p&g

Who We Are

• Procter & Gamble (P&G) is America’s biggest maker of household products

• Founded in Cincinnati, Ohio in 1837.

• Founded by William Procter (Candle maker from England) & James Gamble (Soap maker from Ireland).

• Emphasizes over Product Innovation.

• One of the very first organization to set up R & D department.

• First one to step into direct sales in 1919.

• Established first market research department in 1924.

• Having 250 brands all over.

• One of the biggest advertisers.

P&G Case Study: Group-II2

P&G Case Study: Group-II 3

P&G Products

LEADERSHIPLEADERSHIP

INTEGRITYINTEGRITY

TRUSTTRUST

PASSION PASSION FOR FOR

WINNINGWINNING

OWNERSHIPOWNERSHIP

PEOPLEPEOPLE

United States Market Product Division Management

• Individual Operating System

• Key Dimensions: Function And Brands

• Decentralized Authority to Brand Managers



Advent of Matrix

• Categorization of Business Units

• Each unit with its Sales, Product Development, Manufacturing and Finance

Functions

• Dotted Line Reporting system was followed

Old Design


New Design


• Attractive expansion opportunities in Japan and developing markets led P&G question its globalization model.

• They wanted to cover more diverse consumer taste and income levels.

• Corporate functions in Brussels still lacked direct control of country functional activities.

10P&G Case Study: Group-II

Global Matrix Structure


P&G started migrating to a global matrix structure Europe’s country functions were consolidated into continental

functions• Characterized by dotted line; (Slide 10)• Global functional SVP’s managed functions across all regions;• P&G created global category presidencies reporting directly to

CEO;• This structure allowed for the creation of global technical centers

in different regions. Each with a core competency in a specific product category.


Country category GM’s reports to global category president.

Category presidents were given direct responsibility for managing a fully globalised corporate R&D function.

Global R&D vice presidencies were established to manage R&D for a given product division which in turn directly reported to global category presidents.


The creation of powerful & independent global functions promoted the pooling of knowledge, transfer of best practices, elimination of intra regional redundancies & standardization of activities.

New matrix organization allowed for manufacturing, purchasing, engineering and distribution to be integrated into one global product supply function which managed the supply chain from beginning to end.

In 1993, SGE i.e. Strengthening Global Effectiveness – Restructuring Program allowed for quick rationalizing of acquired assets and smooth integration into the existing manufacturing and distribution network due to which 30 of 147 plants were eliminated.

Stronger Global sales organization with regional leadership was transformed into Customer Business Development (CBD) Function.

CBD’s developed closer global relationship with big customers like Wal-Mart.


It was never symmetrical Management by functional conflicts led to

poor strategic alignments throughout the company

for e.g. – product supply made global efforts to reduce the number of chemical suppliers whereas, R&D looked for high performance ingredients no matter where they came from. Due to which it was difficult for regional managers to focus on particular countries to address these global conflicts.


There was tension between product category & regional management though regional managers had responsibility for financial result.

R&D and global category leaders fought hard to globalize new technological and brand innovations quickly.

Due to the internal conflicts the competitors were catching up quickly.

The organizational structure was facing a big question mark whether it is going to sustain for long term or not.



Organization 2005

• In September 1998, P& G announced a six year restructuring plan,

ORGANIZATION 2005

•Developed by Mr. Durk Jager, former CEO

• Aimed to implement new technologies rather than incremental improvements of

existing products.

• Several new categories and brands were introduced.

• The plan also called to eliminate six management layers.

• It entailed dismantling the matrix organizational structure and replacing it with

an Amalgam of Interdependent organization:

GBU: Global Business Unit

MDO: Market Development Organization

GBS: Global Business Service


GBU

Global Business Units were responsible for :

• Product Development

• Brand Design

• Business Strategy

• Business Development

Each GBU was led by a president who reported directly to the CEO and was a

member of Global Leadership Council that determined overall company strategy.


MDO

MDO were designed to take the responsibility for :

• Tailoring the company global programs to local markets.

• Enhance their knowledge of local consumers and retailers.

• Develop market strategy to guide the entire business.

• Unlike the GBU’s they did not have the complete profit responsibility, but were

instead compensated on sales growth.

• Each MDO was lead by a President who directly reported to CEO.


GBS

GBS was designed to:

• Standardizing Plan of Execution.

• Consolidate

• Stream Line

• Ultimately strengthen business processes.

Before GBS business services and IT systems for processes like A/c

Transaction, Payroll Processes and Facilities management were duplicated and

performed differently across regions.

The task of GBS was to move entire company on to a single share, SAP

software system in order to achieve critical mass in business process execution

and to take the advantage of wage arbitrage.


Routines & H.R. Policies

• Decision making went from the hands of committee to individuals which helped to

speed up business tasks.

• Budgeting process was streamlined in order to have Single business planning

process and joint approval.

• Overhauled incentive System, while maintaining the promote-from-within policy.

• Performance based compensation figures increased.

• Stock-option compensation also increased.


Organization 2005 Durk Jager Experience

• Initial fiscal quarter showed acceleration in business & revenue.

• Prior Quarter showed the downfall in total revenue (monthly).

• Increased competition led to lower volume growth and negative currency effects.

• Fourth Quarter showed 7 % decrease in revenue.

Chairman, President & Chief Executive, The Procter & Gamble Company

Knows what he’s doing!

Tried to change conservative slow moving bureaucratic behemoth

to modern fast moving internet savvy organization.

Tried to make better decision and faster.

Cut red tape.

Fuel Innovation.

Set up more aggressive sales goal in order to double its revenue.

In addition, P&G abandon its legacy of secrecy.

Transparent information sharing was followed in order to manage

consumer-friendly relation with full information to job seekers and

investors.


Profitability

Profit Margin (ttm): 12.81%

Operating Margin (ttm): 19.16%

Management Effectiveness

Return on Assets (ttm): 12.09%

Return on Equity (ttm): 40.18%

PE Ratio: 21.73

Beta: 0.03

Building Global Capabilities

Complexity and Differentiation

Need for IntegrationTransfer of Knowledge and

Innovation

Unilever

Colgate and Palmolive

Kimberly-Clark L’Oreal

Complexity and Differentiation Unilever

◦ utilized a highly decentralized organizational structure

◦ Functional organizations such as manufacturing, R&D, marketing, and sales

◦ regional organization would be split into two divisions: foods and home and personal care (HPC)

Complexity and Differentiation Colgate and Palmolive

◦ CP managed its business through four regional reporting subsidiaries

◦ In a matrix reporting structure similar to P&G’s, general managers of regions were balanced by heads of product-category divisions.

Innovation Kimberly-Clark

◦ KC had the highest operating margin of any paper company (nearly 18 percent, versus the second-highest, P&G Paper, at just over 12 percent)

◦ Huggies had surpassed the category creator, Pampers, in the United States in 1992 and currently held a commanding 15 percent share advantage

Need for Integration L’Oreal

◦ L’Oreal managed its business by distribution channel and geography

◦ Global brand teams were based on the brand’s continent of origin, along with dedicated R&D resources

◦ Regional brand teams negotiated with global brand teams to fine-tune execution locally

p&g

Documents

pg products pg case

new design pg case study

brand managers pg case

global conflicts

old design pg case study

regions pg

global efforts

global category presidencies