Procter and Gamble is a leading seller and distributor of household goods across the world. The company sells consumer goods from six categories including: beauty care, feminine care, food items, paper goods, health care, and beverages. In the UK, they dominate many categories including the detergent market alongside Unilever (Serena, 2014). The study made a number of audits of the company including the situational analysis and competitive advantage, and used this analysis to make recommendations that would assist the company to increase sales and brand awareness.
The SWOT analysis revealed that the company’s strength lies in its finances, innovation, brand, and access to labour. On the other hand their weaknesses include its ineffective distribution system and management. The company has the opportunity to gain from their plan to drop over 100 brands from the company, their well-defined niche, and the removal of trade barriers in certain countries. However, they are threatened by the increasing competition in the household goods category and the lack of investment into certain regions.
P&G’s competitive advantage lies in its ability to innovate and come up with new products and create a market for same e.g. Flash and Pampers disposable nappies. Furthermore, they can effectively segment and target markets to the level of micro-niches. This explains why they often have more than one brand competing within the same market. The paper recommends that they build on their ability to segment effectively markets and to use an intermarketing strategy in the developing countries. Intermarketing involves giving up geographic segmentation in place of segmentation based on behaviour and preference, irrespective of location (Dodgson, Gann and Salter, 2006).
Contents
1 Introduction. 3
2 Strategic Analysis of P&G Company. 3
2.1 Internal Environment Analysis. 3
2.1.1 Strengths. 3
2.1.2 Weakness. 4
2.1.3 Opportunities. 4
2.1.3 Threats. 5
2.2 External Environment Analysis. 6
2.2.1 Political Environment 6
2.2.2 Economic Environment 6
2.2.3 Social Environment 7
2.2.4 Technological 8
2.2.5 Laws and Regulations. 8
2.3 P&G Competitive Advantage. 9
2.3 P&G Marketing Strategy. 10
2.4 Segmentation, Targeting & Positioning. 11
3 Recommended objectives and goals. 12
4 Recommended Marketing Strategies. 12
4.1 Product 12
4.2 Place. 12
4.3 Price. 13
4.4 Promotion. 13
5 Conclusion. 13
References. 15
1 Introduction
The UK detergents market is dominated by Unilever and Procter and Gamble (P&G). Although Unilever sells the most popular detergent brand (Persil) in the country, P&G holds the largest market share through the sale of a number of various detergent brands that take up a sizeable chunk of the market. The detergents include Ariel, Bold, Daz, and Fairy. P&G is one of the largest producers and sellers of household goods. The company has over 250 brands from six consumer goods categories: beauty care, food items, feminine care, paper goods, beverages, and health care. The company’s other famous brands include: Oil of Olaz, Pantene, Sunny Delight, and Head & shoulders. In spite of having many brands, about 50% of company revenue is from their top 10 brands (Serena, 2014). In order to further understand the company, this report will first conduct a situational analysis of the company to understand both the external and internal environment. The assessment will be made in terms of effectiveness, efficacy, and marketing strategy to the investors. Furthermore, the results of this assessment will be used to make recommendations to improve the systems, policies, and structures.
2 Strategic Analysis of P&G Company
2.1 Internal Environment Analysis
The SWOT analysis determines the strengths, opportunities, weaknesses, and threats facing a company.
2.1.1 Strengths
- The company has a strong domestic and international financial position.
- P&G has the capability to commercialize innovations faster than any other competitor in the world. The company has been the first to roll out a number of innovative products within the consumer goods category Dodgson, Gann and Salter, 2006).
- The company’s size given it access to large pool of skilled labour. There are more than 120,000 employees working from the company across the world. In recent years, the company gained the reputation of being a selective employer only accepting around 1% of applicants to work with the company (Dyer, Dalzell and Olegario, 2004).
- Over the years the company has become associated with the production of high quality products across all its brands. Such brand awareness has always worked in favour of the P&G.
- P&G works at such a large scale that they are bound to enjoy significant economies of scale advantages.
2.1.2 Weakness
- The company has often been accused of having an ineffective distribution system in some segments. Furthermore, they are located poorly in most foreign locations. This might have been due to some cost savings initiatives.
- P&G tends to loosen on the management requirements in some foreign countries. The management in most of these countries lack adequate international experience and this makes it difficult for them to communicate with the headquarters (Galbraith, 2009).
- The company has a strong dependence on Wal-Mart stores to sell most of their products. Wal-Mart is a very popular chain store supermarket; however, the decreasing popularity of their stores will eventually hurt the sales of the company’s products (Dyer, Dalzell and Olegario, 2004).
2.1.3 Opportunities
- P&G has a well-defined niche. They have access to a wide range of demography and they can opt to expand and target even smaller micro-niches that exist in the current market.
- Some countries have removed the trade barriers that earlier existed and prevented the company from marketing their products. Countries such as China and across Asia are now more willing to accept foreign companies to run more independently. The loosening of government intervention presents an opportunity for the company to double up on operations in such countries and become more competitive (Serena, 2014).
- The company has invested heavily in just-in-time technology. This technology can give them an edge over most of the competitors if put into use effectively. It will allow them to be more flexible and to react to the needs of their consumers.
- In 2014 the company announced that they were dropping 100 brands from their portfolio. Although this is largely viewed as a threat, it can still be a viable opportunity. The company will now be able to focus on the few profitable brands left (Serena, 2014).
2.1.3 Threats
- Every year there are new entrants into the household products market. The industry has very few restrictions to entry and many small and medium sized businesses are investing in the industry. Consumers are now more willing to try out substitutes than earlier before. The local companies are supported by the government and this makes it even harder for multinational such as P&G (Dodgson, Gann and Salter, 2006).
- Investors do not favour uncertainty. They want to invest in a region where they will be sure of reaping benefits. P&G avoids countries that show any signs of political and economic instability. This can open up opportunities for their competitors such as Unilever.
- The company’s planned sale of close to 100 brands that was announced in 2014 might give their competitors a chance to use their previous brand to compete against them (Serena, 2014).
2.2 External Environment Analysis
The PESTLE analysis identifies the Political, Social, Economic, Environmental, Technological, and Legal environment factors affecting a company.
2.2.1 Political Environment
Changes in the local and foreign political events often affect large multinationals. P&G has come up with certain strategies to cushion themselves from the unpredictable changes that occur in various political environments. As a case in point, the 1960’s nationalization of companies caused P&G to lose market share across the world. At this point, companies were exposed to government control on price, export, import, and work conditions. Over the years P&G has learnt to develop goodwill with the governments in countries around the world. They use this to bargain and convince them to change their policies in favour of multinationals.
P&G is a member of numerous worldwide organizations that have given it the ability to expand its political strategy. The company aims to bring up a favourable corporate community in a bid to enhance their reputation management. Furthermore, P&G uses advertisements to raise awareness on issues, sustain a favourable political environment, and public support (Dyer, Dalzell and Olegario, 2004).
2.2.2 Economic Environment
The market segment targeted by P&G is highly competitive in the international market, especially in regions such as Europe and Asia. Unilever is one of their main competitors and they enjoy a large market share as well. In Europe, the free trade policy kicked and it is already affecting the competition of the consumer markets. Consumers now have a wide variety of products to choose from. Consumer decisions are often based on brand, quality, and price. P&G still has a slight edge over the competition due to their brand popularity and quality. However, other cheaper brands are starting to gain popularity and the company will have to develop a strategy that will keep such competitors at bay (Galbraith, 2009).
The Great recession that took place in 2007-08 has affected the purchase patterns of consumers. Consumers are more reluctant to make expensive purchases. Consumer’s disposable has been greatly affected and only a small percentage has truly recovered from the economic slowdown. Producers who sell fast moving goods have been under pressure to cut down on the cost of their products to recapture their market share (Ohanian, 2010).
In countries such as Germany, Netherlands, and France P&G is struggling to recapture their continuously reducing market share. Also, the company opted to limit its market share in countries that are politically unstable in Africa and the Middle East. In most of these countries, especially in Africa, a majority of the people still live on less than £1 daily (Ohanian, 2010).
2.2.3 Social Environment
P&G’s main target for their personal and consumer good products is women. Most of their brands, and among the most profitable, are from the skin care, hygiene, beauty, and hair care categories. These are products used mainly by women. On the other hand, products such as beverages, detergents, pet foods, and cleaning products are targeted by women who are the decision influencers. In essence, it is women who influence the brand decisions for the use of these products. The company does a lot of sponsored programs, and advertising to attract their audience. They also use the same channels to build brand loyalty and convince new consumers to make purchases. In 2010, the company spent an estimated $9.3 billion on advertising alone. This is $1 billion on top of the amount spent by their closest rival – Unilever (P&G, 2014).
In an effort to improve their goodwill among their customers, P&G is engaged in community service programs that are aimed at improving the hygiene condition in countries such as Africa, Asia, and in the Latin American regions. The company has been on the forefront for the push towards achieving improved hygiene in these regions. Nonetheless, it is proving difficult to pass on their message to the consumers in these countries due to a relatively high illiteracy level in the region. This calls for an improvement in the communication between the consumers and producers in the developing world. It is important to note that P&G has employees from at least 110 different nationalities (P&G, 2014).
The company has aimed at improving the lives of people for the 150 years that it has been functional through a variety of social investment initiatives. P&G is fixated on attracting diverse languages, cultures, and ethnic groups as their consumers. The results have been an increased demand from different countries across the world (Dyer, Dalzell and Olegario, 2004).
2.2.4 Technological
P&G has been on an exponential growth phase since the 1950’s. The company has the capability to come up with innovative new products, improve quality, and to increase production. Their market share price has increased continuously since the 50s. It is significant to note that the company set a record for spending around $2 billion on research in two consecutive years on research and development. The company is currently at the forefront in the use of modern technology in the production of consumer goods. Research and development is an important contributor to the macro environment of a company (Dodgson, Gann and Salter, 2006). Furthermore, there has been an increase in the importance of social media in advertising (Mangold and Faulds, 2009).
2.2.5 Laws and Regulations
P&G is a multinational company and it has to conform to the laws of each country where they manufacture, distribute, or sell their product. There are many environmental, safety, and health requirements across the world. All plans are subject to operation requirements and emission limits within this regulations, statutes, permits, and laws. P&G is among the top companies in the world in regards to compliance with the laid down laws. The company tends to treat any non-compliance case seriously and they are often set on as soon as possible. P&G is subject to a number of governmental regulations, corporate tax, and other matters that may arise out of the normal day-to-day business activities (Dyer, Dalzell and Olegario, 2004).
2.3 P&G Competitive Advantage
P&G is the most innovative company in their niche. They are often among the first to come up with an innovative product that ends up becoming a market hit. The company has an innovative culture, where every member of their team can contribute towards the development of a new product. This is not a new approach, and it has worked for the company for many years. The company’s devotion to R&D led to the creation of Flash which turned out to be a ground-breaking product at that time (Sandholm et al., 2006). This turned out to be the revolutionary innovation that gave them the ability to cater for more household cleaning situations through new and innovative cleaning products that catered to the market. In addition, the company also created the disposable nappy industry through the development of Pampers. Other competitors had to learn from P&G so that they could create their own similar products. In a world where changes occur constantly, only an innovative culture will assist such organizations to move forward. Such a culture has continuously helped P&G to come up with and transfer know-how to the market. The competitive advantage that Procter and Gamble holds is from their innovations that give consumers products that simplify their lives. This is without a doubt the source of the company’s success (Dodgson, Gann and Salter, 2006).
2.3 P&G Marketing Strategy
P&G has 8 laundry detergent brands on sale in the US market (Gain, Oxydol, Era, Bold, Cheer, Ivory Snow, and Tide). These brands from the same company openly compete with each other on shelves. The same holds for toothpastes, tissues, towels, shampoo, deodorants and all the consumer products that the company distributes. It is often argued that it would make more sense for the company to focus on one category rather than have all resources focused on that many products from the same niche (Amuah, 2014). However, the truth is that consumers are always interested in different benefits from such products as the company realized. Take these detergents for example, all consumers are interested in cleaning their clothes but they are all seeking varied additional benefits from the same products. Additional benefits may include bleaching power, fresh smell, strength and mildness, economy etc. The company has successfully segmented the market into very many categories for each product. The company always has an attractive offering in all preference groups (Serena, 2014). This has paid off, especially in the $4.3 billion dollar market for laundry detergents in the US. Their main detergent Tide takes up a 38% market share. When all the detergents from P&G are combined, they take up 57% of the market (Amuah, 2014). This is almost three times the market share that the closest rival –Unilever – enjoys.
It is almost impossible to appeal to all buyers from one market, not while using the same strategy. There are too many buyers, in very many places, and with very different needs. On the other hand, the sellers also have different abilities to satisfy the market segments (Sandholm et al., 2006). Most companies are now opting to become choosy with the consumers that they target. The company engages in market segmentation and targeting very effectively. P&G identifies all the market segments that they can satisfy and they serve most of them (Blythe, 2009).
2.4 Segmentation, Targeting & Positioning
No company has the resources to operate in all countries across the world. Some, such as Coca-Cola, have been able to sell their products in as many as 200 countries. P&G has often found it difficult to operate in very many countries beyond where they currently operate. There are various cultural, political, and economic differences between countries – even those that are close together. This difficult can be overcome by segmenting these markets depending on their buying needs just as they do locally. The company can use one or a number of combined variables. P&G currently uses geographic segmentation which uses the assumption that countries which are close together will have the same traits and behaviour. This is not true in most case, especially in Europe and Asia. As a case in point, Canada and the US have a lot in common, but Mexico differs significantly from both countries economically and culturally. It is also common to find US marketers assuming that all central and South American countries are the same (Kotler and Armstrong, 2010).
A common approach that is gaining popularity should work for P&G in its international marketing strategy is using an intermarket segment. This will not put into consideration the political, cultural, or economic differences of the countries. The segments are formed based on their buying behaviour and needs irrespective of their countries. A company that approaches this very well is Mercedes-Benz. The company targets the well-off across the world and use the same pricing strategy as well. This has been proven, and it was recently surprisingly revealed that teenagers across the world live parallel lives. Teenagers across the world have a lot in common and they follow similar shopping, sleeping, and study habits. Also, they are exposed to similar issues: crime, ecology, love, and working parents. P&G can take up this marketing strategy and use it to divide the countries where they have not expanded into (Kotler and Armstrong, 2010).
3 Recommended objectives and goals
- To identify more market segments for the company products.
- To develop better distribution channels.
- To continue investment in research and development, and to come up with more ground-breaking products.
4 Recommended Marketing Strategies
The 4 Ps are crucial in determining the offer of a product. P&G can improve on their current strategy based on the following improvements.
4.1 Product
Procter and Gamble often uses the same packaging for their products to maintain their brand awareness. However, they can improve this to fall in-line with the proposed intermarketing strategy. This means that they will have to slightly adjust their packaging in the developing countries. The consumers in these countries tend to have fewer segmented preference groups. The packaging should point out the main message on the detergent should be that of hygiene. Additionally, they should have more instructions on proper use. This will improve the efficacy as well as the use of the company products. This is especially useful in regions where the illiteracy levels are high. Flashy advertising won’t cut it in these regions.
4.2 Place
The company already has well-defined distribution channels in place. However, they first have to become independent of their dependence on Wal-Mart in the US for sales. This can be achieved by taking on e-marketing more vigorously and to convince the smaller and more local stores to put more of P&G products on their shelves. This will provide them access to the consumers who have fully embraced ecommerce, and those who prefer to support the local stores (Sonderegger, 2011).
4.3 Price
P&G might have to take up a more flexible pricing strategy. This should fall in line with the intermarketing strategy. Consumers in the developing countries tend to favour cheaper prices and efficacy over other factors. Furthermore, the consumers also prefer items in smaller quantities to fit in with the wages that they receive. The company can opt to make smaller quantities of their detergents for the locals to purchase (Paley, 2005).
4.4 Promotion
Promotion is one area where the company certainly does not fall short. The company is one of the highest spenders on advertising in the world. Suffice it to say that it outspent Unilever their closest rival by $1bn in advertising (Kapferer, 2008). However, this is mostly spent on the conventional advertising methods such as TV, Radio, and Newspaper adverts The Company should vigorously involve themselves in both social media and online advertising (Mangold and Faulds, 2009). These have been proven to be effective at capturing members of Generation Y and X (Kotler and Armstrong, 2010).
5 Conclusion
P&G is a leading multinational company that specializes in the manufacture and distribution of consumer products. The company has over 250 brands from 6 categories. It is among the leading distributors of detergents in the UK along with Unilever. The company has mastered the art of market segmentation and it always has products for every micro-segment in the market. In essence this is the strategy that has given them the largest market share of the detergent market in the UK in spite of the leading brand being from Unilever. The company’s greatness strength lies in its innovation and drive towards the creation of innovative products. However, it suffers from the lack of proper management and distribution systems in some places. The company’s strategy of identifying and fulfilling the needs of consumers at the micro-niche level has played in its favour. In addition the strategy recommended in this paper recommends P&G to use intermarketing to segment the markets in developing countries.
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