2014Strategic Management Mission Statement (Actual) “We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come. As a result, consumers will reward us with leadership sales, profit and value creation, allowing out people, our shareholders, and the communities in which we live and work to prosper.” Mission Statement (Proposed) “We will provide branded products and services of superior quality and value that improve the lives of our consumers around the world and the environment we live in, now and for generations to come. By giving best opportunities to our employees and providing them best resources, we will go for innovations. As a result, consumers will reward us with leadership sales, profit and value creation, allowing out people, our shareholders, and the communities in which we live and work to prosper.” o EXTERNAL FACTOR EVALUATION An external factor evaluation (efe) is the strategic tool used to evaluate firm existing strategies, efe matrix can be defined as the strategic tool to evaluate external environment or macro environment of the firm include economic, social, technological, government, political, legal and competitive information. Matrix includes both opportunities and threats. Following are the opportunities and threats of p&g. OPPORTUNITIES: Growth of global market. Customers in developing markets are increasingly willing and able to purchase expensive items. Growth in the use of advertising Population growth Increased demand of beauty and health products for customers. Supplier diversity in the market Increased amount of customers (male) Increased effectiveness in social media and internet marketing THREATS: Local consumer goods producers. Cheaper brands in market Increase in global industry regulations Rising costs of raw material & labor Customer unwillingness to try new products New and competitive consumer products are constantly being introduced. Rating: 1. Poor. 2. Average. 3. Above average. 4. Superior. o INPUT STAGE: o EFE MATRIX INTERPRETATION: Company’s total score is 2.54; it’s very near to average. It does not shows very good performance of company but still it is able to avail opportunities and avoid threats. OPPORTUNITIES Weight Rating Weighted score 1. Growth of global market. 0.1 4 .4 2. Customers in developing markets are increasingly willing and able to purchase pricey items 0.1 3 0.3 3. Growth in the use of advertising 0.05 3 0.15 4. Population growth 0.05 1 0.05 5. Increased demand of beauty and health products for customers. .1 4 .4 6. Supplier diversity in the market 0.05 3 .15 7. Increased amount of customers (male) 0.08 1 .08 8. Increased effectiveness in social media and internet marketing 0.05 3 .15 THREATS 1. Local consumer goods producers. 0.08 2 0.16 2. Cheaper brands in market 0.08 3 0.24 3. Increase in global industry regulations 0.04 2 .08 4. Rising costs of raw material & labor 0.08 2 0.16 5. Customer unwillingness to try new products. 0.06 1 0.06 6. New and competitive consumer products are constantly being introduced. 0.08 2 .16 TOTAL 1 2.54 o INTERNAL FACTOR EVALUATION The internal factor evaluation matrix is a popular strategic management tool for auditing or evaluating major internal strengths and internal weaknesses in functional areas of an organization or a business.. Listed below are the strength and weaknesses of P&G. STRENGTHS: High market share Strong reputable brand name Customer brand awareness High quality products Strong research and development. Worldwide distribution of products Profitable acquisition of competitor brand companies Diversification of product line WEAKNESSES: P&G’s weak balance sheet, highly leverage 73.3% and low liquidity ratio. Lack of product variety of green products that are environmental friendly. Business ethics lack of women leadership in the executive board. WEIGHT ASSIGN: 4. Major strength. 3. Minor strength. 2. Minor weakness 1. Major weakness. o IFE MATRIX STRENGTHS Weight Rating Weighted score 1. High market share 0.08 4 .32 2. Strong reputable brand name 0.1 4 0.4 3. Customer brand awareness 0.07 3 0.21 4. High quality products 0.08 3 0.24 5. Strong research and development. 0.13 4 0.52 6. Worldwide distribution of products 0.1 4 0.4 7. Profitable acquisition of competitor brand companies 0.08 3 .24 8. Diversification of product line 0.1 3 .3 WEAKNESSES 1. P&G’s weak balance sheet, highly leverage 73.3% and low liquidity ratio. 0.1 4 .4 2. Lack of product variety of green products that are environmental friendly. 0.08 3 0.24 3. Business ethics lack of women leadership in the executive board. 0.08 2 0.16 TOTAL 1 3.43 INTERPRETATION: Company’s total score is 3.43, it shows that it is trying to retain its strengths and overcome its weaknesses. o COMPETITIVE PROFILE MATRIX (CPM): “The Competitive Profile Matrix (CPM) is a tool that compares the firm and its rivals and reveals their relative strengths and weaknesses.” In order to better understand the external environment and the competition in a particular industry, firms often use CPM. The matrix identifies the firm’s key competitors and compares them using industry’s critical success factors. The analysis also reveals company’s relative strengths and weaknesses against its competitors, so the company would know which areas it should improve and which areas to protect. WEIGHT ASSIGN: 4 = Major strength. 3 = Minor strength. 2 = Minor weakness. 1 = Major weakness. o CPM MATRIX INTERPRETATION: Unilever and Johnson & Johnson’s total scores are approx equal while score of p&g is significantly higher than both. The factor having highest weight is advertisement for which unilever is rated only 1,while for some other factors having lowers weights unilever is rated highest such as; customer loyalty. This may be the reason of unilever’s lowest score. P&G is having highest score among its competitors, however, Johnson &Johnson has better financial position and unilever is having better customer loyalty than both. P&G is rated 4 for most of the factors comparatively of higher weight and the factors for which it is rated less than 4 are weighted 0.1 only. This is the reason P&G has got the highest rating. Johnson & Johnson Procter & Gamble Unilever Critical Success Factors Weights Rates Weighted score Rates Weighted score Rates Weighted score Advertising .2 2 .4 4 .8 1 .2 Product quality .1 2 .2 4 .4 3 .3 Price competitiveness 0.1 1 0.1 3 0.3 2 0.2 Management 0.1 3 0.3 4 0.4 2 0.2 Financial position 0.15 4 0.6 3 0.45 2 0.3 Customer loyalty 0.1 3 0.3 3 0.3 4 0.4 Global expansion 0.15 2 0.3 4 0.6 3 0.45 Market share 0.1 3 0.3 4 0.4 2 0.2 Total 1 19 2.5 29 3.65 18 2.25 o MATCHING STAGE: o SWOT MATRIX SWOT ANALYSIS STRENGTHS 1. High market share. 2. Strong reputable brand name. 3. Customer brand awareness 4. High quality products. 5. Strong research and development. 6. Worldwide distribution of products. 7. Profitable acquisition of competitor brand companies. 8. Diversification of product line. WEAKNESSES 1. P&G’s weak balance sheet, highly leverage 73.3% and low liquidity ratio. 2. Lack of product variety of green products that are environmental friendly. 3. Business ethics lack of women leadership in the executive board. OPPORTUNITIES 1. Growth of global market. 2. Customers in developing markets are increasingly willing and able to purchase expensive items. 3. Growth in the use of advertisement. 4. Population growth. 5. Increased demand of beauty and health products for customers. 6. Supplier diversity in the market. 7. Increased amount of customers (male). 8. Increased effectiveness in social media and internet marketing. SO Strategies 1. Go for market development. (S5,O2,O5,) 2. Introduce new products for men. (S2, S5, S6, O7). 3. Introduce new beauty and health products. (S2, S4, S5, O5, ) WO Strategies 1. Develop new herbal products and create a new product line of green products. (W2, O2, O5). 2. Consider recruitment of women to be an equal opportunity provider. (W3, O1). THREATS 1. Local consumer goods producers. 2. Cheaper brands in market Increase in global industry regulations. 3. Rising costs of raw material & labor. 4. Customer unwillingness to try new products. 5. New and competitive consumer products are constantly being introduced. ST Strategies 1. Reduce ineffective and inefficient workforce to minimize cost. (S2, T2) WT Strategies 1. Undergo a cost effective control system to increase profit and to generate more cash inflows.(W1,T2,T3). o SPACE MATRIX Factors of SPACE Matrix : o Competitive Position FACTORS Rating -6=Low ; 0=High Market share -4 Product quality -1 Customer loyalty -3 Control over distributors and suppliers -2 Promotional activities -1 Product price -3 TECHNICAL KNOW-HOW -1 TOTAL -15 Average -2.14=-2 o Industry Position FACTORS Rating 0=Low ;+6=High Growth potential 5 Profit potential 3.5 Financial stability 4 Technological know how 5 Resources utilization 2.5 EASE OF ENTRY INTO MARKET 4 TOTAL 24 Average 4 o Environmental Position FACTORS Rating -6=Low ; 0=High Technological changes -3 Rate of inflation -2 Barriers to entry into market -3 Competitive pressure -1 Demand variability -5 Price elasticity of demand -3 Total -17 Average -2.83=-3 o Financial Position FACTORS Rating 0=Low ;+6=High ROI 5 Financial and Operating leverage 2.5 Inventory turnover 4 Cash flow 5 Working capital 5 Liquidity ratios 2.5 TOTAL 24 Average 4 o Score on X axis Competitive Position = -2 Industrial Position = +4 Total Score on x-axis = -2 + (+4) =+2 o Score on Y axis Financial Position = +5 Environmental Position = -3 Total Score on y-axis = -3 + (+5) = +2 Coordinates (+2;+2) INTERPRETATION: Financial position of company seems to be good but not so strong, competitive position is however very strong. Company has acquired many of its competitor’s successfully and is able to maintain its position. Company is operating in stable market and industrial position is also good. Here company should focus on integration, intensive and diversification strategies. o GSM Matrix o INTERPRETATION: As industry has rapid growth and company has strong competitive position so here it should first focus on intensive strategies then should go for integration and then for related diversification strategies. Weak Competitive Position Strong Competitive Positive Slow Market Growth Rapid Market Growth Procter & Gamble o IE Matrix Division Sales /Revenue ($ millions) % Profit ($ millions) % IFE EFE 1 Beauty 19,491 24 2,712 23 3.4 3 2 Grooming 7,631 10 1,477 13 1.2 2.8 3 Health Care 11,493 14 1,860 16 1.6 2 4 Snacks and Pet Care 3,135 4 326 3 2.9 1.6 5 Fabric Care/ Home Care 23,805 30 3,339 28 3.5 3 6 Baby Care/ Family Care 14,736 18 2,049 17 3.8 4 Total 80,291 100 11,763 100 4 3 3 1 2 1 2 o INTERPRETATION Division I This division has highest sales among all; its IF and EF both are strong so company needs to hold and maintain this division. Most effective strategies for here would be integration and intensive strategies. Division II IF of this division are weak, while, its EF are medium, company should by retrenchment reduce cost or should divest this division. Division III This division is also in 6 th cell, so, here also company should either go for retrenchment or for divestiture. Division IV IF of this division are average, while, its EF are low, here also company should either go for retrenchment or for divestiture. Division V IF of this division are strong and its EF are also high, it show s company is performing well in this division, so for its growth company should focus on integration and intensive strategies. Division VI According to IFE and EFE this is company’s strongest division, here also integration and intensive strategies would grow and build this division. o BCG Matrix Division Sales /Revenue ($ millions) % Profit ($ millions) % Market share % Industry Growth 1 Beauty 19,491 24 2,712 23 60 14 2 Grooming 7,631 10 1,477 13 20 13 3 Health Care 11,493 14 1,860 16 30 12 4 Snacks and Pet Care 3,135 4 326 3 10 5 5 Fabric Care/ Home Care 23,805 30 3,339 28 80 3 6 Baby Care/ Family Care 14,736 18 2,049 17 40 10 Total 80,291 100 11,763 100 o Interpretation Division I o Stars As this division is in star it so, most effective strategies for it would be intensive and integration. Division II o Question mark This SBU is a question mark for company, so if company wants to turn it as star SBU Company can go for intensive strategy to increase its market share. Division III , IV & VI o Question mark For health care division also company should increase its market share through intensive strategies. Division V o Stars Because of high market share companies home care SBU is its star unit and for its maintenance company should focus on integration strategy. DECISION STAGE: o QSPM MATRIX: KEY INTERNAL FACTORS Weights INTENSIVE STRATEGIES MARKET DEVELOPMENT MARKET PENETRATION PRODUCT DEVELOPMENT STRENGTHS AS TAS AS TAS AS TAS High market share 0.08 2 .16 3 .24 4 .32 Strong reputable brand name 0.1 4 .4 2 .2 3 .3 Customer brand awareness 0.07 - - - High quality products 0.08 2 .16 3 .24 4 .32 Strong research and development. 0.13 2 .26 1 .13 3 .39 Worldwide distribution of products 0.1 - - - Profitable acquisition of competitor brand companies 0.08 - - - Diversification of product line 0.1 4 .4 2 .2 3 .3 WEAKNESSES P&G’s weak balance sheet, highly leverage 73.3% and low liquidity ratio. 0.1 - - - Lack of product variety of green products that are environmental friendly. 0.08 2 1 .08 4 .32 Business ethics lack of women leadership in the executive board. 0.08 - - - SUM TOTAL 1.00 OPPORTUNITIES Growth of global market. 0.1 4 .4 3 .3 2 .2 Population growth 0.1 - - - Customers in developing markets are increasingly willing and able to purchase pricey items. 0.05 4 .2 3 .15 2 .1 Growth in the use of advertising 0.05 - - - Increased demand of beauty and health products for customers. .1 3 .3 2 .2 4 .4 Supplier diversity in the market 0.05 - - - Increased amount of customers (male) 0.08 2 .16 1 .08 4 .32 Increased effectiveness in social media and internet marketing 0.05 - - - THREATS Local consumer goods producers. 0.08 4 .32 3 .24 2 .16 Cheaper brands in market 0.08 - - - Increase in global industry regulations 0.04 - - - Rising costs of raw material & labor 0.08 - - - Customer unwillingness to try new products. 0.06 - - - New and competitive consumer products are constantly being introduced. 0.08 4 .32 2 .16 3 .24 SUM TOTAL 1 TOTAL ATTRACTIVENESS SCORE 3.08 2.22 3.37 KEY INTERNAL FACTORS Weights INTEGRATION STRATEGIES FORWARD INTEGRATION HORIZONTAL INTEGRATION STRENGTHS AS TAS AS TAS High market share 0.08 - - Strong reputable brand name 0.1 - - Customer brand awareness 0.07 - - High quality products 0.08 - - Strong research and development. 0.13 - - Worldwide distribution of products 0.1 - - Profitable acquisition of competitor brand companies 0.08 1 .08 3 .24 Diversification of product line 0.1 - - WEAKNESSES P&G’s weak balance sheet, highly leverage 73.3% and low liquidity ratio. 0.1 3 .3 1 .1 Lack of product variety of green products that are environmental friendly. 0.08 - - Business ethics lack of women leadership in the executive board. 0.08 - - SUM TOTAL 1.00 OPPORTUNITIES Growth of global market. 0.1 - - Population growth. 0.1 - - Customers in developing markets are increasingly willing and able to purchase pricey items. 0.05 - - Growth in the use of advertising. 0.05 - - Increased demand of beauty and health products for customers. .1 3 .3 1 .1 Supplier diversity in the market. 0.05 - - Increased amount of customers (male). 0.08 - - Increased effectiveness in social media and internet marketing. 0.05 - - THREATS Local consumer goods producers. 0.08 - - Cheaper brands in market. 0.08 3 .24 4 .32 Increase in global industry regulations. 0.04 - - Rising costs of raw material & labor. 0.08 4 .32 2 .16 Customer unwillingness to try new products. 0.06 - - New and competitive consumer products are constantly being introduced. 0.08 3 .24 4 .32 SUM TOTAL 1 TOTAL ATTRACTIVENESS SCORE 1.48 1.24 KEY INTERNAL FACTORS Weights DIVERSIFICATION STRATEGIES RELATED DIVERSIFICATION UN-RELATED DIVERSIFICATION STRENGTHS AS TAS AS TAS High market share. 0.08 4 .32 2 .16 Strong reputable brand name. 0.1 2 .2 3 .3 Customer brand awareness. 0.07 3 .21 2 .14 High quality products. 0.08 3 .24 4 .32 Strong research and development. 0.13 3 .39 2 .26 Worldwide distribution of products. 0.1 - - Profitable acquisition of competitor brand companies. 0.08 - - Diversification of product line. 0.1 3 .3 4 .4 WEAKNESSES P&G’s weak balance sheet, highly leverage 73.3% and low liquidity ratio. 0.1 - - Lack of product variety of green products that are environmental friendly. 0.08 1 .08 4 .32 Business ethics lack of women leadership in the executive board. 0.08 - - SUM TOTAL 1.00 OPPORTUNITIES Growth of global market. 0.1 - - Population growth. 0.1 - - Customers in developing markets are increasingly willing and able to purchase pricey items. 0.05 2 .1 3 .15 Growth in the use of advertising. 0.05 - - Increased demand of beauty and health products for customers. .1 4 .4 2 .2 Supplier diversity in the market. 0.05 - - Increased amount of customers (male). 0.08 2 .16 3 .24 Increased effectiveness in social media and internet marketing. 0.05 - - THREATS Local consumer goods producers. 0.08 - - Cheaper brands in market. 0.08 3 .24 2 .16 Increase in global industry regulations. 0.04 - - Rising costs of raw material & labor. 0.08 - - Customer unwillingness to try new products. 0.06 - - New and competitive consumer products are constantly being introduced. 0.08 3 .24 4 .32 SUM TOTAL 1 TOTAL ATTRACTIVENESS SCORE 2.88 2.97 o Interpretation: Intensive strategies From the intensive strategy the product development have high score that is 3.37. Integration strategies From the integration strategy the forward integration have high score that is 2.97. Diversification strategies From the diversification strategy the unrelated diversification have high score that is 2.97. o IMPLEMENTATION: From the result of QSPM, it is concluded that P&G should prefer product development as it have the highest score of 3.37 among all strategies. RECOMMENDATION: Procter & Gamble (P&G): a widely revered innovation star that invests US$2 billion in R&D annually, 50 percent more than its largest peer. It spends another $400 million each year on what it calls “foundational consumer research” to uncover opportunities for innovation across nearly 100 countries. PRODUCT DEVELOPMENT STRATEGY: It describes to develop new products or modify the existing products with respect to size, color, packaging, etc. Safeguard is a well-perceived product among the customers, and at this moment, it is available in two sizes; 75gm and 125gm, which cannot satisfy the demand of every segment. While the products of the competitors are available in multiple sizes which provide abundant choices for purchases to customers for example Lifebuoy Gold has 140gm and95gm and Medicare has 80gm soap available in the market. This provides an opportunity to the customer to have multiple choices. It can be a threat for the market share of safeguard. On the other hand, in case of safeguard the choice to customer is very limited. This is what they have analyzed through market survey. Therefore, it is necessary that safeguard should be available in maximum possible sizes to meet the selection criteria of the customer. As far as launching of new product is concerned, it is not necessary for P&G at this moment, but in future, they will require taking this step as well because they have some other soap like ivory, and zest which are very famous in international market. Each company did—and still does—produce plenty of product and service innovation. But these companies didn’t invent the automobile, steel, airlines, carbonated beverages, movie rental services, and online search. What made these companies great—and what will keep them great in the future—is innovation of the way raw inputs become products and services that customers value.