1. INTRODUCTION The aim of this report is analysis P new strategic—sustainability. In the following text, it will expand the current strategic orientation and through PESTEL mode analysis, Five Forces mode analysis and SWOT analysis to analysis sustainability strategic of P. Then I will give some suggestions to future development. In the end, I will give a conclusion for PESTEL mode, Five Forces mode and SWOT analysis. 2. THE CURRENT STRATEGIC ORIENTATION Procter & Gamble (P) released its new sustainability vision along with a detailed list of goals that the company plans to achieve during the next decade.
Sustainable business practices are quickly becoming the norm for companies like P. The new sustainability vision includes specific goals that P wants to meet during the next decade. For example, even though the overall sustainability vision includes the exclusive use of renewable energy to power all of its plants, the company has set an incremental goal of 30% renewable energy use by 2020 (Wartzman, 2011). For the renewable energy availability increases, P may be accelerating their adoption rates during following second decade period.
P isn’t restricting their sustainability vision to in host operations and also to consumer products and habits. As the owner of several high-profile brands including Dawn, Duracell, and Tide, these changes could have far-reaching effects. The company plans to replace petroleum-based materials with renewable materials. By 2020, the company hopes to be one quarter of the way through this ultimate goal (Wartzman, 2011). P also reached consumers’ solid waste. As manufacturers of consumer goods, waste from their products always ends up in landfills site.
P plans to start a pilot program to learn more about decrease the amount of consumers’ waste. The pilot program will be exist and develop market in 2020. Other 2020 goals such as the decreasing about truck transportation, the decreasing of manufacturing waste. 3. EXTERNAL ANALYSIS 1. PESTEL MODE ANALYSIS Political P has it unique business model and has been business in different countries. On one hand, the company has to deal and suit political press from different countries, On the other hand, the company plays important roles to cooperate with and affect local government with regard to the size of the corporations.
Economic In the future years, the economic will present from recession revival in, and the demand of the world will also increase. Hence, P can have a positive anticipation and may be a good sale performance. Social P should have to pay attention different social norms during overseas operations due to distinguished cultural background in different markets. For personal products, social need is evolving with time. Technological As the market size of personal products is huge, major players in this industry invest significantly to gain technological advantage in order to maintain and expand market positions.
So, technology applied should develop relatively fast in this industry. Legal P must be comply with different national legislation in production process and business operations. Environmental P should not do bad to environmental in production process, such as sewage discharge, wasting source. So, the sustainable strategy is clever decision, 2. FIVE FORCES ANALYSIS Buyer Power Buyer industry in the US has been growing these years and presenting an optimistic trend in the future. As figure 1 shows since 2005, the total market for cosmetics and fragrances has witnessed increased by 5. % in 2006, 6. 5% in 2007, 7. 2% in 2008, and 6. 5% in 2009 than their previous years (Baxter J). By the year of 2009, the total value of cosmetics and fragrances market has reached 2. 18 billion (Baxter J). [pic] Figure 1 (The Total US Market for Cosmetics and Fragrances by Sector by Value at Current Prices, 2005-2009) Buyers in personal products industry can be individual consumers and also can be some large retailers and distributors like Wal-Mart and Carrefour. But individual consumers have little buying power because they are scattered and they are limited in affection of price.
For the large retailers and distributors, they have large buying power in bargaining. Supplier Power Every personal products line has its unique requirement and preferences. By the other word, crude material, ingredients, and components are needed and there are subsequent procedures throughout the production process. So, P bargaining is limited for the quality of the products is context the brand. Threat of New Entrants The big amount of investment is essential in this industry to implement production, distribution, R, and marketing.
Thus, threats of new entrants are relatively limited for this industry. And it also can develop new product. Threat of Substitutes Even major companies like P and Unilever has been dedicating to build and reinforce their brand recognition and loyalty, this advantage still might be influence pricing power of substitutions. Degree of Rivalry The total global revenue of personal products market was $361. 1 billion in 2008 and the global market value is estimated to reach $424. 1 billion by the end of 2013 (Datamonitor, 2009).
Facing such a large market value, the completion within the market is extremely fierce. There are a number of comparable rivals for P in terms of company size, brands, capital, and research capability. Major rivals such as Unilever, Avon, Estee Lauder, L’Oreal, all possess their own leading brands and products, and considerable R capability and market competence in global operations (Datamonitor, 2009). Considering low switching cost for consumers into consideration, this industry should be always staying in long operation. 4. INTERNAL ANALYSIS SWOT ANALYSIS
With revenues of $79,029 million, P is the world’s largest consumer products manufacturer, with its products reaching 4 billion people worldwide (Bartlett, C. , Beamish, P. and Choshal, S). In addition, P has the largest lineup of leading brands in its industry, with 23 brands with over $1 billion in annual sales, and another 20 brands generating about $500 million or more in annual sales (Baxter J, 2010). [pic] Strengths The company’s market capitalization in 2009 was roughly $150 billion, making it one of the 10 most valuable companies in the US.
In addition, P holds leading global market shares in a variety of categories, including baby care 33%, blades and razors 70%, feminine protection 37%, and fabric care 33% (Bartlett, C. , Beamish, P. and Choshal, S. ). P strong R capabilities and a marketing-driven understanding of consumer needs are backed by significant marketing investments. The company invests more than $7 billion in advertising annually, consistently making P one of the world’s largest advertisers (Baxter J, 2010). Strong focus on researching make the company dates up its product line in time, and help the company in leading position in competition.
Weaknesses P is heavily dependent on Wal-Mart Stores (Wal-Mart) and its affiliates for generating major part of its revenue. Sales to Wal-Mart and its affiliates represented approximately 15% of its total revenue since 2006 (Holt and Wigginton, 2006). Hence, the loss of this customer will lead to a sharp decline in P’s revenues and also a loss of its market share. Higher product prices translated into sales volume decline and market share loss P increased prices to recover higher commodity costs and foreign exchange transaction impacts.
The higher prices pushed through on its products to offset input cost inflation of $2 billion and negative foreign currency exchange of $4 billion in 2009 translated to uncompetitive pricing on store shelves in the midst of the economic downturn (Galbraith, 2009). The company lost some kinds of marketing share for the sale decreasing. The high price is also make the company lost some consumers. Opportunities This strategy will put P in a stronger position and will drive the company’s profitability in the long term.
Increased investment in manufacturing capacity in developing countries P is planning the biggest increase in its manufacturing capacity in order to expand into categories and countries where it doesn’t have a brand presence. The company is investing 4% of sales in capital spending, including funding for new manufacturing capacity to support future growth. Over the next five years, P will add 20 new manufacturing facilities (Henricks, 2010). Almost all of these products are in developing countries, and the company should be decrease this kind of service in these countries to save the cost. Threats
Although P is based in the US, it earns revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the US dollar. As a result, increases or decreases in the value of the US dollar against other major currencies will affect the company’s net operating revenues, operating income and the value of balance sheet items denominated in foreign currencies. The unfavorable impact of currency fluctuations decreased revenues by about four percentage points, or approximately $4 billion, and profit by more than $1 billion (Peng, M, 2009). The bad impact is major from exchange rate. . RECOMMENDATIONS In my opinion, P should pay more attention to external environment. The company devoted overseas investment and do more in consumer understanding. This is also one of the company’s core strengths. It already performed much better than competitors but continuous searching for more efficient and appropriate consumer interaction methods should be stock to as well. 6. CONCLUTION From the report, through PESTLE analysis, it can be seen that P has to deal with complicated and different conditions in the world market, such as culture background, policy and law from different country.
But the company should not only adapt to the external environment, but also take care of different setting across countries for its sustainable development. Then, five forces analysis shows main factors in personal product industry and its influences. The company has problem on limited buying power from individual consumers and the relationships with large retailers. According to SWOT analysis, P shows its weaknesses by its strengths of strong brand portfolio, robust cash productivity, and outstanding investment in consumer understanding and innovation capability.
Under the framework of Porter’s generic strategies, P has been consistently undertaking differentiation strategy in terms of products, brands, innovation, and organizational management. Several recommendations are given with respect to issues of P. REFERENCE LIST Ailawadi, K. , Lehmann, D. and Neslin, S. (2009) “Market Response to a Major Policy Change in the Marketing Mix: Learning from Procter & Gamble’s Value Pricing Strategy”. Journal of Marketing. Vol. 65 (January 2001), 44-61 Bartlett, C. , Beamish, P. and Choshal, S. 2009) Transnational Management: Text, Cases, and Readings in Cross-Border Management (5th ed). New York. McGraw-Hill/Irwin. Baxter J. (2010) “Market Report Plus 2010: Cosmetics & Fragrances”. 23rd Edition March 2010. Key Note Ltd. Baxter J. (2010) “Market Report Plus 2010: Toiletries”. 23rd Edition June 2010. Key Note Ltd. Galbraith, J (2009) Designing matrix organizations that actually work: how P Procter & Gamble, and other design for success. San Francisco. Calif: Jossey-Bass Holt, D. and Wigginton (2006) International Management (2nd ed).
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