Procter and Gamble: External Analysis

External Analysis

Procter and Gamble

MBA 6024 Organizational Strategy

11/06/16

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 Procter and Gamble: External Analysis

Introduction

Procter and Gamble is a multinational manufacturer of products which includes family,

personal, and household care products. Headquarters in Cincinnati, Ohio and founded by

William Procter and James Gamble (Procter & Gamble, 2016).

P&G is the industry leader because of its ability to maintain a competitive advantage over

its rivals resulting in higher than average profitability and has many resources that contribute

towards gaining and maintaining competitive advantage (Brown & Anthony, 2011) One of

P&G’s main strength is its strong financial position which allows it to acquire other companies.

P&G can push for innovation and ensure faster commercialization than any of its competitor in

the industry. Their initiative is to invest in improving brands and innovation that also promotes

brand loyalty.

P&G works in several areas across the globe and has successfully managed to establish

itself as a leader in these marketplaces across many sectors. This diverse range of product

offerings along with its operation in various geographic regions allows P&G to reel through the

recessions in the economy and maintain its profitability (Brown & Anthony, 2011).

PEST Analysis

The Pest analysis for Proctor and Gamble ls used to discover the external environmental

factors within the company. These factors determine the impact or influence that shapes the

company. The Pest analysis is a useful tool for understanding the macro-environment in which an

organization operates (Grant & Jordan, 2015). The analysis involves reviewing factors which

will have an impact on the organization's business and re level of success t will be able to

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 Procter and Gamble: External Analysis

achieve and maybe carry out as part of an ongoing process of environmental scanning (Grant &

Jordan, 2015).

Politically, for P&G the Action Committee ls an opportunity that was created to gives

candidates economic support (Our political involvement, 2016). Economically, recession and

economy margins affect the price of their products. Socially, tools and programs influence the

society. Procter and Gamble developed a program called the Safe Drinking Water program which

helps children get clean water (Brands and corporate programs, 2016). Finally, technologically,

the creation of new products within different markets reflect a change in technology.

Five Forces Analysis

Porter’s Five Forces of competitive poston analysis developed in 1979 by Michael E

Porter of Harvard Business School as a simple framework for assessing and evaluating the

competitive strength of the organization (Grant & Jordan, 2015). The Five Forces include

supplier and buyer power, competitive rivalry, threat of substitutes, and threat of new entry. ln

examining Porter's Five Forces at P&G, the five forces would be, competitive intensity among

rivals, new entrant to P&G’s product category, the ease of substitution, consumer bargaining

power and supplier bargaining power (Morgan, 2015). As for these forces, P&G supply and

buyer power les within their business. These forces reflect on the profitability of the company.

Summary

Procter and Gamble's pest analysis helps the company understand its political,

economical, soc-cultural and technological environment. Ths analysis helps in determining their

future and it draws attention to the external environmental factors.Proctor and Gamble Five

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 Procter and Gamble: External Analysis

Force model entles the buyers, suppliers, threat of new entrants, threat of substitutes, and the

rivalry of a firm for the company. The P&G buyer power informs the consumers to be aware of

the brands within the company. Price has a lot to do with this. When prices are competitive, the

buyer power is high. When it comes to the supplier, the supplier power can either be high or low

depending on the materials available. The threat of new entrants are not affected because Procter

and Gamble's brands are popular and competitively they operate in a global market. The threats

of substitutes; many retailers terminate their popular product brands at a lower price. Ths can

threaten the company in ways where lt affects their profit. People will buy a similar product to

others at a costly expense. Finally, the degree of rvary. P&G has to stand out more with their

products since the threat of new entrants and substitutes can affect ter business

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 Procter and Gamble: External Analysis

References

Brands and corporate programs.(2016). In P&G. Retrieved from

http://us.pg.com/sustainability/social-responsibility/brand-corporate-programs/children-safe-
drinking-water.

Brown, B., & Anthony, S. (2011). How P&G tripled its innovation success rate. In Harvard
business review. Retrieved from https://hbr.org/2011/06/how-pg-tripled-its-innovation-
success-rate

Grant, R. M., & Jordan, J. (2015). Foundations of strategy (2nd ed.). West Sussex, UK: Wiley
and Sons.

Morgan, P. (2015). Procter & Gamble: Your Guide to the Largest Consumer Staples Firm. In

Market Realist . Retrieved from http://marketrealist.com/2015/07/procter-gamble-global-

giant-household-personal-products/

Procter and gamble. (2016). In Wikipedia. Retrieved from https://en.wikipedia.org/wiki/Procter_

%26_Gamble

Our political involvement. (2016). In P&G. Retrieved from http://us.pg.com/who-we-

are/structure-governance/corporate-governance/political-involvement

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