Proctor and Gamble Alternative Strategie

Procter & Gamble
GEB 4890
Hessum Zangenehpour
1 Procter and Gamble
Table of Contents
Executive Summary ……………………………………………………………………………………………………………… Page 2
The Company………………………………………………………………………………………………………………………… Page 2
History and Evolution……………………………………………………………………………………………….. Page 2
Mission and Major Goals…………………………………………………………………………………………. Page 2
Current Strategies……………………………………………………………………………………………………. Page 7
Competitive Environment…………………………………………………………………………………………………….. Page 14
Industry…………………………………………………………………………………………………………………… Page 15
Forces and Trends…………………………………………………………………………………………………… Page 18
Consolidating Retail Sector…………………………………………………………………………. Page 19
Private Labels…………………………………………………………………………………………….. Page 20
Competition……………………………………………………………………………………………… Page 20
Porter’s Five Forces………………………………………………………………………………………………. Page 21
Ethical Responsibilities and Challenges ……………………………………………………………….. Page 25
Environmental pollution…………………………………………………………………………… Page 26
Energy Consumption………………………………………………………………………………… Page 26
Possible challenges facing Procter and Gamble…………………………………………………….. Page 27
Internal Strengths and Weaknesses…………………………………………………………………………………. Page 28
Recommendations ………………………………………………………………………………………………………….. Page 37,45
Implementation……………………………………………………………………………………………………………….. Page 40,45
Evaluation………………………………………………………………………………………………………………………… Page 44,47
Matrices……………………………………………………………………………………………………………………………. Appendix end

I. Executive Summary
Procter and Gamble is a leader in the Global Household and Personal Products industry
with revenues exceeding 85 billion dollars. It was first founded as a soap and candle company,
and now has six divisions, selling everything from baby wipes to batteries. Not only is the
company is an industry leader in market share, but it also cares greatly about issues like social
responsibility as well, giving back to communities at large. This paper lists some of the main
strategies the company is undertaking, as well as some of the potential issues that are hampering
the company and the industry as a whole. Furthermore, we have outlined internal strengths and
weaknesses, as well as external opportunites and threats that are facing the company.
Additionally, with an eye towards future potential revenue streams, we have outlined two
strategies which we believe will help the company grow.
II. The Company
History and Evolution
Procter and Gamble, founded in 1837 by William Procter and James Gamble, first found
its footing as a soap and candle company in Cincinnati, Ohio. By 1930, Procter and Gamble
offered more than thirty different types of soap, and established its first international subsidiary,
The Thomas Hedley and Sons Company, located in the United Kingdom. In 1933, Procter and
Gamble entered the hair care business with Drene, the first detergent-based shampoo. The
company expanded its international presence with the acquisition of the Philippine
Manufacturing Company, Procter and Gamble’s first operations in the Far East, validating the
company’s intent to be a worldwide producer in household goods. In 1943, Procter and Gamble
created its first division, the drug products division, to sell its growing line of toiletry goods. In
1948, the company began operating in Mexico, its first subsidiary in Latin America. In 1954, the
company began operations in Europe by leasing a small plant in France from the Fournier-Ferrier
Company, a detergent manufacturer. The company also entered the coffee business with the
acquisition of Folgers Coffee in 1963. Manufacturing and sales of the company's products in
Japan began through the acquisition of the Nippon Sunhome Company in 1973.
In 1988, Procter and Gamble announced a joint venture to manufacture products in
China, which marked the company's foray into the largest consumer market in the world. In the
following year, the company entered the cosmetics and fragrances industry with the acquisition
of Noxell, which included CoverGirl, Noxzema, and Clarion product lines. Entering the male
personal care market in 1990, Procter and Gamble expanded its footprint with the acquisition of
Shulton's Old Spice product line. In 1999, the company entered the global pet health and
nutrition business by acquiring Lams Company, a leader in premium pet foods. In early 2005,
the company entered into an agreement to acquire The Gillette Company, a leader in male
grooming products. Duracell, a Procter and Gamble company, acquired Garrity Industries in
2006, a private US based manufacturer and marketer of lighting products. In 2007, Inverness
Medical Innovations and Procter and Gamble announced the completion of the 50/50 joint
venture for the development, manufacturing, marketing and sale of existing and to-be-developed
consumer diagnostic products, outside the cardiology, diabetes and oral care fields.
Now, the company's reportable segments are classified into six divisions: beauty,
grooming, health care, snacks and pet care, fabric care and home care, and baby care and family
care. Additionally, the company's organizational structure is comprised of four divisions; Global
Business Units (GBUs), Global Operations, Global Business Services, and Corporate Functions.
GBUs of Procter and Gamble mainly focus on consumers, brands and innovations around the
world. Again, this is further divided into three sub-units; Beauty, Health and Well-Being, and
Household Care. The Beauty GBU includes the beauty and the grooming businesses. The beauty
business is comprised of cosmetics, deodorants, prestige fragrances, hair care, personal cleansing
and skin care. The grooming business includes blades and razors, face and shave products,
beauty electronics, and small home appliances. The Health and Well-Being GBU includes the
health care, and the snacks and pet care businesses. The health care business includes feminine
care, oral care and personal health care. The snacks and pet care business includes pet food and
snacks. The Household Care GBU includes the fabric care and home care, and the baby care and
family care businesses. The fabric care and home care business includes air care, batteries, dish
care, fabric care and surface care. The baby care and family care business includes baby wipes,
bath tissue, diapers, facial tissue and paper towels.
Mission and Major Goals
“We will provide branded products and services of superior quality and value that
improve the lives of the world’s consumers, now and for generations to come. As a result,
consumers will reward us with leadership sales, profit and value creation, allowing our people,
our shareholders and the communities in which we live and work to prosper.”
Based on the nine components of the mission statements, we were able to conclude that P&G
mission statement complies with the required characteristics.
1- Customers: P&G focus in providing the best quality products to their customer and the
generations to come.
2- Product: P&G delivers the best quality branded products to their customers worldwide.
3- Markets Identified: it is not mention in the mission due to the fact that they cover the
whole world.
4- Technology: it is not mention in the mission but they do emphasize on the importance of
technology and innovation.
5- Concern for survival: P&G is committed to offer superior quality and value for the
products, expecting to get rewarded from their consumers gaining sales, profit and value
creation.
6- Philosophy: P&G knows that by delivering the best quality products they will keep
consumers happy, by doing this it will result to them and the shareholders. At the end a
good corporate environment brings better communities and prosperity.
7- Self Concept: P&G superior quality of their products and services are unique.
8- Concern for public image: P&G places an important focus on providing good products
and services that improves the lives of the world’s consumers.
9- Concern for employees: it is not mention in the mission. P&G consider its employees as
the most important asset on the company, and encourage them to have the same value and
principles as the company
The company goes on further to state, “Our shared Purpose attracts and unites an
extraordinary group of people, P&Gers, around the world—the most diverse workforce in P&G
history. Together, we represent around 150 nationalities. Our recruiting and development
philosophy to ‘build from within’ fosters a strong culture of trust and shared experiences. Our
diversity, our shared culture and our unified Purpose are the defining elements that enable P&G
to touch lives and improve life every day. Sustainability is about ensuring a better quality of life
today, for people and our planet. It is about delighting consumers with innovative products and
services. It is about growing responsibly and using resources and materials efficiently. At P&G
we define sustainability broadly to include both environmental sustainability and social
responsibility.” In 2007, P&G established five strategies for sustainability and set these goals to
be achieved by 2012. In March of 2009, in recognition of the progress they have made so far and
to emphasize their commitment to achieving even more significant wins, they increased each of
their goals. It is part of P&G’s culture to continuously raise the bar, and their work in
sustainability is no exception.
2007 – 2012 Goals

Develop and market at least $50 billion in cumulative sales of
Product Goal “sustainable innovation products,” which are products that have an
improved environmental profile.
Deliver an additional 20% reduction (per unit production) in CO2
emissions, energy consumption, water consumption and disposed waste
Operations Goal
from P&G plants, leading to a total reduction over the decade of at least
50%.
Enable 300 million children to Live, Learn and Thrive. Prevent 160
Social
million days of disease and save 20,000 lives by delivering 4 billion liters
Responsibility
of clean water in our Children’s Safe Drinking Water program.
2020 Goals
Replace 25 percent of petroleum-based materials with
sustainably sourced renewable materials, conduct pilot
studies in both developed and developing markets to
Product Goal understand how to eliminate land filled/dumped consumer
solid waste, have 70 percent of all washing machine loads
use cold water and reduce packaging by 20 percent per
consumer use.
Increase use of renewable energy in our plants to 30
percent, reduce manufacturing waste to landfill to less
Operations Goal
than 0.5 percent of input materials, and reduce truck
transportation by 20 percent per unit of production.
Social Save one life every hour by delivering two billion liters of
Responsibility clean water every year.
Current Strategies
Significant changes have been made to Procter and Gamble’s corporate and operational
strategies as of late; it sought to reduce its cost structure and in-turn develop a more seamless
integrated business-level strategy, in an attempt to increase revenue streams. Cross-functional
integration and speed of innovation has become extremely important to corporate strategy as the
rate of innovation and technology increase.
In order to remain competitive internationally, benefit from economies of scale,
maximize revenues, profits, share price, and return on invested capital, Procter and Gamble is
altering their business strategy to facilitate the increasing complexities of the global business
structure. To facilitate the implementation of their global strategy, Chief Executive Officer, Alan
G. Lafley, changed the structure from a “Global Product Structure,” which is associated with a
standardization strategy, and implemented a “Transnational” global strategy. This strategy takes
into consideration the geographical segmentation of multiple marketplaces, respective
specialization for particular brands and specializations, and economies of scale in particular
value creating functions. These market segmentation areas are broken down by the pie chart in
a following section. This strategy allows P&G to simultaneously merge cost reductions in the
firm and retain efficient customer responsiveness, allowing the company to adapt to local tastes
and expectations as they vary across nations.
The global-matrix structure that Mr. Lafley adopted to support the transnational strategy
is a complex structure that requires significant cohesion from all members of the workforce and
complex controls. Mr. Lafley, being ever cognizant of the significance of worker’s morale,
implemented a culture that would support the structure. He is noted to have implemented pay-
incentives that tied employees to the performance of the company. Mr. Lafley’s strategic
leadership ensured that cross-functional coordination created a significant advantage over
competitors; distribution channels, logistics, supply chain, and manufacturing were all
coordinated across nations, enabling Procter and Gamble to cut costs across the board. A
transnational global strategy requires close coordination with key areas of the business for
increased efficiency and competitiveness. Cross functional coordination at Procter and Gamble
allows the company to organize and utilize their resources to achieve optimal effectiveness in the
marketplace.
R&D and innovation are very much at the forefront of Procter and Gamble’s corporate
strategy. Mr. Lafley has identified that R&D and Product Innovation is tantamount to pioneering
the competitiveness of the corporate strategy; integration mechanisms allow fast communication
between marketing and R&D. Additionally, inter-business function communication facilitates
value creating propensity between manufacturing and marketing. Inter-business function
coordination is crucial as line, functional, business, divisional, and corporate level managers
within the same functions must be able to quickly communicate between one another in order to
mitigate against “information distortion,” especially when spread across many nations.
In its 2013 annual report, Procter and Gamble outlined long-term annual growth targets
that included sales growth incrementally above market growth rates in categories and countries
where the company competes; and growth in EPS in the high single digits. For 2013, Procter and
Gamble calculated EPS from continuing operations to be $4.05, which excludes $0.18 of non-
recurring restructuring charges, a $0.10 impairment charge, a $0.08 charge related to the
Venezuela currency devaluation, $0.05 of charges for European legal matters and a $0.21 gain
on the buyout of a joint venture. In August 2013, the company guided for fiscal year 2014 EPS to
increase by 5% to 7% over the prior year, or 11% to 13% excluding the impact of foreign
currency translation. This incorporates organic sales growth of 3% to 4%.
Procter and Gamble's objective is to deliver total shareholder returns in the top one-third
of its peer group by focusing its resources on its biggest, most profitable categories and markets.
This includes strengthening and growing its core markets, such as the U.S., investing in
emerging markets in categories and countries with the largest opportunity and highest likelihood
of success, and allocating resources to businesses where it can create disproportionate value.
In May 2012, Procter and Gamble sold its Snacks business to The Kellogg Company in a
$2.7 billion all-cash transaction. Procter and Gamble recorded a net gain on the transaction of
$0.48 per share, accounted for in discontinued operations, located on the balance sheet. A prior
agreement to sell the Pringles business to Diamond Foods was previously terminated. (Annual
report 2012/13)
Strategic Consistency
P&G strategies have been largely consistent for the last couple of years. They have
continuously focus on their core businesses and brands by keep growing core brands and
categories since they see it as the primary way to touch and improve lives. They have also place
an importance on keeping consistency in areas such as maintaining and increasing their presence
in developing markets, extending distribution systems to reach more consumers through
undeserved retail channels and expanding brand and product portfolio.
In order to be successful long term using a dividend growth investment strategy, selecting
consistency is necessary. P&G had to become a more consistent operator, and a much more
consistent and reliable innovator.
P&G have made conscious decision to make consistency a priority. Their culture as a company,
their relationship with investors, and their long-term performance metrics have absolutely
depended on becoming consistent. This is what currently sets the company apart from many of
its competitors.
Collaborative Partnership and Strategic Alliance Strategy
The company is currently outsourcing its worldwide print operations to Xerox. This
collaborative partnership with Xerox will allow Procter and Gamble to reduce operational costs
by an estimated twenty to twenty-five percent. The five-year services contract calls for Xerox to
manage Procter and Gamble print shops, office and home-based work settings. Working with
Xerox, Procter and Gamble has the opportunity to deliver substantial sustainability benefits in
addition to cost savings and increased user satisfaction and reliability. P&G predicts it will
reduce print-related power usage thirty percent and paper consumption by twenty to thirty
percent annually. (Xerox.com)
Distribution Strategy
Procter and Gamble is currently working with i2 Technologies to support the physical
distribution of its North American operations. Utilizing the i2 Freight Matrix transportation
solution, Procter and Gamble is working to drive efficiency across its finished product logistics
through improved carrier selection, event management, and dashboard reporting.
Human Resources Strategy
Procter and Gamble view their more than 138,000 employees as the most important asset
of the company and encourage them to share the same values and principles as the company. All
employees of Procter and Gamble are considered leaders and employees are encouraged to take
responsibility to do the best that they can while meeting business needs, bettering the system,
and helping those around them. According to P&G’s 2012 Annual Report, its human resource
strategy is built of five core values, which will be outlined below in the following table.
Human Resource’s Five Core Values at Procter and Gamble

Almost 500,000 people apply for P&G jobs every year, resulting in less than
one percent of those applicants being hired. P&G believes that it attracts top
Hire the Best
talent because of its reputation as a great company for current and future
leaders.
P&G has learned that “there is no substitute for hands-on experience when it
comes leadership development.” To help develop this leadership, P&G has
Challenge From created consequential responsibilities for every employee. Its assignments
Day One typically demand collaboration inside and outside the Company, disciplined
project management, and the need to be in touch with consumers and other
external stakeholders.
Business and At P&G, leadership by example starts from the top. P&G’s Chairman of the
Functional Board, Corporate Officers, Presidents, and Functional Officers recruit on
Leaders Actively college campuses and teach in their executive education programs. These
Recruit, Teach senior executives also act as mentors and coaches for younger managers,
and Coach helping them developing the skills necessary to lead in the future.
P&G believes in creating career opportunities and not just “jobs.” P&G has
been very successful in managing its talent globally, enabling career
Plan Careers development and growth across business and geographies. P&G tries to
identify talent early on and groom people through a series of varied and
enriching assignments that will prepare them for future roles.
P&G provides an almost unlimited amount of opportunities to develop
Never Stop
technical, functional and leadership skills training. These programs are
Learning
offered at different levels of development or new assignments, respectively.
Research and Development and Engineering Strategy
As part of its ongoing initiative to be a supply chain leader and optimize trading partner
relationships, Procter and Gamble uses Axway’s business-to-business solution for their
externally managed file transfers. The solution delivers secure file transfer protocols with real-
time visibility and control, improving communication within and outside Procter and Gamble. It
also offers the agility Procter and Gamble needs to respond quickly to changes in its supply
chain. At present time, orders, invoices, shipment notifications, and other message files flow
through the Axway gateway daily at Procter and Gamble. These Axway enabled gateways
process more than one million files per month, all of which must be processed automatically and
on time for business flow to function properly. Transmission failures and system downtime
would interrupt Procter and Gamble’s entire supply chain, negatively impacting productions and
revenue.
Sales, Marketing, and Promotions
Procter and Gamble is reinventing marketing in a digital world, by using innovative web
based techniques to improve its already considerable consumer listening capabilities. The
company is now conducting online consumer research and concept studies that dramatically
reduce the time required to gather and analyze consumer opinions. Furthermore, online consumer
research reduces costs, and additionally delivers highly reliable results that enable Procter and
Gamble to get solutions to the market faster with new products and services, which are all
critical success factors in its business to consumer strategy.
Moves to Respond and React to Changing Conditions

With an eye toward expanding retail coverage and providing better service at lower cost,
Procter and Gamble has implemented an online system called “Web Order Management” that
enables business retail customers to connect directly to Procter and Gamble anytime, from
anywhere. This online business-to-business network gives retailers full access to Procter and
Gamble’s promotions, inventory, and scheduling information. It also allows retailers to easily
place and manage orders on the web. Procter and Gamble, responding to the ever changing
business conditions, realized it had to become a more consistent operator, and a much more
consistent and reliable innovator. According to Procter and Gamble, the following five strategies
separate them from their competitors: Products, Operations, Social Responsibility, Employees,
and Stakeholders. The qualitative and quantitative information about these ventures can be
found in the table below.
Five Strategies that Separate Procter and Gamble from its Competitors
Products Delight the consumer with sustainable innovations that improve the
environmental profile of our products
Progress Cumulative sales utilizing sustainable innovation products is at 52 billion

Operations Improve the environmental profile of P&G’s own operations
Since July 2007 Since July 2002

Percent Energy Usage : 11% Energy Usage: 48%
Reduction per CO2 Emissions: 10% CO2 Emissions: 52%
Unit from 2007 Waste Disposal: 30% Waste Disposal: 53%
Water Usage: 13% Water Usage: 52%
Social Improve children’s lives through P&G’s social responsibility programs.
Responsibility
Live, Learn & 135 million children reached through Live, Learn, and Thrive Program.
Thrive
Liters of Clean 930 million liters of clean water delivered.

Water
Delivered
39 million days of disease prevented through outreach program.
Days of Disease
Prevented
P&G estimated approximately greater than 5,200 lives have been saved
Lives Saved through these outreach programs.
Employees Engage and equip all P&G employees to build sustainability think and
practices into their everyday work routines.
Stakeholders Shape the future by working transparently with our stakeholders to enable
continued freedom to innovate in a responsible way.
Sustainable Greater than 10% reduction in one or more of the following indicators:
Innovation Energy, Water, Transportation, or Packaging Materials.
Live, Learn, Global cause that focuses social investments on efforts that improve the lives
Thrive of children in need, ages 0-13.
Children’s Safe Within ‘Live, Learn, Thrive,’ is P&G’s signature program, Children’s Safe
Drinking Water Drinking Water. P&G is committed to the wellbeing of children in
underdeveloped nations by providing clean, safe water.
III. Competitive Environment
Industry
Procter and Gamble resides in the household and personal products industry, which
consists of total revenues generated through the sales of household and personal products. The
household products segment includes: air fresheners, bleach, dishwashing products, furniture &
floor polish, general purpose cleaners, insecticides, paper products, scouring products, shoe
polish, textile washing products, toilet care products and others. The personal products segment
includes baby personal care, feminine care, fragrances, hair care, make-up, male toiletries, oral
hygiene, OTC healthcare, personal hygiene, skincare and others. This specific market is valued
according to retail selling price.
According to IBIS World, the global household & personal products industry had total
revenues of $717.7 billion in 2010, representing a compound annual growth rate of 3.9% for the
period spanning 2006-2010. In comparison, the European and Asia-Pacific industries grew with
CAGRs of 2.4% and 5.7% respectively, over the same period, to reach respective values of
$247.1 billion and $210.3 billion in 2010. The personal care segment was the industry’s most
lucrative in 2010, with total revenue of $535.4 billion, equivalent to 74.6% of the industry's
overall value. The household products segment contributed revenue of $182.3 billion in 2010,
equating to 25.4% of the industry's aggregate value. The performance of the industry is forecast
to decelerate, with an anticipated compound annual growth of 3.5% for the five-year period
2010-2015, which is expected to drive the industry to a value of $853.1 billion by the end of
2015. Comparatively, the European and Asia-Pacific industries will grow with CAGRs of 2.9%
and 3.8% respectively, over the same period, to reach respective values of $284.9 billion and
$254 billion in 2015. The following charts and graphs will better display the quantitative
information. *(EFE &CPM Matrix can be found at end of this report)*
Figure 1: Global household & personal products industry value: $ million, 2006-10
Category Segmentation
Geography Segmentation
Market Share
Global household & personal products industry share: % share, by value, in 2010
Proctor & Gamble 13.1%
Unilever 5.7%
Johnson & Johnson 4.8%
L’Oreal S.A. 4.5%
Other 71.9%
Total 100%
Market Share
Industry Outlook
According to IBIS World, in 2015, the global household and personal products industry is
forecast to have a value of $853,097,700,000, which is an increase of 18.9% since 2010. The
compound annual growth rate of the industry in the period 2010-15 is predicted to be
approximately 3.5%.
Global Household & Personal Products Industry Value Forecast (in Millions)
Year $ Millions Growth %
2012 769,894.9 4.1
2013 797,269.5 3.7
2014 827,003.7 3.7
2015 853,097.7 3.2
CAGR 2012-15 3.5
Forces and Trends
International and emerging markets will soon enough start to take over the bulk of sales
related to these large MNC’s. For these trends to continue, international and emerging markets
must remain steady. As with most emerging markets, this is sometimes not the case. Western
economies were negatively impacted when the Chinese government announced in March 2012
that the nation’s GDP growth target for 2012 would be just 7.5%, well below the growth range of
9.2%–14.2% the country recorded in the previous five years. This lowered GDP projection
suggests a decline in China’s consumer spending, which has been a major driver of global
economic growth. In order to stem a decline in consumer demand, China’s government lowered
reserve requirements for financial institutions several times in mid-2012, and cut interest rates in
June for the first time since 2008. China’s GDP started to recover in the fourth quarter of 2012,
posting 7.9% growth, compared with 7.4% in the third quarter. Overall, China’s GDP grew 7.8%
in 2012, and IHS Global Insight projects the same growth rate in 2013.
According to Fan Gang, the director of China’s National Economic Research Institute, a
nongovernment think tank, the country’s economy is now recovering from a “soft landing,” and
the big challenge in 2013 will be to prevent it from overheating while still promoting growth.
However, more recently, in June 2013, concerns about a further slowdown in China came to the
forefront as the government tightened the availability of credit in order to control surging real
estate prices and head off a credit bubble. Consequentially, some market participants and
economists believe that slowing growth now increases the prospects for stronger and more
sustainable growth in future years.
India is another emerging economy that has been experiencing a slowdown, with real
GDP growth slowing from 10.1% in the fourth quarter of 2010 to only 4.8% (advance estimate)
in the fourth quarter of 2012. In May 2013, the Organization for Economic Co-operation and
Development, an international group fostering global economic and social improvement, reduced
its growth projection for India in 2013 to 5.3%, from its earlier estimate in November 2012 of
5.9%.
Consolidating Retail Sector
After facing continued high commodity costs, and with retail consolidation and inventory
reductions forcing them to focus on their best brands, most of the household and personal care
companies began significant restructuring programs in 2011–12 to cut costs and wind-down
product lines. These programs follow a series of restructurings by many of these companies
between 2005 and 2010 in an effort to slim down organizations that had become too large after a
continuous run of acquisitions over a number of years.
A handful of big retailers have captured a large share of the market. These large retailers
have shifted the balance of power within the supply chain. For example, the company’s largest
customer, Wal-Mart, accounts for roughly 15% of net sales. Wal-Mart has exerted its power over
the suppliers to their detriment in the past, such as forcing record companies to produce clean-
label CD’s and pulling adult magazines. A decision by Wal-Mart not to sell a particular Procter
and Gamble consumer product would prevent Procter and Gamble from reaching its entire target
market. In addition, many retailers have pushed their own higher margin private label brands in
competition with Procter and Gamble. One should be cautious of trends such as balance of
power in the supply chain in the future with regards to Procter and Gamble’s revenue streams.
Private Labels
According to Standard and Poor’s, referencing the latest Infortel Select Report, in the 52-
week period ended September 9, 2012, which is the latest available, private label sales accounted
for 14.4% of consumer packaged goods spending at a wide range of outlets, including
supermarkets, drug stores, mass merchandisers, select warehouse club and dollar stores, and
convenience stores. This reflected a 0.1% increase over the prior year. However, unit share of
private label slipped 0.2% to 17.1%, the second straight year of unit share loss. In the grocery
channel specifically, private label dollar and unit shares both increased year over year, while in
the drug channel, dollar share increased 0.2% while unit share fell 0.1%. Standard and Poor’s
expects private label brands to pick up more market share from second or third-tier brands than
from the category leaders. One reason is that top-tier branded companies have more financial
resources—including increased marketing dollars and new product development outlays to
protect their market share. These companies spend heavily on building a strong image for their
brands, which they believe will help them in strengthening customer loyalty.
Competition
The global household and personal products industry is highly fragmented. The industry
is large, with leading incumbents holding less than a 30% share of the industry value, which is
unlike many mature, established industries. This increases rivalry between the large numbers of
market players. The fragmented nature of the household and personal products industry means
that market players can sell their products to a large number of buyers; however, buyer power is
reduced by the necessity of the product to the buyers’ business. Firms in this industry are reliant
on suppliers for raw materials which must be of a certain quality to ensure consistency in
products and therefore brand loyalty. Entrance to the industry is complicated by leading
incumbents who have diversified operations in many sectors. There are few viable substitutes to
household and personal products, as ‘value’ ranges offered by retailers are an economically
viable substitute to branded products. All these factors increase rivalry within the industry.
Porter’s Five Forces
Porter’s Five Forces

Degree of Rivalry High
Threat of New Entrants Low-Moderate
Threat of Substitutes Low-Moderate
Power of Suppliers Moderate
Power of Buyers Moderate
Degree of Rivalry: High
According to IBIS World, the market environment is highly competitive, with global,
regional, and local competitors. In many of the markets and industry segments in which Procter
and Gamble sells its products, the company competes against other branded products as well as
retailers’ private-label brands. There are many different options for consumer products.
Consumers can choose not solely based on price but also brand strength and now there is even a
push for environmentally friendly products. Although the options are abundant, the threat is still
more moderate because of the brand equity in most products. Advertising and marketing are a
large part of swaying consumers to purchase one product over another and the economies of
scale that are presented with large companies favor them in the form of advertising. Advertising
also helps establish the brand loyalty. Although the consumer has many options to choose from it
all comes down to the value and quality of the product. Product quality and performance are
important and P&G focuses on providing a quality offering to the consumer. Competition is even
present with the non-branded products and with consumer spending and disposable income low,
competition is increasing amongst the major competitors in this industry.
Threat of New Entrants: Low-Moderate
The threat of new entrants seems to be low overall but it depends on which business
segment of Procter & Gamble the threat is coming from. Essentially, it is with a very low
probability for a new entrant to become as big and as well capitalized as Procter and Gamble.
Large capital investment is required to set up and operate large scale productions, in addition to
this technical knowledge is a must, so new companies must invest in research and development
as well as strong advertising and marketing schemes. High entry costs consequently means high
exit costs which can prove off-putting to new entrants. The biggest barriers to entry are derived
from research and development. Since competition is somewhat intense, a new entrant must
enter the market with a product that is differentiated. To the extent that these products can
become differentiated in this industry remains unlikely, especially with the access to funds major
players, like Procter and Gamble, can attain for research and development. Again, reputable
companies with successful brand names have established relationships with retailers and have
advantages when competing for shelf space. Nearly all the markets that P&G participates in are
mature markets making it less attractive for new entrants.
Threat of Substitutes: Low-Moderate

Substitutes to companies in this industry exist in the form of homemade products. These
products are usually cheaper than purchasing a branded product, however their preparation
requires skill and time and in some cases the substitute product may not be as satisfying as the
original product. It is difficult to find substitutes for personal products such as makeup or OTC
healthcare. Traditional alternatives are a way of avoiding certain chemicals, however the
inconvenience associated with making the products combined with their often ineffectiveness
outweighs their benefits. Thus they pose a weak threat. According to IBIS World, there has been
a growth in counterfeit and pass-off products available in discount retailers, whereby they market
their own version of a product under a slightly different name, for example Sunslik instead of
Sunsilk. In addition, multinational retailers now sell their own branded products of a similar
nature often under a “value” range. This means that end-users can purchase a similar product to a
branded product for cheaper. By doing so, the retailer is not infringing any copyright laws.
Furthermore there has been a growth in new discount retailers selling branded products at cut
prices, meaning sometimes substitutes are not necessary.
Power of Suppliers: Moderate
There are many products within the household and personal products industry, meaning
the number and type of supplies will most likely greatly vary. Generally, a wide variety of
chemicals are needed in the manufacture of household products whilst synthetic and organic
ingredients are the main components of personal products. According to IBIS World,
manufacturers are typically large scale companies with a great deal of financial muscle. Raw
materials are subject to fluctuations in price which can impact upon a company’s revenues;
however, players can purchase inputs on the open market, although they will have little control
over price. Large industry competitors are able to enter into long term contracts with suppliers,
however high costs will usually be incurred upon termination of the contract. Manufacturers
require specific chemical products to which there are no substitutes, meaning they are reliant on
suppliers, who are few in number. This gives suppliers more power over market players.
Power of Buyers: Moderate
Industry leaders in this space offer diversified product ranges; however, product
differentiation is limited due to their overall function being quite standardized. Manufacturers
can diversify their product range in terms of brand, color or fragrance as well as product type to a
certain degree - for example hair care or deodorants. This means that they can supply to a wide
range of buyers and are less reliant on revenues from one sole retailer. Retailers, however,
especially supermarkets, rely on such goods for business, which weakens buyer power further.
Consequentially, large retailers like supermarkets have enough financial power to enter into long
term contracts with market players, they are also less reliant on sales from the household and
personal segment on account of their diverse product lines. There is increased possibility of
buyers integrating backwards into the production of their own ranges of goods; indeed most
major retailers now sell ‘value’ ranges at cheaper prices than branded products which have
proved popular since the economic downturn. This further enhances buyer power as buyers are
not dependent on revenues from branded products completely; rather their own products are
proving to be economically viable. There are low switching costs for buyers, and they are less
likely to be swayed by brand loyalty, however they do have to stock their stores with popular
products.
The global household and personal product industry has high rivalry among existing forms and a
low threat of new entrants. Therefore, companies in this industry must be able to utilize
economies of scale in order to be successful. Companies must be able to lower their input costs.
Effective management of inputs costs will allow a company to maintain low prices and good
competitive advantage in the global household and personal product.
Despite using a mix cost leadership and differentiation method, the global household and
personal product leans more heavily towards differentiation. Companies like P&G spend a lot of
time and money trying to make their product stand out from the rest. The global household and
personal product industry must provide a superior product variety, a superior customer service
and a brand building and innovation strategy.
Creating the right mix between cost-leadership and differentiation strategies is essential
to last in the global household and personal product industry and to create value for the
company. Most forms will favor differentiation; however, cost leadership must be address as
well. Consumers in this industry do desire a certain quality of products, but they will switch to a
lower cost provider if process are too high. The global household and personal product is very
research intensive; therefore, constant innovation is necessary in order to survive. Finally,
companies in the industry must offer a good variety of products while building a good brand
image and maintaining good customer service.
Ethical Responsibilities and Challenges
As one of the largest daily commodity production enterprises around the world, people
have the tendency to pay attention to the company’s production energy consumption,
environmental pollution, and the product’s packaging with higher expectations. Procter and
Gamble, because of this increased awareness, now organizes a program that is called “Change
that Matters.” The program covers four parts in doing business ethically; this includes
environmental sustainability, social responsibility, employees, and stakeholders. The main
ethical dilemmas that Procter and Gamble faces in regards to the above would be environmental
pollution and energy consumption.
Environmental Pollution
The environment damaging stack effect goes along with the large production outputs of
Procter and Gamble. The raw materials for the products contain a large number of environmental
emissions that may cause pollution. However, Procter and Gamble has been making concerted
efforts to push for green and low emissions. In fact, they are successful in their washing products
for not containing phosphorus, which has been an additive in many washing products in the past.
Friendly environmental material is one of their solutions to address the problem that is
environmental pollution. Additionally, Procter and Gamble is devoted to make the process for
their manufacturing, supply chain, as well as logistics as environmentally green as possible. They
apply smart eco-design in manufacturing, more sustainable designs to reduce waste during
transportation, and making scorecard systems for their suppliers, aiming to help reduce
environmental pollution throughout their supply chain.
Energy Consumption
The EIA expects gas to remain the fastest-growing component of primary world energy
consumption, its use nearly doubling from 2001 levels to 176 trillion cubic feet (cf) in 2025.
Gas's share of total energy consumption is projected to increase from 23% in 2001 to 28% in
2025 and it will also account for the largest increment in electricity generation (53% of the total
increase in energy use for power). Much of gas' projected growth is in response to rising demand
from combined-cycle gas-turbine power plants. Procter and Gamble is continuously looking for
ways to reduce its carbon footprint relating to these industries. But, the rapid acceleration of
adoption for the use of renewable energy is expected to increase around the world by 56%
between 2001 and 2025, maintaining its 8% share of world commercial energy consumption
throughout the forecast period. But because fossil-fuel prices are expected to remain relatively
low, renewable energy is unlikely to be widely competitive, the EIA claims, and its share of
energy use will not, therefore, increase.
Possible Challenges Facing Procter and Gamble in the Future
Weak and volatile consumer spending combined with inflation that has yet to fully
decline continues to challenge companies in this industry, and Procter and Gamble is not an
exception. At the same time, promotional spending over the past several years has conditioned
consumers to expect lower prices. According to Standard and Poor’s Research Group, Procter
and Gamble has raised prices to offset the higher raw material costs it is incurring, competitors
have failed to follow suit in some cases, which has hindered volume and constrained
profitability. Further complicating the situation, with nearly 65% of its sales derived outside of
the U.S., Procter and Gamble is exposed to foreign exchange rate fluctuations, which could have
a negative impact on sales and profitability.
Slowing growth rates around the world, competitive pricing, and unfavorable foreign-
exchange trends have played a part in Procter & Gamble's woes, but the problems may be more
serious, as the firm might have overextended itself in its endeavors to build out its product
portfolio and geographic footprint. While Procter and Gamble was slow to react, management
has responded with a massive $10 billion cost-saving plan to dramatically reduce head count and
ultimately free up funds to reinvest in its business. This overhaul is sizable but necessary;
although many analysts are not entirely convinced Procter and Gamble can pull it off.
There are also some questions regarding Procter and Gamble’s intentions for additional
headcount reductions. The company lowered its employee base by 7,000 individuals (about 5%-
6% of its consolidated base) and anticipates cutting another 2%-4% annually between fiscal 2014
and 2016. When the CEO Bob McDonald was asked last year whether these reductions were
concentrated in any one segment of the business, he told analysts that it inherently skewed more
to brand-building, which had gotten too large for the company’s current portfolio. Analysts will
continue to monitor these initiatives, because there could be significant reductions in research
and development, and this could leave Procter and Gamble idling while others are marginally
growing in this highly competitive operating environment.
IV. Internal Strengths and Weaknesses
*(The IFE can be seen at the end of the report)*
# Internal Strengths Internal Weaknesses

Powerful collection of well-known brands, such Reliance on a collection of key brands for
1 as Gillette, Crest, Tide, Pampers, Clairol, and a material amount of the company’s top
Olay line
Typical customer focus is on high-end of
the market, which could lead to adverse
2 Massive global distribution market
revenue streams during hard economic
times.
Impressive and historically successful R&D Growth hard to achieve for such a large
efforts. Six times in the past eighteen years and diversified portfolio, particularly in
P&G has had the both the #1 and #2 non-food mature product categories.
3 products according to the Independent
Analytics Firm, the Symphony IRI Group,
which is the industry benchmark for new
product launches.
Large balance sheet with revenues of over 5 Easy to “under invest” in lagging brands,
4 billion in cash in 2013 to pounce on new and compounding the brand's problems.
exciting opportunities as they become available.
Economies of scale, leveraging its massive Must keep track of consumer needs and
5
production output potential worldwide wants in many disparate markets.
Innovative industry forward thinking such as Fake products sold under the name of
6 Tide Dry Cleaners, which is being successfully their brands
tested currently in experimental urban markets
Its products have stiff competition from
7 Bargaining power with retailers big domestic players and international
brand.
Culture promotes creativity. Employees are The company must constantly reinvent its
8 most often brought up within the company and products or face flagging sales.
are encouraged to think outside the box.
Diversified portfolio of businesses, which Environmental waste factors, although
include: beauty, grooming, health care, snacks according to company literature, P&G is
9
and pet care, fabric care and home care, and continually working on reducing waste.
baby care and family care.
Strategic product placement in retail settings. Lack of online presence, purchasing
10 Procter and Gamble’s products are always products online
positioned at adult eye level on shelving.
# External Opportunities External Threats

Growth of middle class in developing markets, Fickle consumer tastes
1 these developing markets have had a growth
rate of over 5.8% over the past 20 years.
Increasing awareness for personal hygiene, Unstable economies and political
2 which they could use Gillette or other brands to structures in emerging markets
leverage.
Mergers and Acquisitions – with revenues over Consumer price sensitivity in emerging
80 billion dollars in 2013, they are able to markets
3
acquire smaller, faltering businesses such as
Clairol, Helen of Troy and Nu Skin
4 Increasing purchasing power of customers Raw material cost increases
Use Gillette to expand in men’s markets, Competition from unbranded and local
5 specifically the niche market of teen boy’s areas
products.
Expand presence in Consumer Health Care, Currency Fluctuations
6 which is a $240 billion market; P&G has just a
5% share.
Military use, become sole provider of military Product input price increases / Global
7 shave kits, which would drive sales with the inflation in select markets
ever increasing military budgets worldwide
Use Duracell to enter into contracts with cell High competition in industries that P&G
phone providers to exclusively use Duracell competes in
8 batteries in phones. Over 90% of the adult
populations in developed countries own a cell
phone.
Green and eco-friendly product expansion such Foreign government interventions
as biodegradable packaging and products,
9
which consumers are increasingly choosing
over standard, traditional products.
Social network utilization, location based Rising Commodity Prices
10
marketing (LBM)
V. SWOT Analysis / Assessment of Alternatives
Strength / Opportunity Strategies

Number Variables Used Explanation
Growth of middle class in
O1 – Growth of Middle Class in Developing developing markets; these
Nations developing markets have had a
1 S1 – Powerful Collection of Well-Known Brands growth rate of over 5.8% over
S4 – Large Balance Sheet with over 8 billion in the past 20 years. Expand
revenues these well-known brands into
these markets.
Green and eco-friendly
product expansion such as
O9 – Green and Eco-Friendly Product Expansion biodegradable packaging and
2
S6 – Innovative Technology products, which consumers are
increasingly choosing over
standard, traditional products.
Strength / Opportunity # 1
Emerging markets are increasingly driving their own growth, with domestic demand and
trade between emerging countries becoming much more important - in recent years, the
emerging economies have been growing 4% to 5% faster than the developed economies,
according to IBIS World. These economies are also, broadly speaking, unencumbered by the
huge private and public debt problems of the developed world - unlike the most advanced
economies they do not face the drag on GDP growth of a prolonged deleveraging process.
We are living through a period of important structural change in the global economy in
which power is shifting from the developed to the emerging world. The emerging economies are
now the drivers of global growth and we would suggest that they will account for 70%-75% of
global growth every year for the foreseeable future, according to Allan Conway, analyst for the
global emerging markets at Schroeder PLC.
Furthermore, the superior economic performance of emerging countries is translating into
company profits - earnings growth is expected to be around 30% in these markets this year.
Based on the previous information, Procter and Gamble will be able to use their powerful
collection of well-known brands to leverage this external opportunity and drive growth in these
countries. (O1,S1)
Strength / Opportunity # 2
According to a new IHS Chemical global market research report, mounting consumer
pressure and legislation, such as plastic bag bans and global warming initiatives, will increase
demand for biodegradable polymers (plastics) in North America, Europe and Asia from 269,000
metric tons in 2012 to nearly 525,000 metric tons in 2017. This represents an average annual
growth rate of nearly 15% over that five-year period. North American consumption of
biodegradable polymers has grown significantly in recent years, according to the IHS report,
primarily due to the fact that biodegradable polymers have become more cost competitive with
petroleum-based products.
In 2012, Europe was the dominant market for biodegradable polymers, consuming
147,000 metric tons, or about 55% of world consumption; North America accounted for 29%,
and Asia approximately 16%. Landfill waste disposal and stringent legislation are key market
drivers in Europe and include a packaging waste directive to set recovering and recycling targets,
a number of plastic bag bans, and other collection and waste-disposal laws to avoid landfill.
Utilizing this information, Procter and Gamble could increase awareness in North American
markets, utilizing their superior innovative technologies to create more “green” biodegradable
products, such as razors and packaging products. Because of the European’s attitude towards
biodegradable products, Europe could be used as a test market for these items to gain market
intelligence before implementing them in North America. (O9,S6)
Strength / Threat Strategies

Keep a Low Cost Strategy
with Brand Name Quality in
S1 – Economies of Scale
Emerging Markets for a
1 T3 – Consumer Price Sensitivity in Emerging
Period of Time to Gain
Markets
Market Share in Emerging
Markets
Start Joint-Ventures with
S2 – Massive Global Distribution Market Companies in Foreign
2 T2 – Unstable Economies and Political Structure in Countries and Use P&G
Emerging Markets Distribution Network to
Further Alliance
Strength / Threat # 1
The decision to enter emerging markets is very much a macro-economic and investment
decision. Emerging markets have experienced extreme spurts of growth at various times - Latin
America and Asia being the most widely used in the past two decades. During the past five years
the BRIC (Brazil, Russia, India and China) countries have started to emerge as real players on
the global scale. By featuring four major economies in different parts of the world, the idea is to
offer a product linked to a basket of emerging markets and try to achieve diversification,
allowing Procter and Gamble to utilize retail data for further product offerings in the respective
countries. In theory, this should work very well, but in practice the pricing of products is more of
an art form than science, and with the up and down nature of these emerging economies, it
makes gauging retail interest extremely difficult. Leveraging the immense revenues of Procter
and Gamble, we suggest a low-cost strategy in these countries – even if it means dropping
average retail market prices to gain and maintain market share. During periods of growth in
these countries, the hope is that they will continue to purchase Procter and Gamble items when
the average retail prices start to climb along with purchasing power. (O1,S1,S4)
Strength / Threat # 2
In many foreign countries, the political elite have the ability to remain in power for long
periods of time, which is blamed often for the specific countries economic performance. These
politicians are seen as elite, inaccessible, and they often hold on to long lasting personal
acquaintances with the economic elite, creating a problem that manifests itself in the form of
economic outcomes being driven by these relationships, rather than a true market-driven system.
This ultimately hinders economic growth and usually leads towards an overall inefficient market.
In many of these countries, it is better to form joint-ventures to break into these markets, rather
than to singularly enter the market on their own. With this in mind, to enter politically
challenging markets, Procter and Gamble should seek opportunities for joint-ventures for a
smooth transition and a chance to gain worldwide revenue. These countries include, but are not
limited to, China, Russia, Ukraine, and Venezuela. (S2,T2)
Weakness / Opportunity Strategies

Enhance Online Promotional
Opportunities - Implement
W10 – Lack of Online Presence
1 Real Time Online Shopping in
O10 – Social Network Utilization
Brick and Mortar Stores
(LBM)
W8 – Must Constantly Reinvent or Face Sluggish Expand and bring new
Sales products to the new,
2
O5 - Use Gillette to expand in men’s markets, underdeveloped niche of teen
specifically the niche market of teen boy’s products. boy’s products
Weakness / Opportunity # 1
The digital advertising industry is experiencing remarkable growth as technological
innovations fuel demand. Digital marketing allows marketers for two-way and even one-on-one
communication with consumers, potentially providing them with a very personal experience.
Furthermore, the cost associated with digital advertising is considered to be much lower than the
costs associated with traditional type of advertising. Both effects - enhanced effectiveness and
less cost - translate into a higher return on investment for digital marketing in comparison with
advertising through traditional media. Location based marketing (LBM) is currently a very
small, experimental market which Procter and Gamble could utilize to their advantage in the
coming years. The advantages currently are extremely low cost (if any, at current times) and
increasing opportunities to reach customers at the point of sale.(W10,O10)
Weakness / Opportunity # 2
According to Practical E-Commerce Trends, the 35.6 million teens in the United States
are accomplished multi-channel shoppers and notoriously fickle, so marketing to them is a
challenge. Luckily, this age group is a favorite subject of consumer researchers and a good deal
of recent data exists to gauge the current trends. Investment firm Piper Jaffray recently
published the results of its twenty-fifth semi-annual survey and report, “Taking Stock With
Teens.” The report says that 70 percent of teens prefer to shop at their favorite stores online.
Teens are shopping more via the Internet and brick and mortar outlet stores and less at specialty
stores. The study found that parent contributions to teen purchases have dropped, both at the
upper and middle-income levels. Teens have to come up with more of their own resources,
which may account for teens shopping less at pricier specialty stores. Parent donations decreased
by nearly 10 percent from the previous survey, but a majority of teenagers report that their
parents still subsidize more than half of their spending. Furthermore, the teen boy segment is a
relatively untouched demographic that Procter and Gamble should exploit. (W8,O5)
Weakness / Threat Strategies

Focus Advertising on the
W2 – Focus is on Higher End of the Market Differentiation of P&G
1 T8 – High competition in industries that P&G Products and Quality in
competes in Established Markets to Gain /
Maintain Market Share
Come Up With Marketing
Strategy Aimed at the Markets
With Fake Products,
W6 – Fake Products Sold Under the Name of Their
Consumer Information
2 Brands
Awareness Related to Quality
T1 – Fickle Consumer Tastes
Products and What the P&G
Name Represents in Quality
and Satisfaction
Weakness / Threat # 1
The high threat of competition in the industries that Procter and Gamble competes in is a
reality that the company faces daily. According to IBIS World, the Home Products / Personal
Care industry is highly fragmented, with the market share leaders only owning up to 30% of the
market. While there are certainly many variables involved, Procter and Gamble should focus
advertising strategies on what makes their products unique in the hopes of gaining or maintaining
market share in these industries. They could use strategies to show how the company pays
attention to detail in products with differentiation strategies aimed at personalization, such as
“the deodorant for the active young woman” or drawing from celebrity advertisement relating to
certain segments of purchasers of products. (W2,T8)
Weakness / Threat # 2
The counterfeit item, which at first look seems identical in appearance, gives the
impression of being the genuine product from the real manufacturer. However, a knockoff is
only meaningful if the genuine article is well-known and in demand, which most products in the
portfolio of Procter and Gamble are. They are a deliberate attempt at deceiving consumers into
thinking they are buying products made by a reputable manufacturer when they are, in fact,
purchasing inferior copies. The counterfeiter has no need to spend money on research and
development, or advertising and marketing since he is riding the popularity of a manufacturer
who has already invested heavily in developing and promoting their brand. In some instances,
the consumer is so fickle that it will negate any of the opportunities of the counterfeiter.
According to IBIS World, there has been a growth in counterfeit and pass-off products available
in discount retailers, whereby they market their own version of a product under a slightly
different name, for example Sunslik instead of Sunsilk. In addition, multinational retailers now
sell their own branded products of a similar nature often under a “value” range. Moreover, some
markets are much more prone to counterfeiting of products, such as China, or even more urban
areas in some U.S. cities, for example, New York. To negate the effects of the counterfeiter,
Procter and Gamble should increase advertising for brand awareness and the unique
characteristics of their unique brands.
Recommendation #1 – Location Based Marketing
*(The Grand Strategy,QSPM, SWOT Grid, and Space Matrix can be found at the end of the
report)
At first glance, entering emerging markets would likely be the first choice one would turn
to after going through and analyzing the SWOT matrix. But, after some research, Procter and
Gamble has already taken that route with less than stellar success and has already diverted from
that strategy. According to Erin Lash, equity analyst for MorningStar Research, “P&G has
stumbled over the past several years. For one, we think the firm entered too many new markets
too quickly (especially in emerging markets where its brands remain underpenetrated with a long
runway for growth). Adding to its woes, P&G was late to the game relative to competitors like
Colgate, Unilever, and Reckitt-Benckiser. We think our assertion is supported by the fact that the
firm intends to just focus on its biggest developing markets, pulling back its investment in others,
which suggests P&G's brand strength doesn't necessarily transcend borders. In addition, its
products missed the mark with value-conscious consumers, and volumes and market shares
retreated.” Because of these results, it does not entirely make sense to continue to have strong
advertising dollars spent in these markets, even if it is for brand awareness with the prevalence of
fake brands in these geographic segments.

With regards to joint ventures, Procter and Gamble is already heavily invested in this
process. For example, recently in 2011, Procter and Gamble entered into a joint venture with
TEVA Pharmaceuticals, creating PGT Healthcare. PGT Healthcare’s revenues for the first
quarter of 2013 were over $400,000,000, of which Procter and Gamble received approximately
$100,000,000.
Procter and Gamble’s most interesting forward looking strategy could be the move to
location based marketing (LBM). LBM is a relatively new phenomenon, especially outside of
urban areas where experimental marketing is relatively non-existent. According to
MarketResearchReports, “Location-Based Marketing (LBM) is a form of mobile marketing that
delivers mobile display banner ads, paid search ads, and other forms of ads directly to user
handsets often within proximity of point-of-sale (POS) location. Mobile location based
advertising is also increasing and will be almost 65% of total mobile advertising revenue by
2018. LBM is expected to grow 150% by 2020. Market growth is fueled by multipurpose use of
smart phones & tablet devices such as shopping, entertainment, social networking, mobile
commerce etc. Stakeholders' openness toward adopting mobile LBM technology outweighs other
growth factors.” According to another study conducted by the NETInstitute in 2009, less than
2% of all transactions use paper coupons, which could indicate that the switch to digital real-time
LBM is all the more likely to occur.
According to the 2013 Marketer Perspectives on Mobile Advertising (iab.net/ovumstudy)
study of 300 top-level brand marketing executives, all of whom are currently using mobile in
their media mix, nearly three-quarters (74 percent) expect that their companies' mobile
advertising spend will increase in the next two years - a similar number to those who anticipated
an increase in the two years following the 2011 survey (72 percent). Moreover, building upon
this broad intent to boost mobile spend, almost one in five respondents (19 percent) to the 2013
survey predict that their mobile budgets will increase by more than 50 percent in the next two
years.
As with the 2011 study, the 2013 survey asked marketers about the key challenges facing
mobile advertising. The results clearly demonstrate that while hurdles remain, greater marketer
experience and ongoing industry efforts have allowed earlier urgency to abate. For example, a
highly important challenge in 2011 was privacy issues, named by 40 percent of marketers.
Surveying marketers in 2013, a year in which the Digital Advertising Alliance released mobile
privacy guidelines, that number nearly halved to 22 percent. Back in 2011, 39 percent of
respondents said that device/operating system fragmentation was of high concern. Only 23
percent say the same today. In addition, progress has evidently been made in the area of standard
mobile metrics, as 31 percent of marketers cited it as a highly important challenge in 2011, with
only 13 percent noting it in 2013. (Bradley, NZ Business)
This LBM can be used as a past product shopping list, or can be used to implement new
ideas into the retail consumer mindset as he or she walks into the grocery store. There have been
some recent studies as to how the average retail shopper maintains brand loyalty. For example,
relating to cereal, the average coupon should be approximately $4.00 to assume that there will be
a switch from one brand to another. With the average box of cereal at approximately $3.55
(2009 USD) the coupon should be priced for the competing product to make it free, or in some
cases, even receive money back for purchasing the competing product. According to the study,
“…the negative sign implies (negative coefficient) that consumers dislike to browse for items on
the website, and therefore derive utility from using the shopping history list.” (NETInstitute
2009) This information drives home the point that Procter and Gamble could stand to heavily
gain from working to entice buyers to stay with their products utilizing the “past shopping cart”
strategy coupled with the LBM tactic.
Implementation of Location Based Marketing
Because of the relatively new strategy of LBM, the pricing and implementation strategies
relating to this venture are somewhat hard to estimate. Essentially, what is happening is that
brick and mortar retail stores are creating an app that your mobile or broadband device is
connecting to that is automatically triggered when you are within range of the P.O.S system.
The costs to create these apps are a shared expense between the grocery stores and retail
merchants that are selling products within the store; it is somewhat of a “win-win” for all
stakeholders in the situation. The brick and mortar grocery outlet gives the customer the
efficiency of reduced time while shopping, which is becoming more relevant than ever, and the
merchants of branded items within the store get a greater probability of retaining customers
throughout the sales process.
A conglomerate like Procter and Gamble definitely has enough in the way of budgeting
to allow for these processes. Mr. Lafley, CEO of Procter and Gamble states, ‘We're pounding
away on communication effectiveness, OK?’ Mr. Lafley said. ‘Our digital, I think, is now up to
35% in the U.S. roughly. It goes up and down, 25% to 35%.’ He added that some brands are
finding digital ‘incredibly effective’ while others need to get up the learning curve faster. A
P&G spokeswoman clarified that Mr. Lafley pegged U.S. digital marketing spending in a range
of 25% to 35%, adding that the number includes spending on search, social, online video, mobile
and ‘other costs.’ Advertising Age's DataCenter estimates P&G's fiscal 2012 total U.S. ad
spending at $4.8 billion, which would put the range outlined by Mr. Lafley at $1.2 billion to $1.7
billion. By comparison, the Interactive Advertising Bureau pegs total U.S. digital spending at
$36.6 billion, estimating the entire CPG industry at 7% or $2.5 billion of that. But while the
IAB's numbers include all forms of digital advertising, they don't include the range of production
and agency costs, website development or digital content creation that takes place outside
interactive publishers, which is likely part of Mr. Lafley's tally.
A recent Gartner survey sheds additional light on the $1.2 billion-plus in spending
suggested by Mr. Lafley. At most, the survey found, 30% of what marketers define as digital
spending is on paid media, with the rest focused on so-called owned and earned media costs such
as website operations and social-media marketing. Even so, the figure suggests P&G is ahead of
its peers. The estimated $1.2 billion to $1.7 billion in P&G digital spending comes out to 3.8% to
5.6% of its U.S. sales. That compares to 2.8% of sales spent on digital marketing reported by
manufacturers in the survey.” (Neff, AdvertisingAge) A graph that better displays Procter and
Gamble’s historical quantitative information relating to advertisement spending versus sales can
be seen below.
Ad Spending as Percentage of Sales at Procter and

Gamble
12.00%
11.00%
10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
87 89 91 93 95 97 99 01 03 05 07 09 11
19 19 19 19 19 19 19 20 20 20 20 20 20
An interesting trend lately in business has been to build mobile applications for free and
then later monetize them through private equity or acquisitions through other, more established
companies. For example, up until 2011-2012, it used to be free for companies to advertise on
Facebook. A company in New Zealand is doing just that relating to LBM. “VoucherMobis a
new startup in New Zealand with a simple consumer proposition: download the App for free and
save money at retailers close to your location. It uses a sophisticated content management system
allowing retailers to load and deliver location-based offers to customers via smartphones at a
fraction of the cost it would take to develop a solution themselves. Retailers can promote events,
move perishable goods and generate same-day sales. Reporting tracks sales conversions and
provides superior market intelligence about consumer behavior, giving businesses a mine of
marketing information to help increase revenue opportunities.” (Bradley, NZ Business) The
revenues, if any, relating to new startups such as companies such as VoucherMobis are not
available as they are not publicly traded companies. As this niche industry evolves, revenue
streams for these markets will become readily available with the cost of experimental advertising
for firms like Procter and Gamble better able to be gauged.
Another company, Placecast, recently stepped up into the LBM arena with some
interesting results relating to another type of retail outlet, public wellness. According to their
website, “Placecast is a white label location-based marketing platform offering an opt-in,
consumer-figured ShopAlerts service that works on any mobile phone without an app.
Consumers receive tailored mobile alerts when they enter a Geofence – a field around any
location that is set to trigger a personalized marketing message when entered. The level of
customization of the alerts filters advertising so only relevant, valuable information reaches the
consumer. Clients can integrate this software as a service with customer relationship
management software or loyalty programs. Those who adopt LBM recognize the services offered
as a loyalty and retention mechanism and as a final touch point with consumers in the purchase
funnel. In a study by Placecast, 49% of respondents acknowledged their visit was unplanned
prior to receiving the ShopAlerts text message. Placecast is focused on the privacy of consumers
and stresses opt-in, transparency, and consumer control. Placecast provides an analytics package
with both standard and custom reports that are overlaid on maps as well as consumer research
panels providing attitudinal data, such as brand favourability and insights on purchase behaviour.
Case Study: At Fitness First Gyms – return on investment (ROI) = 2,700%; new sign ups =
1,100; new revenue = $577,000.”
LBM, like any other form of targeted advertising, also has its negatives. Most of these
negatives are realized in the form of privacy concerns. According to vanDoorn and Hoekstra,
“The benefits of customized ads also come with some mental or psychological costs. Customized
ads require customer insights and the use of personal information, which may seem too personal,
because it might demand an unwanted level of knowledge of the consumer's preferences and
behavior (Tucker 2011; White et al. 2008). Although the fit of the customized ad may increase
the ad's relevance, and thus result in positive behavioral effects, the use of more personal
information may induce feelings of intrusiveness that interfere with the consumer's cognitive
processing and interrupt goal pursuit (Li et al. 2002), such that it prevents the consumer from
taking notice of the ad contents (Morimoto and Chang 2006). Intrusive ads also may be
perceived as annoying and result in reactance, such that consumers behave in the opposite way to
the one intended by the advertiser (Clee and Wicklund 1980; Ying et al. 2009).
The effect of potential benefits therefore may be smaller or nonexistent if customized ads
seem intrusive. This trade-off is intriguing; in many cases, the benefits and psychological costs
of customized advertising go hand in hand, such that data usage is a prerequisite of providing
consumers with relevant information. This dilemma raises a key question: can the effectiveness
of providing consumers with ads with high fit be attenuated by feelings of intrusiveness,
triggered by personalizing the message with information necessary to create these ads?” (Tucker
2007) The results from the questions raised are yet to be answered, and probably will not be
until these type of targeted adverts move from the experimental stage to full retail saturation.
Evaluation of Location Based Marketing
Having effective strategy evaluation measures is a good way motive and monitor
employees of a company. Because well-defined systems are a rarity, a good evaluation system
should incorporate strategic success factors. Generally, a business strategy evaluation should
cover a few questions. Are the objectives of the business appropriate? Are the policies and plans
appropriate? Do the gathered results confirm or deny the critical assumptions that were put forth in
the beginning of the process? Trying to draw conclusions from these questions can be quite
difficult. In order to come up with the answers the strategist will most likely take a mixture of past
knowledge and forward looking intuition. Additionally, most well paid executives are generally
more focused on achieving goals rather than the evaluation of such goals. Furthermore, can the top
executives evaluate others in a way to not cause large conflict situations with whoever is being
evaluated? When strategies are being evaluated, they should arguably fit within the following
criteria: consistency, continence, advantage, and feasibility.
In order for Proctor and Gamble to be able to evaluate these strategies, they should
probably employ one of these digital media companies, or just purchase one. Purchasing one of
these companies would allow Procter and Gamble to focus on their brand management while
keeping experimental marketing separate from daily affairs. These companies offer real-time
reporting, track sales conversions and provide superior market intelligence about consumer
behavior, giving Procter and Gamble a wealth of marketing information to help increase revenue
opportunities. Because of the wealth of data that real-time marketing represents, Procter and
Gamble can track customer behavior through stores and even find out how the average retail
consumer moves throughout the store, giving the brick and mortar retail store along with Procter
and Gamble key insights to consumer psychological behavior. Because of the nature of these
new forms of marketing, evaluating progress is all completely performed in real-time, only an
Internet connection is needed to evaluate performance with all relevant reporting just a click
away.
Recommendation # 2 – Exploit underdeveloped niche of teen boy’s markets
The teen boy’s market is an underdeveloped market that is asking to be exploited. The
35.6 million teens in the United States are accomplished multi-channel shoppers and notoriously
fickle, so marketing to them is a challenge. Luckily, this age group is a favorite subject of
consumer researchers and a good deal of recent data exists to gauge the current trends.
Implementation
Over the past year, according to the Piper Jaffray survey results, the top three websites
for teens were Amazon, eBay, and Nike, with Amazon growing ten percentage points between
spring 2012 and spring 2013 — from 13 percent to 23 percent. Teens also enjoy visiting the
websites of brands that provide products targeted to teens. Beyond the three ways to market to
teens above, social media and mobile are both great ways to market to teens.
53% of females and 52% of males indicate that social media impacts their purchases, with
Facebook being the most important. However Facebook seems to have lost influence over the past
six months, with only 33 percent of teens reporting it as the most important social media
influencer in the spring 2013 survey compared with 42 percent in the fall 2012 Piper Jaffray
Survey. A cell phone is the primary access to the Internet for 25 percent of those between 12 and
17 years of age. Forty-eight percent of teens own an iPhone and 58 percent own a tablet according
to the Piper Jaffray report. For those who own a smartphone, 50 percent use it as the main method
of accessing the Internet. Mobile devices are used for browsing, buying, looking for coupons, and
checking in with friends to get their views.
Teens are brand conscious, but they are not necessarily loyal to brands for too long.
Friends heavily influence buying behavior. Peer approval of purchases is very important,
especially to girls. The Piper Jaffray report states that friends had the most influence over teen
purchase decisions and about 50 percent of both males and females said social media influenced
them.
Gathering information from above, we can see that teen boys respond well to sports (from
Nike) and they are obviously deeply entrenched into technology, such as always having the
newest technology, for example, smartphones. Because of the influence of social media on this
demographic, it would make sense for Proctor and Gamble to market personal care products in the
form of sports celebrities endorsing through channels of social media and mobile advertising.
Social media outlet channels could be in the form of Facebook, Twitter, or ad banners relegated to
Amazon. Additionally, Procter and Gamble could even try to implement the LBM strategies
listed above, targeting at teen boys in experimental urban markets. The products produced aimed
at teen boys could be as simple as a razor and shaving cream designed specifically for teen’s, or at
least ‘sold’ as that.
Evaluation of underdeveloped niche of teen boy’s markets
The evaluation of progress could be simply pulled from retail market channel reporting.
Because the specific niche of this market has essentially yet to be exploited, the results from the
campaign may take time to manifest themselves in the form of solid revenue streams. For
example, if the shaving kit idea is implemented, Gillette brand managers should be in charge of
the results, which wouldn’t necessarily involve the implementation of new divisions of Procter
and Gamble, or Gillette.
IX. Quantitative / Financial Information
With regards to the LBM recommendation, we are choosing to purchase a firm already
established for $1,200,000,000. The niche marketing to teen boys campaign we estimate at a
$200,000,000 project. The interest rates used are the average financing for 10 year projects at
Procter and Gamble, which is approximately 5.5%. The average tax rate for the firm is 24.5%.
The results show that for the teen boys campaign, the best route is issuing 100% debt, and for the
LBM firm purchase, the best results are using a combination of 50% debt and 50% equity. The
actual target capital structure for the firm is 33.8% debt and 65.1% equity, with .1% coming from
preferred stock. The excel data can be seen at the end of the report.
Key Ratio’s For Firms in Industry

Current Ratio AR Turnover Debt Ratio NPM Div Payout
PG .8 13.39 .511 13.44% 59.3%
Unilever .77 11.47 .671 8.73% 55.3%
J&J 1.9 6.14 .465 16.14% 64.2%
KMB Clark 1.08 8.51 .749 8.31% 67.1%
Procter and Gamble vs. Industry Peers

Kimberly Johnson &
PG Unilever Clark Johnson
Market
Cap (Mil 230,615 117,759 41,698 266,062
USD)
# of
Institution 2,708 540 1,591 3,106
Owners
# of Fund
3,280 272 1,668 4,023
Owners
% Owned
by 66.49 5.96 73.74 68.73
Institutions
% Owned
26.74 3.14 33.13 30.19
by Funds
% Owned
0.07 0 0.1 0.02
by Insiders
Current, Quick and Debt/Equity Ratios for 10 Year Period

1.4
1.2
1
Percentage (x100)
0.8 Current Ratio

Quick Ratio
0.6 Debt/Equity
0.4
0.2
0
6 6 6 6 6 6 6 6 6 6
-0 -0 -0 -0 -0 -0 -0 -0 -0 -0
04 00
5
00
6
00
7
00
8
00
9
01
0
01
1
01
2
01
3
20 2 2 2 2 2 2 2 2 2
Dividends Paid Over 10 Year Period (Per Share)

2.5
2
$ Amt. of Dividends/Share
1.5
Dividends USD
1
0.5
0
6 6 6 6 6 6 6 6 6 6
-0 -0 -0 -0 8 -0 9 -0 0 -0 1 -0 2 -0 3 -0
04 00
5
00
6
00
7
00 00 01 01 01 01
20 2 2 2 2 2 2 2 2 2
Tax Rate % vs. Net Margins for 10 Year Period

35
30
25
Percentage (x.01)
20 Tax Rate %
15 Net Margin %
10
5
0
6
6
6
6
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
04
05
06
07
08
09
10
11
12
13
20
20
20
20
20
20
20
20
20
20
Institutional Concentrated Shareholders of P&G

% Chg
Shares % Total Shares from % Total Date of
Shares Prior
Name Held Held Change Port Assets Portfolio
The Gillette
Company
0 0.17 -- New 99.64 12/31/2010
Employee Stock
Ownership Plan
Procter & Gamble
Company Profit
Sharing Trust and 94,377,351 3.09 94,377,351 New 37.12 6/30/2008
Employee Stock
Ownershi
Gamble Jones
Investment 3,153,859 0.12 -6,315 -0.2 30.64 9/30/2013
Counsel
RandoLph Co Inc 1,697,110 0.06 -775,496 -31.36 28.75 9/30/2013
CDC Ixis Asset
1,336,681 0.05 -30,944 -2.26 24.06 6/30/2013
Management
Cedar Rock
6,780,917 0.25 -83,202 -1.21 20.3 9/30/2013
Capital Ltd
First Financial
Bank, N.A. -Tr 798,018 0.03 -24,305 -2.96 15.06 9/30/2013
Division
Cypress Insurance
1,560,000 0.06 0 0 14.25 12/31/2012
Company
Schulhoff & CO
265,258 0.01 -8,176 -2.99 13.74 9/30/2013
Inc
Alphabet
Management,... 1,046,000 0.04 580,000 124.46 11.75 9/30/2013
LLC
Columbia
Insurance 20,280,000 0.74 0 0 11.02 12/31/2012
Company
Ridgeworth Capital
315,400 0.01 0 0 10.79 9/30/2013
Management, Inc.
Georgia Bennicas
Dba Bennicas & 195,658 0.01 -2,142 -1.08 10.67 9/30/2013
Assoc.
Morgan Stanley
Investment Mgmt 8,582,092 0.32 -667,100 -7.21 10.46 9/30/2013
Ltd
National Fire &
Marine Insurance 6,240,000 0.23 0 0 9.73 12/31/2012
Co
YCG, LLC 260,864 0.01 2,884 1.12 9.13 9/30/2013
Bank of Kentucky,
411,813 0.02 3,449 0.84 8.94 9/30/2013
Inc.
Encore Bank
National 192,922 0.01 681 0.35 8.75 9/30/2013
Association
Yacktman Asset
25,107,262 0.92 -285,785 -1.13 8.46 9/30/2013
Management Co
United Bank
10,080 0 -126 -1.23 7.63 9/30/2013
(Vienna, VA)
172,611,285.0
Total
0 93,080,774.00
Works Cited
Argyris, Chris, and Donald A. Schon. Organizational Learning: A Theory of Action
Perspective. Reading, Mass.: Addison-Wesley, 1978.
Bradley, Scott. "Killer App for Location-Based Marketing." NZ Business 24.11 (2011):
60. ProQuest. Web. 16 Nov. 2013.
Clee, M. A., & Wicklund, R. A. (1980). Consumer behavior and psychological reactance.
Journal of Consumer Research, 6(4), 389-405.
Drucker. P. F., "We Need to Measure, Not Count." Wall Street Journal . April 1993: Also in
ExpertChoice Voice, July 1993.
Li, H., Edwards, S. M., & Lee, J.-H. (2002). Measuring the intrusiveness of advertisements:
scale development and validation. Journal of Advertising, 31(2), 37-47.
"MarketResearchReports.com: Mobile location based advertising will be nearly 65% of total

mobile advertising revenue by 2018, Finds New Report." M2 Communications 15 Nov.
2013. General OneFile. Web. 16 Nov. 2013.
"New IAB Study of 300 Brand Marketers Reports 142% Uptick in Mobile Advertising Budgets
between 2011 and 2013."Professional Services Close - Up (2013)ProQuest. Web. 16 Nov.
2013.
Neff, Jack. "Can P&G's Marketing Spend be 35% Digital?" Advertising Age 84.29 (2013):
6. ProQuest. Web. 17 Nov. 2013.
Schelling, T. C. The Strategy of Conflict. Cambridge, Mass.: Harvard, 1963.
Thinnes, and Billy. "Biodegradable Plastics Demand should Grow 15% Annually from 2012 to
2017." Hydrocarbon Processing(2013)ProQuest. Web. 20 Nov. 2013.

Tucker, C. (2011). Social networks, personalized advertising and privacy controls. Working
Paper 4851-10, MIT Sloan School of Management, Cambridge, MA.
White, T. B., Zahay, D. L., Thorbjørnsen, H., & Shavitt, S. (2008). Getting too personal:
reactance to highly personalized email solicitations. Marketing Letters, 19(1), 39-50.

Proctor and Gamble Alternative Strategie

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Procter & Gamble

Executive Summary ……………………………………………………………………………………………………………… Page 2

The Company………………………………………………………………………………………………………………………… Page 2

History and Evolution……………………………………………………………………………………………….. Page 2

Mission and Major Goals…………………………………………………………………………………………. Page 2

Current Strategies……………………………………………………………………………………………………. Page 7

Competitive Environment…………………………………………………………………………………………………….. Page 14

Forces and Trends…………………………………………………………………………………………………… Page 18

Consolidating Retail Sector…………………………………………………………………………. Page 19

Private Labels…………………………………………………………………………………………….. Page 20

Porter’s Five Forces………………………………………………………………………………………………. Page 21

Ethical Responsibilities and Challenges ……………………………………………………………….. Page 25

Environmental pollution…………………………………………………………………………… Page 26

Energy Consumption………………………………………………………………………………… Page 26

Possible challenges facing Procter and Gamble…………………………………………………….. Page 27

Internal Strengths and Weaknesses…………………………………………………………………………………. Page 28

Recommendations ………………………………………………………………………………………………………….. Page 37,45

Implementation……………………………………………………………………………………………………………….. Page 40,45

Evaluation………………………………………………………………………………………………………………………… Page 44,47

Matrices……………………………………………………………………………………………………………………………. Appendix end

strategies which we believe will help the company grow.

II. The Company

History and Evolution

In 1988, Procter and Gamble announced a joint venture to manufacture products in

bath tissue, diapers, facial tissue and paper towels.

Mission and Major Goals

mission statement complies with the required characteristics.

technology and innovation.

good corporate environment brings better communities and prosperity.

and services that improves the lives of the world’s consumers.

principles as the company

we define sustainability broadly to include both environmental sustainability and social

2007 – 2012 Goals

Responsibility clean water every year.

integrated business-level strategy, in an attempt to increase revenue streams. Cross-functional

rate of innovation and technology increase.

In order to remain competitive internationally, benefit from economies of scale,

into consideration the geographical segmentation of multiple marketplaces, respective

and expectations as they vary across nations.

leadership ensured that cross-functional coordination created a significant advantage over

between marketing and R&D. Additionally, inter-business function communication facilitates

value creating propensity between manufacturing and marketing. Inter-business function

currency translation. This incorporates organic sales growth of 3% to 4%.

in developing markets, extending distribution systems to reach more consumers through

undeserved retail channels and expanding brand and product portfolio.

consistent and reliable innovator.

Collaborative Partnership and Strategic Alliance Strategy

percent annually. (Xerox.com)

through improved carrier selection, event management, and dashboard reporting.

Human Resources Strategy

Human Resource’s Five Core Values at Procter and Gamble

Research and Development and Engineering Strategy

Sales, Marketing, and Promotions

critical success factors in its business to consumer strategy.

Moves to Respond and React to Changing Conditions

found in the table below.

Progress Cumulative sales utilizing sustainable innovation products is at 52 billion

Operations Improve the environmental profile of P&G’s own operations

Since July 2007 Since July 2002

Liters of Clean 930 million liters of clean water delivered.

III. Competitive Environment

Forces and Trends

sustainable growth in future years.

(The IFE can be seen at the end of the report)