NED University of Engineering and Technology, Karachi
Civil Engineering Department
MEM_Construction Management_Weekend Program
EM-503Strategic Planning and Decision Making
Report – Case Analysis
“Proctor and Gamble Company - 2011”By Alen Badal – The Union Institute
Prepared by: Course Instructor:
Mr. Waleed Mazhar Kalhoro/CE-107 Mr. Syed Iqbal Hashmi
Table of Content
1. Vision Statement 12. Mission Statement 1
3. External Audit 1-2
3.1. Opportunities 1-2
3.2. Threats 2
4. Competitive Profile Matrix 3
5. EFE Matrix 3-4
6. Internal Audit 5
6.1. Strengths 5
6.2. Weaknesses 5
7. Financial Ratio Analysis 6
8. Net Worth Analysis 7
9. IFE Matrix 7-8
10. SWOT 8
10.1. SO Strategies 8
10.2. WO Strategies 8
10.3. ST Strategies 8
10.4. WT Strategies 8
11. Space Matrix 9-10
12. Recommendations 10
13. EPS/EBIT Analysis
10-11
14. Conclusion 11-12
Strategic Planning and Decision Making P&G Case Study
1. Vision Statement
“To maintain our status as the number one household nondurables company
in the world”
2. Mission Statement
We will create and promote household nondurable (2) products that are not
only known for quality and innovation (4) but for value (7) and
environmentally (8) conscious. Our consumers (1) around the world (3) use
our products on a daily basis (5) and trust the Procter & Gamble name and
our brands. At Procter and Gamble we believe good ethics is good business
(6) and strive to conduct business in accordance to the laws of the nations in
which we operate and treat our employees (9) with the respect they deserve.
1. Customers
2. Products or services
3. Markets
4. Technology
5. Concern for survival, growth, and profitability
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees
3. External Audit
3.1. Opportunities
1. Younger customers are being fascinated by social media
advertising.
2. The beauty and cosmetics industry is expected to increase globally
by 8.5% in 2014 in accordance with recent research from Euro
Monitor International.
3. Men are increasingly concerned with their appearance, this provides
an opening to grab a new division of consumers.
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Strategic Planning and Decision Making P&G Case Study
4. Consumers are interested in natural products.
5. Higher demand for higher-priced products such as prestige
cosmetics and fragrances.
6. Social media advertising is more cost effective than traditional
advertising.
7. There is an endless possibility to `celebrities’ endorsing fragrances,
these products are successful because many are persuaded by
celebrity’s fame.
8. Increase in online purchasing, average monthly visits in the U.S. to
beauty-related websites topped 60 million and grew 94% over past
3 years.
9. Research shows that by 2015, global women’s purchasing power is
expected to increase by $5 trillion and beauty is the category these
consumers are most likely to purchase.
3.2. Threats
1. Volatile foreign exchange rates.
2. Substantial investment is necessary to bring new products to the
market and to preserve their high profile.
3. Upsurge in competitor expansion globally from Colgate-Palmolive,
Unilever, and Clorox.
4. Discounting premium cosmetics can damage its prestige image for
the consumers who purchase these products.
5. Diamond foods struggling financially, may not be able to purchase
Pringles.
6. The Estée Lauder companies ranks number one in prestige skin care
and number two in makeup in the channel.
7. Subject to anti-trust investigation in Europe.
8. Premium cosmetics are a prime target for counterfeiters. 9%,
according to the Global Congress on combating counterfeiting, of all
the world trade comprises counterfeit goods.
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Strategic Planning and Decision Making P&G Case Study
9. Regulations are increasing due to the voicing of different groups
about harmful chemical ingredients in cosmetic products.
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Strategic Planning and Decision Making P&G Case Study
4. Competitive Profile Matrix
P&GEstee
LauderRevlon
Critical Success
Factor
Weig
ht
Rati
ng
Sor
e
Rati
ng
Sco
re
Rati
ng
Sco
re
Advertising 0.12 4 0.48 2 0.24 1 0.24
Market Penetration 0.08 4 0.32 3 0.24 1 0.08
Customer Service 0.06 1 0.06 3 0.18 2 0.06
Store Locations 0.07 4 0.28 2 0.14 3 0.14
R&D 0.05 3 0.15 3 0.15 2 0.15
Employee Dedication 0.06 4 0.24 2 0.12 3 0.12
Financial Profit 0.13 4 0.52 3 0.39 2 0.39
Customer Loyalty 0.07 4 0.28 3 0.21 2 0.14
Market Share 0.09 3 0.27 3 0.27 2 0.18
Product Quality 0.11 2 0.22 3 0.33 2 0.22
Top Management 0.05 4 0.2 3 0.15 3 0.1
Price Competitiveness 0.11 4 0.44 2 0.22 2 0.33
Total 3.46 2.64 2.15
5. EFE Matrix
Opportunities Weig
ht
Rati
ng
Weighte
d Score
1
.
Younger customers are attracted by social media advertising. 0.06 2 0.12
2
.
The beauty and cosmetics industry is expected to increase globally by 8.5 per cent in 2014 according to recent research from Euro Monitor International.
0.06 3 0.18
3
.
Men are increasingly concerned with their appearance, this provides an opening to grab a new branch of consumers. 0.08 3 0.24
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Strategic Planning and Decision Making P&G Case Study
4
.
Consumers are interested in products that are made with all natural products. 0.03 2 0.06
5
.
Higher demand for higher-priced products such as prestige cosmetics and fragrances. 0.08 3 0.24
6
.
Social media advertising is more cost effective than traditional advertising. 0.06 2 0.12
7
.
There is an endless possibility to `celebrities’ endorsing fragrances, these products are successful because many are persuaded by fame of the celebrity.
0.04 2 0.08
8
.
Increase in online purchasing, average monthly visits in the U.S. to beauty-related websites topped 60 million and grew 94 percent over past three years.
0.06 3 0.18
9
.
Research shows that by 2015, global women’s purchasing power is expected to increase by $5 trillion and beauty is the category these consumers are most likely to purchase.
0.05 3 0.12
Threats
Weig
ht
Rati
ng
Weighte
d Score
1
.
Volatile foreign exchange rates.0.02 4 0.08
2
.
Considerable investment is necessary to bring new products to the market and to maintain their high profile.
0.05 4 0.2
3
.
Increase in competitor expansion globally from Colgate-Palmolive, Unilever, and Clorox. 0.08 4 0.32
4
.
Discounting premium cosmetics can damage its prestige image for the consumers who purchase these products.
0.04 3 0.12
5
.
Diamond foods struggling financially, may not be able to purchase Pringles. 0.08 2 0.16
6
.
The Estée Lauder companies ranks number one in prestige skin care and number two in makeup in the channel.
0.07 3 0.21
7 Subject to anti-trust investigation in Europe. 0.03 3 0.09
Waleed Mazhar Kalhoro Page 5
Strategic Planning and Decision Making P&G Case Study
.
8
.
Premium cosmetics are a prime target for counterfeiters. 9%, according to the Global Congress on combating counterfeiting, of all the world trade comprises counterfeit goods.
0.04 2 0.08
9
.
Regulations are increasing due to the voicing of different groups about harmful chemical ingredients in cosmetic products.
0.07 3 0.21
Total 1.0 2.84
6. Internal Audit
6.1. Strengths
1. New CEO, Mr. McDonald focuses on lower end products aimed at
price sensitive customers.
2. Market share grew in 14 of top 17 countries in 2010.
3. Invested over $2 billion in R&D in 2010.
4. In 2011, Fortune ranked P&G the number one soap and cosmetic in
the world.
5. Braun, bounty, Charmin, Crest, Downy, Gillette, Pampers are all top
brands owned by P&G.
6. 23 P&G brands routinely earn over $1 billion in revenue per year.
7. Proposed sale of Pringles line of snacks in 2011 for $1.5 billion.
8. EPS is 3.94
9. P&G operates under a SBU structure.
10. P&G is focused solely on the beauty and personal-care products
business
6.2. Weaknesses
1. $57 billion in goodwill on balance sheet.
2. Profits declined 5% in 2011 yet revenues increased 2.9%.
3. Spent $772 million in advertising to Johnson & Johnson’s $366
million.
4. No published vision statement.
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Strategic Planning and Decision Making P&G Case Study
5. Consumers may not associate all of our brands with P&G rather
view them as their own distinct companies.
6. Not operating as efficiently as Johnson & Johnson
7. Weak profitability ratios
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Strategic Planning and Decision Making P&G Case Study
7. Financial Ratio Analysis
Growth Rate PercentP&
G
Indus
try
S&P
500
Sales (Qtr vs year ago qtr)8.9
010.40 14.50
Net Income (YTD vs YTD) NA NA NA
Net Income (Qtr vs year
ago qtr)
-
1.9
0
4.00 47.20
Sales (5-Year Annual Avg.)5.0
95.47 8.31
Net Income (5-Year Annual
Avg.)
7.5
47.90 8.76
Dividends (5-Year Annual
Avg.)
11.
3710.67 5.70
Profit Margin Percent
Gross Margin50.
053.3 39.8
Pre-Tax Margin17.
816.3 18.2
Net Profit Margin13.
912.4 13.2
5Yr Gross Margin (5-Year
Avg.)
50.
853.7 39.8
Liquidity Ratios
Debt/Equity Ratio0.5
2
0.80 1.00
Current Ratio 0.8 1.0 1.3
Waleed Mazhar Kalhoro Page 8
Strategic Planning and Decision Making P&G Case Study
Quick Ratio 0.5 0.7 0.9
Profitability Ratios
Return On Equity18.
332.6 26.0
Return On Assets 8.7 11.1 8.9
Return On Capital11.
015.4 11.8
Return On Equity (5-Year
Avg.)
16.
732.2 23.8
Return On Assets (5-Year
Avg.)8.0 10.0 8.0
Return On Capital (5-Year
Avg.)
10.
113.9 10.8
8. Net Worth Analysis (‘000,000)
Net Income ×5 $
58,985
Stockholders Equity $
67,640
( Share PriceEPS )×Net Income $189,4
71
Number of shares outstanding X
Share Price
$
174,02
0
Average $
122,52
9
9. IFE Matrix
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Strategic Planning and Decision Making P&G Case Study
StrengthsWeig
ht
Rati
ng
Weighted
Score
1. New CEO, Mr. McDonald focuses on lower end products aimed at price sensitive customers.
0.06 4 0.24
2. Market share grew in 14 of top 17 countries in 2010.
0.08 4 0.32
3. Invested over $2 billion in R&D in 2010. 0.06 4 0.24
4. In 2011, Fortune ranked P&G the number one soap and cosmetic in the world.
0.03 4 0.12
5. Braun, bounty, Charmin, Crest, Downy, Gillette, Pampers are all top brands owned by P&G.
0.09 4 0.36
6. 23 P&G brands routinely earn over $1 billion in revenue per year.
0.11 4 0.44
7. Proposed sale of Pringles line of snacks in 2011 for $1.5 billion.
0.13 4 0.52
8. EPS is 3.94 0.04 4 0.16
9. P&G operates under a SBU structure. 0.06 4 0.24
1
0. P&G is focused solely on the beauty and personal-care products business.
0.07 4 0.28
Waleed Mazhar Kalhoro Page 10
Strategic Planning and Decision Making P&G Case Study
WeaknessesWeig
ht
Rati
ng
Weighted
Score
1
.$57 billion in goodwill on balance sheet. 0.05 1 0.05
2
.Profits declined 5% in 2011 yet revenues increased 2.9%.
0.02 2 0.04
3
.Spent $772 million in advertising to Johnson & Johnson’s $366 million.
0.06 1 0.06
4
.No published vision statement. 0.03 1 0.03
5
.Consumers may not associate all of our brands with P&G rather view them as their own distinct companies.
0.04 1 0.04
6
.Not operating as efficiently as Johnson & Johnson. 0.04 1 0.04
7
.Weak profitability ratios. 0.03 2 0.06
Total 1.00 3.24
10. SWOT
10.1.SO Strategies
a. Allocate $100 million for advertising and promoting male skin care
products using celebrities as spokesmen.
b. Spend $400 million in R&D to produce 3 new lines of higher end
fragrances.
10.2.WO Strategies
a. Increase social medial advertising targeting teenagers by $100M.
10.3.ST Strategies
Waleed Mazhar Kalhoro Page 11
Strategic Planning and Decision Making P&G Case Study
a. Engage in talks with Pepsi to purchase Pringles if the deal with
Diamond Foods is not completed.
b. Continue to market low end cosmetics and fragrances.
10.4.WT Strategies
a. Reduced advertising by $300M on well-established products letting
their brand name sell for itself.
11. SPACE Matrix
Internal Analysis:
External
Analysis:
Financial Position
(FP)
Stability Position
(SP)
Return on Investment (ROI) 3 Rate of Inflation -3
Waleed Mazhar Kalhoro Page 12
Strategic Planning and Decision Making P&G Case Study
Leverage 5 Technological Changes -2
Liquidity 5 Price Elasticity of Demand -3
Working Capital 5 Competitive Pressure -5
Cash Flow 6 Barriers to Entry into Market -2
Financial Position (FP)
Average
4.
8
Stability Position (SP)
Average
-
3.
0
Waleed Mazhar Kalhoro Page 13
Strategic Planning and Decision Making P&G Case Study
Internal Analysis:
External
Analysis:
Competitive Position
(CP)
Industry Position
(IP)
Market Share -2 Growth Potential 5
Product Quality -1 Financial Stability 6
Customer Loyalty -3 Ease of Entry into Market 4
Technological know-how -2 Resource Utilization 7
Control over Suppliers and
Distributors -2 Profit Potential 7
Competitive Position (CP)
Average
-
2.
0
Industry Position (IP)
Average
5.
8
12. Recommendations
1. Allocate $100 million for advertising and promoting male skin care
products using celebrities as spokesmen.
2. Increase social medial advertising targeting teenagers by $100M.
3. Spend $400 million in R&D to produce 3 new lines of higher end
fragrances.
4. Engage in talks with Pepsi to purchase Pringles if the deal with
Diamond Foods is not completed
13. EPS/EBIT Analysis (‘000,000)
Amount Needed: $600M
Stock Price: $64
Shares Outstanding: 2,750
Interest Rate: 5%
Tax Rate: 22%
Waleed Mazhar Kalhoro Page 14
Strategic Planning and Decision Making P&G Case Study
Common Stock Financing Debt Financing
Recessio
nNormal Boom
Recessi
onNormal Boom
EBIT $15,000 $17,000
$20,0
00 $15,000 $17,000
$20,0
00
Intere
st 0 0 0 30 30 30
EBT 15,000 17,000
20,00
0 14,970 16,970
19,97
0
Taxes 3,300 3,740 4,400 3,293 3,733 4,393
EAT 11,700 13,260
15,60
0 11,677 13,237
15,57
7
#
Share
s 2,759 2,759 2,759 2,750 2,750 2,750
EPS 4.24 4.81 5.65 4.25 4.81 5.66
20% Percent Stock 80% Percent Stock
Recessio
nNormal Boom
Recessi
onNormal Boom
EBIT $15,000 $17,000
$20,0
00 $15,000 $17,000
$20,0
00
Intere
st 24 24 24 6 6 6
EBT 14,976 16,976
19,97
6 14,994 16,994
19,99
4
Taxes 3,295 3,735 4,395 3,299 3,739 4,399
EAT 11,681 13,241
15,58
1 11,695 13,255
15,59
5
#
Share
2,752 2,752 2,752 2,758 2,758 2,758
Waleed Mazhar Kalhoro Page 16
Strategic Planning and Decision Making P&G Case Study
s
EPS 4.24 4.81 5.66 4.24 4.81 5.65
14. Conclusion
For year 2010, the company’s overall earnings fell to $12.736 billion from
$13,436 billion a year earlier. During that year, P&G raised prices across all
divisions and regions to help make up for higher costs for commodities.
P&G’s overall 2010 net income fell 5.20 percent, but sales increased 2.92
percent to $78.938 billion, from $76.694 billion earlier.
For that year of 2010, P&G’s Beauty division sales increased 2.99 percent
to $ 19.491 billion. However, this division reported that net earnings also
increased 1.80% to $2,712 million. Also for year 2010, P&G’s grooming
division reported a 3.01 percent sales increase to $7.631 billion, also that
division’s earnings increased 8.62 percent to $1477 million. For year 2010,
P&G’s Health Care sales increased 1.81 percent to $11.493 billion. Sales of
Snacks and Pet care increased about 0.67 percent to $3.135 billion and net
income increased by 39.3% to $ 326 million. For year 2010 P&G’s Fabric
Care/Home Care sales increased by 2.66% to $23.805 billion and net
earnings increased by 10.1% to $ 3.339 billion. For year 2010 P&G’s Baby
Care/Family Care sales increased by 4.48% to $ 14.736 billion and net
earnings increased by 15.76% to $2.049 billion.
Waleed Mazhar Kalhoro Page 17