Industry Environment Analysis: consumer goods
– The consumer goods is a global and mature industry.
– Highly competitive with an increasing number of competitors offering different versions
of the same product and competing for price. Generic brands and Private-label goods are
populating the market.
– Product innovation and quality are critical to succeed.
– Individual buyers have no bargain power. Instead, large retail chains and major
supermarkets increase competition among consumer goods manufacturers. Switching costs
are low or in most cases null.
Position of the company in the Industry:
P&G has a global leader position in the consumer goods industry with many well known
premium products in its portfolio like:
– Fabric and Home Care: Tide, Cascade
– Baby, Feminine and Family Care: Bounty
– Beauty Care: Max factor, Cover Girl, Head & Shoulders
– Health Care: Crest
– Food and Beverage: Folgers Coffee
Company Strategy Analysis
Procter & Gamble is a related diversified company with five main business segments:
Fabric and Home Care; Baby, Feminine and Family Care; Beauty Care; Health Care; and
Food and Beverage.
Competitive Strategy:
Market Target Broad P&G – Broad Differentiation
Narrow
Low Cost Differentiation
– Popular products are attractive for imitations
– Broad market target sensitive to product price, quality and innovation.
Competitive Advantage
Strategy performance:
Although Organization 2005 was conceived as a promising strategy to reinvigorate P&Gs
growth, its initial period propelled the company to financial problems that led to Jagers
failure and subsequent resignation. In mid-2000 Lafleys administration initiate a second
period for Organization 2005 and the new initiative improved the P&G finances.
The following is a comparative performance analysis of the two different administrations:
Jager:
Strategy
– The Company changed from its previous geographic-based structure to a product-based
global business unit structure.
– New initiatives in undeveloped countries.
Lafley:
– Improve operations and profitability and rebuild the management team.
– Focused in Big countries and big products (Tide and Pampers in Europe).
– An attempt to develop a core competency in speeding new products was done recklessly.
Additionally, the initiative to unify the name of the products dropped the sales in Germany.
– In the race for global market leadership the company made and erroneous acquisition of
Warner-Lambert that was also a failure.
Financial
– Almost 50% decrease in the EPS.
– Stock price fell from $117 in 2000 to $90 in one month and then to less than $ 60 by
mid-2002 wiping out &40 billion market value in one day.
– Earnings drop by 10 – 11 % instead of the expected rise of 7 – 9% due to higher costs of
raw materials costs, lower realization and increasing competition from many generic
