige fragrances, retail and skin care. P&G has shifted the business portfolio to more beauty and personal care products. During this time, the percentage of sales in these higher-margin businesses has increased from 18% to 33%.
In the past eight years, beauty, personal care, and health care products have accounted for 60% of sales and growth. At the end of FY 09, Proctor and Gamble had expected net sales growth of between 5-7% for 2010 with free cash flow equaling to 90% or more of net earnings. Now, it expects sales to be roughly flat over 2009. P&G also had just 32% of sales coming from developing markets, compared to almost 45% for its global competitors. Consequently, P&G should have a lot of room for global sales growth, as it catches up to its competitors global sales figures.
Proctor and Gamble’s strategies to win include its extensive expenditures in consumer and product research, product innovation, brand-building, go-to-market capabilities and economies of scale advantages. STRENGTH Leading market position – P&G competes primarily in 22 global product categories and is a market leader in over two-thirds of these categories. In ’09, P was the global market leader in beauty segment with a market share of 20%, the hair care segment with a market share of 33%, the fabric care segment with a share of 33%, baby care with a share of over 32%, and he manual blades and razors segment with a dominant share of 70% of the market. It is also the leader in the nonprescription heartburn medications, oral care, and personal health products segments. Another strength is the effective employment structure. Due to the fact that the plan is going to use the normal hiring and retirements, hiring reductions, relocations, job retaining and voluntary separations to help reduce the number of potential involuntary separations. The use of Information Technology (IT) is also one of the advantages of this plan.
With the use of the said technology it’ll be much easier to maintain the flow of data and information inside the company. The main target of the plan is to recapture the market that they have lost and to improve their marketing strategy for the sake of competitive edge against the growing competition in the market. Highly-diversified product portfolio – P portfolio includes 23 brands that generate $1 billion in annual sales and 20 more brands that generate at least $500 million.
The billion-dollar brands accounted for 85% of the company’s sales growth over the past decade and 90% of the company’s profits. This strong portfolio of brands enables the company to deliver consistent, reliable top- and bottom-line growth. P also spends nearly $7 billion a year in advertising, making it one of the world’s leading advertisers. Strong brands – P&G competes primarily in 22 global product categories and is a market leader in over two-thirds of these categories.
In ’09, P was the global market leader in beauty segment with a market share of 20%, the hair care segment with a market share of 33%, the fabric care segment with a share of 33%, baby care with a share of over 32%, and the manual blades and razors segment with a dominant share of 70% of the market. It is also the leader in the nonprescription heartburn medications, oral care, and personal health products segments. Focus on research and development – In 2009, two product categories accounted for 10% or more of consolidated net sales.
The laundry category constituted approximately 17% of net sales in 2009 and 16% for the fiscal years 2008 and 2007. The diaper category constituted approximately 11% of net sales for fiscal year 2009 and 10% in 2008. Below is a chart that shows the breakdown of sales by segment for the first six months of FY 2010, ending December 31, 2009. Also included are the key products of that segment and the billion dollar brands. WEAKNESS Weakening consumer demand for premium products – Permanent changes in buyer decisions emerging from the recession also might have a negative impact on growth.
If buys continue to focus on down-market, generic brands instead of premium brands, then P would be hurt. Whether that shift is a long-term trend remains to be seen; if it is, it could cut into P’s annual growth rates. Currently, retailers are promoting their own, less expensive labels. If consumer spending picks up, and disposable income also comes back to pre-recession levels, P&G’s growth in branded products will return with strength. Increasing instances of product recalls – P has been facing an increased number of product recalls.
For instance, in March 2007, P Pet Care voluntary recalled in the US and Canada canned and foil pouch wet cat and dog food products manufactured by Menu Foods Inc, and in September 2006, P suspended sales of the cosmetics in China after they were found by the authorities to contain banned substances. It also recently recalled its Sweep Vac, a product of Swiffer. Product recalls are never good news for a company, as they can tarnish a company’s reputation and brand loyalty. This is especially important to P because they rely so heavily on repeat purchases of its products to generate sales growth.
Dependence upon large retailers, such as Wal-Mart, for its revenues – Proctor and Gamble is very dependent on Wal-Mart for its sales growth. Sales to Wal-Mart and its affiliates have represented approximately 15% of its total revenue since 2006. Any decrease in revenue from Wal-Mart could have a negative impact on the company’s businesses. Wal-Mart is therefore a very important customer for P&G to keep. There is also a risk of Wal-Mart having increased bargaining power, resulting in decreased profitability from their stores.
This lead to pressure and heavy atmosphere at work that lead to employees’ resistance and as employees felt that they are being pushed, many of them transferred to different part of the country and the transaction was a mess (. ) Another weakness of the plan is the part where the company cuts the 15, 000 employees from the original 110, 000. This move affects the impressions of the public to the company. OPPORTUNITIES Growth plans – Many of P&G’s developing markets are experiencing strong growth in household income and population.
In China and Russia, P&G is using its portfolio of leading brands to attract, build and expand a network of distributors. Expansion into developing countries – Currently, its distributor network in China reaches 800 million people. In Russia, it now has access to 80% of the population. Not only is P&G growing into other countries, it is also cutting costs. Proctor and Gamble aims to streamline its worldwide operations by as much as 25% through 2012. It is also building production facilities in 18 developing countries.
Currently P&G’s products are used by 3. 5 billion people around the world. This growth plan will increase P&G’s reach to an additional 1 billion of the world’s 6. 5 billion consumers later this year. On an aggregate basis, P&G has a 19% share in developing markets and hopes to grow by . 50% per year. P&G generates roughly $25 billion in developing markets per year, more than five times the average of its competitors. The farther the company can reach, the higher the top-line growth P&G will realize in the future. Leveraging brand strength –
Fast-growing Indian consumer goods market – The Indian Fast Moving Consumer Goods (FMCG) industry is likely to witness strong growth in the future as well. In India, P&G’s distributor network currently covers 4. 5 million stores, an increase of two million stores in the five years ending in 2009. This provides P&G with an opportunity to enhance its market share as well as expand its presence in other categories. Foreign-currency exchange rates – The main opportunity of the plan is to take advantage of globalization.
This will help them to be well-known in the world as well as to target a vast amount of market. And because of the large population of their employees it will be easy for them to produce large quantity of products. This plan will also open for partnership and the same kind to extend the line of products that they are offering to the public. The use and application of IT to the company will also open for change and innovations. This helps them to continue to reinvent the system of the company that will reflect to the overall production. It also helps them to stay competitive in an ever-changing environment.
With the use of new technologies it will be a lot easier for the company to communicate as well as to produce new ideas for their products. The technology also opens the application of e-commerce to the business. The e-commerce helps the company to focus on the advertisement and marketing of their products to target immeasurable customers. The use of Internet also gives the company the ride to globalization. With the use of the said technology, it is much easier for them to communicate to other countries where their local offices are located.
THREATS Counterfeit products – According to AC Nielsen, a global marketing research firm, 10-30% of cosmetics, toiletries and packaged foods are counterfeits. Counterfeit goods negatively impact profits, and also hurts P&G’s brand image. Regulatory environment – Due to increasing public pressure, the US Food and Drug Administration (FDA), European Commission, as well as the European Chemical Agencies are passing new regulations to help protect consumers from products that contain damaging substances.
These new regulations could have a negative impact on profitability. Global economic conditions – Foreign-currency exchange rates – The biggest threat for Organization 2005 is its wide competition with other companies that are offering the same line of products around the globe. It is also hard to compete to those local companies of different countries that are actually offering the same kind of product but in a very low price. Another problem is the irregular change of price of the raw materials that are used in productions of the company’s products.
This event will add a domino effect, like if the price of the raw materials rise, the retail price of their products will also rise. The attention of the company to a product is not equal, that is why there are products and brand that are not that welcome in the market due to the fact that it was not advertise properly. The loss of key staff is also a threat, this is because of the fact that the management of people was not properly done. Loss of the key staff will affect the overall production of the company.