Strategic Management Case Study:

Procter & Gamble 2011

PREPARED BYMohd Rijal Bin Jamaluddin GA01290

Muhamad Rizuwan Bin Mokhtar GA01293

Muhasibi Bin Hj Abdul Wahab GA01298

Zulhan Bin Juraimi GA01343

PREPARED FORProf. Madya Dr. Zizah Che Senik

Content

• Introduction

• External Analysis

• Internal Analysis

• Strategy Analysis

• Strategy Implementation

• Strategy Recommendation

• Conclusion

A Comphrehensive Straregic Management Model

• Headquartered in Cincinnati, Ohio.

• The world's largest household products company.

• The firm is divided into two global units: Beauty &

Grooming and Household Care but P&G also makes

pet food and water filters.

• Many P&G's products are billion-dollar sellers,

including Febreze, Fusion, Always, Braun, Bounty,

Charmin, Crest, Downy, Gillette, Mach3, Iams, Olay,

Pampers, Pantene, Tide, Gain, and Wella, among

others. (250 brand products)

• P&G’s fiscal year ends June 30 every year

Procter & Gamble (2011)

• Focus on beauty and personal care

products – Sold Pringles

• P&G desires to accelerate its growth in

developing market such as Brazil & India –

”walled cities” (Emerging Market).

• Focus on “Affordability, accessibility and

brand awareness.”

• Improve existing product lines by focusing

on consumer needs.

Main Issues

Vision & Mission Statement

• No Vision

• Mission

“ 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. As a result, consumers will reward us with

leadership sales, profit and value creation,

allowing our people, our stakeholders and the

communities in which we live and work to prosper.”

Mission AnalysisComponents P&G Mission

Customers. value that improve the lives of the world’s

consumers, now and for generations to come √Products or services We will provide branded products and services of

superior quality √Markets the world’s consumers, now and for generations

to come √Technology

Concern for survival

growth and profitability.

As a result, consumers will reward us with

leadership sales, profit and value creation √Philosophy.

Self-concept. branded products and services of superior quality√

Concern for public

image.

As a result, consumers will reward us with

leadership sales, profit and value creation,

allowing our people, our stakeholders and the

communities in which we live and work to prosper

√Concern for employees

√

77.78%

Perform External Audit

Opportunities Higher demand for higher-priced products such as prestige cosmetics and fragrances.

Younger customers are attracted by social media advertising.

Social media advertising is more cost effective than traditional advertising.

The beauty and cosmetics industry is expected to increase globally especially in the emerging market

There is an endless possibility to `celebrities’ endorsing fragrances, these products are successful because many are persuaded by fame of the celebrity.

Men are increasingly concerned with their appearance, this provides a opening to grab a new branch of consumers.

Increase in online purchasing.

Being a leader in some of the most demanding product in the market.

Perform External Audit

Threats Volatile foreign exchange rates.

Subject to anti-trust investigation in Europe.

Increase in competitor expansion globally from Colgate-Palmolive, Unilever, and Clorox.

Regulations are increasing due to the voicing of different groups about harmful chemical ingredients in cosmetic products.

The Unilever companies ranks number two in personal care and household companies.

Considerable investment is necessary to bring new products to the market and to maintain their high profile.

Competitive Profile MatrixCritical Success

Factors

Weight P&G Estee Lauder Revlon

Rating Score Rating Score Rating Score

Advertising 0.10 4 0.40 2 0.20 1 0.10

Market Penetration 0.10 4 0.40 3 0.30 1 0.10

Current Ratio 0.05 1 0.05 4 0.20 3 0.15

Inventory Turnover 0.08 4 0.32 1 0.08 2 0.16

R&D 0.06 4 0.24 3 0.18 2 0.12

Income 0.05 4 0.20 1 0.05 3 0.15

Financial Profit 0.12 4 0.48 3 0.36 2 0.24

Customer Loyalty 0.08 4 0.32 3 0.24 2 0.16

Market Share 0.10 4 0.40 3 0.30 2 0.20

Product Quality 0.10 2 0.20 4 0.40 3 0.30

Top Mgmt 0.06 4 0.24 3 0.18 2 0.12

Price Competitiveness 0.10 4 0.40 2 0.20 3 0.30

TOTALS 1.00 3.65 2.69 2.10

EFE Matrix

Opportunities Weight Rating Rated

Score

1 Higher demand for higher-priced products such as prestige cosmetics and

fragrances.0.09 3

0.27

2 Younger customers are attracted by social media advertising. 0.07 2 0.14

3 Social media advertising is more cost effective than traditional advertising. 0.07 2 0.14

4 The beauty and cosmetics industry is expected to increase globally

especially in the emerging market0.08 3

0.24

5 There is an endless possibility to `celebrities’ endorsing fragrances, these

products are successful because many are persuaded by fame of the

celebrity.

0.06 20.12

6 Men are increasingly concerned with their appearance, this provides a

opening to grab a new branch of consumers.0.08 3

0.24

7 Increase in online purchasing. 0.08 3 0.24

8 Being a leader in some of the most demanding product in the market. 0.09 3 0.27

EFE Matrix

Threats Weight Rating Rated

Score

1 Volatile foreign exchange rates. 0.04 4 0.16

2 Subject to anti-trust investigation in Europe. 0.04 3 0.12

3 Increase in competitor expansion globally from Colgate-Palmolive,

Unilever, and Clorox. 0.09 4 0.36

4 Regulations are increasing due to the voicing of different groups about

harmful chemical ingredients in cosmetic products.0.07 3 0.21

5 The Unilever companies ranks number two in personal care and household

companies. 0.09 3 0.27

6 Considerable investment is necessary to bring new products to the market

and to maintain their high profile0.05 4 0.20

TOTAL 1.00 2.98

Perform Internal Audit

StrengthsProposed sale of Pringles line of snacks in 2011 for $1.5 billion.

P&G is focused solely on the beauty and personal-care products business.

In 2011, Fortune ranked P&G the number one soap and cosmetic in the world.

New CEO, Mr. McDonald focuses on lower end products aimed at price sensitive customers.

P&G operates under a SBU structure.

23 P&G brands routinely earn over $1 billion in revenue per year.

Braun, bounty, Charmin, Crest, Downy, Gillette, Pampers are all top brands owned by P&G.

Invested over $2 billion in R&D in 2010.

Market share grew in 14 of top 17 countries in 2010.

EPS is 3.94.

Perform Internal Audit

Weaknesses No published vision statement.

$57 billion in goodwill on balance sheet.

Profits declined 5% in 2011 yet revenues increased 2.9%.

Weak profitability ratios.

Not operating as efficiently as Johnson & Johnson.

Spent $772 million in advertising to Johnson & Johnson’s $366 million.

Consumers may not associate all of our brands with P&G rather view them as their own distinct companies

IFE Matrix

Strengths Weight Rating Rated

Score

1 Sold Pringles line of snacks in 2011 for $1.5 billion. 0.12 4 0.48

2 P&G is focused solely on the beauty and personal-care products

business.0.08 4 0.32

3 In 2011, Fortune ranked P&G the number one soap and cosmetic

in the world.0.06 4 0.24

4 New CEO, Mr. McDonald focuses on lower end products aimed at

price sensitive customers.0.07 4 0.28

5 P&G operates under a SBU structure. 0.05 4 0.20

6 23 P&G brands routinely earn over $1 billion in revenue per year. 0.10 4 0.40

7 Braun, bounty, Charmin, Crest, Downy, Gillette, Pampers are all

top brands owned by P&G.0.10 4 0.40

8 Invested over $2 billion in R&D in 2010. 0.05 4 0.20

9 Market share grew in 14 of top 17 countries in 2010 0.07 4 0.28

IFE MatrixWeaknesses Weight Rating Rated

Score

1 No published vision statement. 0.02 1 0.02

2 $57 billion in goodwill on balance sheet. 0.04 1 0.04

3 Profits declined 5% in 2011 yet revenues increased 2.9%. 0.04 2 0.08

4 Weak profitability ratios. 0.04 2 0.08

5 Not operating as efficiently as Johnson & Johnson. 0.05 1 0.05

6 Spent $772 million in advertising to Johnson & Johnson’s $366

million.0.07 1 0.07

7 Consumers may not associate all of our brands with P&G rather

view them as their own distinct companies0.04 1 0.04

TOTAL 1.00 3.18

SO Strategies

• Spend $400 million in R&D to produce 3 new lines of higher end fragrances (S7, S8, S9, O1).

• Allocate $100 million for advertising and promoting male skin care products using celebrities as spokesmen (S6, O5, O6).

WO Strategies

• Increase social medial advertising targeting teenagers by $100M (W3, O2).

ST Strategies

• Continue to market low end cosmetics and fragrances (S4, T5).

WT Strategies

• Reduced advertising by $300M on well established products letting their brand name sell for itself (W5, W6, T7).

SWOT

BCG Matrix

Division

Sales

/Revenue ($

millions)

%Profit

($ millions)% RMSP

Net sales

growth %

1Beauty

19,491 24 2,712 23 0.60 3

2Grooming

7,631 10 1,477 13 0.20 3

3Health Care

11,493 14 1,860 16 0.30 2

4

Snacks and

Pet Care 3,135 4 326 3 0.10 1

5

Fabric Care/

Home Care 23,805 30 3,339 28 0.80 3

6

Baby Care/

Family Care 14,736 18 2,049 17 0.40 4

Total80,291 100 11,763 100

BCG Matrix

23%

1.0 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 0.9 0.8

+5

+10

+15

-5

-15

-10

-20

0

+20

0

2 3 1

5

6

28% 23% 17%

16% 13%

3%

Relative Market Share Position (RMSP)

Ind

us

try S

ale

s G

row

th R

ate

Star Question Marks

DogsCash Cow

III

III IV

3% 3%2%

1%

3%4%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0.000.100.200.300.400.500.600.700.800.901.00

Ind

us

try S

ale

s G

row

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ate

Relative Market Share Position (RMSP)

P&G BCG Matrix

Stars

Dogs

Question

Marks

Cash Cow

III

III IV

SPACE Matrix

X-axis 3.6

Y-axis 2.4

•Market Penetration

•Market Development

•Product Development

SPACE Matrix

Grand Strategy Matrix

The Internal-External (IE) Matrix

Segment Revenues Profits

Beauty &

Grooming

34% 36%

Health &

Well-Being

18% 19%

Household 48% 45%

4.0 I II III

Household

High

3.0 IV V VI

The Beauty & Grooming

EFE

Total Medium

Weighted

Scores

Health & Well-Being

2.0 VII VIII IX

Low

1.0

The Total IFE Weighted Scores

Strong Average Weak

4.0 to 3.0 2.99 to 2.0 1.99 to 1.0

QSPM

QSPM

Recommendation

• Spend $400 million in R&D to produce 3

new lines of higher end fragrances and

lower end products.

• Allocate $100 million for advertising and

promoting male skin care products using

celebrities as spokesmen.

• Increase social medial advertising

targeting teenagers by $100M.