UNIVERSITY MALAYSIA SABAH

LABUAN INTERNATIONAL CAMPUS

FACULTY OF INTERNATIONAL FINANCE

STRATEGIC MANAGEMENT AND BUSINESS POLICY

(GT30003)

INDIVIDUAL ASSIGNMENT 3: P&G CASE STUDY

PREPARED FOR:

MADAM DARIA COM

PREPARED BY:

NO NAME MATRIC NUMBER

1.
HENG HAN LIN BG17160493
Table of Contents
1.0 Compute the following financial ratios for Procter and Gamble (June...3

2008).................................................................................................................3

a. Liquidity Ratios..........................................................................................3

b. Leverage Ratios.........................................................................................3

C. Activity Ratios............................................................................................4

D. Profitability Ratios....................................................................................4

2.0 Discuss any TWO (2) of major types of external forces that should be
examined and would be beneficial to the firm as part of an external audit.
Give an example of each type of force. Provide justifications.......................5

2.1 Economic forces.......................................................................................5

2.2 Social-cultural forces...............................................................................6

3.0 Discuss TWO (2) reasons why continuous emphasis on R & D could
prove to be advantageous for P&G. Justify your answers with examples....7

3.1 Business models of Procter & Gamble Company...................................7

3.2 Environments in highly competitive.......................................................8

4.0 References.................................................................................................10

5.0 Plagiarism Report.....................................................................................12

1.0 Compute the following financial ratios for Procter and Gamble (June
2008)

a. Liquidity Ratios

Jun-08
Formula
$'000
Current Assets
Current ratio=
Current Liabilities
24,515,000
=
30,958,000

= 0.79

Current Assets-Inventory
Quick ratio=
Current Liabilities
24,515,000-8,416,000
=
30,958,000
= 0.52

b. Leverage Ratios

Jun-08
Formula
$'000

Total Debt
Debt-to-Total Assets ratio=
Total Assets

74,498,000
=
143,992,000

= 0.52

Total Debt
Debt-to-Total Equity ratio=
Total Stockholder's Equity
74,498,000
=
69,494,000
= 1.07

Long-term Debt-to-Equity Long-term Debt

ratio= Total Stockholder's Equity
43,540,000
=
69,494,000
= 0.63
C. Activity Ratios

Jun-08
Formula
$'000
Sales
Inventory Turnover= Inventory of Finished
Goods
83,503,000
=
8,416,000

= 9.92

Sales
Total Assets Turnover=
Total Assets
83,503,000
=
143,992,000
= 0.58

D. Profitability Ratios

Jun-08
Formula
$'000
Sales-minus Cost of Goods Sold
Gross Profit Margin= X100
Sales
83,503,000-40,695,000
= X100
83,503,000
= 0.5127 /51.27%

Earnings before Interest and Taxes EBIT

Operating Margin Profit= X100
Sales
17,545,000
= X100
83,503,000
= 0.2001 /20.01%

Net Income
Return on Equity X100
Total Shareholder's Equity
12,075,000
= X100
69,494,000
= 0.1738 /17.38%
2.0 Discuss any TWO (2) of major types of external forces that should be
examined and would be beneficial to the firm as part of an external audit.
Give an example of each type of force. Provide justifications.
The external auditor must review the company's internal operations to assess
the organization's financial situation when they examined to the firm. However, the
auditor must also consider the external impact on the company. No business can
operate in a vacuum, and external pressure can affect the financial condition of the
firm. External forces are those factors, circumstances or conditions that cannot be
regulated by a business which affect the business decisions made by the business
owner and stakeholders. There are a vast range of external factors that can directly
affects the business' ability to attain its strategic goals. Monitoring the macro factors
that impact your company and industry on a regular basis is critical and reacting to
them in a way that is suitable for your company. [ CITATION Kev17 \l 1033 ]

2.1 Economic forces

One of the major types of external forces that should be examined to the firm as
an external audit is economic forces. This is because the success of the Procter &
Gamble Company in the consumer goods market is focused directly on the
economies in which the company operates. For example, a company’s growth may
be down, but if the economy is in recession, it may be appropriate for that fall in
growth. Conversely, a firm that does not experience growth in a robust economy
may be in worse trouble than if the lack of growth is in a flat economy. Economic
forces refer to the variables such as inflation rate, savings rate, interest rate, foreign
exchange rate, and business cycle assess aggregate demand and aggregate business
expenditure. Although Procter & Gamble Company is based in the United States, in
countries using currencies other than the US dollar it earns income, pays
expenditures, own assets and incur liabilities. Consequently, rises or decreases in the
value of the US dollar against other major currencies would impact the company's
net operating profits, operating expenses and the value of foreign currency
denominated balance sheet products.
Besides, sales are relying on consumer spending. The economic downturn
triggered spending cuts for consumers, and this would affect the profits of Procter &
Gamble Company decline. Therefore, they must retain the ability to compete with
costs, and sell their diversified commodity supply chain to preserve financial
equilibrium. Procter & Gamble Company has attracted more consumers by offer
superior performance compared to their competitors. It has markets more than 300
brands in the beauty, health, fabric, home, baby, family and personal care product
category. For instance, Olay - the leader in skin care product worldwide. It has eight
global product lines which offer a variety of products. Product such as Olay
professional pro-X, Olay Definity, Olay Regenerist, Olay Total effect, Olay complete,
Olay hydrate & cleanse, Olay clarity, Olay body lotion, Olay touch of sun and Olay
body cleansing. [ CITATION UKE16 \l 1033 ] This attracts female customers’ base from all
levels of income, since majority women are like to look after their appearance.

2.2 Social-cultural forces

The external audit also has to examine to social-cultural forces that can affect
the Procter & Gamble Company. Sociocultural factors are social customs, lifestyles
and values. Cultural aspects in particular include aesthetics, education, language, law
and politics, religion, social organizations, culture of technology and materials, values
and attitudes. [ CITATION Kev17 \l 1033 ] Therefore, social trends and changes affect
Procter & Gamble in terms of customer preference and buying behaviour. With the
development of the country, consumers increasingly their preference for high-quality
products instead of the low-quality product. These external social factors have
created opportunities for business growth in the remote or macro environment of the
consumer goods industry. For example, Procter & Gamble Company can anticipate
potential revenue growth by improving their product quality. On the other hand, the
growing preference for health products provides Procter & Gamble Company with
another growth opportunity. The company can improve the health effects of its
consumer products accordingly. [ CITATION Bab17 \l 1033 ] Despite such opportunities,
Procter & Gamble Company is still facing the threat of declining population growth
rates in many developed countries. This external social and cultural factor reduces
the long-term business growth potential of developed markets. [ CITATION AND17 \l
1033 ]
Lastly, the Procter & Gamble Company has evolved to become one of the world's
largest consumer goods firms. This market condition is partially due to the success of
the organization in resolving the issues identified in an examination of the sector by
PESTLE analysis. The PESTLE analysis is a management method for assessing how
the company influences the external environment. Most of the approaches of Procter
& Gamble are based upon an awareness of external conditions in the consumer
goods industry's remote or macro-environment.
3.0 Discuss TWO (2) reasons why continuous emphasis on R & D could
prove to be advantageous for P&G. Justify your answers with examples.
Every company has the core organizational concepts of certain people that are
used to make decisions, to meet challenges and to build simple opportunities.
Procter & Gamble Company, a global leader in the fast-moving consumer goods. It
offers top-quality and value branded products to its customers around the world.
Procter & Gamble Company believes that continuous emphasis on Research and
Development could bring advantageously for their company.
3.1 Business models of Procter & Gamble Company
The business model of Procter & Gamble Company is focused on the continued
growth and success of established brands and products, as well as the creation of
new products and innovation in emerging brands. For any company that wants to
develop and prosper in both the short and the long term, creativity must be the core
driving force. We live in a time when change rates are such that the unique product
or service of today becomes commodity of tomorrow. This means innovative is the
core foundation of operation. Whether it is goal selection, strategy, organizational
structure, resource allocation, budget commitment or leadership development,
innovation is the key to driving decision-making. [ CITATION Bru11 \l 1033 ] Hence,
continuous Research and Development is essential and very helpful for the product
innovation.
Besides, Procter & Gamble Company put consumer needs and demands at the
center of everything they do. They believe that innovation starts with the consumers
themselves. [ CITATION HOW08 \l 1033 ] Hence, Procter & Gamble Company places
enormous significance on gaining insight into the everyday lives of consumers so
that they can incorporate "what is needed" and "what is possible." Citing Pampers as
an example, the product is reinvented on target market base. Pamper is a tape
diaper in the United States because parents typically change diapers on a changing
table. However in Japan, diapers of babies are changed on a traditional Japanese
mat which also known as tatami. [ CITATION Zaf17 \l 1033 ] Since it is done on the floor,
babies tend to run around the house, making putting on the diapers more difficult for
the parents. Procter & Gamble Company launched a pull-up diaper for this category
of customer.
With independent clinical trials and new standards of both natural and organic
cosmetics, skin care is changing faster than ever. Besides, women pay great
attention to take care of their appearance in this era. They are willing to try new
things and spend money to make themselves look better and younger. As the
number of women working increases so that women have more money to spend,
and skin care is one of their favorite channels of consumption. Procter & Gamble
Company has broadened their product line in order to reach these market segments.
They market Olay (moisturizing skin care products), it has eight global product lines
which offer a variety of products. Product variety including Olay professional pro-X,
Olay Definity, Olay Regenerist, Olay Total effect, Olay complete, Olay hydrate &
cleanse, Olay clarity, Olay body lotion, Olay touch of sun and Olay body cleansing.
[ CITATION UKE161 \l 1033 ] Therefore, Olay has achieved great success with an 8 percent

market share in the facial moisturizing market in Mexico. In addition, Olay skin cream
advertised with Pantene hair-care products makes Olay skin cream enter 150
countries where Pantene has been sold. Procter & Gamble Company by broadening
the product lines. Finally, Olay becomes a brand that has a big success in Mexico.

3.2 Environments in highly competitive

Besides that, the market and industry Procter & Gamble Company operate was
in the environments that are highly competitive. Although Procter & Gamble is one of
the world’s largest consumer products companies and the company have various
well-known brands in almost every country or region in the world. But it is not the
only company trying to stand out in the consumer goods industry. Procter & Gamble
Company compete against with the global, regional, local competitor and other
branded products as well as retailer’s private label brands. Additionally, the needs
and desires of customers were differing from country to country, from gender to
gender, and by age. To get on top of the market, a company with its product lines
and brand names needs to be creative and diverse and needs a strong marketing
strategy. [ CITATION Inv20 \l 1033 ]
The effective multiple brands strategies of Procter & Gamble Company have
been successful target different market segments. This enables them to tailor a
various feature that appeal to different consumers such as Head & Shoulders and
Pantene shampoo. As a result, companies can adopt the differentiated marketing
approach. Therefore, long-term relationships with consumers are built by closely
meeting their needs and desires with goods that have a competitive edge over their
rivals. However, each brand can only get a small market share by using multi-brand
strategy. Their major competitors - Unilever and Reckitt Beckinser was unlike them.
As compared to their products, they have already begun to market their corporate
brands. Unilever displays their logo distinctly on their advertisements; while Reckitt
Beckinser has begun raising their corporate advertising among students to highlight
the job opportunities they offer for graduates. This means that promotion above the
line is needed to quickly raise their corporate profile in the form of advertisements.
The corporate branding strategy will offer even greater long-term benefits to
companies, which may not be part of its marketing goals. However, as consumers
trust and recognize Procter &Gamble Company, the more they are willing to try to
launch new brands. [ CITATION Jos10 \l 1033 ]
In conclusion, by focus on continuous research and development makes Procter
& Gamble Company has successfully expanded their business into new markets.
They also increase their presence in the developing markets and sales in respective
developing country by focus on brand awareness, ability and accessibility. Thus,
research and development are critical for the operations of an organization. Because
companies can seek expertise to create, design, and improve its products, services,
technologies, or processes.

4.0 References
ANDREW THOMPSON. (2017, May 25). Panmore. Retrieved from Procter & Gamble
PESTEL/PESTLE Analysis & Recommendations: http://panmore.com/procter-
gamble-pestel-pestle-analysis-recommendations

Babu John Mariadoss. (2017). CORE PRINCIPLES OF MARKETING. Retrieved from

https://opentext.wsu.edu/marketing/chapter/5-1-factors-that-influence-
consumers-buying-behavior/

(2008, February 27). Retrieved from HOW AND WHY INNOVATION AT PROCTER &
GAMBLE CHANGED ITS GAME: http://www.ram-charan.com/wp-
content/uploads/2012/12/Game-Changer-sample.pdf

Bruce Brown, Scott D. Anthony. (2011, June). Harvard Business Review. Retrieved
from How P&G Tripled Its Innovation Success Rate:
https://hbr.org/2011/06/how-pg-tripled-its-innovation-success-rate

Investopedia. (2020, February 24). Retrieved from Who Are Procter & Gamble's Main
Competitors?: https://www.investopedia.com/ask/answers/120114/who-are-
proctor-gambles-pg-main-competitors.asp

Josh. (2010, December 31). Retrieved from Procter and Gamble – Corporate
branding vs multi-branding:
https://manifestedmarketing.wordpress.com/2010/12/31/proctor-and-
gamble-corporate-branding-vs-multi-branding/

Kevin Johnston. (2017, September 26). What Are 5 External Forces That Should Be
Examined As Part of an External Audit? Retrieved from Bizfluent:
https://bizfluent.com/info-12017840-5-external-forces-should-examined-part-
external-audit.html

UK ESSAYS. (2016, December 5). Retrieved from Product extension of procter and
gamble: . https://www.ukessays.com/essays/marketing/product-extension-of-
procter-and-gamble-marketing-essay.php

UK ESSAYS. (2016, December 5). Retrieved from Marketing Analysis Of The Product
Olay Marketing Essay:
https://www.ukessays.com/essays/marketing/marketing-analysis-of-the-
product-olay-marketing-essay.php
Zafirah Salim. (2017). Vulcan Post. Retrieved from 7 Secrets To Success: How P&G
Climbed Its Way Up To Be A Billion Dollar Company:
https://vulcanpost.com/609482/procter-and-gamble-billion-dollar-company/

5.0 Plagiarism Report