Procter and Gamble
Historical Background of Procter and Gamble
Procter and Gamble (P&G) was founded in 1837 in Cincinnati, Ohio as a partnership between a British candle maker and Irish soap maker William Procter and James Gamble (Conklin 2006, p. 189). The partnership led to birth of the company proctor and gamble that gained fame quickly and reputation because of their honesty which made it possible for them to earn respect and trust from suppliers and customers alike. The company delivered its products at prices that were competitive and the quality of products was always superior. Upon the merger, the company’s sales reached $ 1 million by 1859 and by that time, the company already had an excess of eighty employees. During the 1880s, the company started to market new products which included an in-expensive sop that could float in water.
The company, in 1887 allowed employees to undertake employee stock option plan (ESOP) where they were permitted to buy shares from the company. The company continued introduction of new products and product improvement as well as engaged in diversification of related products (189). The company, by 1980 was a leading marketer and a leader in advertising as well as basic development and research. By that time, it had marketed move than 300 brands within thirty nine categories which included personal care, laundry, cleaning food and beverages, chemical and pulp products. In the 1980’s the company was able to achieve 95% market penetration. The acquisitions the company made helped in fostering the company (192) and it continued to grow such that by 1990, performance of the company in terms of sales reached a high sales record.
Success of P&G can be attributed to the company’s willingness to operate the business in a manner that was consistent with integrity values, doing what is right in the best manner possible and respecting individual working with the company (192). The environment the company worked on was one of religious backing as such, they were able to inculcate honesty in all dealings. The management policies set aided in best performance among employees. The company also held the belief the company was inseparable from employees as such, it placed great value on workers. The principle of placing high value on workers dictated the HRM policies which included promotion and recruitment of staff from within the organization on the basis of merit, development of individuals through coaching and training, rewarding and encouraging individuals, leadership and innovations and teamwork across the numerous divisions, disciplines and geographies (194-7). The company as well employed in excess of 89,000 people throughout the globe by 1990.
The environment within which the organization operated was comprised of strong internal competition and teamwork which was characterized by a management process that was well structured. The company famed the brand management system by ensuring each brand had drive and focus. In this regard, the management allocated people to foresee the performance of drive in the market place. Each brand was assigned to a specific brand manager and a couple of assistants mandated with the responsibility for loss and profit for the complete product line, for instance, detergents (197). Changes in business environments contributed t revelation of the effects of internal competition leading to conflicts, lack of focus and inefficiencies (197). When authority was pushed down to managers of categories, decision making was also enhanced and the company was better able to get closer to its customers (198).
In the 70s and 80s, competition and globalization in the industry led to many issues because P&G was not in the position to respond to the new environment fast. This contributed to erosion of earnings, brand leadership and margins. The new entrants into the industry included warehouse retailers such as Wall-Mart and large supermarkets. The new entrants as well brought about new sale of point technology, shifting balance of power within the industry from the manufacturers to consumers (199). The retailers benefited as a result of this and they were able to exploit rivalries ad dictate terms of trade.
As the level of competition intensified, competitors reacted quickly to change and they benefited more from restructured operations. P&G faced a lot of competition in all brand categories mostly from competitors that were foreign based such as France’s L’Oreal, Japans Kao, Germany’s Henkel and Unilever Johnson and Johnson, and Gillette (199). Others included American’s Colgate Palmolive and Kimberly Clark who stole the market share for diapers and dental products. The competitive was extremely stiff such that one analyst indicated there were over 1000 new products introduced in the market each month (199-200). The competition was high and especially with the brands established to the point that by 1989, unit sales had risen by 17% and other products competing in the same category doubled. Changing demographics affected competition. An increase in working women and proliferation of media outlets made it hard for the company to be in the position of reaching a large number of segments. As a result of this, the financial state of P&G was drastically reduced.
Market Strategy and Model
Due to the deteriorating results, the company was forced into implementing internal changes in marketing, sales, manufacturing and distribution (199). The structure of management and creation of new category managers begun turning the business around. The company was able to be more customer focused as a result of this since it was in a position to work with its big pool of customers. In order to make this possible, the company employed globalization strategy and research as well as development in marketing, distribution and production of its products. International strategy, worked well till 1970 when the low prices and increased competition weakened it. By 1990 however, the company increased its international marketing and this was attained as a result of foreign expansions, acquisitions and mergers (201). The company as well as able to use global strategy by expanding into Asia, Latin America and Europe among other places (201-203). After the war P&G management carried out research and development, talked to European managers and were able to understand the economic, social and political state throughout Europe making it possible for them to start business once more in these regions by using different models such as taking the entire pulp and detergent industry in the Soviet Union nations.
The merger between gamble and proctor aided in nurturing a global company. The company won the market as a result of its capability to invest in employees and cultivate a culture of honesty in its dealings. Work allocation and hiring within the company made certain that the company retained competent employees and this made it possible for it to introduce more than a hundred new product brands. Technological innovation also led to company collapse. The management should have looked into the issue immediately as it would have made it possible to know introduction of technology age into the market. Development and research was not properly carried out since the company did not have the slightest idea of how to respond to the conditions in the market faster. While the company valued internal hiring, external experts might have been integrated into the company to introduce new ideas such as technology, new products and ideas. Regardless of this fact, the company still managed to perform well by restricting and this helped it to reclaim its lost glory through initiating different kinds of models to be taken to Eastern Europe.
Conklin, D. W. 2006. Cases in the environment of business: international perspectives. Thousand Oaks, Sage Publications.
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