Corporate Strategy of Procter & Gamble

Corporate Strategy of Procter & Gamble

nName

nInstitution

nCourse

nDate

n

nIntroduction

nCorporate strategy focus on how an organization establishes value across various businesses. It compel the company to invest in a crucial set of capitals, formulate the corporate systems, structure and organization functions to transfer or share skills across businesses (Galbraith, 2012). In this respect, Procter & Gamble company has corporate strategy that involves a explicitly defined and long-term vision that the firm designed, aiming to establish corporate value and inspire its workforce to execute the proper actions to accomplish the satisfaction of customers (Spring, 2013). The organization has restructured its corporate strategy in order minimize its cost structure and grow its distinguished business-level strategy in a bid to raise profits and revenue (Jones, 2011). Precisely, it pays close attention on product differentiation, diversification, and globalization. The paper will examine the corporate strategy of P&G.

nProduct Scope

nProcter & Gamble has adopted a corporate strategy that is based on the vertical and geographical scope as well as its products. The product categories comprises of beverages and foods, cleaning products, personal care goods. The company has been regarded as the most sophisticated organization across the group owing to the thousands of brands, more than 300 products and nearly 110,000 staff operating in 150 countries (Aaker & Joachimsthaler, 2012). The Family care items, baby care, and feminine protection brands contribute to over 29 per cent of the total revenue of the organization in the relevant division. Procter & Gamble has also generated different types of products such as Household detergents and goods, hair care, skin care, and cosmetics. The division comprises popular brands such as Oral-B, Vicks, Tide, Pampers, Always, Charmin and Bounty. Reports indicate that in 2015, the company utilized more than $4.3 on product promotions and advertisements in the United States (Cervantes, Crimson, Figueroa, Hess & Martinez, 2015).

nGeographical Scope

nThe firm has also established manufacturing operation in different parts of the world such as in the United Arab Emirates, Russia, Australia, Brazil, the United States, China, India, Europe and Canada (Galbraith, 2012). P&Gs geographical scope in the emerging markets overseas has grown tremendously relative to other firms in the same sector. The key factor of success of P&G has been based on its extensive geographical locations (Aaker & Joachimsthaler, 2012).

nP&G has realized that the rising globalization of trade and gradually changed their corporate structure aiming to optimize its exposure in more markets across the world. In addition, the reason for enhancing its geographical space ensures that the organization remains competitive globally, exploit share returns, price and revenue on invested resources (Aaker & Joachimsthaler, 2012). To enable the execution of their global strategy, the CEO, has adopted a new structure. The organization now executes Transnational global strategy as opposed to the earlier structure referred to as Global Product Structure that emphasized on standardization approach. The new global strategy focuses on execution of a hybrid business structure that pay close attention on geographical diversities of various marketplaces (Galbraith, 2012). Similarly, it specialises products on respective markets as well as economies of scale in certain value generating functions. Through this strategy, P&G is able to manufacture products that meet the local expectations and tastes hence able to sustain effective consumer responsiveness in different countries. Consequently, some of the companys functions are decentralized with others are centralized. Strategies are designed through collaboration of the Global Business Units (GBUs) and the Research and Development (R&D) (Jones, 2011).

nVertical Scope

nIn business vertical integration, describe the process of amassing control in the levels of production of a product. Therefore, in case the business is able to control any of the steps of production, supplying and selling the brands. P&Gs vertical integration is applicable through the management style that generates chain analysis (Stadtler, 2015). The organizational and business studies have used value chain analysis that permits the firm to create a competitive advantage in the market over its business rivals. It begins with the purchase of raw materials to real physical product sold by the firm. The main aim of vertical integration is to maximize profits because proceeds created at each stage is retained within the firm (Jones, 2011). In addition, influence the whole stream of production, which guarantee products quality is sustained. Furthermore, its vertical scope concentrates on the bargaining power by appealing to its customer. The main goal of the company is to add value to the daily lives of their customers via efficient pricing of its products in order to prevent them from switching to rival products that can lower its bargaining power (Moharana, Murty, Senapati & Khuntia, 2012).

nVertical integration is an important part of the Procter & Gambles corporate strategy because it enables the firm to minimize cost in different levels of production. Moreover, it allows it to guarantee a seamless flow and management of facts throughout the supply chain (Stadtler, 2015). The key aim of the strategy is creation of value and higher profit base via efficient influence over its operations. P&G is able cost through its vertical integration strategy such as business-to-business advertising cost, transaction costs and transportation costs. Significantly, the company uses this approach to eliminate or reduce the advantage that buyers and suppliers possess over its business (Aaker & Joachimsthaler, 2012). The vertical integration permits the organization to enhance its profitability by peeling off the intermediary. In this regard, it sometimes operates as retailers and wholesalers.

nProduct line Expansion

nProcter & Gamble has expanded its initial product line and its operation field. For instance, the company was established in the late 1800s when it had one manufacturing unit in Cincinnati, the United Stated. Notably, the company later expanded to other cities in the country such as New York and Kansas City (Spring, 2013). It launched new production of cottonseed oil known as Buckeye in 1901. At that moment, the cottonseed oil was important for the manufacture of soap. Consequently, in 1903, it acquired Schultz & Company as it entered into business of powder and laundry soap (Cervantes et al, 2015). From 1912, the company started production of other products such as Crisco, which was a new form of vegetable oil. By 1955, the company had diversified its product lines to include toothpaste, shampoos and tissue papers. Through acquisition of other companies has also ventured into production of disposable diapers and fabric softener materials (Galbraith, 2012). In the 1990s and the early 2000s, the firm started manufacturing other items such as Gillette Razors and Oral-B as well as food business.

nDiversification

nP&G is one of the organizations that have successful used diversification in its corporate strategy. In fact, it has positioned itself as the universal leader in manufacture of household products by producing and distributing a wide range of consumer domestic brands. Currently, P&G provides one of the most robust and reliable product line, which comprises numerous well-known brands such as Crest, Duracell, Pampers, and Tide (Cervantes et al, 2015). In particular, P&G is a world leader in three crucial segments in the market that contain household care, health and well-being, and grooming and beauty. Over the years, the company has changed its strategy from limited diversification, to related associated business, which is commonly known as related diversification. The aim of this strategy is to avoid being a dominant company in the market (Spring, 2013). A related linked company is a business, which has sales, which are less than 70 per cent in a single industry as opposed to a dominant business that has 70-90 per cent of sales in the market. therefore, the household care division of P&G is the profitable among all other market segment since it provided almost 50 per cent of the total annual sales in 2011 (Aaker & Joachimsthaler, 2012). Other effective market segments include grooming and beauty, which is closely trailed by health and well-being division. In so doing, diversification helps to distribute risk to different segments of the market.

nGlobalization

nThe corporate strategy of the company is founded on new opportunities in the different parts of the globe. Specifically, the company embraced the strategy in order to benefit from emerging world economies such as India, China, and Brazil (Cervantes et al, 2015). There is increasing number of middle class in South American, African and Asian countries. through this strategy, the company seeks to increase its level of revenues. In this regard, the company concentrates on establishing an effective distribution network and global supply chain. Moreover, it has come up with innovative process such as non-traditional advertising and localization in the emerging markets in order to accomplish international objectives (Galbraith, 2012). In 2013, the company decided to concentrate on 10 key emerging countries in different parts of the globe such as Poland, Mexico, South Africa, China, and Brazil. In so doing, it aimed at localizing it business strategies to meet the domestic demands (Aaker & Joachimsthaler, 2012). For instance, it planned to construct a diaper industry in countries such as China to satisfy the rising demand of these products. Similarly, in India, it sought to encourage use of single-blade razors as well as environmental friendly products in Europe.

nGlobal Alliances

nP&G has established a number of alliances with partners across the world. For instance, P&G has collaborated with Cargill, BASF and the Deutsche Gesellschaft Internationale Zusammenarbeit (GIZ) under the Economic Cooperation and Development in Germany (Spring, 2013). The aim of the alliance is to formulate a transparent and sustainable flow of coconut oil in Indonesia and Philippines. It helps to improve the supply chain, and improve the economies of scale for farmers, which causes untenable and inefficient agricultural practices (Cervantes et al, 2015). The partnerships also enable the farmers to enhance the productivity of their farms. P&G has also formed an alliance with USAID in order to improve health living conditions of the people by providing clean drinking water (Jones, 2011).

nOverall Corporate Structure and Key Management Systems

nThe management system of P&G comprises Corporate Functions (CF), Global Business Services (GBS), Selling and Market Operations (SMOs), and Global Business Units (GBUs) (Galbraith, 2012). The SMO design and implements the business plans at the local market including trade channels, country-specific teams, and devoted marketing advertising consumers. The organization of P&G is structured into six regions including Latin America, Asia Pacific, Europe, Greater China/India, North America and Middle East/Africa. The GBS roles include maintenance of data tools, technology, and processes aiming to understand the best services for the customers (Aaker & Joachimsthaler, 2012). the CF is responsible for delivering corporate accounting, business strategies, human resources, tax, governance, treasury and external relations.

nThe Strategic Fit between the Business and Corporate Strategies

nP&G has demonstrated the strategic fit because it is matching it competences and resources with the business opportunities in the market. The level at which the company is able to achieve strategic fit needs a proper corporate and business strategy. In this regard, it has succeeded in using the strategic fit to assess the apparent strategic situation of a firm (Cervantes et al, 2015). More importantly, it is very essential as it express the degree of profitability which is a product of internal focus that attempt to use special features of the firms capabilities and resources. Furthermore, the strategic fit in P&G has been used to develop and sustain competitive advantage over its rival (Spring, 2013).

nConclusion

nP&G has a corporate strategy that ensures that the company align its resources and competences to achieve a common mission. Its corporate strategy comprises of a companys corporate actions intended to accomplish its objectives as well as competitive advantage. In addition, it uses the corporate strategy to reduce cost in the process of production. Some of the strategies include vertical integration, globalization and diversification (Aaker & Joachimsthaler, 2012). It has also expanded its product line in order to take advantage of the emerging markets. The organization has successfully used diversification in its corporate strategy by providing different types of brands. It has also opened up businesses in other parts of the world especially the emerging economies such as India, China, and Brazil (Cervantes et al, 2015). P&G has global alliances with other firms such as USAID in order to improve the living conditions of the people.

n

nReferences

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

nCervantes, M., Crimson, K., Figueroa, C., Hess, A., & Martinez, E. (2015). Gm 105–12: Procter & Gamble Companys 2015 Strategic Audit.

nGalbraith, J. R. (2012). The future of organization design. International Journal of Management Review, 2(1), 46-50.

nJones, G. (2011). Globalization and Beauty: A Historical and Firm Perspective. EurAmerica, 41(4).

nMoharana, H. S., Murty, J. S., Senapati, S. K., & Khuntia, K. (2012). Coordination, collaboration and integration for supply chain management. International Journal of Interscience Management Review, 2(2), 46-50.

nSpring, D. (2013). The Globalization of American Advertising and Brand Management: A Brief History of the J. Walter Thompson Company, Procter and Gamble, and US Foreign Policy. Global Studies Journal, 5(4).

nStadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.