Name : Hazelle Joy C.

Borja
Course : Bachelor of Science in Accountancy
Subject : GED EL 1B Business Logic

Procter & Gamble

Part I
Introduction

William Procter and James Gamble established the Procter & Gamble Company
(P&G), an American international consumer goods company with its headquarters located in
Cincinnati, Ohio, in 1837. English-born candlemaker William Procter and Irish-born soap
manufacturer James Gamble immigrated to the United States from the United Kingdom.
They initially settled in Cincinnati, Ohio, where they first connected through their marriage to
sisters Olivia and Elizabeth Norris. Procter & Gamble was founded in 1837 after their father-
in-law, Alexander Norris, convinced them to be business partners. P&G is incorporated in
Ohio and is a leading manufacturer of consumer health, personal care, and hygiene goods. Its
product line is divided into multiple categories, such as beauty, grooming, health care, fabric
and home care, and infant, feminine, and family care. It also included meals, snacks, and
drinks prior to Pringles being sold to Kellogg's. Consumers all over the world rely on P&G
brands to deliver products with the best quality, exceptional performance, and value for their
everyday cleaning, health, and hygiene needs. P&G brands are trusted to provide products of
the highest quality and superior performance and value for the daily-use cleaning, health and
hygiene needs of consumers around the world.
Baby Care

Fabric Care
Family Care

Feminine Care
Grooming

Hair Care
Home Care
Multi Brands Programs
Oral Care

Personal Health Care

Skin and Personal Care
 Part II.
Main Report

A. Explain and discuss its success story, the business model used, how it achieved
superior profitability and profit and growth.

Success Story

In the early 1830s, Cincinnati was a borderland town. With boat service to bring trade
up and down the river to other places like Pittsburgh, Louisville, Memphis, and New Orleans,
the city, which was situated at the large bend of the Ohio River, was ready for explosive
growth. Also known as "Porkopolis" due to the abundance of meatpacking companies, the
city also provided an abundance of fat and oil for soap and candle manufacturing. Although
Cincinnati's market was expanding, the majority of the country was experiencing financial
difficulties. There was a widespread concern that the US may go bankrupt as hundreds of
banks closed their doors around the nation. Nevertheless, William and James persisted,
promising $3,596.47 individually to launch the Procter & Gamble Company, a joint venture
that would sell soap and candles. Establishing a business at that time was risky because there
were already 14 other soap and candle makers in Cincinnati alone. On October 31, 1837, the
collaboration agreement was signed. The new business partners opened their first office at 6th
and Main, two blocks from the current headquarters location. A print advertisement for
machine and lamp oil is Procter & Gamble's first advertising campaign. The development of
print advertising coincided with the advent of the newspaper. The Daily Gazette published it
on June 29, 1838.

William and James decide to sell some of their personal assets to finance the
development and manufacturing of a new star candle product, in an attempt to create a
higher-quality candle than any that was being made in Cincinnati at the time. P&G's first
factory, located on Central Avenue (formerly known as Western Row), is where the work is
being conducted. It was close to Cincinnati's canal, providing affordable water access to the
expanding upper Midwest markets. In terms of the numerous advantages that the plant
provided was its close proximity to the stockyards, which made raw materials easily
accessible. In addition, On January 7, 1884, a destructive fire ultimately destroyed the
facility. In the year 1841, James Gamble created and obtained P&G;’s first utility patent for
an apparatus that molds candles. Procter & Gamble had made $37,000 by 1848. However,
rapid and consistent growth continued, and by 1859, the company's sales exceeded
$1,000,000 and it employed 80 people. Lard oil was the best-selling product, followed
closely by candles, with soap accounting for only one-third of the sales as candles and
glycerin accounting for one-tenth. The Moon and Stars image first appeared on Procter &
Gamble crates in 1850. The symbol was used by wharf hands to identify Star Candle boxes.
This became the initial logo for the business, and by the 1860s, it was used on all
correspondence and merchandise from the company. The original American colonies were
represented by the image of a man on the moon with thirteen stars in the logo. The P&G
word mark took its place as the new logo in 1993. Each vessel transporting goods from
Cincinnati carried its fair share of boxes packed with Procter & Gamble candles and soaps. A
clerk who wanted to be an artist drew a starry sky on a candle crate. Afterwards, a man-in-
the-moon image was drawn in a circle around the stars. In effect. customers down the river
refused to accept the company's candles without the Moon and Stars on the crate, and soon
this became the unofficial trademark for the products. P&G formally adopted the Moon and
Stars as their trademark in 1850. By the late 1850s, they reached $1 million in sales and had
about 80 employees.

During the American Civil War, the company supplied soap and candles to the Union
Army, and after the war, it sold even more of these products to the general public. Introduced
in 1879, Ivory soap, Crisco shortening (1911), Tide (1946)—the first synthetic laundry
detergent—and Joy (1949), the first synthetic liquid detergent, were some of its initial
offerings. In 1932 Procter & Gamble introduced the “The Puddle Family,” to the radio
audience called the first “soap opera,” because of its sponsorship. The business expanded its
product lines over years that followed to include baking mixes, toothpaste, coffee, and tea.
Procter & Gamble was marketing products in a number of significant categories by the early
21st century: house and home (cleaning products, detergents, paper towels, coffee, and snack
foods); personal and beauty (fragrances, deodorants, cosmetics, shaving supplies, and hair
color); baby and family (diapers and tissue, cleansing products, and moisturizers); and pet
care, including meals for pets. The company has been a prominent provider of free samples
and discount coupons, as well as a top national advertiser in the United States for a
considerable amount of time.

Business Model

● Research and Development

Distinct knowledge centers of first-in-class experts uncover new technologies and
cutting-edge capabilities based on current and future consumer needs. From there,
novel insights are translated by multi-disciplinary experts, validated with cognitive
science and anthropology-based human truths, and ultimately harnessed by our
scientists, designers, and engineers to constructively disrupt the status quo.

● Testing and Quality Control

Safety is at the heart of everything P&G does.. Before marketing a new product, they
go beyond regulatory compliance to ensure every ingredient’s safety through a four-
step, science-based process. P&G uses the same process as regulatory agencies
around the world, like the US FDA, EPA, the EU, the WHO, and others.
The 4 Step Process:
Step 1: Doubt
Before using any ingredient, P&G scientists start by asking questions. If there is any
doubt about its safety or benefit to its consumers, they would not use it.
 Step 2: Define
P&G defines the ingredient’s safe range using the same science-based standards as
major regulatory agencies around the world.

Step 3: Determine
P&G evaluates all ingredients in the product to ensure they are safe when used - both
for you and the environment. If the brand cannot confirm that, they will go back to the
drawing board.
Step 4: Diligence
The last step never ends. Once a product is on shelves, P&G keeps up with new
information on each ingredient—collaborating on new products safety methods with
regulatory agencies and scientists outside of P&G to make sure the company is up to
date. Most importantly, the company listens to you—making sure the products they
design meet your expectations for safety and performance.

● Manufacturing
P&G Manufacturing is all about safety, quality, and productivity. It is where products
are packaged and palleted. Typical production lines are an important part of the work
and traditional warehousing., but P&G manufacturing facilities also include state-of-
the-art robotics, automation, zero-touch systems, and even “zero waste to landfill”
capabilities.

● Packaging and Design

Packaging plays an essential role in delivering products to the consumers. P&G set
ambitious goals to drive greater circularity of the packaging at end of life. The teams
of designers, material scientists, and innovators work hand and hand to create new
packaging solutions to reduce plastic, reduce transportation emission, consumers with
disabilities, and reuses materials while providing an incredible usage experience. In
fact, these innovators around the world are working towards 100% recyclable or
reusable packaging.

● Distributions
P&G caters to a wide range of age, gender, and income demographics with a wide
range of customers who utilize essential daily products. They also provide their
products to institutional buyers, which include wholesalers, retailers, and other
companies that need them for consumer-facing services or resale. In addition, P&G
has a wide range of retail channels, including both online and offline ones. They
distribute their goods via pharmacies, convenience stores, supermarkets,
hypermarkets, and other retail outlets. In addition, they make use of e-commerce
platforms, which let customers buy their goods online.
 ● Acquisitions
Procter & Gamble has made acquisitions across sectors such as Beauty & Personal
Care Products, B2C E-Commerce, Consumer Digital - US and others. Some of these
are Billie, Tulla, Walker & Company, Wella, and Max Factor.

● Connect + Develop
P&G/s global team searches for trailblazers outside the company. Then, the company
creates and nurtures partnerships with these inventors, patent holders and other
innovators—ultimately leading to new solutions in every area of business, from
supply chains to products and technologies to in-store and e-commerce experiences.

How it Achieved Superior Profitability and Profit and Growth

P&G brands are trusted in millions of living rooms, kitchens, laundry rooms, and
bathrooms—and have been passed down from generation to generation. Procter and
Gamble’s key resources are its product portfolio, strong brand reputation, research and
development capabilities, and global supply chain network. These resources enable them to
maintain high quality standards and efficient production processes. This diversification of the
product portfolio reduces business risks and helps to maintain a consistent revenue stream.
P&G can also effectively penetrate emerging and developed markets due to its vast global
distribution network. The company's commitment to research and development has also
helped it to launch innovative products and maintain its competitiveness in the rapidly
changing consumer goods market. Procter & Gamble can keep growing its consumer base
and optimizing its market penetration. The business uses a variety of marketing and
promotional initiatives to keep its good reputation with customers. These marketing
initiatives foster a sense of loyalty and trust that leads to enduring connections with clients. In
order to guarantee satisfaction and handle any issues, they also put a lot of effort into
providing outstanding customer service and support By ensuring efficient and effective
customer outreach and focusing on developing markets with significant growth potential,
Procter & Gamble can capitalize on a number of industry trends and advancements.
B. How it attained competitive advantage and attained superior performance.

Differentiation
Differentiation involves improving the uniqueness of the business and its products in
order to attract target customers. Procter & Gamble emphasizes quality and value in its
consumer goods in this case. For example, the company sells high-quality cleaning agents at
low prices, such as Tide laundry detergent. A suitable strategic objective based on this
generic competitive strategy is to maintain P&G's high investment in research and
development and market research in order to ensure high-quality and valuable products which
results in superior performance because the company produces consumer needs based
products.

Maintain Effective Marketing Strategies that Highlight the Uniqueness of Products

Another strategic goal based on Procter & Gamble's generic differentiation strategy is
to maintain effective marketing strategies that highlight the uniqueness of such products.
Pricing and promotional activities are determined by the uniqueness of the product. These
factors are incorporated into Procter & Gamble's four-part marketing mix.

Cost Leadership
The cost leadership generic competitive strategy is partially applied to some of
Procter & Gamble's products to achieve competitive advantages through cost or pricing.
Pantene hair care products, for example, are priced lower than competitors such as Unilever's
Dove hair care products. This generic competitive strategy is also factored into Procter &
Gamble's marketing mix. A strategic goal based on the cost leadership generic strategy is to
develop Procter & Gamble's competitive advantage through cost-cutting measures.

Automation
Automation is increasingly being used to reduce costs and increase efficiency in
Procter & Gamble's operations management and manufacturing processes.

P&G’s formidable success to date is attributable to a number of distinct competitive

advantages:

➢ P&G is the innovation leader in the industry.

All the organic sales growth P&G delivered in the past years comes from new brands
and new or improved product innovation. P&G spends almost twice as much on research and
development spending as its closest competitor. In addition, the Company multiplies its
internal innovation capability with a global network of innovation partners outside P&G.
More than half of all product innovation coming from P&G includes at least one major
component from an external partner.
 ➢ P&G is also the brand-building leader of its industry.
The Company has built the strongest portfolio of brands in the industry with 23
Billion-dollar brands and 20 half-billion-dollar brands. These 43 brands account for 85% of
sales and more than 90% of profit. Twelve of the billion dollar brands are the #1 global
market share leaders of their categories. The majority of the balance are #2. As a group,
P&G’s billion-dollar brands have grown sales at an average rate of 11% per year

➢ P&G has also established industry-leading go-to-market capabilities.

P&G is consistently ranked by leading retailers in industry surveys as a preferred
supplier and as the industry leader in a wide range of capabilities including clearest company
strategy, brands most important to retailers, strong business fundamentals and innovative
marketing programs.

➢ P&G has also established significant scale advantages.

The Company has also established significant scale advantages as a total company
and in individual categories, countries and retail channels. P&G’s scale advantage is driven
as much by knowledge sharing, common systems and processes, and best practices, as it is by
its size and scope. These scale benefits enable P&G to deliver consistently superior consumer
and shareholder value.
C. Why shareholders invested in it.

Procter and Gamble offers a diversified product portfolio. P&G is a multi-category

company that offers products for home care, personal care, health, and beauty. When a
company is diversified, it reduces the risk of operating in a single industry or category
because its strengths can be used to counterbalance its weaknesses in other areas. The
company's reach is an additional factor. P&G's global reach, spanning more than 180
countries, serves to reduce the risk that comes with operating exclusively in one area or
market. Due to its extensive and varied customer base, the company's global reach also
contributes to its consistent revenue and earnings growth.

In the 2023 Fiscal Year P&G Annual Report Organic sales for the year grew 7%.
Core earnings per share grew 2%. Currency-neutral core earnings per share were up 11%.
Adjusted free cash flow productivity was 95%. This was the second consecutive year of 7%
organic sales growth and fifth consecutive year of 5% or better organic growth — starting in
fiscal 2019: 5%, 6%, 6%, 7%, 7%. Growth was broad-based across business units, with all 10
of the product categories growing organic sales. Personal Health Care grew mid-teens.
Feminine Care grew double in digits. Fabric Care, Home Care and Hair Care were each up
high single digits. Skin & Personal Care, Baby Care, Family Care and Grooming each grew
mid-single digits. Oral Care grew in the low single digits. Focus markets grew 5% for the
year. P&G delivered strong results in the largest and most profitable market, the United
States, with organic sales growing 6%. This is on top of a strong 8% growth comparison in
the base period. Sales in the U.S. are up 32% on a four-year stack basis (across fiscal years
2020, 2021, 2022 and 2023). Enterprise markets were up 15%, led by Latin America with
24% organic sales growth. E-commerce sales increased 7%, now representing 17% of total
Company sales. Seven of 10 product categories grew share globally over the past year.
Twenty-nine of our top 50 category/ country combinations held or grew share for the year.

The core earnings per share growth of 2% overcame a 24 percentage-point headwind

from higher materials costs and foreign exchange. P&G increased the dividend by 3% and
returned over $16 billion of value to shareowners with $9 billion in dividends and over $7
billion in share repurchase. Over the past 10 years, P&G have returned $145 billion to
shareowners through dividends and share repurchase. P&G has paid a dividend for 133
consecutive years, raising the company’s dividend for 67 consecutive years. Only seven U.S.
publicly traded companies have paid a dividend more consecutive years than P&G, and only
three U.S. companies have raised their dividend more consecutive years.
(Data was sourced from the Procter and Gamble 2023 Annual Report)
D. Discuss the effects of the characteristics of the industry to the performance of a
company.

P&G has a focused portfolio of daily-use products in categories where performance

plays a significant role in brand choice. The company focuses on delivering superior products
with the best performance, in every price tier in which they compete. The company remains
committed to the strategy that give focus on daily use categories where performance drives
brand choice, superiority (of product, package, communication, go-to-market execution and
value), productivity, constructive disruption, and an agile and accountable organization
structure and culture — all in pursuit of sustainable, balanced growth and value creation.

Procter & Gamble focuses on continuous market research and product development
which affects the performance of the company. In 1921, P&G started market research and
was joined by D. Paul "Doc" Smelser, a Ph.D. economist from Johns Hopkins University. He
collects statistical data breaking out consumers by income and background, making Procter
and Gamble the first company to conduct deliberate, data-based market research with
consumers. This allowed them to improve consumer understanding and anticipate their needs
to create products that improve everyday life. It paved the way for them to have a superior
performance among other companies because the company produces consumer needs based
goods that are safe for the community. Aside from that, P&G’s geographic scope is wide,
making the products accessible to different continents. Procter & Gamble ensures the safety
of products, packages and operations for the employees, consumers and the environment. The
company considers this to be a requirement for conducting responsible business, and an
essential element of building and maintaining public trust in the products. They carefully
evaluate the safety of all products and ingredients before releasing to the market, using well-
established risk assessment methods to understand both hazards and potential exposures.
These evaluations are a mandatory part of the company’s product development process, and
begin during the early stages of a product’s design. With this assurance, brand loyalty is
expected from the consumers.
E. Explain/enumerate the strategies it adopted to build barriers to entry.

Economies of Scale

Based on Procter & Gamble’s global scale of operations, the company is one of the
biggest firms in the market. The company benefits from high process efficiencies and high
cost-effectiveness linked to its organizational size. Also, P&G maintains a high-efficiency
global product distribution network. This network involves company-owned facilities as well
as third-party service providers which strengths support market penetration and product
competitiveness. This allows the company to meet consumer demands and respond quickly to
changes in the market. The products under P&G are all scalable and can be mass-produced;
therefore, creating a vast supply chain and distribution systems would be difficult for a new
entrant. Therefore, for a new entrant, it is possible to compete with a particular segment, but
becoming such a giant in multiple sectors is going to be a challenge. New entrants would
struggle to match P&G’s production efficiency and cost-effectiveness.

Brand loyalty

Procter & Gamble Company (PG) is a leading household and personal care
manufacturer that has been around since 1837. The company has had a significant amount of
time to create a brand image. P&G brands are trusted to provide products of the highest
quality and superior performance and value for the daily-use cleaning, health and hygiene
needs of consumers around the world. P&G is the market leader in categories where products
solve problems and performance drives purchase For example, Tide and Pampers are
household names that contribute to consumer loyalty and P&G’s stable market share. P&G's
strategy that involves consumers' brand loyalty is the “Point Loyalty Program.” Consumers
find the code on the product they buy, enter it online (or mobile), and earn rewards. This
simple process is constructed with some interesting benefits for P&G. For example, by
having consumers enter a unique code found on each package, P&G collects transaction info
without digging into retailer data; an often complicated and messy process.

P&G incorporates many of the usual loyalty program features and they use it to track
consumer behaviors at key transition points (e.g., change in diaper size) in the overall product
usage life-cycle. In that way, they can send special offers and targeted messages to keep
consumers loyal and mitigate switching behaviors at critical junctures.

Absolute Cost Advantages

P&G also has an efficient distribution system which allows it to distribute its products
in various regions of the globe at a lower cost than its competitors. P&G also collaborates
with distributors like Wal-Mart, Target etc. to keep the supply chain functioning efficiently.
This allows restocking of shelves at distributors much easier as it provides real time data to
P&G as stock levels deplete.This allows P&G to save costs associated with huge inventories
and warehouses. Also, P&G owns and operates almost 115 manufacturing facilities across 80
countries around the globe. This Is a great asset of the company which provides it with the
capability of saving on the cost of shipping products from one region to another. All these
sets of co-related resources and capabilities allow &G to save on costs and provide high
quality products to reasonable people which in turn has generated above average profits in the
industry making P&G the industry leader.

Customer Switching Costs

P&G enjoys exceptional brand name recognition and commands a considerable

market share. Switching costs in the industry are quite low. It does not cost anything for a
consumer to buy one brand of shampoo instead of another. This external factor enables new
entrants to exert a strong-intensity force against the company. However, the moderate capital
costs limit this threat against Procter & Gamble. New firms find it difficult to directly
compete, considering the company’s organizational size and capitalization. However, with
the combined size of other competitors such as Unilever, makes this a highly competitive
industry. Significant Competitors include: Unilever, Colgate-Palmolive, Playtex, Avon and
Estee Lauder.

Government Regulation

P&G’s Global Government Relations & Public Policy (P&G GGRPP) team represents
the Company’s point of view in Washington, D.C., in U.S. state capitals and in key country
capitals around the world. Working with the businesses, P&G GGRPP focuses on legislative
and public policy issues that impact the Company’s bottom line and long-term business
interests. Where permitted by law, P&G GGRPP engages and educates policy-makers and
key stakeholders on issues that impact our business; facilitates the exchange of information
between key decision makers and public policy organizations in the United States and
abroad; and leads Company actions on policy matters both unilaterally and in industry
coalitions and associations.

P&G complies with all U.S. federal and state laws, including the Lobbying Disclosure
Act and Honest Leadership and Open Government Act that require reporting on lobbying
activities and certification of compliance with Congressional gift rules. For the 2022 calendar
year, P&G reported U.S. lobbying expenditures of $3.2 million in the lobbying disclosure
reports filed with the Clerk of the U.S. House of Representatives and the Secretary of the
U.S. Senate and a total of $1.10 million in lobbying expenditures in U.S. states. In fiscal year
2021-2022, P&G reported lobbying activity in the range of 700,000 - 799,999 € at the
European Union level under voluntary guidelines issued by the EU Commission and the
European Parliament.
 Part III
Conclusion

A. Lessons Learned

To conclude, Procter & Gamble's business model has demonstrated resilience and
innovation over the years, making it an outstanding example of sustainability, adaptability,
and innovation in a fiercely competitive industry. Several lessons can be learned from P&G's
success:
● Innovation and Research & Development (R&D): P&G has a strong focus on
innovation and invests heavily in R&D. The company is known for consistently
introducing new and improved products to meet changing consumer needs. Lessons
include the importance of staying ahead in terms of product development and
constantly investing in research to stay competitive.

● Brand Management: P&G is a master at brand management. The company has a

diverse portfolio of well-known brands, each with a clear market position. The lesson
here is the importance of building and maintaining strong brands, understanding
consumer perceptions, and managing brand equity effectively.

● Consumer-Centric Approach: P&G places a high emphasis on understanding and

meeting consumer needs. The company invests in consumer research and feedback to
shape product development and marketing strategies. This customer-centric approach
is crucial for long-term success.

● Global Expansion: P&G's success is, in part, attributed to its global expansion
strategy. The company operates in numerous countries and tailors its products to local
preferences while maintaining a global brand identity. The lesson is the significance
of adapting to local markets while maintaining a consistent global brand image.

● Cost Management and Efficiency: P&G is known for its efficient supply chain and
cost management practices. The company constantly seeks ways to streamline
operations and reduce costs without compromising product quality. This highlights
the importance of operational efficiency for sustained success.

● Acquisitions and Alliances: P&G has a history of strategic acquisitions and alliances
that have contributed to its growth. The lesson is the value of strategic partnerships
and acquisitions in expanding market reach, accessing new technologies, and staying
ahead of competitors.

● Talent Management: P&G places a strong emphasis on talent development and

management. The company is known for grooming leaders from within and creating a
 culture that fosters innovation. The lesson is the importance of investing in human
capital and creating a corporate culture that encourages creativity and leadership.

● Adaptability: P&G has demonstrated the ability to adapt to changing market

conditions. The company has undergone restructuring and portfolio adjustments to
stay relevant. The lesson here is the importance of being agile and willing to adapt
strategies to meet evolving market demands.

● Sustainability and Corporate Social Responsibility (CSR): P&G has increasingly

focused on sustainability and CSR initiatives, aligning its business practices with
environmental and social responsibility. The lesson is that companies can enhance
their reputation and appeal to a broader consumer base by actively engaging in
sustainable and socially responsible practices.

In summary, P&G's success story provides valuable insights into the importance of
innovation, brand management, consumer-centricity, global expansion, cost management,
strategic partnerships, talent management, adaptability, and sustainability. These lessons can
be valuable for businesses across various industries aiming for long-term success.

B. Recommendation

Aspiring companies can surely take a cue from P&G's experience and diligently use
these guidelines to accomplish their own objectives. Furthermore, it is clear from P&G's
ongoing evolution that they will continue to dominate the consumer goods sector for a very
long time by embracing new opportunities and continuously adjusting to the ever-changing
market.

● Continuous Innovation: Maintain a strong focus on innovation and R&D to stay

ahead of market trends. Regularly assess the competitive landscape and invest in
developing new products or improving existing ones.

● Digital Transformation: Embrace digital technologies to enhance operations,

improve customer experiences, and optimize supply chain management. Leverage
data analytics and artificial intelligence to gain actionable insights into consumer
behavior.

● Sustainability Initiatives: Continue and expand efforts in sustainability and

corporate social responsibility. Consumers are increasingly concerned about
environmental impact, and companies that demonstrate a commitment to
sustainability can enhance their brand image.
● E-commerce Strategies: Given the rise of e-commerce, invest in robust online
strategies. Enhance the digital presence, optimize online shopping experiences, and
leverage e-commerce channels to reach a broader customer base.

● Risk Management: Continuously assess and manage risks, both internal and
external. Develop robust risk management strategies to navigate uncertainties in the
business environment.