Name: Sukriti Grover ROLL NO: 2014HRLP006

PROCTER AND GAMBLE CASE STUDY

INTRODUCTION Procter and gamble is one of the most successful companies in the world. The company markets its brands in more than 140 countries, and had net earnings of $1.6 billions in 1990. The Canadian subsidiary contributed $1.4 billion in sales and $100 million in net earnings in 1990. P&G philosophy is to provide superior quality and value that best fills the needs of the consumers; it was recognized as a leader in the Canadian packaged good industry. Scope (a green mint tasting mouthwash) was positioned as a great tasting mouth refreshing brand that provided bad breath protection. MARKET ANALYSIS Market for mouthwash is a mature market and a huge market. Sales are increasing but not at the expected rate). Market scenario is that 65% of sales in drugstores, as compared to 35% in food stores, but Scope sells better in food stores vs. drugstores which pointing out that consumer views the brand as good tasting but not health-related. Scope is the market leader with 32% share facing competition from mainly Plax due to switch from users of Listerine and Cepacol.. PROBLEM STATEMENT The problem for Procter & Gamble`s (P&G) Scope brand is that their share at mouthwash market is slightly going down while a new brand called Plax launched by Pfizer Inc. has gained a %10 market share in a very short time period which created a situation that left P&Gs management team in dilemma for how to respond. ALTERNATIVES Option 1: Introduce a line extension to compete with Plax - using Scope name On introducing a line on Scope name help new product image and get retailer buy in. Introducing it at a higher price point may increase profits. But, it will cause a strategic shift in marketing/advertising, and also it will require conformity with certain health regulations, which may inhibit promotion flexibility. Option 2: Introduce a flanker brand to compete with Plax without Scope name Avoid customer confusion and any possible negative impact on Scope, but it requires considerable marketing money and time to build brand awareness; with no guarantee retailers will be receptive. Option 3: Reposition Scope to include plaque-fighting benefit Including a benefit will reduce consumer switching to other brands and a potential to increase price. Using Scope name would aid acceptance by the consumers. But, with rise in unit cost price rise will occur which might not be accepted well by the customers. It may also pose a potential damage to the market leader position. Option 4: Maintain Status Quo Company should not introduce a new line or changes but focuses on market penetration in order to increase its market share. RECOMMENDATIONS: It is recommended that P& G increase price slightly (by 5%) to improve profit margin but still allow for a low-price, high quality positioning. It should continue with current distribution but focus more in improving distribution and presence in drugstores and wholesale clubs. Increase promotional activities like samples, in-store coupons, pop displays, etc. to increase the market share by at least 5%.

Exhibit 1: SP VC Contribution Total contribution 41.25 20.52 20.73 440,000 x $20.73 = $9,121,200

Total Fixed Cost = $6,907,500 Net Income = 9,121,200 - 6,907,500 = 2,213,700

Exhibit 2: Increase market share by 5% Sales 440,000 x 5% = 462,000 units SP VC Cont/unit 43.31 20.52 22.79

Total contribution 462,000 x $22.79 = $ 10,528,980 Fixed Costs Net Income Increase in Net Income 7,248,000 3,281,480 $ 1,067,780