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Strategic Analysis

STRATEGIC MANAGEMENT SIM336

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Table of Contents

1. Introduction...........................................................................................................................................2
2. Profile of the Company..........................................................................................................................2
2.1 Business Objectives of P & G............................................................................................................3
3. Strategic Analysis of Procter & Gamble................................................................................................3
3.1 General or Common Environment.....................................................................................................3
3.1.1 Political Environment..................................................................................................................3
3.1.2 Social Environment.....................................................................................................................3
3.1.3 Technological Factor...................................................................................................................4
3.1.4 Environmental Factor..................................................................................................................4
3.1.5 Legal Factor................................................................................................................................4
3.2 Industry Environment.........................................................................................................................4
3.2.1 Industry Life Cycle......................................................................................................................4
3.3 SWOT Analysis of P&G Company....................................................................................................5
3.4 Porter Five Forces Model...................................................................................................................5
3.5 Porter’s Generic Strategies.................................................................................................................6
3.6 Ansoff Matrix.....................................................................................................................................7
4. Future Strategies for P&G.....................................................................................................................8
4.1 Corporate Strategy.............................................................................................................................8
4.2 Business Strategies.............................................................................................................................8
5. Synthesis of ideas or solutions relating to strategy issues......................................................................9
6. Recommendations.................................................................................................................................9
7. Conclusions.........................................................................................................................................10
References..................................................................................................................................................10

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1. Introduction
Strategic management is the systematic analysis of the company for implementing major goals and
objectives (Haberberg & Rieple, 2008). The main concerning area of the strategic management is to
achieve better success with the help of corporate policies and strategic investigation. On the other
hand, strategic analysis is the business analysis of an organization which is developed by the firm for
developing their strategy by researching the business environment where they operate their business.
Sometimes, it is regarded as SWOT analysis but it is more than that. Strategic analysis is one of the
most useful elements for the strategic business planning by the organization (Goksoy & Ozsoy, 2010).
In this assignment, the strategic analysis of Procter & Gamble (P&G) is going to be discussed.

Procter & Gamble is the America’s largest producer of household goods. They have almost 250
brands only in six categories. Its different products are selling under top ten brands across the globe. P
& G is such a company that always concerned for the improvement of the style and quality of the
people’s day to day life. Their general target is to meet the customer’s demands and wants properly.
For the changing competitive environment they need to adopt different strategy for competing with
the rivals and gain the competitive position in the market place (Dyson, 2010). As a result, to cope
with the change and to get more profitability the company needs to formulate various effective
strategies.

2. Profile of the Company


Procter & Gamble was founded in 1837 in Ohio, United States of America. William Procter and
James Gamble was the founder of this company. The expansion of the company was so fast in the
next three years after its establishments. After the Second World War the company started its journey
with new and innovative idea. By this time the world already experienced some creative idea and
exceptional products from them. For serving their customer properly, P & G divide their working area
in three segments (Barney & Hesterly, 2010).
a) Beauty segmentation
b) Health care segmentation
c) Household product segmentation

2.1 Business Objectives of P & G


Procter & Gamble is operating their business throughout the world. P & G focuses on the social and
environmental sustainability of the world. Company committed to purpose, value and principles
which is the main concerning area of the company (Barney & Clark, 2007). In 2007, P & G set a
target for achieving sustainability by implementing five strategies and they are become successful to
achieve this target by the year 2012. In case of selling the products, the company set a goal to sell at
least £39 billion sustainable modern products for improving the company’s environmental

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profile. They focus to produce a product which is environment friendly and emits less carbon
di oxide. In the issue of social responsibility, P & G is working to improve the life of millions
of children. The employees of this company are dedicated to achieve the business goals and
the sustainable development of the company (Dagnino, 2012).

3. Strategic Analysis of Procter & Gamble


After the establishment of the Procter & Gamble Company, it is working to satisfy the customers by
providing the products according to their demands. For this reason they implement and formulate
various strategies in their company for producing superior quality products. The strategic analysis of P
& G can be discussed from two different environment- general environment and industry
environment.

3.1 General or Common Environment


It is very much effective to know about the insight of the organization. PESTEL analysis which is
known as macro environment level can be identified through this approach where PESTEL refers
political, economic, social, technological, environmental, and legal factors of the organizations
(Miller et al., 2011). Analyzing the each and every factor of PESTEL analysis is very much important
for the strategic investigation of any organization. The factors of PESTEL analysis are discussed
below:

3.1.1 Political Environment


Procter & Gamble has a political action committee which is deliberate and impartial committee. This
committee is governed by maintaining certain law and regulations. Some members from the board of
directors supervised the committee (Hussey, 2012). Moreover, selected officer from US government
and some legal councilors also help this committee to run properly.

3.1.2 Social Environment


The environment of the Procter & Gamble is very much friendly. Though the people came from the
different region but the working environment is created in a way that everyone welcomed warmly and
feels comfortable to work here. Every employee has equal opportunity in every sector, they can get
information easily. Corporate culture of P&G is excellent for working here. There is much flexibility
for the employee in this organization. Leaders provide sufficient training to the employee to work
properly and accurately (Haberberg & Rieple, 2008).

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3.1.3 Technological Factor
The management team of Procter & Gamble is working to assure a healthy and safe environment for
the employee. The technological issues are maintained in a way that helps to increase the market share
of P&G. New and innovative products and services help to gain profitability of this company. By
innovating new products and services and improving the existing products P&G tries to improve the
lives of the consumers. Innovative technologies work better and effectively for the sustained growth
of the company (Dagnino, 2012).

3.1.4 Environmental Factor


While producing the product P&G management’s tries to maintain the environmental law to save the
environment free from pollution. P&G believes that lessening the emissions of greenhouse gas will
save the earth and helps to control global climate change (Barney & Clark, 2007). As a global citizen,
it is the duty of the authority to take care the environmental issues in manufacturing products. For
handling this sensitive issues regarding earth P&G takes some initiatives to save the mother earth.

3.1.5 Legal Factor


P&G is established by maintaining the legal procedures of the government. As a result, to maintain
the organization properly, they have certain rules and regulations (Brown et al., 2013). Government’s
regulations, taxation policy, environmental laws maintained strictly by the management of the P&G.

3.2 Industry Environment

3.2.1 Industry Life Cycle


Industry environment can be formed through the industry life cycle of the company. The industry life
cycle consists of five stages includes- growth, maturity, decline, time and industry sales. P&G is the
market leader in the market with different categories products and service. They have almost 50
categories products (Kotler, 2009). Customers from all over the world use the product from P&G.
They have product for all types of customers. Their products are categorized in a way that satisfies the
needs of the every customer. As the current position of P&G in marketplace is satisfactory and they
are in the maturity stage of the industry life cycle, they are now trying to improve the future growth of
the company by diversifying the products and services.

3.3 SWOT Analysis of P&G Company


SWOT analysis of the company refers to the analysis of the company’s strengths,
weaknesses, opportunities and threats. It helps to implement the company’s plan according to
the aim and objectives of the company (Dyson, 2010). P&G is already established company
in the world. They are the market leader for many years in the baby care and woman health
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care products. By evaluating the market of Procter & Gamble the SWOT analysis has been
identified.
Strengths: The market value of P&G is $192 billion in 2014. It has almost 300 brands all
over the world. 121000 employees are working for P&G and they are well trained. Their
gross profit margin is higher than the industry average and it is 15 times better. They are 84 th
in the innovative company’s lists by the Forbes (Goksoy & Ozsoy, 2010). The company
invested huge amount of money for the research and development purpose and it is almost $2
billion.
Weaknesses: For the intense competition P&G is losing their market share gradually. The
world technology is advancing day by day. Online marketing by the company is becoming
popular but the P&G is lagging behind in this regard (Mezger & Violani, 2011). The main
target customer of P&G is woman and their most of the products are woman based so they
are losing huge number of male customer as they have no enough products for the male.
Opportunities: As the company has no sufficient beauty product for the man so they can
launch products for the male users. Establishing social relationship with the customer can
enhance the performance of the P&G Company. Emerging country like India and China has
the huge opportunity for P&G to operate their business properly.
Threats: Existing as well as new competitors are the constant threats for the P&G.
Availability of the low price product from the different local company is also a concerning
threat for the company (Dagnino, 2012). The price of the raw materials is increasing that’s
why the price of the P&G products will be increased in a considerable rate.

3.4 Porter Five Forces Model


Michael Porter formulates a strategy for the analysis of the competitiveness among the companies in
1979 which is commonly known as five forces model. Five competitive forces help to achieve the
business goal of the organization (Kotler, 2009). Five forces include- threat of the new entrants, threat
of the supplementary products, buyers bargaining power, suppliers bargaining power and industry
rivalry. These five forces manipulate the price of the product as well as the cost and overall
investment of the company.

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Figure: Porter’s five forces model

Procter & Gamble has such strategy that creates a challenge for the new comer of the market. They
have a huge market share so the new entrants have to vast capital to compete with the P&G. Their
average annual sales are $84.74 billion. The company is aware about the firms who can enter into the
market and for that they maintain specific policies for the specific market. P&G has a good
relationship with their suppliers (Brown et al., 2013). Without the relationship with the suppliers it
will be impossible for any business organization to run properly in this competitive market. Though
P&G is a large business organization, they have good understanding with their customers. Customers
are the life blood for any business organizations. So, customers get priority in all aspects from them.
There are lots of company are operating their business in the marketplace. Other companies same
category products are becoming threats for P&G’s products. So, they adopt such a policy that helps
control the market share of the business environment. Many business organizations are becoming
competitors of P&G. So, the management of P&G is aware to prevent such type of competitors from
the market place (Mezger & Violani, 2011).

3.5 Porter’s Generic Strategies


Michael Porter developed another strategy for the product development by achieving competitive
advantage. Generic strategies include- cost leadership strategy, differentiation, and focus (Kotler,
2009). These strategies are highly effective for the company like Procter & Gamble to gain
competitive advantage.

Figure: Generic strategies

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Cost Leadership Strategy of P&G
By adopting cost leadership strategy P&G has been able to become the market leader in the business
field. P&G offers low price for their products by maintain high quality. For their effective strategy
P&G can get maximum benefit by their minimum resources (Barney & Clark, 2007). The main target
of this company is to gain competitive advantage and for this they introduced a product named “Tide
Natural” by reducing 30% cost than the existing products. Most of the world populations are in the
developing countries and this is the target market of P&G. The introduction of MACH3 razor was for
the middle class people where latest technology was used and the price of the product is obtainable.
Differentiation Strategy of P&G
The main target of the company is to become the market leader. To be market Leader Company has to
follow certain strategies. P&G is able to do this because of their distinctive strategies. They have
almost 300 different brands around the world to keep close with their customer where innovative
products get the most priority (Barney & Hesterly, 2010). P&G is the first company who introduced
baby diapers in the market by using latest technologies.
Focus Strategy of P&G
With the help of this strategy company try to improve their certain sector for the competitive
advantage. Normally, small business enterprises follow this strategy. So, P&G adopts this strategy in
their company for the certain products.

3.6 Ansoff Matrix


Ansoff Matrix was introduced by Igor Ansoff for focusing the potential products and services in the
markets (Kotler, 2009). Ansoff Matrix follows four combinations namely- market penetration, product
development, market development, and diversification.

Figure: Ansoff growth matrix


Ansoff matrix gives the organization a basis for setting objectives through particular process and
provides a foundation for the future governing policy. Other models like porter’s model, BCG matrix,
DPM matrix, Ansoff’s matrix is used for setting objectives of the particular company (Mezger &

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Violani, 2011). For taking any decision instantly this model is best suitable. P&G used these strategies
for the market development in the existing market as well as for creating new market for their
products.
Market Penetration Strategy
Market penetration strategy is used for selling products into the existing market (Haberberg & Rieple,
2008). Recently, P&G started a product in India named “Tide Natural” by reducing the price of the
product which was before in the market. As 50% people of that particular country earns very low so
P&G adopts this strategy for gaining market share.
Market Development Strategy
Market development strategy is used by the company in the new or potential market. P&G primarily
set up their target market and then they launched a new and innovative product for this market. In this
way they entered into the market and then they captured the market share. P&G developed a product
“Ambit” for their potential market in African region.
Diversification Strategy
Diversification involves the diversification of the existing products. Before adopting this strategy
P&G do the market research and then implement this strategy. With the help of diversification new
and innovative products is introduced for the potential market.

4. Future Strategies for P&G

4.1 Corporate Strategy


The future corporate aim of the company is to become the number one company in all over the world
(Hussey, 2012). The main motto of the company not only innovate the new products but also to satisfy
the customer needs and wants. To achieve the corporate aims P&G will adopt the strategy according
to the situation and demand.

4.2 Business Strategies


The existing products will be given the more emphasis. After doing this the market development
program will be implemented by P&G in the new emerging markets or geographical area. As the cost
leadership strategy is adopted by P&G, the strategy will be implemented in the area according to the
situation (Dyson, 2010). Where cost of the production is high then the products price will be slightly
higher.

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5. Synthesis of ideas or solutions relating to strategy issues
Different strategy has been used for the different market and different situations (Haberberg & Rieple,
2008). In order to get competitive advantage, manager has to take challenges. To take any decision
instantly, strategic drift has been used. As implementing strategy is a long term process, it is not good
for many organizations. The business environment of the world is changing rapidly, so the business
organization has to cope with the changing need. As a result, business organization has to adopt and
change strategy in any situation to keep them on the competition (Mezger & Violani, 2011).

Figure: Strategic Drift


For the large business organization like P&G, strategic drift is not always good for the
business. So, strategic drift can be avoided systematically and continuously. For avoiding
strategic drift, the marketers of P&G have to collect the market information, monitor the
market is essential. Moreover, strategic drift can be avoided in the following ways-
 By evaluating the existing market
 Assessing the present strategic efficiency
 Formulating the new strategy
 Assessing the efficiency of the new and innovative strategy
 Implementing the mew strategy
 Monitoring the performance of the new strategy.

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6. Recommendations
Retain the competitive advantage and achieve the market growth, business organization have to
achieve the customer loyalty by providing quality products in a low price (Dyson, 2010). The
company should utilize the new market segments for gaining profitability. P&G should utilize their
strengths in the R&D sector for developing the technological resources. The full utilization of
financial sources will help to invest more on for the product innovation and starting venture on the
new market. With the implemented strategy, government regulations and law should be maintained by
the Procter & Gamble. The company should take the environmental sustainability program for the
sustainable development of the company. To implement the strategy effectively, innovation and
knowledge about the current issues is extremely important. The decision making authority should be
decentralized for the easy and fast decision making process (Goksoy & Ozsoy, 2010).

7. Conclusions
Strategic management is very important element for the strategy analysis of the company. For gaining
market share and enhancing profitability, P&G adopts different strategy for their products but the
most widely accepted strategy for the P&G is cost leadership strategy. The strategy should be adopted
for the development of the product with the changing situation and demand (Dagnino, 2012). Present
market is highly competitive for the various business organizations. So the company like Procter &
Gamble should meet the customers need by adopting appropriate strategy for their organizations.

References
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