Project Report on Consumer Product

Subject Name : Strategic Management

Project Title Group no. Submitted to

: Consumer Product : 07 : B.V. Meshram

Roll No. FV - 02 FT - 02 FV - 05 FT - 06 FT - 11 FV - 17
Group no.7

Name

Rachana Chaudhari Suraj Angane Chandni Devani

Roshan Darekar
Gaurav Dharod Hemangi Vaze

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Project Report on Consumer Product

INDEX
SR. NO.
1

Particulars Profile of the company Products and services Market size & share Consumers Suppliers Competitors Current strategies SWOT analysis PEST analysis Competitive analysis Porters Five Forces Model of P&G Evaluation and Recommendations Bibliography

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10

11

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18

10

19

11

21

12

22

13

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Project Report on Consumer Product Profile of the company

History
Procter & Gamble is an American global corporation based on manufacturing a wide range of consumer goods. As of 2007, P&G is the 25th largest US Company by revenue, 18th largest by profit, and 10th in Fortune's Most Admired Companies list. William Procter, a candle maker, and James Gamble, a soap maker, formed the company known as Procter & Gamble in 1837. The company prospered during the nineteenth century. Throughout the twentieth century, the company moved into other countries, both in terms of manufacturing and product sales, becoming an international corporation. In January 2005 P&G announced an acquisition of Gillette, forming the largest consumer goods company and placing the Anglo-Dutch Unilever into second place. The company is organized into three Global Business Units (GBUs) and a Global Operations group. The three GBUs are beauty, health and well-being, and household care. The Global Operations group consists of the Market Development Organization (MDO) and Global Business Services (GBS). The beauty GBU includes beauty and grooming businesses. The beauty businesses are comprised of cosmetics, deodorants, prestige fragrances, hair care, personal cleansing and skin care. The grooming businesses include blades and razors, electric hair removal devices, face and shave products and home appliances. The health and well-being GBU includes health care and snacks, coffee and pet care businesses. The health care businesses include feminine care, oral care, personal health care and pharmaceuticals. The snacks, coffee and pet care business include coffee, pet food and snacks. The household care GBU includes fabric and home care as well as baby care and family care businesses. The fabric care and home care businesses include air care, batteries, dish care, fabric care and surface care. The baby care and family care businesses include baby wipes, bath tissue, diapers, facial tissue and paper towels.

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Mission Statement
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.

The Vision
Be, and be recognized as, the best consumer products and services company in the world.

Values
Integrity Passion for Winning Leadership Trust Ownership

Objectives
- Build existing core businesses into stronger global leaders - Grow leading brands, big countries, winning customers - Develop faster-growing, higher-margin with global leadership potential - Regain growth momentum and leadership in Western Europe - Drive growth in key developing markets

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Project Report on Consumer Product Products and services

The 10 Pillars of P&G

Ariel Detergent Powder Head & Shoulders Shampoo Olay Joy Pampers Safeguard Whisper Pantene Tide Downy

Coconut-based cleaning and food products

Purico Star Perla Sunshine Camay

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Mayon PMC Victor Ola Agro Fresco

Laundry and personal cleansing products

Tide Safeguard Ariel Gain Bonus Daz Lava Mr. Clean Prell Crest Zest Moncler Ivory

Health care
Vicks Fibresure Thermacare Page 6

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Pepto Bismol

Hair care and laundry categories

Pampers Whisper Rejoice Tide Max Factor Vidal Sassoon Ivory Pantene

Dishwashing and fabric care

Joy Mr. Clean Downy Alldays

Laundry, personal care and hair care

Ariel Ascend Camay Clairol Nice n Easy Old Spice Safeguard Page 7

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Market size & share

Chairman and CEO Bob McDonald said that , We are expanding market shares by touching and improving the lives of more consumers in more parts of the world, more completely through our innovation and expansion plans. This is driving strong volume and sales growth ahead of market levels. Core EPS(2) is ahead of year-ago levels, and we are on track to deliver seven to nine percent growth for the year. Net sales increased two percent and organic sales (3) grew three percent for the quarter. Diluted net earnings per share from continuing operations increased 10 percent to $1.11. Core EPS was $1.13, an increase of three percent, driven by benefits from organic sales growth, cost savings, a decline in the effective tax rate and a reduction in shares outstanding. These benefits were partially offset by negative impacts from higher input costs and higher marketing and portfolio expansion investments. We continued to deliver broad-based volume and market share growth in the second quarter. Volume increased six percent behind growth in all geographic regions, 16 of 17 top countries, five of our six business segments and 19 of 23 billion-dollar brands. Our market share of the categories in which we

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compete grew in all geographic regions, 12 of our 17 top countries and 16 of our 23 billion-dollar brands. Businesses representing about 60% of our net sales maintained or grew market share. We delivered $2.1 billion in free cash flow(4) for the quarter. We also repurchased $0.5 billion of P&G stock during the quarter, and returned another $1.4 billion of cash to shareholders as dividends. Through our innovation and expansion plans, P&G is expanding market shares, building shareholder value, and touching and improving the lives of more consumers in more parts of the world, more completely. Today, P&G markets its products to more than five billion consumers in 130 countries. The company has on-the-ground operations in over 70 countries around the world, and employs more than 106,000 people. Last years (2000) turnover equalled $37 billion *25,6 billion+.

Consumers

Households

Beauty & grooming

Hospitality industry

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Project Report on Consumer Product Suppliers

P&G works with more than 80000 suppliers all over the world
Consumers around the world rely on P&G brands for their superior performance and value. For that reason, P&G want agencies, partners and suppliers that participate with in open innovation, and that help to improve competitive advantage and maintain standards of excellence for both companies. At P&G, successful partnerships require a respect for diversity, the environment and sustainability, and P&G seek those values in our agencies, business partners and suppliers. P&G wants to be the business partner of choice because they believe more value can be created in effective collaboration with the right partners than they could achieve alone. In their efforts to foster effective collaborations, they continually seek to understand how their needs and capabilities can be aligned with their partners to build their businesses together. The breadth of their business creates opportunities to connect technology and capabilities across categories and global regions in unexpected ways or to foster disruptive innovations that change the game. So they seek collaboration in areas, such as packaging, design, distribution, business models, marketing models, consumer research methods, trademark licensing, and technology research. they are also interested in innovations that can help increase the demand, reach and sales of their brands. They are interested in talking to any company that can offer innovation that delivers greater value for consumers and their retail partners, achieves greater cost efficiencies, facilitates their environmental and sustainability goals or helps them reach and serve more of the worlds consumers.

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Competitors
Johnson & Johnson Kimberly-Clark Unilever Nestle ITC CCA Industries, Inc. Church & Dwight Company, Inc. Estee Lauder Companies, Inc Stepan Company Revlon, Inc. Avon Products, Inc Amway international Alticor Inc.

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Current strategies
User driven innovation: User driven innovation mainly focuses on developing products based on customer needs. P&G carries out user driven innovation by engaging their customers as codesigners. The Corporate Innovation Fund: This can simply be described as an in-house venture capital firm which hands over successful innovations to the relevant business units in the company. The firm carries out the initial concept, design, engineering and qualifications work prior to handing over the ideas; and specializes in high-risk, high reward ideas Innovation Net: A knowledge sharing solution at P&G, Innovation net provides access to 18,000 knowledge workers at P&G from the R&D to the Patent/Legal and Business Information systems The main function of innovation net is to allow users to catalogue, locate and maintain employee knowledge. This provides employees with the ability to take immediate action when required. Enterprise 2.0: This is P&Gs version of web 2.0 which is a set of web based software service that helps increase the involvement of employees in establishing and managing data. In addition to this, the company is also allowing its employees to personalize its web portal by adding RSS feeds of news and business information. This web-based service includes the customer and the suppliers web portals, online hubs for all the interactions with supermarkets, suppliers and technology providers around the world

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Project Report on Consumer Product

SWOT analysis
STRENGTHS
Strong focus on R&D
P&G has strong R&D capabilities. P&G's annual R&D budget is about $2 billion which supports 8,000 engineers and scientists at 25 research centers in 12 countries. Additionally, P&G also involves external innovation partners to boost its internal innovative capability, an approach it calls 'Connect and Develop.' In 2002, only 15% of its product initiatives included innovation from outside P&G. Currently, more than half of all P&G innovation includes an external partner. In just the past year, it has evaluated more than 5,000 innovation opportunities from small entrepreneurs, universities, research institutes, and large companies.

P&G is ranked as one of the top-20 largest R&D investors among US-based companies, which include Pfizer, General Electric, Sony, Merck, 3M, DuPont and Hewlett-Packard. The best proof of its innovation capability is the number of top selling new products that come from P&G. The IRI Pacesetters study tracks and ranks the most successful new consumer products introduced in the US for the past 13 years. Onethird of the most successful Pacesetter products, on average, have come from P&G and Gillette. Moreover, in 2008, five of the ten best-selling new products came from P&G, including Tide Simple Pleasures detergent, Febreze Noticeables air freshener, the new Herbal Essences line of products, Crest Pro-Health toothpaste, and Olay Definity skin care products. P&G's research and development capabilities have enabled it to secure about 27,000 patents globally and allows it to renew its product line at regular intervals, which boosts customer loyalty and revenue growth.

Leading market position

P&G has leading market positions across most of its businesses. It competes primarily in 22 global product categories and is a market leader in over two-thirds of these categories. P&G is the global market leader in the beauty segment with leading market shares of over 20% and 33% in the hair care and feminine care categories respectively, owing to its brands Always, Head & Shoulders, Olay, Pantene and Wella. The company also holds a leading position in oral care. In Group no.7 Page 13

Project Report on Consumer Product

pharmaceuticals and personal health, P&G has approximately 33% of the global bisphosphonates market for the treatment of osteoporosis under the Actonel brand. The company is also a global leader in nonprescription heartburn medications and respiratory treatments. Actonel, Crest, and Oral-B are well known brands in the company's health care segment. The company is also the market leader in fabric care with global market share of approximately 33%, through key brands such as Ariel and Tide. In baby care, the company has a global market share of over 32%, competing through the strong Pampers brand. The acquisition of Gillette has enabled P&G to hold leading market share in the manual blades and razors segment with a global market share of approximately 70%. The leading market position provides it with significant competitive advantage, as well as stabilizing the company's financial growth.

Diversified product portfolio

P&G maintains diversified product portfolios. The company participates in more than 22 global product categories with 300 brands in over 180 markets. The company markets a range of products across six segments: beauty; grooming; health care; snacks, coffee, and pet care; fabric care and home care; and baby care, and family care. In the beauty segment, the company's products include cosmetics, deodorants, feminine care products, hair care, personal cleansing and skin care products. The grooming category sells products like blades and razors, electric hair removal devices, face and shave products, and home appliances. Feminine care, Oral care, pharmaceuticals and personal health care products are marketed under the health care segment. The snack, coffee, and pet care category deals in coffee, pet food, and snack products. The fabric care and home care category comprises air care, dish care, fabric care, and surface care products. In addition, under the baby care family care category, P&G offers diapers, baby wipes and bath tissue. The diverse product portfolio enables the company to protect itself against demand fluctuations for certain products.

Strong brand portfolio

P&G has a strong portfolio of brands. P&G's portfolio includes 24 brands that generate over $1 billion in annual sales and 20 brands that generate between $500 million and $1 billion in annual sales. Combined, these 44 brands account for 85% or more of its sales and profits. This strong portfolio of brands enables the company to deliver consistent, reliable top- and bottom-line growth.

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WEAKNESSES
Increasing instances of product recalls
In the past few years, P&G has registered an increasing number of product recalls. For instance, in March 2007, P&G Pet Care in the US and Canada voluntarily recalled canned and foil pouch wet cat and dog food products manufactured by Menu Foods Inc. This recall was part of a larger product recall by Menu Foods Inc., a contract manufacturer that makes a small portion of canned and foil pouch wet cat foods for P&G's Iams and Eukanuba brands. Moreover, in September 2006, P&G suspended sales of cosmetics in China after they were found by authorities to contain the banned substances, chromium and neodymium. Also, the company recalled supplies of Sweep+Vac by Swiffer Vacuum Cleaner in 2005, after it received several complaints of overheating, including one report of a fire resulting in minor property damage. Recurrent product recalls could affect the brand image of the company, which would lead to low customer loyalty and brand equity.

Dependent on Wal-Mart Stores for majority of its revenue

P&G is heavily dependent on Wal-Mart Stores, Inc. (Wal-Mart) and its affiliates for generating a major part of its revenues. Sales to Wal-Mart and its affiliates have represented approximately 15% of its total revenue since 2006. High dependence upon Wal-Mart reduces the bargaining power of the company. Also, Wal-Mart could use its bargaining power to impose unfavorable terms on the company. Any decrease in revenues secured from Wal-Mart could have a negative impact on the company's business. Hence, the loss of this customer would lead to a sharp decline in P&G's revenues and also a loss of its market share.

OPPORTUNITIES
Expansion in developing markets
The consumer products business is driven significantly by three basic demographic factors: population growth, household formation, and household income growth. These factors are now driving strong growth in many of the company's developing markets, including China and Russia. The GDPs of these economies are expected to register a decent growth rate in the future. In China and Russia, P&G is using its portfolio of leading brands to attract, build and expand a network of distributors. Currently its distributor network in China reaches about 800 million Group no.7 Page 15

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people. In Russia, it now has access to 80% of the population. Therefore, with its expanding distribution network, P&G could harness opportunities in these two countries to enhance its market share as well as stabilize its top line growth.

Future growth plans

P&G is pursuing a clearly drafted growth plan. As per its plans, the company has reorganized its Asian operations from one headquarters into three. It is applying this model to other nations, as well. Further to this, it aims to streamline its worldwide portfolio by as much as 25% through 2012. At the same time, it will be building production facilities in 18 developing countries over the next four years. Currently, P&G's products are used by 3.5 billion people around the world. These growth plans will increase P&G's reach to an additional 1 billion of the world's 6.5 billion consumers, by 2010. Thus, pursuing a clearly drafted growth plan is likely to have a positive impact on the company's top line growth.

Growing Indian FMCG market

The Indian Fast Moving Consumer Goods (FMCG) industry is likely to witness strong growth in the future. It is poised to achieve 16% growth in sales during 200809, compared to 14.5% in 200708, according to a survey by the Federation of Indian Chambers of Commerce and Industry. The growth would be attributable to rising income and increasing demand. The survey points out that consumer preference for FMCGs is shifting towards higher lifestyle categories like skin care, shampoos, deodorants, anti-aging solutions, fairness products and men's products, in particular. In India, P&G's distributor network covers 4.5 million stores, an increase of two million stores in just five years. Moreover, in India, P&G is present in merely eight different categories, as opposed to 21 categories in the US. This provides P&G with an opportunity to enhance its market share, as well as to expand its presence in other categories.

THREATS
Regulatory Environment
Several consumer protection groups are voicing concerns over the presence of harmful chemical ingredients in cosmeticproducts. A recent study showed that about one-third of cosmetic products contain carcinogens. Due to increasing public pressure, the US Food and Drug Administration (FDA) are expected to impose stringent quality norms on cosmetic products. New regulations may delay launch of new products Group no.7 Page 16

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and result in higher product development expenditure. At the EU level, the European Commission has published a draft regulation for the registration, evaluation and authorization of chemicals (REACH), along with restrictions applicable to chemical substances, and has set up a European Chemicals Agency. REACH focuses on the 30,000 chemical substances introduced into the market before 1981 and manufactured or imported in quantities of more than one ton per year, on which hazard information has not been sufficiently well examined by the current system. The regulations came into force in the fourth quarter of 2008, imposing new liabilities and increasing operating expenses.

Global Economic Conditions

The global Gross Domestic Product (GDP) is expected to increase marginally by 0.9% in 2009, according to the World Bank's report 'Global Economic Prospects 2009'. According to the report, the economic growth rate in developing countries is expected to decline from 7.9% in 2007 to 4.5% in 2009, while the growth in developed countries in 2009 is likely to be negative. The current economic climate is forcing shoppers to watch their expense and look for cheaper options of discounted brands or own label merchandise. Even suppliers as powerful as P&G are under pressure from retailers like Wal-Mart, who are cutting prices and introducing their own labels. These retailers are promoting their own-labels for the purpose of sustaining their revenue growths and margins. The dent in consumers' disposable income caused by the slowdown in the global economic situation is making it increasingly difficult for branded product manufacturers like P&G to maintain their sales volume and revenue growth.

Counterfeit goods
The trade of counterfeit and pass-off products is negatively affecting the growth of FMCG companies like P&G. Pass-offs are look-alike products that resemble the original products, mainly through misspelling of the trademark. For example, Sunslik instead of Sunsilk, Clemic Plus or Climic Plus or Cosmic Plus instead of Clinic Plus, Collegiate for Colgate, and Vips Rub or Vives Rub as a pass-off for Vicks Vaporub. Whereas counterfeits are the infringement of trademarks and copyrights, duplicate/fake products are passed off as company products. According to AC Nielsen, a global marketing research firm, 1030% of cosmetics, toiletries and packaged food are counterfeit. The top two brands within any category, be it cosmetics, detergents, or soaps, are effected the most by counterfeiting and pass-offs. Besides revenue losses, counterfeits and pass-offs also affect the company's brand as they are unsafe. Moreover, counterfeiting could hit customer confidence as the fake product does not give the desired results promised by the brand. Group no.7 Page 17

Project Report on Consumer Product PEST analysis

Political & Legal Factors Manufacturing trend in the economy has changed 4.5 to 8.6 in last 5 years. Manufacturing of detergents are no more in the country. Company Shift their business outside the country because of government taxes.

Economic Factors National Income & GDP is growing. The Infrastructure did not support the industry. Company did not like to do business in this economic situation.

Social & Culture Factors People now much conscious about branded products. Detergents are now available on different prices. Company awareness in people about detergent uses.

Technology Factors Using latest technology to attract customers. No Technology transformation. Company has intense Competition for using latest technology.

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Project Report on Consumer Product Competitive analysis

Competitive analysis of P&G often focuses on hard outcomes like market share ,gross margin , and number of patent applications but misses some under-appreciated but nevertheless critical strategies that drive P&Gs business. The least understood and most powerful P&G strategy is leveraging its scale. Least understood because it is hard to measure; most powerful because it touches everything the company does

Leveraging scale with the retail trade

Everyone recognizes that retailers are becoming more and more powerful, demanding more price concessions from manufacturers while themselves marketing private brands of higher and higher value to consumers. Most manufacturers respond by dumping cash into the retailers wallet. P&G responds by leveraging its scale. P&G is investing tens of millions of dollars in Supply Chain efficiencies to become the low-cost distributor, developing innovative distribution concepts and then marketing their advantages to retailers with sophisticated Activity Based Costing software tools. In addition, high volume from multiple categories permits P&G account handlers at all levels to offer retail customers benefits such as Account specific consumer research Multi-category consumer studies Software analytics

Use systems in marketing.

No other global company, with the possible exception of IBM, is leveraging scale to build systems to accelerate marketing and sales. This use of systems extends to the critical area of marketing process.

Embed marketing processes in software. P&G is embedding its best practice marketing process in software and is years ahead of its competitors. Diageo has done a remarkable job of codifying its processes, but they exist on paper, not in digital, collaborative, at-the-speed-of-electrons form.

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Learn locally but act globally. P&G is a latecomer globally. The company does not have the experience, marketplace position, or international heritage of a Unilever or Nestle. But the company is totally committed to thinking and acting globally. P&G no longer sees itself as a U.S. company with overseas operations. Oddly, its top-down, Cincinnati-driven culture helps in this regard because the company does not have to overcome the ego and prerogatives of an entrenched country- based culture. This new global ethos is enabled by common global processes deployed through a common IT infrastructure. Of equal importance are two relatively new aspects of the P&G organization-- its remarkable international and multi-cultural staff and its use of multi-functional teams. Every global business unit is international in character. The global head of Hair Care is an Austrian. The head of Hair Care U.S. is an Indian. And so it goes. Many people are surprised to learn that forty percent of P&Gs R&D occurs outside the U.S., executed by a lower-cost (but often U.S. educated) work force. Organize around multi-functional teams. Equally striking is the companys development of multi-functional teams that run businesses on a regional basis and interact with their counterparts in other regions to identify problems and successes so that they may be swiftly addressed or expanded. These multi-functional regional teams collaborate using common processes that are increasingly softwareenabled. One common objective of these strategies is to decrease cost in price-sensitive categories like diapers, coffee and detergent. Leverage suppliers through partnerships. Everyone understands that P&G leverages its scale in buying media and raw materials. Less well understood is the companys new strategy of leveraging suppliers capabilities through unique partnerships like the one with BASF.

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Porters Five Forces Model of P&G

1. Bargaining Power of Suppliers
Medium bargaining power Option to produce their own raw materials Few large manufacturing suppliers : complex machines Volume is very important to supplier Switching costs are high - machines are finely tuned

2. Threat from Substitutes

High threat from substitutes Other products perform just as well Ease and convenience of disposal diapers keeps the use of cloth diapers down High price-performance trade-off (lower priced substitutes)

3. Threat of New Entrants

Low threat Brand identity is extremely important Millions of dollars spent on advertising Shelf space on stores is hard to get (would need to offer coupons and promotional allowances to stores) Huge setup costs = machines and crews can cost millions of dollars Economies of scale (takes a few years to get things up to speed) Access to distribution is extremely important (volume) Must roll out region by region - timely and costly

4. Bargaining Power of Consumers

High bargaining power - they vote with their pockets Brand is extremely important Customers are very sensitive to price Substitutes are readily available High buyers incentive = coupons, hospital kits Buyers are very informed of products (starting at the hospital and continuing through heavy advertising)

5. Competitive Rivalry
No exit barriers Industry is highly concentrated Large fixed costs Very little diversity of rivals Few product differences - all are beginning to offer similar products (adhesive tabs) Had to differentiate with things like coupons, samples, etc.

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Evaluation and Recommendations

P&Gs foundation is household products. These are large businesses that are growing steadily and reliably generate earnings and cash. Overall company performance has been driven by these foundation categories for generations. P&G should stay focused on their customers needs and wants and continue to deliver high value products and customer service. Because there are so many different forms of media available today, targeting markets through specific Medias can be a challenge. Learn locally but act globally. Organize around multi-functional teams. Build capabilities to serve lower-income consumers who are not buying and using P&G products on a regular basis today.

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Bibliography

Annual reports from P&G websites. Strategic Management Competitiveness & Globalization, Concepts . Information regarding P&G on internet & various articles.

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