Posted: May 25th, 2022

Proctor and Gamble Strategic Case Study

Proctor and Gamble Strategic Case Study

Company Overview

P&G is an American multinational consumer goods corporation founded in 1837, headquartered in Cincinnati, Ohio. It manufactures and distributes food and beverages, cleaning supplies and personal care products. In 2011, it showed almost $83 billion in sales, making it 5th in the “World’s Most Admired Companies.” P&G has about 130,000 employees globally (P&G Information, 2012). Bob McDonald is the current CEO, and worked for the company for 29 years prior to his promotion. His view is that P&G should touch and improve “the lives of the world’s consumers through branded products of superior quality and value” (Dyer, D., et.al. 2004).

Mission Statement and Values

P&G’s values focus on its people and the values with which these people live and work. P&G believes it attracts and recruits the finest people globally, builds its organization from within, and promotes and rewards its employees without regard to any difference unrelated to performance. P&G acts on the conviction that the men and women of the company will always be the foremost asset since each individual is a leader in their own area of responsibility. As leaders, employees should retain a deep commitment to deliver leadership results (Proctor and Gamble 2012).

General Business Strategies

Proctor and Gamble has been a household name in consumer products for multiple generations. Around the globe, Procter & Gamble takes the consumer “from cradle to grave” with its long-time, consistent and quality household and personal care products. For P&G, its 150-year tradition was both a positive for brand awareness and experience and a negative in that it was mired in traditional, and more bureaucratic, management structure. Instituting a boundary less organization changes the paradigm by making all boundaries between layers in an organization, functional units, customers and suppliers, and the outside world, more permeable. It also allows information and ideas to flow from one organization to another; and while an organization cannot be completely without boundaries, it can weaken the layers and open approval levels, innovation discussions, and speed of change. Changing such a large ship was not easy, and called for innovation, patience, and expertise. It was also required and thus merged into a situation in which company-wide collection and usage of data combined with more employee empowerment would energize the organization.

Strategic Directions

Again, due to globalism and increased stakeholder attention, the company as a whole has taken a two pronged approach to moving into the 21st century global marketplace more effectively. First, the company adopted a Knowledge Management Paradigm corporate wide; second, the company has focused both internally and externally on Corporate Social Management (CSR). P&G’s hope is that the combination of using the incredible about of data they hold plus their branding philosophies, will use non-traditional marketing tools to retain market share, grow share in new and emerging markets and brand categories, and still satisfy the overall stakeholder need for transparency and active sustainability philosophies. The only way this is happening in the 21st century is new research, new products and new markets — and the only way to capture those three strategies is to provide continual and accrual knowledge coupled with a softer strategy that gives individuals and governments a belief that P&G is acting morally and for the best interest of its stakeholders and the planet (Procter & Gamble’s Innovation Success 2002).

Strategic Methods — Knowledge Management

Because P&G has so many divisions, each with a specific set of strategic and tactical goals, the company has opted to use an overall paradigm of Knowledge Management (KM). KM provides far more advantages than disadvantages in the modern organization. For years, largely due to size and culture, P&G operated on a traditional structure tended toward a lack of flexibility to changing needs in a rapidly changing world; internal and external communication and sharing of information was limited — each business unit seemed to act in a proprietary manager; it was slow and ponderous in responding to customer requirements due to internal turf battles; because of its size, it was a lumbering giant, unable to get things done quickly, and finally, difficult to deal with suppliers and vendors because of the specific job responsibilities most managers held and the lack of internal communication (Thieraug & Hoctor 2006).

As an overall strategic direction, the company must continually reinvent its centuries of branding to fit the needs of the modern, global audience. This may require restructuring current brands, ancillary brand development, and certainly new technologies. The only way this can be accomplished on scale suitable for a mega giant like P&G is the innovative use of information. Knowledge management differs from information technology in numerous ways, among which the strategic focus is most obvious. Information technology is tactical — moving information from a to b, but not necessarily in the interpretation of that information. KM takes the information to a new level of interpretation and reinvention — the difference from looking at a spreadsheet for data and taking that same spreadsheet and focusing on organizational objectives. These objectives might include improved performance, competitive advantage, innovation, sharing of competitive and sales information/lessons, integration and continuous improvement for the organization. In this way, KM overlaps with the strategic and tactical areas of organizational learning. However, KM focuses more on the management of knowledge as a strategic asset and focus on encouraging the sharing of knowledge within the organization and stakeholders (Thompson & Walsham 2004). Prior to the implementation of this strategic direction, P&G was known for taking years to roll out a new product, resting on its laurels and simply counting on generations of branding to fulfill its needs. This may have worked in the developed markets — somewhat. With increased competition and then a global audience, the company had to find a way to reinvent itself (Basdur & Gelade 2006). This would also provide the means for the organization that could implement new strategies, learn from each division, and be comfortable in redesigning their own work units as corporate goals shift (Beer & Eisenstat 1996).

Strategic Directions — Corporate Social Responsibility

It is natural that a company of the size and dimensions of P&G would incur some level of controversy. In 1999 it announced that it would limit animal testing practices and invested more than $275 million in alternative testing methods. In the 1980s they had a situation with Toxic Shock Syndrome and tampons that has sense been corrected through massive recalls and reengineering of products (Snopes.com 2003). It has had its share of concerns about certain drugs like Actonel, and in 2007 one revolving around Crest Pro-Health mouthwash (U.S. District Court for Southern Georgia 2007).

However, in relation to the volume of sales, P&G has a good record for CSR. In fact, The Cause Marketing Forum (publishers of Ad Age, The Grocer, etc.) recognized P&G as a premium example of companies that use cause marketing, social responsibility and supplier exchange. Cause Marketing President David Hessekiel noted, “The depth and breadth of Procter & Gamble’s marketing and corporate initiatives designed to do well by going good is truly breathtaking” (Business Wire 2012). This is echoed in the philosophy of CEO McDonald, who especially pushes P&Gs program for safe drinking water for children globally. P&G spends millions in time and resources globally to ensure that clean water and water education be a priority in the developing world (Children’s Safe Drinking Water 2012). Comparatively speaking, these are low-cost, high-impact strategies that can involve most of P&G’s divisions, increase brand loyalty and recognition, and place the company in an extraordinarily positive position for emerging markets.

Strategic Implementation Example — P&G Pharmaceuticals

P&G’s Pharmaceutical Division has always been known from its innovative culture. The broad corporate mission is to “create and deliver products, packaging and concepts” that are innovative and strategically aligned for the marketplace. They tend to hire those who are diverse, contributors to innovation, highly educated, and of recent years, out of the box thinkers. In a given year, they invest almost $400 million in consumer understanding, simply to understand consumer motivation. That being said, the pharmaceutical division remains under tremendous pressure to produce that next great wonder drug that will, in effect, ensure greater potential profits for the first few decades of the 21st center. Despite this innovative culture, several sites resisted the including of web-based systems as being inconvenient, feelings of fear and anxiety, and the lack of understanding that initial change is expensive and time consuming, but for an innovative company, quite necessary to grow and prosper. Luckily, management viewed the investment in time and services to be worth a spearheaded and robust effort in implementation (Robbins 2010).

The most significant, and readily apparent, impact on the process for P&G was the reduction of time to represent and lock in the data sets. Because of this vast improvement in the data-lock times, compounds and processes were available for submission to the FDA and human trials. Additionally, the manner in which the data was reported allowed for an easier answer back to the FDA questions on protocol and individual data information. The implications were threefold:1) a significant costs reduction; 2) the increased time to market and therefore profitability, and; 3) the increased use of human resources for more analytical and advanced skills (Huckman & Cotterleer 2006).

Conclusions

In 1998, A.G. Lafley became P&G’s new CEO. Initially, the market dropped and investors had little confidence in the company’s growth. Instead, Lafley committed to using innovation and overall message of global CSR as his method into transforming the company. In fact, Lafley was so committed to innovation, that he defined it as everyone’s job and provided all the tools necessary for turning rhetoric into reality. The new CEO, Robert McDonald, understands that the financial crisis of the new century, globalism, and changing demands requires that P&G remain innovative, but use that innovation to deliver lower-cost, higher-value products and move its high impact (techcnology, pharmaceuticals, etc.) units to continue to be market leaders (Gregersen 2009). Clearly, the four major ways P&G will succeed is to continue with its focus while leveraging its scale through a retail-trade strategy, the top down branding strategy also including consumer cohorts, and KM as part of systemic leadership strategies (EMM Group 2010). P&G moved successfully from a company in which it had a high commitment to innovation, but was monolithic as a culture, and therefore slow to innovate; to a company that is now seen as one of the top, world-class innovators participating in the global marketplace (Kastelle 2012).

REFERENCES

Basdur, M & Gelade, G 2006, ‘The Role of Knowledge Management in the Innovation Process’, Creativity and Innovation Management, vol 15, no. 1, pp. 45-62.

Beer, M & Eisenstat, R 1996, ‘Developing and Organization Capable of Implementing Strategy and Learning’, Human Relations, vol 49, no. 5, pp. 597-618.

Business Wire 2012, Proctor and Gamble Received Golden Halo Award, viewed December 2012, .

Children’s Safe Drinking Water 2012, viewed December 2012, .

Dyer, D., et.al. 2004, Rising Tide: Lessons from 165 Years of Branding Building at Proctor and Gamble, Harvard Business Press, Boston, MA.

EMM Group 2010, How P&G Leverages Its Scale, viewed December 2012, .

Gregersen, H 2009, The Future of P&G, viewed December 2012, .

Huckman, R & Cotterleer, M 2006, ‘Proctor and Gamble: Electtronic Data Capture and Clinical Trial Management’, Case Study, Harvard Business School, Harvard Universty, 9-606-033, Harvard University Press, Boston, MA.

Innosight 2010, How can you build a Growth Factory?, viewed December 2012, .

Kastelle, T 2012, Proctor & Gamble – Using Open Innovation to Become a World Class Innovator, viewed December 2012, .

‘Procter & Gamble’s Innovation Success’ 2002, Strategic Direction, vol 21, no. 7, pp. 11-13.

Proctor and Gamble 2012, Sustainability Report, viewed December 2012, .

Robbins, J 2010, Proctor and Gamble’s INnovative Culture, viewed December 2012, .

Snopes.com 2003, Tampax Pearl, viewed December 2012, .

Thieraug, R & Hoctor, J 2006, Optimal Knowledge Management, The Idea Group, Hershey, PA.

Thompson, M & Walsham, G 2004, ‘Placing Knowledge Management in Context’, Journal of Management Studies, vol 41, no. 5, pp. 725-47.

U.S. District Court for Southern Georgia 2007, Silverstein v. Procter and Gamble, viewed December 2012, .

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