Industry Environment Analysis: consumer goods
The consumer goods' is a global and mature industry.
Highly competitive with an increasing number of competitors offering different versions of the same product and competing for price. Generic brands and Private-label goods are populating the market. -
Product innovation and quality are critical to succeed.
Individual buyers have no bargain power. Instead, large retail chains and major supermarkets increase competition among consumer goods' manufacturers. Switching costs are low or in most cases null.
Position of the company in the Industry:
P&G has a global leader position in the consumer goods industry with many well known premium products in its portfolio like: -
Fabric and Home Care: Tide, Cascade
Baby, Feminine and Family Care: Bounty
Beauty Care: Max factor, Cover Girl, Head & Shoulders
Health Care: Crest
Food and Beverage: Folgers Coffee
Company Strategy Analysis
Procter & Gamble is a related diversified company with five main business segments: Fabric and Home Care; Baby, Feminine and Family Care; Beauty Care; Health Care; and Food and Beverage.
P&G - Broad Differentiation
Popular products are attractive for imitations
Broad market target sensitive to product price, quality and innovation.
Although Organization 2005 was conceived as a promising strategy to reinvigorate P&G's growth, its initial period propelled the company to financial problems that led to Jager's failure and subsequent resignation. In mid-2000 Lafley's administration initiate a second period for Organization 2005 and the new initiative improved the P&G finances. The following is a comparative performance analysis of the two different administrations:
The Company changed from its previous geographic-based structure to a product-based global business unit structure. -
New initiatives in undeveloped countries.
Improve operations and profitability and rebuild the management team.
Focused in Big countries and big products (Tide and Pampers in Europe). -
An attempt to develop a core competency in speeding new products was done recklessly. Additionally, the initiative to unify the name of the products dropped the sales in Germany. -
In the race for global market leadership the company made and erroneous acquisition of Warner-Lambert that was also a failure. Financial
Almost 50% decrease in the EPS.
Stock price fell from $117 in 2000 to $90 in one month and then to less than $ 60 by mid-2002 wiping out &40 billion market value in one day. -
Earnings drop by 10 - 11 % instead of the expected rise of 7 - 9% due to higher costs of raw materials costs, lower realization and increasing competition from many generic brands. -
Top Priority to P&G best selling brands (over 1 million sales). A big accomplishment was the return of Crest as the number one oral care brand in The United States. -
Dropped numerous brands that did not fit with its global strategy.
- Sales Growth in 2002:
Fabric & Home care 9%
Baby and Family Cares 5%
Sales Growth in 2003 6% the biggest since 1996.
Most of the staff were transferred or relocated leading to behavioral problems and disappointment among employees. -
Centralized decision making in business units (profit on brands) and business services (one corporate organization). -
Majority of retired employees in the managerial team.
Staffing reduction of non-manufacturing functions.
Decentralized and multicultural decision making assigning managers form different countries. -
Recruited, retained and promoted employees in order to rebuild the managerial team.
Since the introduction of Organization 2005 in 1999 to 2000, net sales...