PROCTOR & GAMBLEPROCTOR & GAMBLE

Presented byChris Collins & Ben Fournier

Company OverveiwCompany Overveiw

World’s largest maker and distributer of household items and consumer goodsSome of Proctor & Gamble’s “super brands”. Super brand means the product does more than $1 billions in sales in a year. P&G has 21 of these brands.

Product LineProduct LineBillion Dollar BrandsBillion Dollar Brands

Beauty Care – 23% of sales Always, Head & Shoulders Olay, Pantene, Wella

Fabric & Home Care – 28% Ariel, Dawn, Downey, Tide

Baby & Family Care – 16% Bounty, Charmin, Pampers

Health Care – 17% Actonel, Crest, Oral B

Pet Health & Snacks – 6% Iams, Pringles

Grooming – 10% Gillette, Mach 3

Batteries & Electrical Devices Braun, Duracell

Mission StatementMission Statement

To provide brandedproducts and services of superior quality and value that improve the lives of the world’s consumers. As a result, consumers will reward us with leadership sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper.

Sustainability Video

Industry PioneersIndustry Pioneers

Created the concept of "soap opera" by sponsoring radio and television dramas targeting women

First Fluoride-based toothpaste, Crest

Tide was a revolutionary synthetic detergent

First disposable diaper, Pampers

General Business Level General Business Level StrategyStrategy

Product Differentiation – through the utilization of brand recognition and value, they maintain a competitive advantage.

The products are of higher cost but also of higher quality and value.

Corporate Level StrategyCorporate Level Strategy

Concentric Diversification Growth Strategy – continuous expansion into related but distinctively different areas. Constant focus on innovation and new product

development

AcquisitionsAcquisitions

In 2005 Proctor & Gamble bought out Gillette for $57 billion, making it the biggest acquisition in company history. This enabled P&G to go from having 16 to 21 “super brands”They sold off their Folgers division in November 2008 for more than $3 billion in an effort to stay focused on the markets they are already in

External EnvironmentExternal Environment

Economic Adapted to the recession by lowering earning

projections Shed 15% of the management staff to help cope with

the tough economy Focus their greatest resources on the 43 best-selling

brands

Social Cultural Have to keep up with changing trends in consumer

demand

External EnvironmentExternal Environment

Demographic Everybody will use most these products Middle to upper class consumers due to the higher

price of the brand name products

Physical Global – in more than 80 countries

Legal / Regulatory Must meet industry regulations and standards in

many different countries

External EnvironmentExternal Environment

Competition Three main competitors

Johnson & Johnson Kimberly-Clark Unilever

Medium threat, hard to challenge brand value but relatively easy to enter the market

Internal EnvironmentInternal Environment

Human Resources Hire and retain some of the most talented people in

the industry. Rewarded and recognized for their contributions

through financial compensation, promotions and freedom to influence project selection

Global training programs on managing the innovation process

Training for high-potential junior staff

Internal EnvironmentInternal EnvironmentP&G operates in more than 80 countries worldwide

Internal EnvironmentInternal Environment

Location International operations are concentrated in Europe

with a lesser presence in Asia and Latin America. An opportunity is available in India, where Unilever

dominates and P&G has a small footprint

Internal EnvironmentInternal Environment

Marketing Constant emphasis on building brand recognition and

brand value In the 1880’s it was one of the first companies to

advertise nationally. In the 1930’s, P&G was the first firm to develop the

idea of brand management. They would set up marketing teams for each brand and urge them to compete against each other.

In the 1930’s they used their own soap operas and radio programs to promote their products and appeal household women.

Internal EnvironmentInternal Environment

Financial Analysis Liquidity

Current ratio: .792 Quick ratio: .52

Leverage Debt ratio: .52

Asset turnover Inventory turnover: 4.8 times Days’ sales in inventory: 76 days Total asset turnover: .58 times

Internal EnvironmentInternal Environment

Financial Analysis Profitability

Profit margin: 14.5%

Internal EnvironmentInternal Environment

Copyright © 2009 Yahoo! Inc. All rights reserved

Stock price growth from 1995 - 2009

P&G vs. Kimberly-Clark

Internal EnvironmentInternal Environment

Research World class R&D organization, with more than 7,500

scientists working in 12 countries around the world. This includes 1,250 Ph.D. scientists. For perspective, this is larger than the combined science faculties at Harvard, Stanford & MIT.

Invest 4% of sales back into research & development which is higher than most of their global competitors

Internal EnviromentInternal Enviroment

Recently elected a new CEO, Bob McDonald, is going to start his duty on July 1st, 2009.

Taking over for A.G. Lafley, who will now serve as Chairman of the Board of Directors. Lafley had an enormous impact on P&G, taking over in June 2000, in an attempt to turn a stalling company around.

Internal EnvironmentInternal Environment

Leadership A.G. Lafley states that the fundamental role of the CEO is

to link the external world with the internal organization through four key tasks:

3. To define and interpret the meaningful outside (external environment).

4. To answer the two-part question, time and time again, “What business are we in and what business are we not in?”

5. To balance sufficient yield in the present with necessary investment in the future.

6. To shape the values and set the standards of the organization.

A.G. Lafley, CEOA.G. Lafley, CEO

Comparable to GE’s CEO Jack Welch in some of his organizational leadership qualitiesLafley wants to shift the focus back to the consumer. Let consumers needs dictate new products, rather than technology.Lafley began by breaking down the walls between management and employees. Moved senior executives from the 11th floor to the

same floor as their staff Exchanged a rectangular meeting table for a round

one and allowed executives to sit where they want.

A.G. Lafley, CEOA.G. Lafley, CEO

Lafley began his term with P&G by stripping away the bureaucracy in order to speed up product development and build up well-known brands.“The assets of P&G are our people and our brands.”

P&G’s Value ChainP&G’s Value Chain

Primary inputs A large majority of Proctor & Gamble’s products,

about 90%, are made “in house”. They manufacture most of their products with their own plants, do research and development with their own team, and store and distribute their own products.

However, A.G. Lafley feels that they can cut the amount of workforce they have by almost 75% by doing less in house and outsourcing much more. P&G currently employs about 110,000 people

Value ChainValue Chain

Nearly one half of the company’s employees work in its plants. A.G. Lafley feels that cutting back on operations is necessary and will undoubtedly create some hardships on employeesLafley feels outsourcing more activities may also create more flexibility for the firm in the long runIf there are no clear benefits from doing something within the firm, it should be contracted out

Value ChainValue Chain

Wal-Mart provides about 15% of their total annual revenue. P&G is getting pinched by huge suppliers, Wal-Mart specifically, due to their buying power and ability to squeeze out lower prices. The power of these big-box buyers is only expected to increase.

Porter’s 5 ForcesPorter’s 5 Forces

Threat of New Entrants Medium – can be easy to enter the market but hard to

be successful, at least on a large scale It can be difficult to obtain shelf space in stores

Bargaining power of buyers High and increasing due to large retailers such as

Wal-Mart Wal-Mart could account for up to one third of global

sales by the end of the decade

Porter’s 5 ForcesPorter’s 5 Forces

Bargaining of suppliers Low

Threat of substitute products Low

Intensity of rivalry High – many powerful competitors

Social ResponsibilitySocial Responsibility

P&G is doing extensive research on where their products go after use and what affects they may have on the environment

Looking to see what impact their products have on plants, animals, and bacteria

P&G embraces the UK government definition of sustainability, which says: "Sustainable Development is a very simple idea. It is about ensuring a better quality of life for everyone, now and for generations to come."

Social ResponsibilitySocial Responsibility

P&G focuses on two areas they can make a difference1. Water2. Hygiene and health

These focus areas support ongoing work to understand issues concerning water availability, quality and quantity, and health, hygiene and nutritional issues.

Social ResponsibilitySocial Responsibility

For 2007, P&G is ranked as the leading company in the consumer, non-cyclical market sector of the Dow Jones Sustainability Group Index. This is the seventh year in a row that P&G has been ranked first.