P&G internationalization strategy

STRATEGY & STRUCTURE

Strengths and Weaknesses of the Multinational Enterprises’ strategies

Anne-Charlotte Bazoud

Gabrielle Colombier

Franziska Guehlcke

Marcus Bormann

Arnaud Katz

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Structure

I. Context

II. Aims – Objectives

III.Strengths and Weaknesses of the strategies adopted by MNEs

IV.Case study: Procter & Gamble

V. Managerial implications

VI.Conclusion

VII. Sources

I. Context

To be successful in an increasingly globalised

world, companies have to enter into new

foreign markets and to adapt their strategies.

II. Aims - Objectives

Objectives

Describe the international, multi-domestic, global and transnational strategies with practical examples

Show the strengths and weaknesses of each strategy

Illustrate the theories by describing P&G’s strategy

Aim

Identify and analyse the different strategies adopted by MNE’s to coordinate the international operations

III. Strengths and Weaknesses

of the strategies adopted by MNEs

Typology of strategies

EfficiencyResponsivenessLearning

Efficiency

Learning Responsiveness


LEARNING

International strategy

« Miniature replica » of

parent

Centralised decision making

I.E. Hilton Carrefour

Production andmarketing function in

each host

“ Trying to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies. ”


International strategy

WEAKNESSESSTRENGTHS

• Facilitates transfer of core competencies

• Moderation of operational costs

• Great amounts of profits

• No integration economies

• Little local responsiveness


EFFICIENCY

Global strategy

Centralised decision making

Global integration

I.E. Standardized product The wireless industry, the credit card industry (American Express)

Dispered value/supply

chain

“ Strategy focusing on increasing profitability by reaping cost reductions from experience curve and location economies. ”


Global strategy

WEAKNESSESSTRENGTHS

• Strong production orientation

• Scale economies

• Creation of a “virtuous circle”

• Lacks local responsiveness

• No customization of the product


RESPONSIVENESS

Multi-domestic strategy“Strategic and operating decisions are decentralized to Strategic Business Units in each country to allow products to be tailored to the local

market.”

De-centralised decision making

Local operations

I.E. Johnson & Johnson


Multi-domestic strategy

WEAKNESSESSTRENGTHS

• Difficulty in transferring knowledge across countries

• High costs (tailored products + duplication of resources)

• Control and coordination problems

No global efficiency

• Ability to adapt products to local market conditions

Strong marketing orientation

Locally responsive


Transnational strategy

EFFICIENCYRESPONSIVENESS

LEARNING

“A combination of the multi-domestic and global strategies. Firms seek to

achieve both global efficiency and local responsiveness.”

Joint decision making

Dispersed value chain

Flexibility

I.E. Verifone, a subsidiary of Hewlett-Packard


Transnational strategy

WEAKNESSESSTRENGTHS

• Difficulty to implement this strategy (complex structure)

• Ability to adapt to local market

•Ability to attain economies of scale

• Ability to increase learning

Global competitiveness

IV. Case study: Procter and Gamble

Case study: Procter & Gamble

Founded: 1837

Headquarters: Cincinnati, Ohio, USA

Chairman and CEO: A.G. Lafley

Products: consumer goods

Slogan: “Touching lives, improving life”

Employees: 138 000 worldwide

25th largest US company by revenue, 81th in the world (2006)

Procter & Gamble Presentation


Procter & Gamble products

Three categories:

Beauty

Household Care

Health & Well-Being

I.E.

More than 250 brands, including 23 brands which have

more than a billion dollars in net annual sales


P&G’s strategies


Long time to internationalize: almost 100 years before P&G undertook operations internationally

1930: P&G began to sell its products overseas (International Strategy)

1950’s: P&G focused on the largest emerging market in the world (China…) with a multi-domestic strategy

1980’s: P&G chose to benefit from the large experience of the company (more than a century) by using a transnational strategy

International expansion of Procter & Gamble


Strengths of P&G’s international strategy

Ability to respond effectively to the new and complex demands of their international business environments (emerging markets…)

Ability to attain economies of scale

Ability to increase learning

Global competitiveness


Weaknesses of P&G’s transnational strategy

Time: The transnational strategy is not easy to build and

the history of P&G shows that the transition from a strategy

to a transnational strategy requires time.

Management: There were also big managerial challenges

for Procter & Gamble in order to have a transnational strategy

A transnational strategy confronts managers to three

main challenges:

Coordinate the decision making between each subsidiary

and the parent company

Transfer knowledge

Set up a strong marketing strategy which meets the local

customers’ requirements

V. Managerial implications

VI. Conclusion

The strategy’s choice depends on the industry

or the product.

This strategy is not static

VII. Sources

Procter and Gamble’s website : www.pg.com

John D. Daniels, Lee H. Radebaugh, Daniel P.

Sullivan, (11th Edition, 2007), International Business:

environments and Operations

Bartlett & Ghoshal, (1998), Managing Across Borders:

The Transnational Solution

THANK YOU FOR YOUR ATTENTION

P&G internationalization strategy

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