Established in 1837, the Proctor & Gamble Company has grown from a small, family operated soap and candle company into the world’s largest consumer product that has the revenue of more than 83 billion US$ in 2008. Also in 2008, the company rank 5th on Fortune’s “Global Most Admired Companies” and No. 1 in the Household & Personal Products. However, P&G was not able to maintain consistent performance throughout its history. Because of failed leadership of former CEO Mr. Durk Jagar from 1999 to 2000, P&G experienced difficult time because of inappropriate strategic direction. The company during that time was shaken from its heart as Jagar tried to implement some of the fundamental changes at the root of the consumer goods giant. Jagar’s efforts included modification of company’s culture, shifting P&G product portfolio into expensive market segments. The strategy proved failed and resulted in P&G poor performance in terms of market share, profitability, stock price as well as employees’ morale. Not until current CEO A.G. Lafley takeover in 2000, the company's profits have more than tripled. Under the new leadership and modification in the company’s strategy, the company returned to its core competences such as corporate culture, innovation, competent people, consumer understanding, go-to-market capability, sound marketing practices and scale, meanwhile struggled to adapt with social, technological, economic trends and market uncertainties. The turnaround of P&G as the world’s leading producer of consumer goods products has many strategic implications that will be analyzed and illustrated in this case write-up. Some important strategic alternatives will be discussed and strategic recommendations will also be suggested in this essay. 2.
The problems of P&G rooted from the incompetent strategic directions of Jagar. As a person who did not come from genuine P&G culture, Jagar possessed little knowledge and understanding of P&G long and admired history and tradition, and therefore resulted in the lack of appreciation of the company’s culture and willing to sustain its legacy. He initiated ranges of decisions which did not fit the company tradition, competitive situation. Those decisions included the introduction of expensive new products, planning to buy two huge pharmaceutical companies and companywide reorganization. Those strategic directions stretched company’s resources, diluted its core capabilities. Moreover, the soaring of commodity prices, unfavorable currency trends and situation in stock market also hindered Jagar’s efforts. As the consequence, Jagar was pressured to resign in June, 2000. 3.
P&G traditional battlefield is consumer goods market. Company’s products are distributed in 180 countries, in five continents. P&G divided its market into six major segments including:
Fabric and Home Care
Baby and Family Care
Snack and Beverages
Market growth: Because of ongoing global financial crunch, consumers are facing the decrease in disposable income, declining home values, and rising levels of unemployment and instable future, therefore they have to be more frugal in their consumption, even for the less expensive commodities. However, economic recession does not stop consumers from shopping essential products such as detergent, tooth-paste, toilet paper, shampoo, as well as beauty care. The possible shift is that they will cut back consumption on pricier products and spend more of P&G's affordable brands. As the results, P&G is still able to maintain a certain level of positive market growth expectation. Cost structure: the fluctuation in commodity prices, raw materials, labor costs, energy costs, foreign exchange and interest rate significantly affect the success of consumer goods producers in general and P&G in particular. Therefore, the better the company manage the fluctuation through value chain management,...
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