PROCTOR & GAMBLE

Presented by
Chris Collins & Ben Fournier
Company Overveiw
World’s largest maker
and distributer of
household items and
consumer goods
Some of Proctor &
Gamble’s “super
brands”. Super brand
means the product
does more than $1
billions in sales in a
year. P&G has 21 of
these brands.
 Product Line
Billion Dollar Brands
Beauty Care – 23% of sales Batteries & Electrical Devices
 Always, Head & Shoulders  Braun, Duracell
 Olay, Pantene, Wella
Fabric & Home Care – 28%
 Ariel, Dawn, Downey, Tide
Baby & Family Care – 16%
 Bounty, Charmin, Pampers
Health Care – 17%
 Actonel, Crest, Oral B
Pet Health & Snacks – 6%
 Iams, Pringles
Grooming – 10%
 Gillette, Mach 3
 Mission Statement
To provide brandedproducts and services of
superior quality and value that improve the
lives of the world’s consumers. As a result,
consumers will reward us with leadership sales,
profit, and value creation, allowing our people,
our shareholders, and the communities in which
we live and work to prosper.

Sustainability Video
 Industry Pioneers
Created the concept of "soap opera" by sponsoring radio
and television dramas targeting women

First Fluoride-based toothpaste, Crest

Tide was a revolutionary synthetic detergent

First disposable diaper, Pampers

 General Business Level
Strategy
Product Differentiation – through the utilization
of brand recognition and value, they maintain a
competitive advantage.

The products are of higher cost but also of

higher quality and value.
Corporate Level Strategy
Concentric Diversification Growth Strategy –
continuous expansion into related but
distinctively different areas.
 Constant focus on innovation and new product
development
 Acquisitions
In 2005 Proctor & Gamble bought out Gillette for
$57 billion, making it the biggest acquisition in
company history.
This enabled P&G to go from having 16 to 21
“super brands”
They sold off their Folgers division in November
2008 for more than $3 billion in an effort to stay
focused on the markets they are already in
 External Environment
Economic
 Adapted to the recession by lowering earning
projections
 Shed 15% of the management staff to help cope with
the tough economy
 Focus their greatest resources on the 43 best-selling
brands
Social Cultural
 Have to keep up with changing trends in consumer
demand
 External Environment
Demographic
 Everybody will use most these products
 Middle to upper class consumers due to the higher
price of the brand name products
Physical
 Global – in more than 80 countries
Legal / Regulatory
 Must meet industry regulations and standards in
many different countries
 External Environment
Competition
 Three main competitors
 Johnson & Johnson
 Kimberly-Clark
 Unilever
 Medium threat, hard to challenge brand value but
relatively easy to enter the market
 Internal Environment
Human Resources
 Hire and retain some of the most talented people in
the industry.
 Rewarded and recognized for their contributions
through financial compensation, promotions and
freedom to influence project selection
 Global training programs on managing the innovation
process
 Training for high-potential junior staff
Internal Environment
P&G operates in more than 80 countries
worldwide
 Internal Environment
Location
 International operations are concentrated in Europe
with a lesser presence in Asia and Latin America.
 An opportunity is available in India, where Unilever
dominates and P&G has a small footprint
 Internal Environment
Marketing
 Constant emphasis on building brand recognition and
brand value
 In the 1880’s it was one of the first companies to
advertise nationally.
 In the 1930’s, P&G was the first firm to develop the
idea of brand management. They would set up
marketing teams for each brand and urge them to
compete against each other.
 In the 1930’s they used their own soap operas and
radio programs to promote their products and appeal
household women.
 Internal Environment
Financial Analysis
 Liquidity
 Current ratio: .792
 Quick ratio: .52
 Leverage
 Debt ratio: .52
 Asset turnover
 Inventory turnover: 4.8 times
 Days’ sales in inventory: 76 days
 Total asset turnover: .58 times
 Internal Environment
Financial Analysis
 Profitability
 Profit margin: 14.5%
 Internal Environment
Stock price growth from 1995 -
2009
P&G vs. Kimberly-Clark

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 Internal Environment
Research
 World class R&D organization, with more than 7,500
scientists working in 12 countries around the world.
This includes 1,250 Ph.D. scientists. For perspective,
this is larger than the combined science faculties at
Harvard, Stanford & MIT.

 Invest 4% of sales back into research & development

which is higher than most of their global competitors
 Internal Enviroment
Recently elected a new CEO, Bob McDonald, is
going to start his duty on July 1st, 2009.

Taking over for A.G. Lafley, who will now serve

as Chairman of the Board of Directors. Lafley
had an enormous impact on P&G, taking over in
June 2000, in an attempt to turn a stalling
company around.
 Internal Environment
Leadership
 A.G. Lafley states that the fundamental role of the CEO is
to link the external world with the internal organization
through four key tasks:

3. To define and interpret the meaningful outside (external

environment).
4. To answer the two-part question, time and time again,
“What business are we in and what business are we not
in?”
5. To balance sufficient yield in the present with necessary
investment in the future.
6. To shape the values and set the standards of the
organization.
 A.G. Lafley, CEO
Comparable to GE’s CEO Jack Welch in some of
his organizational leadership qualities
Lafley wants to shift the focus back to the
consumer. Let consumers needs dictate new
products, rather than technology.
Lafley began by breaking down the walls
between management and employees.
 Moved senior executives from the 11th floor to the
same floor as their staff
 Exchanged a rectangular meeting table for a round
one and allowed executives to sit where they want.
 A.G. Lafley, CEO
Lafley began his term with P&G by stripping
away the bureaucracy in order to speed up
product development and build up well-known
brands.
“The assets of P&G are our people and our
brands.”
 P&G’s Value Chain
Primary inputs
 A large majority of Proctor & Gamble’s products,
about 90%, are made “in house”. They manufacture
most of their products with their own plants, do
research and development with their own team, and
store and distribute their own products.
 However, A.G. Lafley feels that they can cut the
amount of workforce they have by almost 75% by
doing less in house and outsourcing much more.
 P&G currently employs about 110,000 people
 Value Chain
Nearly one half of the company’s employees
work in its plants. A.G. Lafley feels that cutting
back on operations is necessary and will
undoubtedly create some hardships on
employees
Lafley feels outsourcing more activities may also
create more flexibility for the firm in the long
run
If there are no clear benefits from doing
something within the firm, it should be
contracted out
 Value Chain
Wal-Mart provides about 15% of their total
annual revenue. P&G is getting pinched by
huge suppliers, Wal-Mart specifically, due to
their buying power and ability to squeeze out
lower prices. The power of these big-box buyers
is only expected to increase.
 Porter’s 5 Forces
Threat of New Entrants
 Medium – can be easy to enter the market but hard to
be successful, at least on a large scale
 It can be difficult to obtain shelf space in stores

Bargaining power of buyers

 High and increasing due to large retailers such as
Wal-Mart
 Wal-Mart could account for up to one third of global
sales by the end of the decade
 Porter’s 5 Forces
Bargaining of suppliers
 Low

Threat of substitute products

 Low

Intensity of rivalry
 High – many powerful competitors
 Social Responsibility
P&G is doing extensive research on where their
products go after use and what affects they may
have on the environment
 Looking to see what impact their products have on
plants, animals, and bacteria
P&G embraces the UK government definition of
sustainability, which says: "Sustainable
Development is a very simple idea. It is about
ensuring a better quality of life for everyone,
now and for generations to come."
 Social Responsibility
P&G focuses on two areas they can make a
difference
1. Water
2. Hygiene and health

These focus areas support ongoing work to

understand issues concerning water
availability, quality and quantity, and health,
hygiene and nutritional issues.
 Social Responsibility
For 2007, P&G is ranked as the leading company
in the consumer, non-cyclical market sector of
the Dow Jones Sustainability Group Index. This
is the seventh year in a row that P&G has been
ranked first.