INDUSTRY ANALYSIS

1. HISTORY
Origin
Candlemaker William Procter, born in England, and soap maker James Gamble,
born in Ireland both emigrated from the United Kingdom. They settled in Cincinnati initially
and met when they married sisters Olivia and Elizabeth Norris. Alexander Norris, their
father-in-law, called a meeting in which he persuaded his new sons-in-law to become
business partners. On October 31, 1837, as a result of the suggestion, Procter & Gamble
was created.
In 1858–1859, sales reached $1 million. By that point, about 80 employees worked
for Procter & Gamble. During the American Civil War, the company won contracts to
supply the Union Army with soap and candles. In addition to the increased profits
experienced during the war, the military contracts introduced soldiers from all over the
country to Procter & Gamble's products.
In the 1880s, Procter & Gamble began to market a new product, an inexpensive
soap that floats in water. The company called the soap Ivory. William Arnett Procter,
William Procter's grandson, began a profit-sharing program for the company's
workforce in 1887. By giving the workers a stake in the company, he correctly assumed
that they would be less likely to go on strike.
The company began to build factories in other locations in the United States
because the demand for products had outgrown the capacity of the Cincinnati facilities.
The company's leaders began to diversify its products, as well, and in 1911, began
producing Crisco, a shortening made of vegetable oils rather than animal fats. As radio
became more popular in the 1920s and 1930s, the company sponsored a number of radio
programs. As a result, these shows often became commonly known as "soap operas".
International expansion
The company moved into other countries, both in terms of manufacturing and
product sales, becoming an international corporation with its 1930 acquisition of
the Thomas Hedley Co., based in Newcastle upon Tyne, England. After this acquisition,
Procter & Gamble had their UK Headquarters at 'Hedley House' in Newcastle upon Tyne,
until quite recently. Numerous new products and brand names were introduced over time,
and Procter & Gamble began branching out into new areas. The company
introduced Tide laundry detergent in 1946 and Prell shampoo in 1947. In 1955, Procter &
Gamble began selling the first toothpaste to contain fluoride, known as Crest. Branching
out once again in 1957, the company purchased Charmin paper mills and began
manufacturing toilet paper and other tissue paper products. Once again focusing on
laundry, Procter & Gamble began making Downyfabric softener in 1960 and Bounce
fabric softener sheets in 1972.
One of the most revolutionary products to come out on the market was the
company's disposable Pampers diaper, first test-marketed in 1961, the same year
Procter & Gamble came out with Head & Shoulders. Prior to this point, disposable
diapers were not popular, although Johnson & Johnson had developed a product called
Chux. Babies always wore cloth diapers, which were leaky and labor-intensive to wash.
Pampers provided a convenient alternative, albeit at the environmental cost of more
waste requiring landfilling.
Further developments
Procter & Gamble acquired a number of other companies that diversified its
product line and significantly increased profits. These acquisitions included Folgers
Coffee, Norwich Eaton Pharmaceuticals (the makers of Pepto-Bismol), Richardson-
Vicks, Noxell (Noxzema), Shulton's Old Spice, Max Factor, the Iams Company,
and Pantene, among others. In 1994, the company made headlines for big losses
resulting from levered positions in interest rate derivatives, and subsequently
sued Bankers Trust for fraud; this placed their management in the unusual position of
testifying in court that they had entered into transactions that they were not capable of
understanding. In 1996, P&G again made headlines when the Food and Drug
Administration approved a new product developed by the company, Olestra. Also known
by its brand name 'Olean', Olestra is a lower-calorie substitute for fat in cooking potato
chips and other snacks.
In January 2005, P&G announced the acquisition of Gillette, forming the largest
consumer goods company and placing Unilever into second place. This added brands
such as Gillette razors, Duracell, Braun, and Oral-B to their stable. The acquisition was
approved by the European Union and the Federal Trade Commission, with conditions to
a spinoff of certain overlapping brands. P&G agreed to sell its SpinBrush battery-
operated electric toothbrush business to Church & Dwight, and Gillette's Rembrandt
toothpaste line to Johnson & Johnson. The deodorant brands Right Guard, Soft and Dri,
and Dry Idea were sold to Dial Corporation. The companies officially merged on October
1, 2005. Liquid Paper and Gillette's stationery division, Paper Mate, were sold to Newell
Rubbermaid. In 2008, P&G branched into the record business with its sponsorship of Tag
Records, as an endorsement for TAG Body Spray.
On August 25, 2009, the Ireland-based pharmaceutical company Warner
Chilcott announced they had bought P&G's prescription-drug business for $3.1 billion.
P&G exited the food business in 2012 when it sold its Pringles snack food business
to Kellogg's for $2.75 billion after the $2.35 billion deal with former suitor Diamond
Foods fell short. The company had previously sold Jif peanut butter, Crisco shortening
and oils, and Folgers coffee in separate transactions to Smucker's. In April 2014, the
company sold its Iams pet food business in all markets excluding Europe to Mars, Inc. for
$2.9 billion. It sold the European Iams business to Spectrum Brands in December 2014.
Restructuring
In August 2014, P&G announced it was streamlining the company, dropping
around 100 brands and concentrating on the remaining 65, which were producing 95% of
the company's profits. In March 2015, the company announced it was selling
its Vicks VapoSteam U.S. liquid inhalant business to Helen of Troy, part of a brand-
restructuring operation. This deal was the first health-related divestiture under the brand-
restructuring operation. In July 2015, the company announced the sale of 43 of its beauty
brands to Coty, a beauty-product manufacturer, in a US$13 billion deal. It cited sluggish
growth of its beauty division as the reason for the divestiture. The sale was completed on
October 3, 2016. In February 2016, P&G completed the transfer of Duracell to Berkshire
Hathaway through an exchange of shares. In April 2018, Reuters reported that Procter &
Gamble would purchase the consumer health division of Merck Group for €3.4 billion
euros (£2.96 billion; $4.2 billion).

2. BUSINESS PRODUCT PORTFOLIO (SBUs)

 Procter & Gamble portfolio has three Global Business Units (GBUs). The main
responsibility of the GBU is to improve the overall strategy for their brands. They develop
new product innovations and upgrades, classify common consumer needs, and construct
their brands through effective commercial innovations. The business units encompassing
the GBUs are aggregated into six segments.
a) Beauty Care
 Beauty Segment
They are global market leader in beauty and compete in market which comprise
approximately $230 billion in global retail sales. In skin care they compete primarily with
Olay brand, which is the one of the top facial skin care retail brand in the world. They are
also one of the global market leaders in prestige fragrances, the Gucci, Hugo Boss and
Dolce & Gabbana fragrance brands.

 Grooming Segment
This segment includes blades and razors, face and shave preparation products
(such as shaving cream), electric hair removal devices and small household appliances.
They compete well in the manual blades and razors market on the global basis and in
almost all the geographies in which they compete. Brands under this segment are Mach3,
Fusion, Venus and Gillete.
b) Health and Well-Being
 Health Care
This segment consist of oral care, feminine care, and pharmaceuticals and
personal health care. In oral care, there are several global competitors in the market and
they have a good market share position in the global market. They are global market
leader in the feminine care category with about one-third of the global market share. In
pharmaceuticals and personal health, they have approximately one-third of the global
market for the treatment of osteoporosis under Actonel brand. They are the market leader
in nonprescription heartburn medications and in respiratory treatments behind Prilosec
OTC and Vicks, respectively.

 Snacks, Coffee and Pet Care

In this segment, they compete against both global and local competitors and have
a good global market share in the potato chips market behind our Pringles brands. Their
coffee business competes almost solely in North America, mainly behind our Folgers
brand. In pet care, through the Iams and Aukanaba brands, they compete in several
markets around globe in the quality pet care segment.

c) Household Care
 Fabric Care and Home Care
This segment includes a variety of fabric care products, including laundry cleaning
products and fabric conditioners; home care products, including dish care , surface
cleaners and air fresheners; and batteries. In fabric care, they generally have the number
one or number two share position in the markets in which they compete. In batteries, they
compete primarily behind Duracell brand.

 Baby Care and Family Care

In baby care, they compete primarily in diapers, training pants and baby wipes.
They are the number one or two baby care competitor in most of the key markets in which
they compete, primarily behind Pampers. The Company’s largest brand, with annual net
sales of approximately $8 billion.
3. ORGANIZATIONAL STRUCTURE
4. INDUSTRY ANALYSIS

A. Economic Environment
P & G is a global company employing over 100,000 people worldwide. Brands are
produced in nearly 130 plants around the world and the majority of raw materials are
purchased locally in regions where products are manufactured. P & G contributes taxes
and benefits where it operates and its successes are shared through increasing
shareholder value, local charitable donations and the opportunity to access a wider range
of products and services.
B. Legal/ Political Environment
In order to maintain the organization well, an organization should have certain rules and
regulations. P &G is established by continuing the legal procedures of the government.
Regulations by the government environmental laws, and taxation policy are maintained
strictly by the management of the P&G. The company has also a political action
committee in which it is governed by upholding certain laws and regulations. Some
members from the board of directors managed the committee. Furthermore, selected
officer from US government and some legal councilors also help this committee to run
appropriately.
C. Social Environment
P & G attempts to do what is right for consumers, employees, shareholders and
communities in a socially and environmentally responsible manner. Its determination
towards better social responsibility has included widening the diversity within its workforce
to include people from broader backgrounds and experiences and also making a positive
contribution to education. The management team of P & G is also working to assure a
healthy and safe environment for its people. The company is also maintaining an
environment that is welcoming and outstanding. Leaders offer adequate training to the
employees to work efficiently and effectively. Motivating them and giving them all the
necessary incentives.

D. Technological Environment
The technological issues are sustained in a way that helps to increase the market
share of P&G. The organization uses new technologies to invent new products, increase
production and improve the quality of product. New and innovative products and services
help to gain profitability of the company. P & G is trying to minimize cost to the use of
efficient technology. P&G tries to improve the lives of the consumers. Innovative
technologies work better and effectively for the continuous growth of the organization.
E. Competitive Environment
 Intensity of Rivalry
The industry that P&G operates in is highly competitive and it has emerged as one
of the leaders in the industry. This industry has five major competitor sand has reached
the stage of consolidation. Due to industry consolidation, changes made by one company
forces other competitors to react and follow suit. This increases rivalry and might lead to
price wars. The demand for beauty and personal hygiene products is on the rise due to
many factors such as; the growth in the economies of developing world has improved the
standard of living of people in those regions; men are becoming more interested in beauty
and skin care; and also due to the growing demand for products made with natural
ingredients and raw materials. This increase in demand and potential for growth has
provided stability in the industry. Among the five forces, competition or competitive rivalry
has the highest intensity. As a result, the company must prioritize competition in strategic
formulation.
 Entry Barriers
Five major competitors in this industry have captured most of the market share
through economies of scale and brand loyalty. The wide range of products in major
competitor’s portfolio makes it extremely difficult for the new entrants
to compete and gain any significant market share. Potential entrant would require
enormous amount of capital for manufacturing alongside a huge budget for marketing
activities, R&D, supply/sales channel in order to compete at the same level as major
competitors. This creates a very high barrier to entry in the industry that makes the thre
at
of new entrants, very low for the industry. The patents held by the company on various
products also act as barriers to entry.
 Bargaining Power of Suppliers
There are almost no substitutes for raw materials being used in products
manufactured by this industry which is a cause of concern. Suppliers seem to enjoy high
bargaining power but the sheer size and quantities purchased by major competitors in
this industry tends to scale back the supplier power as competitors can move towards
vertical integration. Hence, the buying power of suppliers is medium.
 Bargaining Power of Consumers
Businesses in this industry rely heavily on its buyers to generate a considerable
portion of revenue. Buyers of this industry are mainly distributors like Walmart, Macy’s,
Target etc. These distributors buy in large quantities which increases their buying power
allowing them to bargain lower prices. As a result, over exposure of sales to any single
buyer could pose a serious threat to this industry if competitors do not have their own
customized distribution network.
 Threat of Substitute Products
There are no known substitutes for this industry which places the
threat of substitutes at a very low level.