Epgdib 2014-15 p&g

INTERNATIONAL BUSINESS STRATEGY

Assignment: P&G Case

Faculty: Dr. K. Rangarajan Developed by: Group 6

Abhishek Das, Roll No-4

Pratip Kumar Kar, Roll No-37

Saibal Chatterjee, Roll No-45

17-Oct-2014

P&G: Group 6 (EPGDIB-VSAT-2014-15) 1

The case is about P&Gs revival strategy in early 2000

2

Procter and Gamble (P&G) ran through a troubled time in early 2000 with as much as 18% decline in profit in one quarter and 7% drop in yearly revenue guidance resulting significant fall in stock market

P&Gs President and CEO, Durk Jager launched the Organization 2005 program to leapfrog over the declining trend

However, much of the initiatives provided poor return leading a premature exit for Durk Jager

Alan George Leafley, new CEO undertook a number of promising strategies that brought P&G back in the path of growth and profit

Case Brief Aspects to be Assessed

Key elements of the Organization 2005 program and the changes the program brought about in P&G

Organization structure and its suitability in view of the overall strategy

Changes in the marketing strategy of P&G proposed in the case

Merits and demerits of Organization 2005 program

Leafleys strategy and the measures to be taken to improve P&Gs growth in developing markets

P&G: Group 6 (EPGDIB-VSAT-2014-15)

The aspects will be covered in three steps

3

Key elements of the Organization 2005 program and the changes the program brought about in P&G

Organization structure and its suitability in view of the overall strategy

Changes in the marketing strategy of P&G proposed in the case

Merits and demerits of Organization 2005 program

Leafleys strategy and the measures to be taken to improve P&Gs growth in developing markets

Why Organization 2005 program

Elements of Organization 2005 program

Leafleys strategy evaluation

1

2

3

Steps to Address Aspects to be Assessed


Why Organization 2005 program?

4

Change in revenue guidance leading to reduction in stock price causing loss of more than $40billion market capitalization

Stagnant revenues

Declining profit to about 18% reduction sequentially, a phenomenon in eight years

Lack of competitiveness

1

External Indications Root Causes

Organization & Governance

- Complex organization structure with lack of clarity on the roles and responsibilities

- Excessive decentralization hindering overall globalization goals

Culture

- Bureaucratic culture prohibiting innovation and growth

Processes

- Fragmented process across geographies

Marketing Strategy

- Aging brand lines failing to capture millennial and new customers

- Minimal new launches over long period


Changes were pervasive with both foundational and strategic in natures

5

2

Strategy

Process Marketing

Organization Culture and People

Changes from conservationist strategy to more outward, revenue focused strategy

IT as a business partner Focus more on innovation

Process: - Standardization across globe - Technology aided

Marketing - New brands - Promotions

Organization: - Structural and functional change - Centralization

Culture and People - Innovation - Rewards based - Collaborative


Fundamentally, a conservative strategy was changed into a dynamic innovation oriented strategy

6

2

From To

Conservative outward strategy

- Concentration on cash cows

- Risk averseness

- Concentration on operation and bottom line

- Physical link with the customer

Insular inward strategy

- Decision making through hierarchical communication

- Traditional supply chain operation

- Bureaucracy in culture

IT as a support service

Dynamic outward strategy

- Concentration on new launches

- Stronger appetite to risks e.g. Large acquisitions

- Concentration on topline

- Virtual link with the customer

Open inward strategy

- Faster decision making

- Technology driven supply chain

- Open and reward based culture

IT as an enabler to business

- Operation enabler

- CRM enabler


Processes were standardized and IT driven

7

2

From To

Core processes

- Inefficient processes

Product line

- Too much focus on old products as roughly 8% of the products led to about 85% of the revenues

Information Technology

- Minimal use of technology apart from the traditional ones

Core Processes - Improvement in core processes including product

development, supply chain management and marketing functions

Product line - Stronger focus on new product development with

greater impetus on innovation, faster time to market

- Simplification of product lines through standardization of product formulas and worldwide packages

Information Technology - Significant leverage of IT in supply chain, knowledge

management, collaboration - More focus on technology driven order

management, processing, category management - Internet based distribution system Web Order

Management - B2C e commerce with introduction of P&G

Interactive marketing and customer collaboration


Marketing approach was focused on new launches and brand promotion

8

1

From To

Product

- Focus on cash-cow products

- Minimal growth outlook on more than 80% of the product lines

Price

- Pricing strategy decided by country managers

Place

- Decisions taken in a federated way by geographies

- Traditional distribution processes

Promotion

- Traditional promotion process mainly focused to core products

Product

- Focus on new product launches

- Emphasis on innovation

Price

- Price set by GBUs and products sold worldwide accordingly

Place

- Centralized decision making by the GBUs

- Internet based decision making and collaboration (Web Order Management)

- Improved and faster technology driven point of sales information to sales people

Promotion

- Various discount and reward system for products

- Increased impetus on brand management


Marketing approach and global perspectives

9

1


HIGH

GLOBAL

FORCES

LOW

LOW HIGH LOCAL FORCES

Research

Finances

Development

After Sales

Services

Logistics

Components Sourcing

Components Manufacturing

Marketing

Accounting

Customers Services

Sales

Advertising

Centralization of core functions to leverage economies of scale and scope

1

2

Standardization of packages and product

ingredients

Focusing on new brand launches across the globe

driven by innovation

3

Emphasizing rise of emerging economies

Realigning and revitalizing global

positioning through value chain optimization and

structural changes

4

5

The organization was centralized to enable process change and ensure faster decision making

10

2

From To

Model - Geography based - Profit centers oriented - 100 profit centers

GBU - Limited control on the

GBUs - Limited accountability on

profits for the GBUs GBS

- Almost negligible or no presence

Corporate Functions - No existence

Model - Product line based - 5 product based global business units - 7 profit centers

GBU - Increased centralization of GBUs with sourcing,

R&D and manufacturing further consolidated - Direct accountability on profits for the GBUs - Strengthening of GBU by integrating integrating

with eight regional market development organizations (MDOs)

GBS - GBS service for global integration of processes

around accounting, order management, human resource systems, employee benefits and welfare and IT services

Corporate Function - New structure for centralized capabilities for

corporate operations to support GBU and MDO in collaboration with GBS


An open, innovative reward-based culture was brought in

11

2

From To

Cultural philosophy

- Conservative and bureaucratic

- Limited focus on collaboration

Misaligned objective with high penalties for failure

Internal inspection keeps everyone under control

Risk is avoided and victory is narrowly defined

Complexity is delegated down

Creating a slow moving organization that lacks stretch, innovation and speed

Traditional time based performance reward

Cultural philosophy

- Modern, quick moving and internet savvy

- Technology based collaboration

The organization is aligned on common goals with trust as a foundation

A focus on coaching and teaching enables informed risk taking and team collaboration

Victory is defined as stretch with trust and candor

Leaders take on complex challenges

An organization driven by stretch, innovation and speed toward breakthrough goals

Innovation and result oriented reward system


Merits and Demerits

12

2

Innovation and change - A push in the direction of change

- Innovation on new products

Centralization of decision making

- Large part of centralization helped in decision making faster

Standardization of processes

- Standard and unambiguous process for reduced time to market

- Customer orientation and cost reduction

- Customer oriented drives such as Web order management, Reflect.com, P&G Adivisors etc.

Supply chain revamp

- KARS for minimized and just time inventory

- Technology driven supply chain

- Faster cash to cash cycle

IT as a business partner

- Introduction of IT in core supply chain to web commerce to collaboration

Strategy radically different

- Radical changes in P&G philosophy: leading to confusions internally as well as externally in the stock market

- Miscalculated large acquisitions in short time: Warner-Lambert and American Home products

- Disproportional focus on revenue increase as opposed to cost reduction for execution

Far fetched expectations on Product lines & marketing strategy

- Disregard on the core products to focus excessively on new products

- Selling P&G products globally under the same name

Cultural shift raising people nervousness

- Significant change from conservationist culture to Confrontational style of management

- Indiscriminate change of reporting hierarchy and people location

- Working environment uncertainties through Job cut

Inadequate organization change management


Organization 2005 strategy implication

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2

The strategy was in the right direction for P&G as it helped

Transform the firms overall conservative and insular strategy into dynamic and open one that eventually was followed by Leafley leading to phenomenal success

New marketing approach helped the firm to determine and evaluate prospective product lines that can render high return in emerging markets

A productive culture was brought in to help transform overall firms agility

Faster time to market philosophy was heavily reaped for significant benefits subsequently

Uncovering Inorganic growth as a part of P&Gs fundamental growth strategy

Some of the approaches didnt yield the benefit not because of strategy mishap but more of implementation faults

Change in culture was not properly accepted although needed and fundamentally appreciated by Leafley

Too many changes, too fast had put a strain on the firm although recreating the roadmap had brought in desired results


Leafleys Strategy is highly focused towards developed markets

14

3

Refocusing on core products and brands such as Tide, Pampers and Crest to drive up the revenues in the leading markets

Revitalizing untapped potential of traditional businesses such as baby care, fabric & home care and oral care

Ensuring large ($5 billion) but measured acquisition through Clariol to drive up core competency

Driving various cost reduction initiatives including job reduction

Realigning corporate culture to open, collaborative but soft one

Recognizing women power as a major driving factor

Continuing on the innovation and technology path laid down by Jager

Start of big acquisitions

IT and .com boom

Heavy reliance on baby, home care products

Cost cutting as a measure for profit boost

Typical Developed Country Trends and Needs

Leafleys Strategy


Leafleys Strategy and developing markets

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3


Some of Leafleys strategies were equally applicable for developing markets

Focusing on traditional baby care and home care products as the lifestyles were changing for the developing markets as well

Continuing on the path of innovation and technology rendered much needed lever for collaboration and faster decision making across the globe

Continuing on the structural reforms but softer people management approaches would have provided appropriate cultural orientation for Asian markets such as India

Concentration of cost reduction is vital operation strategy for new market entries

Adapting to local market packaging and product requirements with global touch

However, some additional aspects would have been necessary for emerging markets

Continuing the focus and ambition on rising emerging markets so gain early entry advantages

Classifying expansion strategies (e.g., export vs. FDI) for key markets

Realigning and emphasizing needs for certain functions such as HR for local markets

Evaluating the need for local sourcing from certain markets

Localizing brands and meeting local customer needs such as Healthcare and hygiene products like Vicks, Head and shoulder in India

Thank You

16 P&G: Group 6 (EPGDIB-VSAT-2014-15)

Documents

Epgdib 2014-15 p&g