synopsis p&g

8/8/2019 Synopsis P&G

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Staying ahead in the market place:

Analysis of marketing strategies of

Procter and Gamble

A Brief Synopsis submitted to

Prof. U. M. Amin

(Mentor, Comprehensive project report)

BY: Mukhtaar Abbas (08-MBA-30)


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P&G has grown into the worlds largest consumer goods product company that today market

brand in more than 180 countries, with on the ground operation in more than 80 countries.

P&G has grown sales from $39 billion to $83 billion in the past seven years. It has more thandoubled the number of brands that generate $1 billion or more in annual sales and more thanquadrupled the number of brands that generate at least $500 million.

The Company reported net earnings of $12.1 billion for the fiscal year ended June 30, 2008,an increase of 17 percent compared to $10.3 billion in 2007. Diluted net earnings per sharewere $3.64 in 2008, compared to $3.04 in 2007. Net sales were $83.5 billion in 2008, up 9

percent from last year. First discretionary use of cash is dividend payments. Commonshare dividends grew 13 percent to $1.45 per share in 2008, representing the 52nd consecutivefi scal year of increased common share dividends. Total dividend payments, to both commonand preferred shareholders, were $4.7 billion, $4.2 billion and $3.7 billionin fiscal 2008, 2007 and 2006, respectively.

The reconciliation of reported sales growth to organic sales for the 2009 fiscal year is as

follows:

Net Foreign Acquisition/ OrganicSales Exchange Divestiture Sales

FY 2009 Growth Impact Impact Growth------- ------ -------- ------------ -------

Total P&G -3% 4% 1% 2%

FY 2008 FY 2009------- -------

Diluted Net Earnings Per Share - Continuing Operations $3.56 $3.58Significant Adjustments to Tax Reserves ($0.14) -

Incremental Folgers-related Restructuring Charges - $0.09 For FY2009 Net Free

Earnings CashExcluding Flow

Operating Capital Free Net Folgers Folgers Product

Cash Flow Spending Cash Flow Earnings Gain Gain -ivity--------- -------- --------- -------- ------- --------- -------

The company's strengths lie in its commitment to:

Provide products of superior quality and value that improve the lives of the world'sconsumers.

Be a world leader in relevant scientific research and technology.

Maintain economic success based on P&G 's experience in managing the business withexcellence and training, and developing people to build it.


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$14,919 ($3,238) $11,681 $13,436 $2,011 $11,425 102%

(SOURCE: Procter & Gamble official websites annual report)

Year wise financial information of P&G,

(Amounts in millions, except per share amounts) (Source:www.pg.com/annual report/investors)

2009 2008 2007 2006 2005 2004

1) Net Sales $ 79,029 $81,748 $74,832 $66,724 $55,292 $50,128

2) Gross Margin 40,131 42,212 39,173 34,549 28,213 25,709

3) Operating Income 16,123 16,637 15,003 12,916 10,026 9,019

4) Net Earnings 13,436 12,075 10,340 8,684 6,923 6,156

5) Net Earnings from

Continuing Operations 11,293 11,798 10,063 8,478 6,648 5,930

6) Net Earnings Margin

from Continuing-

-Operations 14.3% 14.4% 13.4% 12.7% 12.0% 11.8%

7) Diluted Net Earnings

per Common Share $ 4.26 $ 3.64 $ 3.04 $ 2.64 $ 2.53 $ 2.20

8) Diluted Net Earnings

per Common Share from

Continuing Operations 3.58 3.56 2.96 2.58 2.43 2.12

9) Dividends per

Common Share 1.64 1.45 1.28 1.15 1.03 0.93

10) Total Assets $134,833 $143,992 $138,014 $135,695 $61,527 $57,048

11) Long-Term Debt 20,652 23,581 23,375 35,976 12,887 12,554

12) Shareholders Equity 63,099 69,494 66,760 62,908 18,475 18,190

13) Employees (est.) 135,000 138,000 138,000 138,000 110,000 110,000

Major Expenditures:

2009 2008 2007 2006 2005 20041

1) Capital Expenditures $ 3,238 $ 3,046 $ 2,945 $ 2,667 $ 2,181 $ 2,024

2) Dividends to Shareholders 5,044 4,655 4,209 3,703 2,731 2,539
http://www.pg.com/annualhttp://www.pg.com/annualhttp://www.pg.com/annual


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3) Advertising Expense 7,579 8,583 7,850 7,045 5,850 5,401

4) Research and Development

Expense 2,044 2,212 2,100 2,060 1,926 1,782

(Amounts in millions)

P&G is recognized as a leading global company, including a #6 ranking onFortunes

Worlds Most Admired Companies, the #2 ranking onFortunes Top Companies for

Leaders survey, the #3 ranking onBarrons Worlds Most Respected Companies List,

a #12 ranking onBusiness Weeks list of Worlds Most Innovative Companies, named to

Chief Executive magazines worldwide survey of the Top 20 Best Companies for Leaders, top

rankings on the Dow Jones Sustainability Index from 2000 to 2009, being named to the list of

the Global 100 Most Sustainable Corporations in the World, and a consistent #1 ranking

within our industry onFortunes Most Admired list for 24 of 25 total years and for 12 years in

a row.

P&Gs commitment to creating a diverse workplace has been recognized by the National

Association for Female Executives (Top 10 Companies for Executive Women), Working

Mothermagazine (100 Best Companies for Working Mothers and Top 20 Best Companies for

Multicultural Women),Black Enterprise magazine (40 Best Companies for Diversity), and

Diversity Inc. (Top 50 Companies for Diversity and #3 ranking on the Top 10 Companies for

Global Diversity).

Supplier diversity is a fundamental business strategy at P&G. In 2009, P&G spent more than

$2 billion with minority- and women-owned businesses. Since 2005, P&G has been a member

of the Billion Dollar Roundtable, a forum of 16 corporations that spend more than

$1 billion annually with diverse suppliers.

Literature Review:

Procter & Gamble is strongly committed to the concept of sustainable development, and

continues to lead its industry in that regard. The company views sustainability as anopportunity to innovate in products that improve the lives of the world's consumers. P&G


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largely centers its sustainability efforts on its core activities, in particular on two key themes

that are significant to a number of P&G's businesses: water purification technology &

products and sanitation & hygiene. In that context, P&G emphasizes innovation in products

that serve basic needs of consumers in least developed countries. The company's high scores

in the criteria of product impact and strategies for emerging economies is a reflection of thatfact. In developed markets, P&G focuses on environmental excellence, innovating in products

such as cold-water cleaning technologies that provide good performance as well as energy

savings and eco-efficiency. The company's best-of-class scores in environmental performance

and reporting illustrate its success in these areas. P&G is also an above-average performer in

the social dimension, a position which is underlined by high scores in reporting, human capital

development, and talent attraction & retention. (Analyst: Gabriela Grab Hartmann, SAM

group, sept 5, 2006)

Much research has focused on how consumers and competitors respond to short-term changes

in advertising and promotion. In contrast, the authors use Procter & Gamble's (P&G's) value

pricing strategy as an opportunity to study consumer and competitor response to a major,

sustained change in marketing-mix strategy. They compile data across 24 categories in which

P&G has a significant market share, covering the period from 1990 to 1996, during which

P&G instituted major cuts in deals and coupons and substantial increases in advertising. The

authors estimate an econometric model to trace how consumers and competitors react to such

changes. For the average brand, the authors find that deals and coupons increase market

penetration and surprisingly have little impact on customer retention as measured by share-of-

category requirements and category usage. For the average brand, advertising works primarilyby increasing penetration, but its effect is weaker than that of promotion. The authors find that

competitor response is related to how strongly the competitor's market share is affected by the

change in marketing mix and the competitor's own response and to structural factors such as

market share position and multimarket contact. The net impact of these consumer and

competitor responses is a decrease in market share for the company that institutes sustained

decreases in promotion coupled with increases in advertising. (Kusum L. Ailawadi, Donald

R. Lehmann, Scott A. Neslin)

Procter and Gamble has capitalized on innovation and creativity to lead the consumer andhousehold product industry. This paper will explore some strengths and weaknesses, as well as

opportunities and threats that Procter and Gamble had utilized to sustain its success and

competitiveness. This case study will also explore some characteristics of innovative

organizations and why they have chosen to be innovative.

Innovative play-to-win strategy that P&G management had adopted was the acquisition of its

domestic and foreign competitors. P&G acquired a number of other companies that helped

diversified its product line and increased profits significantly. In order to foster this aggressive

strategy, management had integrated and reorganized all the manufacturing processes of the

companies they acquired. Manufacturing processes of companies like Folgers Coffee,


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Norwich Eaton Pharmaceuticals, Richardson-Vicks, Noxell, Shultons Old Spice, and many

others. Innovation must be encouraged, carefully implemented within an organization at all

times (Hesselbein, Goldsmith, & Somerville, 2002, p. 82).

Dividend History

P&G has paid dividends without interruption since its incorporation in 1890 and has increaseddividends each year for the past 53 fiscal years. P&Gs compound annual dividend growth rateis 9.5% over the last 53 years.

(in dollars, split adjusted) 1956 1970 1984 1998 2009Dividends per Share $0.01 $0.04 $0.15 $0.51 $1.64

Coming out of one of the toughest years P&G has faced in more than 50 years, Mr. McDonald

said the company today served about four billion of the world's seven billion consumers but

aimed to reach five billion over the next five years.

Mr. McDonald said: "Our choices are a natural evolution of the strategies that have been

working for nearly a decade. We will grow leading, global brands and core categories. We

will build our business with under-served and un-served consumers and we will continue to

develop faster growing, structurally attractive businesses with global leadership potential."

"More than at any time in our company's 170-plus year history, we have the brands,

capabilities, strategies and financial flexibility necessary to expand our product portfolio into

more parts of the world."


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Geographic and portfolio expansion coupled with a focus on simplifying business structure

and processes, leveraging scale and enhancing execution will all be elements of P&G's long

term growth success, he added.

Earlier, Mr. McDonald paid tribute to former President and Chief Executive and current

Chairman of the Board, A.G. Lafley, calling out the transformation he had led over the last 9

years.

"As P&G shareholders, we've all benefited substantially from A.G.'s leadership. When he took

over the helm, P&G's market capitalization was about $74 billion - 35th highest among the

Fortune 500. P&G stock has appreciated approximately 100 percent since then and today the

company's market capitalization is about $170 billion making P&G one of the most valuable

companies in the world," he said.

P&G's net sales for the fiscal year ended June 30, 2009, were $79 billion, with organic sales

up two percent. Core earnings per share increased 8 percent to $3.67 while P&G continued to

deliver strong free cash flow at more than 100 percent of earnings excluding the gain on the

Folgers sale.

On average, P&G sales have nearly doubled for each of the past three decades - from $10

billion in 1980 to approximately $80 billion today with earnings increasing from $643 million

to $12 billion over the same period. The company's dividends have also increased every year -

more than 9 percent a year on average, over the past 53 years, and have been paid without

interruption since the company was incorporated 119 years ago.

(Bob McDonald, oct 13, 2009)

For many years, consumers who wanted whiter teeth had to use weak over-the-counter polish

products, or go to the dentist for bleaching. The over-the-counter products were generally not

able to produce dramatic results, as dentist offices could, but the in-office procedure was

expensive and inconvenient. In addition, many consumers associate dental visits with

unpleasant experiences and are not eager to visit the dentist for more than just a regular check-

up and cleaning. Recently, advances in whitening technology have made it possible for

consumers to whiten their own teeth at home. Procter & Gamble, one of the largest consumer

products companies in the world, undertook market research before launching its own product

in this category, and used the research to make decisions about the marketing mix as well as

its marketing strategy and tactics. This research considers the effect of the marketing research

on the launch of Crest Whitestrips.

Procter & Gamble used market research to determine whether there was a need for a

whitening product for in-home use, what type of product would be appropriate, and whether

that product would fit with Procter & Gamble's overall marketing strategy. Initial research

confirmed that there was, indeed, an unmet need in the market. Research also revealed that


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consumers would accept a product that required up to 30 minutes of use, and that women were

considerably more interested in the product than men. I

So indicated that the product would do better under the Crest brand. This is a significant shift,

in that Crest denotes hygiene and tooth care while Cover Girl would indicate cosmetics and

would definitely limit the number of male consumers who would purchase--and possibly use,

if purchased by someone else--the whitening product. Market research thus helped the

company determine its market strategy by shaping the brand name and the product

identification (dental hygiene rather than mere cosmetics) that the product would carry.

Knowing that women would be the primary target market for the product also shaped the

tactics that Procter & Gamble used in its promotional strategy. Celebrity endorsements can be

effective, but using the right celebrity is critical to that effectiveness. By using Rosie

O'Donnell to endorse the product, and by placing the product on her show, Procter & Gamble

was able to reach the target demographic that research showed would be critical to the

product's success. Subsequent research has shown that consumers have approached their

dentists regarding other cosmetic dental procedures; this helps maintain the relationship

between Procter & Gamble and dentists. Perhaps the strongest support for the research

(Proctor and Gamble marketing Strategy, HBR)

Today, P&G estimates that its products already can be found in more than 90 percent of all

U.S. homes, and more than 20 percent of all homes in the world. The company's list of soap

and laundry products includes: Bold, Dreft, Bounce, Cheer, Era, Tide, Downy, and Gainlaundry products; Dawn, Ivory, Joy and Cascade dish soaps; and Mr. Clean, Comet, and Spic

& Span cleansers. P&G's paper products division peddles such mainstays as Charmin toilet

tissue and Pampers diapers. The health care division be deciding product range. 1. CASH

FLOW ISSUES -- Extending commercial credit is risky enough in a stable economy, but in

one where the value of a currency changes throughout the day, credit presented some major

transaction and translation exposures. 2. REPUTATION ISSUES -- P & G was known to have

good products -- its detergent Ace Lemon for instance, was a market leader -- but situations

beyond its control were threatening P & G's good name. Alternatives The P & G strategy team

had four main alternatives. 1. SHUT DOWN STRATEGY -- This would involve sacrificing

market share, losing customers and causing ill-will. However, it would cut the losses from the

operation and have a minor (at the time) impact on P & G's profits. 2. GENGHIS KHAN

STRATEGY -- This strategy, attributed to a Harvard Professor, refers to the technique of the

"home office warriors" invading a "settlement," and setting up new and alien rule. This is a

dangerous strategy since it alienates many management levels and governments (Hoffman,

1994, 69). 3. HOME RULE STRATEGY -- Defer all decisions to the home office. One

management consultant for P&G explains it like this. "P&G must guard against losing its grip

as it expands overseas. (Marketing in Adverse economic climate, the Harward BusinessReview)


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"Design thinking" may seem like just another new buzzword in the lexicon of innovation, but

Procter & Gamble is using the approach to change its culture. Leadership is listening, learning,

and deploying; cross functional teams are cracking vexing problems across its business

landscape; and visualization, prototyping, and iteration are facilitating communication

internally and with customers like never before. Here's a look inside one of the most intriguingchange management efforts going on in Corporate America today.

"It has been transformative for our leadership teams," says Cindy Tripp, marketing director at

P&G Global Design, as she describes her work rolling out the company's Design Thinking

Initiative. With a cadre of 100 internal facilitators, more than 40 design thinking workshops

have been held in P&G business units across the globe during the past year. The design

thinking facilitation team comes from every function at P&G [such as marketing, research and

development, info tech, and product supply as well as design]. Perhaps most important, half of

the workshops focused on something other than new product initiatives to include other types

of pressing business issues such as strategy, retail relationship building, and matters of

operational excellence. "We want people to use these techniques daily in their work using

broad insights; learning faster; failing faster. Design thinking can be applied

everywhere, every day," says Tripp. This attitude signifies an extreme shift for the $81.5billion global consumerproduct giant, whose longtenured design managers describe P&G'sformer attitude about design as "the last decoration station on the way to market." (ByJeneanne Rae, July 30, 2008 7:25AM)

2009 NET SALES

(% of total business segments)

Objectives:

The purpose of the study is descriptive and diagnostic in context of strategies adopted byProcter and Gamble.

33%($26.3b)

46%

($37.3b)

21%

($16.7b


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To identify the factors that has led to the success of P&G over a long period of time to

stay ahead in the market place.

To analyze the marketing and positioning strategies adopted by P&G.

To analyze the advertisement and corporate social responsibility budgets of P&G to

make (sustain) brand image.

To compare the strategies adopted by P&G to its closer competitor like HUL.

Research Methodology:

The research will be diagnostic in nature with some qualitative research and some input from

quantitative technique. And data will be primary and secondry.

Sampling:

Non probability sampling with a mix of

Judgement sampling

Convenience sampling

Purposive sampling

Time frame: 3 months


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Data collection Tools:

Texts (Research papers, Websites and articles published on P&G)

Media (advertisements and promotion)

Events

P&G annual report for investors

People (interviews)

Sample size:

100 (consumer of P&G)

50 (P&G officials)

Target population: consumers and officials of P&G

Hypothesis:

Hypothesis to be checked in the study are:

Pricing model of P&G is delivering value to the consumers

Advertising and corporate social responsibility expenses are direct related to the

revenue of the company.

CSR creates brand image in the minds of consumers.

P&G has a brand image of quality and innovation in reasonable price in the minds of

consumers.


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P&G has maintained its growth rate in terms of revenue, sales, profit dividends over a

long period of time.

Various statistical tools like t-test, correlation, chi-square test will be used to check the

hypothesis.

Tentative chapter plan:

Chapter 1: Introduction of P&G, (History, products, SBUs, etc)

Chapter 2: Evaluation of various factors and marketing and positioning strategies adopted by

P&G

Chapter 3: comparison of P&G to its closer competitors.

Chapter 4: Determination of Advertising and CSR.

Chapter 5: Data analysis and interpretation

Chapter 6: findings and conclusions.

Bibliography:

www.pg.com

Best of HBR 1992 onwards

Journal of marketing, vol-65, 2001

www.knol.google.com

Anthony, S.D., Eyring, M., Gibson, L. (2006). Mapping your innovation strategy.Harvard Business Review.

http://www.businessinnovationinsider.com/2007/01/the_5_principles_of_innovation.php

Remarks by the corporate director of innovation capability, procter & gamble (2006).Retrieved June 4, 2008 fromwww.serve.com/athenaalliance/pdf/JWL%20remarks.pdf

www.newscom.com/cgi-bin/prnh/20090115/CLTH035LOGO-a )
http://www.pg.com/http://www.knol.google.com/http://www.businessinnovationinsider.com/2007/01/the_5_principles_of_innovation.phphttp://www.businessinnovationinsider.com/2007/01/the_5_principles_of_innovation.phphttp://www.serve.com/athenaalliance/pdf/JWL%20remarks.pdfhttp://www.newscom.com/cgi-bin/prnh/20090115/CLTH035LOGO-ahttp://www.pg.com/http://www.knol.google.com/http://www.businessinnovationinsider.com/2007/01/the_5_principles_of_innovation.phphttp://www.businessinnovationinsider.com/2007/01/the_5_principles_of_innovation.phphttp://www.serve.com/athenaalliance/pdf/JWL%20remarks.pdfhttp://www.newscom.com/cgi-bin/prnh/20090115/CLTH035LOGO-a


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