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Introduction of The Company
Introduction of The Company
Introduction of The Company
Procter and Gamble is actually the name of two persons and
Both of them wives were sisters and their father in-law asked
them to become partners. In the start Procter¶s business was candle making and
Gamble¶s business was soap making. The !"#$% was a difficult
time to start the business although Cincinnati was a bustling market place; the
nation was gripped by financial panic. Hundreds of banks were closing around the
country. In the 1850s, despite rumors of an impeding civil war in the US, they built
a new plant to sustain their growing business.
Later they pioneered one of the nation¶s profit sharing programs and were among
the first in American industry to invest in the research laboratory. By 1890, the
fledgling partnership between the Procter and Gamble had grown into multi
million dollar corporation .Television in USA introduced in
1939and P&G is the only company that commercialize its product just after five
months .With the passage of time P&G acquire different other companies to
enhance the business. In 1980, as it approached its 150th anniversary, P&G was
poised for a most dramatic period of growth in its history. Company serves
106000emloyees allover the world.
P&g is a recognized leader in the development, manufacturing and marketing of
superior fabric & home care, baby care, feminine care, tissues & towel, beauty
care, health care, and food.
Î United States
Î International
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' Mr. Edwin L Artz
P&G started its operations in Pakistan in 1991. First it introduces its brand of
Head& Shoulder After that it gave brand of Vicks and Olay oil.
Now company has eleven brands in Pakistan .The yearly sales consistently doubled
during the past three years. P&G Pakistan establish local manufacturing base.
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In 1991 =1.1Billion Rs
In 2001= 12 Billion Rs
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There are 300 employees with 12 managers serving on 150,000 stores in Pakistan.
And all over the world the no of employees is 106,000.
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VISION of P&G
³To be a leading consumer goods company and to improve the lives of world
consumers by providing valuable and innovative products´.
Ten years ago Procter and gamble started the journey to improve the lives of
Pakistani consumers by providing them with world famous quality brands. P&G
want to be an outstanding organization with a passion for winning that would felt
by everyone everyday; in the office, in the field every where P&G vision is to lead
business growth by proactively identifying opportunities and positively
contributing to volume growth.
MISSION STATEMENT
V
These are the Principles and supporting behaviors, which flow from their Purpose
and Values.
> Build major global brands through strong programs based on local understanding.
> Improve the environmental quality of its products, packaging and operations around
the world.
> Build superior relationships with all the parties who contribute to fulfilling their
corporate purpose, including their customers, suppliers, universities and
government.
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> Bring together transactional activities such as accounting and order management in a
single organization to provide services to all p&g units at best in class.
> Be competitive with other high quality companies in order to help, attract, motivate
and retain the talent needed to lead and grow P&G¶s business.
ENVIRONMENTAL ANALYSIS
P&G Safeguard is operating in a complex and stable environment, complex
because there is a number of factors in its environment, about which less
information, stable, because the changes in these factors is predictable factors,
which makes its environment complex are:
A group having strong influence over the opinion of the consumers regarding
which soap should be purchased. This group is becoming more and more concern
to their own incentives/margin.
Small soap manufacturing units, having no or very low overhead charges, under fix
tax system or hidden units evading tax and growing like mushroom, involve in the
low price soap war, exploiting consumers through retailers.
People having social influence on their neighbors also affect on the sale of soap.
PEST ANALYSIS
POLITICAL AND LEGAL FORCES
Rapid changes in the political scenario of the country along with the uncertain
policies of the Government have made the whole business community as uncertain.
Also there is terrorism prevailing in the important cities of the country like Karachi
and Afghan War, which are affecting the business activities. Policies about taxes
are changing continuously due to changing government.
ECONOMIC FORCES
y Increasing inflation in the country, persistently reducing the purchasing power of
the people and dropping people from high price soap to low price soap and
providing more fuel for expansion of local Producers.
y Increased import duties on the finished goods and raw material have increased the
price of the product, along with this, increasing inflation in the country have made
it difficult for soap industry to transfer the whole increased cost at the consumer,
thus forcing the industry to operate at a very low margin.
y Sanctions imposed by the developed nations on Pakistan due to nuclear
experimentation create the uncertainty in business activities.
SOCIAL
y The greater the tendency towards urbanization in Pakistan, the living standard
which is forcing the people to use standardized product and people are diverting
from the beauty soap to anti bacterial soap.
TECHNOLOGICAL
y No major and rapid breakthrough in the technology of soap and their
manufacturing process, but innovations is required so that the product does not
become obsolete.
SWOT ANALYSIS
STRENGTHS
> Heavy and impressive promotional plan for safeguard.
> Highly health caring product, safeguard gives protections against germs.
WEAKNESSES
> Safeguard is available in limited pack sizes; only two sizes are available. One is 125
gm and other is 75 gm.
> Unwilling to serve low-income market. Price is especially very high towards lower
income groups.
> Due to limited manufacturing facility, they cannot reduce production cost of the
safeguard. But now expansion is being made in hub plant to increase production of
safeguard. One Plant start production since 10th of April.
OPPORTUNITIES
> According to the information obtained by Chamber of Commerce and Industry
Lahore, the soap market is growing at an annual rate of 9.8%. The main reasons for
this growth are:
Rapid growth in population,
High urbanization
Increase in awareness among people about new advancements.
Due to this growing market, there are lots of opportunities for P&G to exploit this
growing market by introducing new soaps.
> P&G has a good corporate image among consumers. Therefore, they can get
maximum share from the soap industry by introducing multiple brands of soaps
because they have already different soaps in their international health and beauty
care product line.
> Due to rising awareness among people, switching trend toward health care soaps is
high. Therefore, it is a good opportunity to capture this segment through efficient
marketing practices.
THREATS
> Increasing market share of local Producers. The local Producers are playing an
important role in soap industry, because they are providing low price soaps and try
to penetrate in their local market by replacing the branded products.
> Threat of new entrants is also present. As Lever Brothers is a potential threat in soap
industry, because they are already involved in different related businesses and
providing raw material for soap production to different manufacturing companies
like Colgate Palmolive, etc.
> Increasing inflation in the country is also a major threat of P&G because it is
reducing the purchasing power of consumers.
STRUCTURAL ANALYSIS
PORTER MODEL
Structural analysis helps to analyze the competitive process as well as the sources
of competitive pressure. In the structure analysis, certain questions like what are
the strengths of these pressures, what type of competition is prevailing and what
future competitive conditions will be included. Generally, there are five forces
which affect the competitive position in an industry and these forces are as
follows:-
1) Competitive rivalry
2) Buyer¶s power
3) Supplier¶s power
4) Threat of new entrants
5) Substitute products
COMPETITIVE RIVALRY
Competition is concerned with the degree of rivalry within the industry. Danger of
rivalry is greater when the competitors are of equal size. In the soap industry, the
competitors are;
y Lever Brothers Pakistan Limited
y Colgate-Palmolive Ltd.,
y Reckit Benckiser
So competition is very tight. Rivalry is greater between these three firms due to
their equal sizes. Soap industry shows growth rate, which is 9.8% per annum. It
seems that it offered very lucrative business opportunities but these opportunities
also carry threats with them. Because to capture the high market share, an
organized distribution channel is required for this industry which carry heavy cost.
THREAT OF SUBSTITUTES
Substitute means a product which can perform the same functions as the original
product can perform. Substitute of the anti bacterial soap is beauty soap. Since the
quality of these substitutes is not comparable. So there is low threat of substitute to
the soap. But due to rise in inflation in the country,
threat of the substitute of high price soap like Safeguard is gradually increasing.
BUYER¶S POWER
When there are a few number of buyers those purchase the large portion of a
company¶s sale, then in this case, they have maximum power. But in the case of
soap industry, the buyers are the distributors, to whom bulk amount of products is
sold and this sale is maximally on the cash basis. So the buyers have no handsome
power to interrupt or interfere in the Soap industry.
SUPPLIER¶S POWER
Supplier¶s power is less because they are having support from their parent
company for raw material and technological assistance.
COMPETITOR¶S ANALYSIS
Competitors of Safeguard can be categorized into two segments:-
1. Competitors in organized sector
2. Competition with local Producers
heavily advertised their products on mass media. They display their product
brochures at every retailer.
The company has strong financial background and has much excess budget for
launching a new product, because their market share is maximum in soap industry
and they are carrying marvelous profits.
> These are the firms under the protective tax policy of the government and even most
of them are not paying tax.
> Local based brands activate more sales.
> Byusing promotional tools, which cannot be used by the firms in organized sector,
they are offering small monetary incentive to the retailers, etc.
Therefore, they have different product depths are available providing by P&G as compared to
their competitors in case of soap. In the depth they have:-
y Safeguard pink
y Safeguard green
y Safeguard white
y Safeguard Beige
HUMAN RESOURCES
P&G Pakistan is determined to create a way of working that release the energy and
talents of everyone in the company and strips away everything that stifles
creativity. It aims to be a company in which very employee knows what is
expected of them, has the freedom to take initiatives, is accountable for the results
and is properly rewarded for success.
At present more than 300 employees are employed in P&G Pakistan, and in order
to enable their employees to achieve what is expected of them, the company has a
well established program for the training and a system for the measurement of their
performance.
Human Resources ensure that P&G has the employees, organizational design and
work culture to deliver business productivity and to continually improve consumer,
employee and shareholder value.
SHARE HOLDERS
Shareholders are important stakeholders at P&G. P&G has 1.3 billion shares of
stocks outstanding. Large institutions and mutual funds, retirement programs,
individual investors and employees throughout the world own these shares.
Individuals hold approximately 50 percent of their shares, with nearly 20 percent
held by employees and retirees. They work to increase the value of P&G stock for
all their shareholders in a variety of ways, including growing the company¶s sales
and earnings each year. They measure for tracking their success for shareholders is
total shareholder Return (TSR). TSR measures how much value their investors
receive as a result of owning P&G stock. They track TSR against 29 companies in
similar industries, such as consumer, health care and beauty products. P&G tracks
performance to compensate key managers based on how well they increase
shareholder value. Their Shareholder Relations team is available every day to
answer questions, listen to shareholder feedback and provide perspective on
Company decisions.
DISTRIBUTION CHANNEL
Distribution channel of a company is a very important for its survival, and
especially in soap industry, they have to make it excellent, because if they will not
make it easily available to the consumer, all is useless. So providing needs,
satisfying goods at the right place is very important.
P&G itself has no distribution channel for safeguard rather they are distributing the
safeguard through International Brands Limited (IBL), which is a renowned
distribution company in Pakistan and they have their distribution network in all
major cities of the country.
COMPANY IMAGE
P&G is a multinational company and is using its corporate image as a marketing
resource. So this is beneficial for the safeguard in each segment.
At present, P&G is famous for its quality product, but it has implemented different
strategies to improve its image in future. Because just providing quality products
are not enough. They have to show concern for their
Society
Customers
Employees
P&G has adopted all its ways to achieve this aim, which will lead to a better
corporate image of the company in future. If they got a chance to see the
advertisement of P&G¶s safeguard customer satisfaction and environmental safety
are emphasized.
For environmental safety, they have the motto of cleanliness and protection from
the germs.
As explained above that company image can be used as marketing resource. Due to
the image, people are attracted to P&G. That¶s why market helps the sales force to
persuade the customers. In this way, P&G is using corporate image as a marketing
resource.
MARKET COVERAGE
As far as safeguard is concerned, P&G is emphasizing only on urban areas, while
rural areas are neglected, because their target market is middle and upper class and
this class is mostly located in urban areas. Therefore, due to their product features,
their market coverage is better.
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According to this program, P&G hires doctors who go to schools and address
children regarding cleanliness and germ protection through safeguard.
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According to this program, P&G personnel take children to the seashore and
arrange different amusement programs and deliver lectures how to dispose waste
and how to promote cleanliness in the environment.
FINANCIAL RESOURCES
The safeguard business accounts contribute nearly 6.3% of the company¶s profit.
The impressive growth recorded by the soap industry enabled it to make this
contribution. This is due to increase in sales of safeguard in 1999.
SALES VOLUME (Rs. in 000)
Year 1999 2000 2001
Sales 276,558 308,915 358,525
PROBLEM STATEMENT
There is gradual increase in the substitution of Safeguard due to its higher price.
There is also great competition in the local Producers due to low price soap and
also great competition in the organized sector due to equal size of the competitive
organizations.
MARKETING STRATEGIES
PROMOTIONAL STRATEGIES
P&G gives high emphasis on direct approach to customers. Its sales teams visits
schools after schools along with the medical practitioners and demonstrate
experiments of hand and face washing in comparison with other soaps. They
involve children and house wises in their campaign and then asks them to give
comments. This way they create awareness and demand for the safeguard.
They try to satisfy the customer at the spot and then sell a small size of 75 gm pack
for trial basis. They also advertise these practices on television, often sponsors
famous plays on dramas on TV. P&G gives high media coverage to Safeguard.
Regarding the commercials on TV, they follow the policy that their commercials
will not be executed right before and after the commercial of competitors.
DISTRIBUTION STRATEGIES
As described earlier that P&G is distributing safeguard through c
*+-+., distribution network which is a renowned distribution company. In
each IBL office, there is an Area Sales manager of P&G who is responsible to
watch the activities of c*- regarding distribution of Safeguard and make direct
contact with customers to obtain the complaints.
PRICING STRATEGIES
P&G always emphasizes safeguard as quality product and they try to differentiate
it as compared to competitors. But they have set the price of 125 gm of Safeguard
Rs. 21 which is equal to the major competitor product Detol soap having price of
Rs. 21 for 125 gm pack. Therefore, we can say they are somewhat following
3 (!.
PRODUCT STRATEGIES
Safeguard is quality product as described earlier and P&G do not compromise on
quality. Therefore, in product strategy, they are following +22(!.
There are the marketing strategies of safeguard but there are a group of strategies,
which determine the strategies of company regarding a product.
High
Low
High 100 r
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Market
Growth
)
The BCG Matrix tells about the position of the products either as star, cash cow,
question mark or dog. The two dimensions of this matrix are the relative market
share and on y ±axis industry growth rate.
The market share of safeguard (P&G) in soap industry is lower than their
competitors because of price sensitivity and its market share is increasing. &+7
the market growth rate of soap business is faster than general economy, which is
9.8% per annum. This is due to increasing population and urbanization in the
country.
The above analysis shows that safeguard is a question mark in soap industry. It is recommended
for question mark to follow (18+(+3. P&G have
resources to move it towards star. For growth strategy, company should seek out new
opportunities. So they are now spending $ 3 million to expand the , where safeguard
is manufactured. From the 10th of April another production unit has started production for safe
guard to meet the expanding marketing needs.
GENERAL ELECTRIC COMPANY MATRIX
General Electric Company (GEC) Matrix uses the dimensions of industry
attractiveness and business strengths to identify the current position of the
company and suggests which type of strategy should be used.
To measure each dimension, certain factors are selected. In soap industry,
following factors are applicable:
BUSINESS STRENGTHS
Rating
Weight 1=High Score
.5=Medium
0=Low
Price competitiveness 15 .60 9
Financial strength 30 .90 27
Knowledge of customers and market 15 ð 9
Technological Advancement 15 ð 10.5
Total 100 70
INDUSTRY ATTRACTIVENESS
Rating
Weight 1=High Score
.5=Medium
0=Low
):+(1 30 1 30
2! 10 .60 6
*!+4 10 .50 5
SPACE MATRIX
Strategic Position and Action Evaluation Matrix is useful for determining the
current strategic position of the organization with reference to its environment and
helps deciding the strategy profiles for the company. In the context of P&G, the
factors considered and intensity of their influence is given below: -
p
Rating -
6=Low
0=High
Market share -4
Product quality -1
Customer loyalty -3
Control over distributors and -2
suppliers
Promotional activities -1
Product price -3
)181 -1
Average -2.14=-2
Rating -
6=Low
0=High
Technological changes -3
Rate of inflation -2
Barriers to entry into market -3
Competitive pressure -1
Demand variability -5
Price elasticity of demand -3
Total -17
Average -2.83=-3
2!) +4
+24
Average +4
SCORE ON X=AXIS
Competitive Advantage = -2
Industrial Strength = +4
Total Score on x-axis = -2(+(+4)=+2
SCORE ON Y-AXIS
Financial Strength = +5
Environmental Stability = -3
Total Score on y-axis = -3 +(+5) = +2
Coordinates (+2_+2)
The direction vector points towards the ((3 ;,+. Therefore, the
suitable strategies for P&G safeguard are:-
y )
y )+3
y +,+3
MARKET PENETRATION
Market penetration means to exploit the available consumer efficiently to achieve high market
share. This is probably done for a product, which is at the growth stage. Market penetration can
be done through heavy advertisement and by providing products of different sizes and types for
different consumers. For this purpose, highly extensive distribution channel should be used.
MARKET DEVELOPMENT
In market development strategy, organization should find the new uses of product,
new segments and entering into new geographic areas. Still safeguard is being used
for germs protection purpose, focusing on urban areas and more emphasis on
middle and upper class. Therefore, they should identify the new such as for
crockery purpose and explore the new and potential customers.
PRODUCT DEVELOPMENT
For product development, development of internal resources is emphasized.
Therefore, P&G should acquire one more product or manufacturing plant for the
production of safeguard to capture the wide market.
For safeguard P&G is intensifying the efforts to increase the market share in
growing industry because soap industry is growing with an annual rate of 9.8%.
Therefore, we can say they are following consolidation strategy for safeguard,
because they are intensifying their efforts on advertisement and promotional
activities.
PROPOSED STRATEGIES
The practice of incomplete market coverage should not be followed because you
cannot hijack other company¶s customers and new customers as well. All these
problems require following strategies: