Environmental analysis of Proctor and Gamble
P&G is one of the largest consumer goods company, it is faced with significant strategic issues. The company's product portfolio comprises home, beauty, baby care, health, personal care, family, and pet health products. Despite having a strong brand portfolio and market positioning, the company is faced with competition in the industry, which makes it difficult to maintain its growth and sales volumes.
The company's healthcare segment comprises products in feminine care, OTC drugs, toothpastes, oral care, and personal care categories. This segment accounted for 11 percent of the company's sales in 2014, with these products being sold mass-market merchandisers, supermarkets, and drug stores (P&G Report 11). This market segment is mature and is characterized by name brand and private label competitors such as Pfizer, MERCK, Bayer, Novartis, GSK, and Johnson & Johnson (Euromonior International 8). These private brands offer intense competition because they are cheaper compared to products marketed by P&G. The core competencies of this market segment include strong, reliable, and superior quality products. The products adhere to stringent internal standards and comply with Food and Drug Administration standards. The only product recall the company has experienced in the recent past is the
Vicks 4-hour nasal spray, which was recalled in 2010. Another core competency is the company's focus on research and innovation through its Health Care Research Center that promotes innovation and development of new products to meet market needs.
Family and baby care is another product segment of product and gamble and it comprises products such as baby wipes, paper towels, diapers, and toilet paper. It contributes approximately 19percent of the company's sales. These products are sold through supermarkets, hotels and motels, convenience stores, and other industries. Key competitors in this segment include Koch Industries Inc, Johnson & Johnson, and Kimberley-Clark.
The other product segment is the beauty segment, comprises products such ad skin care, hair care, cosmetics and fragrances. This segment accounts for 34 percent of the company's product portfolio. Leading brands in the segment include Pantene, head & shoulders, and Olay. The products in this segment have core competencies such as great product availability since most of the products are sold in almost all drug stores and retail chains. Additionally, the products in this segment are highly recognizable which gives its string brand differentiation. Lastly, the company's beauty products are associated with tried and trusted products. The main competitors in this segment include L'Oreal, Unilever and private labels. This segment is important to the company since it registered a 3 percent net sales growth from 2010 and represents 24 percent of the company's net sales (P&G Report 9). The main threat to this segment is threat of rivalry from competitors such as L'Oreal.
The fabrics and homecare product segment comprises fabric conditioners, cleaning products, homecare products such as surface cleaners, detergents, air fresheners and batteries. This segment is important to the company because it dominates 30 percent of the world market share. Furthermore, it is the largest and most lucrative of all segments and it has been growing at a rate of 6 percent since 2011. It is also the most mature and it comprises brand name and generic brands. Snack and pet care product segment is the smallest of al segments and is the least profitable; it recorded net sales of 4 percent in 2011. Previously, Pringles was the only snack brand the company has added Iams and Eukanoba. This product segment is faced with several threats. First, it lacks presence in other industries and it faces fierce competition. Secondly, extending the product segment will entail significant investment in the development of new products and brands. Lastly, competition in the segment is more industry-faced.
Based on this environment analysis, P&G should adopt several strategies in order to remain competitive. The first strategic decision is to divest or selloff least performing business segments such as the snack and pet care segment. This is the least profitable of all the segments and it will demand a huge investment to make it profitable. By selling this segment, the company can focus on profitable business segments such and the home and fabrics, and the beauty segments. Furthermore, it will give the company an increased opportunity to innovate in profitable business segments. Another strategy is to acquire new customers by investing in developing markets such as Latin America, Asia, and Africa.
These markets offer growth opportunities and they are not competitive. Geographic expansion will allow the company to take advantage of the projected population growth in developing markets (Euromonior International 32). Another strategy is to enhance productivity in all areas by lowering excess inventory and RM costs. This can also be achieved by investing more on research and development to ensure that new products are developed to satisfy new needs and to facilitate continuous improvement. Lastly, the company should continue to cultivate the open innovate: connect + development. This form o innovation is both inbound and outbound and includes business processes from marketing, engineering, packaging to business services.