Introduction
Procter & Gamble is one of the world’s largest producers of consumer goods and it was
founded in 1837. Recently, Procter & Gamble is operating in 50 countries and serving
nearly five billion customers with a series of brands across beauty, healthcare and food
industry which generate which create more than 1 billion revenue annually.
The purpose of this essay is to discuss how the diversification strategy changed Procter &
Gamble in Singapore over the last ten years. The main position in this essay is that
diversification can be considered as one of the main strategies used to assist Procter &
Gamble build up business competitive advantage. This essay will use theoretical evidence
from literature review to analysis the impact of diversification on Procter & Gamble in
different time period. The analyses of Procter & Gamble will be carried out in 3
perspectives: the operation of business, the performance of business and the brand of
business.
Literature Review & analyses of organization
Diversification can be defined as a strategy used to increase the range of products or
markets of organization. (Johnson, Scholes & Whittington, 2008) There is a range of
reasons result the diversification of organization such as spreading the business risk and
increasing the business expectation of stakeholder. (Johnson, Scholes & Whittington,
2008) But the result of research from Aisjah and Subroto (2011) indicated that there are
two main reasons boost the diversification of business: firstly, diversification expands the
economics of scope of the organization; secondly, diversified business helps organization
develop the market power. Similarly, Kotler & Armstrong (2008) also claimed that the
diversification enable organization acquire business not only from current products and
markets but also from outside. Moreover, diversification also assists organization to
allocate tangible resource more efficiently. (Helfat and Eisenhardt, 2004)
This essay will focus on the business running of Procter & Gamble in Singapore from
2005 to 2012. In 2005, P&G announced an acquisition of Gillette Company. (P&G annual
report, 2005) After the acquisition, P&G acquired several new products from Gillette
Company such as razors and blades and it obtained several new production lines from
Gillette without the expenses on research and development. As a result of acquisition, the
growth rate of net earnings of P&G in personal beauty area in 2005 was much higher than
previous year. (P&G Annual Report, 2005) In this case, P&G used a related diversification
strategy to increase its economics of scope. Meanwhile, since the Gillette Company is also
