AN ANALYSIS

ON
STRATEGIC MANAGEMENT
OF
PROCTER & GAMBLE
(P&G)

Submitted By:

Pankaj Gaur C20-103

Pooja Nair C20-107
Prabhu G C20-108
Pulkit Kumar C20-113
Purvesh Shinde C20-114
Radhika Chaudhry C20-115
 TABLE OF CONTENTS

ABOUT PROCTER & GAMBLE (P&G) ............................................................................................. 3

BUSINESS MODEL SCORECARD ..................................................................................................... 4

FINANCIAL PERSPECTIVE................................................................................................................ 6

CUSTOMER PERSPECTIVE ............................................................................................................... 9

No. of customers- .............................................................................................................................. 9

Market Share- ................................................................................................................................. 10
Value of total proposition- ............................................................................................................. 10
Big customers – ............................................................................................................................... 10
INTERNAL PROCESS PERSPECTIVE ............................................................................................. 11

High risk due to reliance on third party ....................................................................................... 11

Productivity and Cost saving plan ................................................................................................ 11
Reduce the size of brand portfolio ................................................................................................ 12
LEADERSHIP...................................................................................................................................... 12

STRATEGIES ADOPTED .................................................................................................................. 13

Strategies adopted by Proctor & Gamble .................................................................................... 13

Some of the strategic decision taken by P&G in last 10 years. ................................................... 13
CORE COMPETENCIES .................................................................................................................... 15

COMPETITIVE ADVANTAGE ......................................................................................................... 15

EFE Matrix ..................................................................................................................................... 16

Porter Five Forces .......................................................................................................................... 16
Core Strengths of the Company .................................................................................................... 17
BUSINESS PORTFOLIO ANALYSIS ............................................................................................... 19

BCG MATRIX FRAMEWORK ................................................................................................... 19

PRODUCT SEGMENTS OF P&G............................................................................................... 20
FORMULATION OF BCG MATRIX ......................................................................................... 21
PROSPECTIVE STRATEGIES FOR NEXT 3 YEARS ............................................................ 23
REFERENCES ..................................................................................................................................... 24
ABOUT PROCTER & GAMBLE (P&G)

Procter & Gamble (P&G) Company is a multi-national consumer goods

manufacturing company with a market capitalization of $247 billion as on February 28, 2019.
The company was founded in 1837 by William Procter and James Gamble and it is head
quartered at Cincinati, Ohio in the United States of America. The company has around 95000
employees working for it around the globe. The company recorded total revenue of $66.8 billion
for its fiscal year 2018 a Net Sales of around 67 billion dollars in 2018.
The company has 5 major product segments namely,
1. Beauty – Haircare and Skin care.
2. Grooming – Shave care.
3. Healthcare – Oral care and Personal Health care.
4. Home care – Fabric and Home care.
5. Family care – Baby and Family care.

The brands that are very famous among the various P&G products include:
 Pampers
 Vicks
 Ariel
 Tide
 Gillete
 Head & Shoulders
 Pantene
 Oral-B and many more.
BUSINESS MODEL SCORECARD

A balanced scorecard is a performance metric used in strategic management to identify and

improve various internal functions of a business and their resulting external outcomes. It is used
to measure and provide feedback to organizations. Data collection is crucial to providing
quantitative results, as the information gathered is interpreted by managers and executives, and
used to make better decisions for the organization.
The Four Legs of the Balanced Scorecard-
Information is collected and analyzed from four aspects of a business:
 Learning and growth are analyzed through the investigation of training and knowledge
resources. This first leg handles how well information is captured and how effectively
employees utilize the information to convert it to a competitive advantage over the
industry.
 Business processes are evaluated by investigating how well products are manufactured.
Operational management is analysed to track any gaps, delays, bottlenecks, shortages, or
waste.
 Customer perspectives are collected to gauge customer satisfaction with quality, price,
and availability of products or services. Customers provide feedback about their
satisfaction with current products.
 Financial data such as sales, expenditures, and income are used to understand financial
performance. These financial metrics may include dollar amounts, financial ratios, budget
variances, or income targets.
FINANCIAL PERSPECTIVE CUSTOMER PERSPECTIVE
Revenue- 66.80 bn 4.6Bn Customers across globe.
Operating Profit- 20.51%
Net Profit Margin- 14.80% Big Customers- Walmart (15%)
Interest Coverage Ratio- 27.1 Market Share- North America
Debt Equity Ratio- 0.39 (44%)- Developing Markets
EPS- $4.22 Intangible Assets - $29.058bn
ROE- 0.48
DPS -$2.79 Gross Carrying amount for
customer relationship - $1.4bn

8 9

7
8
8
INTERNAL PROCESS
Cost Reduction Plan
LEADERSHIP AND GROWTH Productivity plan
These 2 resulted in saving of
Innovation Leadern in the Market
$3.3bn.
Skilled Employees Strong Supply Chain
1.6x spending on R&D as Profit per employee = +45%
compared to largest compt. High Risk due to reliance on 3rd
party.
FINANCIAL PERSPECTIVE

Procter and Gamble operates in over 80 countries and offers products and services in more
than 180 countries worldwide.
In the report we have tried to analyze the financial position of the company with respect to the
Financial Year starting from 2008 to 2018.
The revenue of the company has decreased over the last 10 years from $77bn to $66 bn.

Revenue
90.00
80.00
70.00
60.00
50.00
40.00 Revenue
30.00
20.00
10.00
0.00
2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008

The Operating Income is a profit from business operations (gross profit minus operating
expenses) before deduction of interest and taxes. It has shown a down trend over the years as the
revenue of the company has also decreased.
During FY 2018, the operating income was $13.70 bn. The net profit margin has remained
almost constant over the years (between the range of 14-16%) whereas the operating profit
margin has been a bit fluctuating.

Operating Income
18.00
16.00
14.00
12.00
10.00
8.00
Operating Income
6.00
4.00
2.00
0.00
40.00%

35.00%

30.00%

25.00%

20.00% Operating Profit Ratio

15.00% Net profit Margin

10.00%

5.00%

0.00%
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
 EPS
4.5
4
3.5
3
2.5
2 EPS
1.5
1
0.5
0
2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008

80

70

60

50

40 Share holder's equity

30 Long term Debt

20

10

0
 Interest Coverage Ratio
35.00
30.00
25.00
20.00
15.00 Interest Coverage
Ratio
10.00
5.00
0.00

Operating Cash Flow

18
16
14
12
10
8 Operating Cash Flow
6
4
2
0

CUSTOMER PERSPECTIVE

No. of customers- P&G has around 4.6 billion consumers across the globe.

Customers –
Mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores,
department stores, distributors, wholesalers, baby stores, specialty beauty stores, high-frequency
stores and pharmacies. Sales to Walmart Inc. and its affiliates represent approximately 15% of
our total sales in 2018, 16% in 2017 and 15% in 2016. No other customer represents more than
10% of our total sales. Our top ten customers accounted for approximately 36% of our total sales
in 2018 and 35% in both 2017 and 2016. The nature of our business results in no material
backlog orders or contracts with the government. We believe our practices related to working
capital items for customers and suppliers are consistent with the industry segments in which we
compete.

Market Share-
Developing markets currently make up 86% of the world’s population. Procter and Gamble has
already established a strong market share in the most crucial areas of these developing markets:
Central & Eastern Europe, Middle East & Africa Region, Latin America, Greater China and
Developing Asia. It is important that PG takes advantage of opportunities in these particular
markets as these areas provide the largest international growth opportunities. Procter and Gamble
has established themselves as the leader in market share in the Blades and Razors markets. They
are also first and second in market share in the Shampoos and Diapers markets, respectively.
Additionally, they maintain first, second and third market share positions in the Laundry,
Feminine Care and Oral Care product markets, respectively.4

Value of total proposition-

 Product
 Package
 Communication
 Retail Execution
 Price.

Big customers –
Sales to Walmart Inc. and its affiliates represent approximately 15% of our total sales in 2018,
16% in 2017 and 15% in 2016.
MARKET
SHARE
(Regional) 2018 2017 2016 2015 2014 2013 2012 2011 2010
North America 44% 45% 44% 41% 39% 39% 39% 41% 42%
Europe 24% 23% 23% 24% 28% 18% 19% 20% 21%
Asia Pacific 9% 9% 9% 8% 16% 18% 18% 16% 15%
Greater China 9% 8% 8% 9% - - -
Latin America 7% 8% 8% 10% 10% 10% 10% 9% 9%
IMEA 7% 7% 8% 8% 7% 15% 14% 14% 13%

INTERNAL PROCESS PERSPECTIVE

High risk due to reliance on third party-Due to the scale and scope of our business, we
must rely on relationships with third parties, including our suppliers, distributors, contractors,
commercial banks, joint venture partners and external business partners, for certain functions. If
we are unable to effectively manage our third-party relationships and the agreements under.

Productivity and Cost saving plan- In R&D, Marketing, SCM and Overheads, the company
estimated that this cost saving has increased the savings by $3.3bn.
 Reduce the size of brand portfolio –In August 2014, the company embarked on a plan to
divest or consolidate roughly 100 brands in order to focus attention on most profitable assets.

LEADERSHIP
Innovation- P&G is known for its innovation and has become the leader in this field. The
report says it has spent 1.6X as compared to their largest competitor.

Conclusion - Although Procter & Gamble has seen its share price decline as
recent as July 2018, the company’s long-term investors are unlikely to be overly
concerned. For such investors, Procter & Gamble’s sterling record of uninterrupted
dividend payments provides a degree of insulation against short and medium-term
declines in share prices.
In its 2018 Annual Report, Procter & Gamble says it has returned more than
$14 billion of value to shareholders. The company repurchased $7 billion of stock
and paid $7.3 billion in dividends. It increased its dividend by 4%, marking the
62nd consecutive annual increase and the 128th consecutive year Procter &
Gamble has paid a dividend - every year since its incorporation in 1890.

STRATEGIES ADOPTED
Strategies adopted by Proctor & Gamble
1. Building a better company
P&G is working on organization design for a number of years. Its biggest reorganization
since 1999 indicates a willingness “to change anything and everything” except its core
values and its purpose to create value for its stakeholders and to serve its consumers.
Over the past 2 years, P&G has been moving towards having one person monitoring
marketing but also sales elements and supply chain to ensure integrated decisions.

2. Value Creation
P&G is giving highest priority to value addition. It is integrating strategies and
capabilities in order to transform itself into a faster growing, simpler, and more
profitable.
3. Innovation
Innovation is the heart of P&G business model. Since A.G. Lafley became the CEO in
2000, leaders of P&G has been continuously working hard to make innovation part of
their daily routine and to establish an innovation culture. It’s product category offers a
portfolio of innovation with a mix of commercial programs and game changing
improvements.
4. Productivity
Productivity is the core strength of P&G which reduces cost and increase profit margins
and create flexibility to fund growth efforts. P&G is executing its strategic plan of
increasing productivity and decreasing cost in these specific areas: supply chain,
marketing, research and development and overheads.

Some of the strategic decision taken by P&G in last 10 years.

1. In 2009, P&G came up with a line of laundry additives called Tide stain release. Within a
year, it incorporated this additive into a new detergent, Tide with Acti Lift which was the
first major redesign of Tide liquid laundry detergent in a decade. This strategy helped
P&G to gain huge market share in the United States.
2. Another strategic decision taken by P&G in 2009 was customising its formulations for
emerging markets. According to Ethnographic research, about 80% consumer in India
 wash their clothes by hand. So they needed a detergent that relatively gentle on the skin.
This problem was clearly identified by P&G and in 2009, it came up with Tide Naturals,
which cleaned well without causing irritation. This decision helped Tide brand accessible
to 70% Indian consumers and helped to significantly increase its share in India.
3. In 2011, Swash took an unconventional path to commercialization. With a different brand
name and having no apparent connection with Tide, the product was first sold in a store
near P&G headquarters in Ohio. After this experiment P&G opened a “POP UP” Swash
store at the Ohio state university. These experiments helped P&G to understand how
consumers would buy & use the products, which P&G then began selling on platform
like Amazon and other online channels.
4. Created new tools for gauging new business by doing Transactional Learning
Experiments or TLEs. This was based on concept of “makes a little & sells a little”. In
this experiment teams have sold small amounts of product online, at mall, in pop up
stores, at amusement parks, and even at company stores.
5. In the past, most teams consisted of part time workers, but disruptive and
transformational efforts require undivided attention. P&G found that big team pursue too
many ideas at once and often bog down whereas small teams quickly focus on the most
promising initiatives. So it divided big teams into smaller teams and made sure that right
people doing the right work.

6. P&G started a program called P&G Connect + Develop. This decision was part of a
larger effort to intersect with other disciplines and gain new perspectives. Under this
program P&G and Google swapped two dozen employees for a few weeks. This helped
P&G employees to get exposure to online models. Similarily it helped Google employees
in learning how to build brands.
7. In 2010, P&G refreshed its Connect + Develop program. It has expanded the program to
build connections with government labs, small and medium sized entrepreneurs,
universities and venture capital firms. It helps in becoming partner of Innovation and
helped in deriving $3 billion of the company’s annual sales from outside innovaters.
8. P&G has tradition of promoting from within. But when it realized that total reliance on
internal employee could stunt its ability to create new business. So it started bringing
highly talented expert from outside to address needs beyond its core capabilities.
9. Since 2012, P&G is executing its strategic plan of increasing productivity and decreasing
cost in these specific areas: supply chain, marketing, research and development and
overheads. These cost reduction plan was facilitated by streamlining management
decision-making and manufacturing.
10. In Aug 2014, it opted to reduce the size of its brand portfolio, which was driven largely
by investor’s pressures. In July 2015, it completed a deal of $12.5 billion with French
cosmetic manufacturer Coty Inc, resulted in disinvestment of its 43 brands.
 Strength Weight Rating Weighted score
Excellent R&D 0.30 4 1.20
system
Strong distribution 0.20 3 0.60
channel and Extensive
supply chain
Reputed brand 0.10 3 0.30
High gross profit 0.10 3 0.30
margin
Multinational and 0.15 4 0.60
Multi product line
presence
Good marketing 0.15 4 0.60
strategies
Total 1.00 3.60

CORE COMPETENCIES

Weakness Weight Rating Weighted score

Limited online presence 0.20 4 0.80
Lack of direct company 0.15 2 0.30
outlets
Limited business 0.20 3 0.60
diversification
Imitable and Fake 0.45 4 1.80
Products
Total 1.00 3.50

COMPETITIVE ADVANTAGE
EFE Matrix
EFE Matrix is a technique to evaluate the external position of the organization in comparison to
others. It prioritize the opportunities and threats which the business is facing.

Opportunities Weight Rating Weighted score

Expansion into new 0.05 3 0.15
categories
Increased 0.25 4 1
purchasing power
Rural Markets 0.20 4 0.80
Innovation in 0.25 0.75
existing products 3

Mergers and 0.15 3 0.45

Acquisitions
Online presence 0.10 3 0.3
development
Total 1.00 3.40

Threats Weight Rating Weighted score

Low demand in 0.05 3 0.15
global market (Trade
Barriers)
Intense competition 0.50 4 2.00
Unbranded and 0.20 2 0.40
local players
FDI in retail 0.15 3 0.45

Entry of substitute 0.10 3 0.30

products (E.g.: Electric
Shaver)
Total 1.00 3.30

Porter Five Forces

It helps to determine the competition in the industry and the profitability level. Moreover, it helps to
determine the competitive advantage of the company in the industry.
 Threat of new entrants
P&G offer variety of products and therefore it becomes hard for new companies to compete
With a similar product portfolio.

Threat of Substitutes
P&G has been always focused towards quality and innovation, therefore the threat for
Substitute remains low.

Industry Rivalry
The intensity for the industry has been high since P&G, even though the market leader,
Have giant competitors. Eg- Unilever, Patanjali

Customer’s Bargaining Power

With products such as Gillette, Pampers and Olay, etc P&G is the market leader, making the
Prices relatively inelastic.

Supplier’s Bargaining Power

Being a huge customer of the supplier, P&G maintain a standard pricing with its suppliers
And therefore the bargaining power of the suppliers remains low.

Core Strengths of the Company

P&G focuses on the five core strengths which are the key elements for the company to lead the
consumer products industry.
1. Consumer Understanding
P&G invests a huge amount of their funds on Market Research. In order to understand
their customers, P&G invest more than $350 million and also conduct research studies
each year.
2. Innovation
P&G has been known as the global innovation leader which has grown it sales over the
past decade through new brands or improved products. Also over the years the
collaboration with global research partners takes place.
3. Brand Building
The company has been successful in building the strongest portfolio of brands in the
industry i.e 50 leadership brands. Together they make up 90% of the P&G’s sales and
more than 90% profits.
4. Go to Market Capabilities
The company has been ranked as a preferred supplier by the leading retailers in the
industry survey. The reason maybe: Clearest company strategy, brands which considered
important to the retailers lie under P&G, innovative marketing programs, etc.
5. Scale
By harnessing the strength of different brands and categories under the company as one,
it helps in increasing the scalability of the company, therefore serving more customers
around the globe. Also the company is capable enough to create the scalability advantage
by allocating resources strategically and efficiently in comparison to other business.
BUSINESS PORTFOLIO ANALYSIS

Business Portfolio Analysis is a method of thoroughly evaluating a firm’s product lines and
categorizing the products on the basis of their market share and market growth rate. It helps the
firm understand which products are successful in the market and which products require
additional focus to improve the performance of the firm as a whole.

Business Portfolio Analysis is usually performed using a BCG matrix. Boston Consulting Group
Growth Share Matrix is a planning tool that provides guidance to a company on which products
to invest, keep, sell and divest. The matrix maps products on the basis of the relative market
share and market growth rate.

BCG MATRIX FRAMEWORK

PRODUCT SEGMENTS OF P&G
The products of P&G can be classified under five major product segments as shown
below:
1. Beauty – Haircare and Skin care.
2. Grooming – Shave care.
3. Healthcare – Oral care and Personal Health care.
4. Home care – Fabric and Home care.
5. Family care – Baby and Family care.
 Source: 2018 Annual Report of P&G

FORMULATION OF BCG MATRIX

 The BCG matrix has two components:
1. Relative market share.
2. Market growth rate.
 The Relative market share is calculated by:

Relative market share = Market share of P&G / Market share of competitor

 The Market growth rate is calculated by:

Market growth rate = (Net Sales in the current year / Net Sales in the previous year) - 1
RELATIVE MARKET GROWTH
RATE
NET SALES NET SALES RELATIVE
2017 (million 2018 (million MARKET
S.NO PRODUCT SEGMENT dollars) dollars) GROWTH RATE
1 Beauty 11710.44 12698.08 8.43%
2 Grooming 6505.8 6683.2 2.73%
3 Healthcare 7806.96 8019.84 2.73%
4 Fabric and Home care 20818.56 21386.24 2.73%
5 Baby and Family care 18216.24 18044.64 -0.94%

Please check the Excel sheet attached for detailed calculation.

 The above BCG matrix is based on the overall product segment and not based on
individual products, owing to the complexities and unavailability of market share and market
growth information of individual products.

PROSPECTIVE STRATEGIES FOR NEXT 3 YEARS

P&G being a very vast company, though a particular product segment is a star, there are products
within the product segment that do not perform well. The performance of the entire product
segment may be offset by a single product. For example, the Health care segment of P&G comes
under the Question mark segment of the BCG matrix. This is mainly contributed by the brand
Oral-B. However, Ambi-pur (Car freshener) which comes under the health care segment is a
Dog, with a very low market share and market growth.

This is also applicable vice-versa, when the product segment may be a cash cow, but the product
within it may be a star. For example, the product segment Grooming is a cash cow, but the
product Gillete is a star.

So here are few strategies for the next 3 years to the company with regard to the product
portfolio.
 1. Identify the individual products, that offset the entire product segment’s performance
(outliers). For example, Ambi pur in the health care segment and Gillete in the grooming
segment. If the product reduces the performance of the entire product segment and if it is
a Dog (Ambi-pur), divest the product. If the product is a Star (Gillete), invest more on the
product to sustain the performance and improve further. Do the same for all such outlier
products.

2. For the STAR product segment of P&G, the Beauty segment, invest more to retain the
growth and improve further.

3. For the QUESTION market product segments like Health care and Fabric care, first
analyze if the business has the potential to improve the market share and become a star or
is it declining in growth and becoming a potential dog. In both cases, invest on the
product segment and focus on marketing of the product more to improve performance.

4. For the CASH COW products, identify ways of marketing the product segment to a
larger customer base, but at the same time do not let the market share go down. Try to
earn the maximum profits possible from this product and focus on the growth of the
products.

5. For the DOG products like Ambi-Pur, stop investing on the product and focus on the
other products if the products have a very pathetic market share and market growth.

REFERENCES

1. The Annual Report of P&G for the Financial year 2010 to 2018.
2. https://en.wikipedia.org/wiki/Procter_%26_Gamble