Business Strategy of Procter & Gamble (P&G)

Business Strategy of Procter & Gamble (P&G)

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nIntroduction

nProcter & Gamble is one of the leading multinational companies that focus on the production of consumer products such as laundry detergents, shampoos, juice drinks, snacks, disposable nappies and feminine safeguard goods (Denham & Kaberon, 2012). James Gamble and William Procter founded the company in 1837, and it is headquartered in Cincinnati, Ohio. P&Gs business strategy has been based on a wide range of factors, which enables it to accomplish competitive advantage (Buxel, Esenduran, & Griffin, 2015). Precisely, the company has utilized business strategies such as innovation, product diversification, brand building, scale, and market penetration. In this regard, these strategies are important in reinforcing P&Gs work to accomplish and sustain a leadership position in the fast-moving consumer goods across the globe.

nBusiness Strategies

nIn the contemporary market, businesses should innovate to maintain their top positions over their competitors. Research by Lafley & Charan, (2014) noted that if a company intends to establish business strategies that enable it to remain inventive, it should formulate approaches of ensuring that such strategies work. More importantly, innovation encompasses the utilization of capabilities from each member of the organization to establish processes that assist the new product to access the market more efficiently and quickly. One of the main business strategies that have facilitated the rise of P&G in the market is innovation (Lafley & Charan, 2014). The companys culture encourages innovation in every service or product with the aim of re-establishing needs for the development of consumer markets. Some of its outstanding brands such as Pampers, Fabrics, Oral B, Gillette, and Head & Shoulder are products of innovation. P&G has established an innovative culture since the 19th century that has aided it to achieve extensive business objectives and sustain its competitive advantage in a swiftly changing world (Denham & Kaberon, 2012). Current CEO of the company, Mr AG Lafley, highlighted the significance of innovation to the firm by suggesting that big concepts entice the talent and capital they need which propel it to innovation (Buxel, Esenduran, & Griffin, 2015).

nThe organizational culture is one of the most important drivers of innovation in companies. It assists to demonstrate what the firm stands for and is mirrored via its norms, values, meanings, beliefs, and actions. Procter & Gamble has an elaborate innovation culture that encourages human resource to develop inventive products (Lafley & Charan, 2014). In addition, it supports the firm in eliminating obstacles that hold staff back, as it empowers them to utilize their hunger, drive, integrity, and expertise to help in the development of new goods and enhance customers service (Payaud, 2014). In this regard, it calls for staff to utilize their creativity and influences of innovation to move beyond conventional ideas to formulate new approaches to achieving quality results. P&G has more than 100,000 employees whose creative drive and talents within the business define where it will make a difference in its international markets (Denham & Kaberon, 2012).

nAaker & Joachimsthaler, (2012) argued that people are the initiators of innovation within business, not firms. The HR department of P&G has the role of the growth and development of individuals towards greater levels of fulfilment, creativity, competency, and skills. Consequently, the company is widely identified as the international innovation leader in the industry (Aaker & Joachimsthaler, 2012). Almost all the growth of organic sales over the past decade has been generated from new products or improved brands. In addition, the firm has formed an international network with many research partners (Lafley & Charan, 2014). Reports have indicated that more than 50 percent of product innovation in the organization involves at least one main element from the external partner.

nApart from innovation, Procter & Gamble uses market penetration strategies to advance its business strategies. Research has indicated that this strategy helps the company to promote its market share. P&G enhance the market penetration through marketing campaigns to raise the customer awareness on its consumer goods. More significantly, this business strategy is of particular importance for low-performing brands in the market (Buxel, Esenduran, & Griffin, 2015). Furthermore, P&G executes this intensive business strategy via valuable contracts with retailers. For instance, Procter & Gamble propagates its market share by providing higher profit margins for retailers especially among the large retailers. In response, such retailers exhibit P&Gs brands in prominent shelves or locations in their stores. The differentiation standard strategy produces a competitive advantage that enables the organization to grow its rate of success in utilizing the market penetration exhaustive approach (Aaker & Joachimsthaler, 2012). A tactical objective based on this rigorous growth strategy is to nurture the market share of Procter & Gamble via an aggressive promotion and marketing (Denham & Kaberon, 2012).

nProcter & Gamble also uses product development to enhance its business strategies. Notably, this is a secondary rigorous business strategy aiming to accomplish growth. Specifically, it encompasses production and design processes for brands that entice the target customers (Payaud, 2014). P&G utilizes product development to reinforce constant business growth, while paying close attention to competition. For instance, Procter & Gamble initiates new brands to raise its share of the international customer goods market (Buxel, Esenduran, & Griffin, 2015). Moreover, P&G develops its competitiveness through frequently improving current brands. The differentiation standard strategy openly determines the type of products that the organization initiates, particularly with regard to competitive advantage depending on value and quality (Denham & Kaberon, 2012). A strategic purpose linked with this exhaustive strategy is to propagate P&G via continuous innovation.

nMarket development is one of the key business strategies that P&G uses to reinforce its competitive advantage. Significantly, market development plays an important part in the organizations growth via entry into emerging market segments. For instance, P&G enters into emerging markets after creating a completely new brand line or after adjusting its market focus (Aaker & Joachimsthaler, 2012). In so doing, P&G can anticipate a new source of revenue. The standard approach of differentiation enables the firm to enter the emerging markets when executing this kind of growth plan (Buxel, Esenduran, & Griffin, 2015). Additionally, a strategic objective formed based on market development helps to raise the organizations Research & Development investment for new brand lines. Moreover, it contributes to restructure its marketing approaches when entering new markets in a stable or growing customer goods market.

nAccording to Payaud, (2014), diversification is a crucial part of business strategy that multinational company such as Procter & Gamble should seek to take advantage. Diversification is one of the business growth strategies that support the success of the company in the market. In this respect, the approach encompasses the creation of new commercial operations. For instance, the organization has used acquisition in the past, which has led to significant business growth (Payaud, 2014). Furthermore, business diversification in the firm has facilitated considerable growth. Nonetheless, this type of business strategy is substantially challenging to execute because of its extensive effect of the Procter & Gambles commercial organization (Stahl, et al, 2012). Subsequently, every acquisition causes the adjustment in the organizational structure of the Procter & Gamble. Moreover, the diversification strategy assists the company in the development of competitive advantage that the organization uses to succeed in the evolving business operations. In addition, this business strategy assists the firm to nurture tactical objective of utilizing a proper approach to purchase other companies to support the growth of its business (Denham & Kaberon, 2012).

nProcter & Gamble is establishing scale advantage by incorporating across its business steadily acting as one firm in all its markets and business. By harnessing its strength of its categories and brands as one organization, it is able to serve a wide range of customers across the world (Stahl, et al, 2012). In addition, with all its human resources, businesses and brands functioning in unison, the company has the power to establish scale advantages by assigning resources more efficiently and strategically than any other private business can do on its own. For this reason, such a combination is superior to the total of its parts. Importantly, it helps the company to maximize its potential (Buxel, Esenduran, & Griffin, 2015).

nProcter & Gambles Business Model

nA business model explains how P&G establishes, captures, and delivers value. It helps to strengthen the business strategy. The firm produces and delivers consumer packaged products to consumers and retailers (Vij, 2017). It accomplishes one of the largest consumer good portfolios in the world including the household brands such as Fairy, Pantene, Pampers, Vicks, Oral-B, Head & Shoulder, Gillette and Ariel. P&G operates in more than 70 nations across the world and involves retailing goods in over 180 nations. The organization also administers a network of associates including innovation partners, and supply chain associates who assist in formulation and execution of marketing plans, product upgrade and brand strategy (Procter & Gamble, 2017). Some of the crucial resources include house brands, customer service, research and development, brand portfolio and customer service.

nCore Products

nIts businesses are in five segments including Grooming, Health Care, Hair and Personal Care, Family, Feminine, and Baby Care, and Home Care, and Fabric Care. Beauty segment provides a wide range of goods such as skin care, cosmetics and deodorants (Procter & Gamble, 2017). Moreover, the Grooming category offers products such as razors and blades including Prestobarba, Mach3, Gillette and fusion. Health care segment offers materials such as Vicks, Oral-B and Crests. Fabric care goods include fabric enhancers, additives, laundry detergents and detergents. Baby Care includes baby wipes, pants, and pampers diapers (Vij, 2017).

nCustomer value proposition

nP&G offers value to customers via its different quality goods, its reputation, and customers services as a consistent manufacturer. The firm provides brands that meet the needs of the customer segments, especially the most respected and popular brands. It has trustworthy distribution operations and supply chain as well as a wide range of high-quality goods (Vij, 2017). Additionally, it establishes the value for its distribution and retail customer in the form of sales and revenue.

nProfit proposition

nP&G creates revenue via the sales and manufacture of consumer products to distributors, mass merchandiser, and retailers. In 2015, the firm recorded approximately $76.3 billion (Procter & Gamble, 2017). Moreover, Home care and Fabric care accounted for the largest percentage of revenue at 29 percent while Family, Feminine & Baby Care, Personal, Hair & Beauty Care and Healthcare segments accounted for 26.6 percent, 23.8 percent, and 10.1 percent respectively. However, the year reported a decline of 38.6 percent drop in its profits as compared to the previous year. Moreover, in 2015, the company recorded profits of $37.4 billion. The gross profit margin was about 49 percent. Furthermore, the operating profit was 11.8 billion while $7.1 billion as net profit (Vij, 2017).

nConclusion

nProcter & Gamble is an international company that produces fast moving products. Since its formation in the 18th century, the company has grown tremendously because it uses successful business strategies. Some of these include instilling a culture of innovation, product differentiation, market penetration and market development (Denham & Kaberon, 2012). In addition, these strategies have helped the company to acquire competitive advantages over its business rivals. Furthermore, these strategies have enabled the organization to acquire higher market share (Aaker & Joachimsthaler, 2012).

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nReferences

nAaker, D. A., & Joachimsthaler, E. (2012). Brand leadership. Simon and Schuster.

nBuxel, H., Esenduran, G., & Griffin, S. (2015). Strategic sustainability: Creating business value with life cycle analysis. Business Horizons, 58(1), 109-122.

nProcter & Gamble. (2017). Company Procter & Gamble | Cleverism.com. Cleverism. Retrieved 22 August 2017, from https://www.cleverism.com/company/procter-gamble/

nDenham, J., & Kaberon, R. (2012). Culture is king: How culture contributes to innovation. Journal of Product Innovation Management-Bognor Regis, 29(3), 358.

nLafley, A. G., & Charan, R. (2014). P&G’s innovation culture. Strategy+ Business.

nPayaud, M. A. (2014). Marketing strategies at the bottom of the pyramid: Examples from Nestle, Danone, and Procter & Gamble. Global Business and Organizational Excellence, 33(2), 51-63.

nStahl, G., Björkman, I., Farndale, E., Morris, S. S., Paauwe, J., Stiles, P., … & Wright, P. (2012). Six principles of effective global talent management. Sloan Management Review, 53(2), 25-42.

nVij, R. (2017). How Procter & Gamble Makes Money? Understanding P&G Business Strategy – Revenues & Profits. Revenues & Profits. Retrieved 22 August 2017, from https://revenuesandprofits.com/how-procter-gamble-makes-money/