MAF 661 STRATEGIC MANAGEMENT

CASE STUDY
PROCTER & GAMBLE COMPANY (P&G)

AC220 8C

PREPARED BY:

FHATIN ELYANI BINTI AZMAN 2014454252

NOR AMIRAH BINTI MOHD AZMI 2014538733
SITI NUR ALIA BINTI KHARAHAB 2014787451
NURSHAMIERA BINTI SHAMSUDDIN 2014399549
SYAFARINA IZWANIE BINTI JAMIL 2014302369

PREPARED TO:

MADAM ANITA CHE HASSAN

 CASE STUDY PROCTER & GAMBLE

TABLE OF CONTENTS

CONTENT PAGE

ACKNOWLEDGEMENT 3

QUESTION 1 4

QUESTION 2 5-7

QUESTION 3 8-10

QUESTION 4 11-12

QUESTION 5 13-14

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ACKNOWLEDGEMENT

In the name of Allah, the Most Gracious and the Most Merciful. Alhamdulillah, all praises to
Allah for the strengths and blessing in completing this project. Special appreciation goes to our
lecturer, Madam Anita Che Hassan for the valuable guidance and advice. She inspired us
greatly to work on this case study. Her willingness to motivate us contributed tremendously to
our project. We also would like to thank him for showing us some example that related to the
case study.

Beside, we would like to take this opportunity to thank to the all of our team members
for willingness to spent time to finish this project. It gave us an opportunity to understand and
have knowledge about the importance of internal audit and the process of producing a good
quality of internal audit report. Finally, an honourable mention goes to our families and friends
for their understandings and supports on us in completing this project. Without helps of the
particular that mentioned above, we would face many difficulties while doing this.

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QUESTION 1
Discuss the impact of the P&G mission statement to the sustainability of the company.

Procter & Gamble’s mission statement is “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 our people, our shareholders and the communities in which we live
and work to prosper.” This corporate mission contains a detailed about the sustainability of
their company that also can influences Procter & Gamble’s on their strategic direction. Procter
& Gamble’s corporate mission statement has the following characteristics which are branded
products and services of superior quality and value, improve the lives of the world’s consumers,
now and for generations to come, leadership sales, profit and value creation and prosperity of
people, shareholders and communities. This will lead the company to sustain their company.
This show that the mission statement of the Procter & Gamble that they want the best
performance on their company and their customer satisfaction for their future.

The mission statement requires that the Procter & Gamble Company must ensure the
superior quality and value of their products. Based on this characteristic, a strategic objective
is to continue enhancing the company’s products to maintain superior quality and value. Procter
& Gamble had mention on their growth strategy that they always innovate and will introduced
new product and make some research and development for product development as an intensive
growth strategy. Another feature of the mission statement is the improvement of consumers’
lives. Thus, P&G develops its consumer goods to address challenges or problems consumers
face. The third characteristic of the corporate mission refers to business performance,
especially Procter & Gamble’s financial performance that is important to their sustainability
and will lead to a good future forecast on the financial performance of their company. The
fourth feature depicts the desired combined effect of the activities based on Procter & Gamble’s
mission statement, contributing to various stakeholders’ prosperity. Prosperity of stakeholders
supports long-term business survival. This will considered as a sustainability of the company
that will maintain a good performance of their business activities.

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QUESTION 2

Discuss the competitive environment of P&G by using the Porter’s Five-Forces model of
industry competition. Please discuss the following two (2) of the five competitive forces:

a) The threat of substitute products and services.

All firms within an industry compete with industries producing substitute products and
services. It is the threat of limiting the potential returns of an industry by placing a ceiling on
the prices that firms in that industry can profitably charge without losing too many customers
to substitutes products. Substitute products and services are products and services outside the
industry that serve the same customer needs as the industry’s products and services. This may
lead a manager into businesses seemingly far removed from the industry. There are always
substitutes available for every different kind of product in the personal products industry,
creating a mild threat of substitute products. However, there are some factors in considering a
product to be a substitute. The relative price and performance of the substitute product must be
close to the original product to be considered as a substitute. In addition, customers’ willingness
to switch is a factor in considering a substitute for a product.

The threat of substitute products and services based on the case Procter & Gamble is low to
moderate. It is because most of the products that Procter & Gamble sells are necessities. Procter
& Gamble has to deal with the presence of various substitutes in market, however quality of
offered by Procter & Gamble in its all products ensure the sustainability of company in the
market. In this situation, the company has adopted a variety of strategic strategies with their
customers in order to develop better understanding of consumer demands and their response
and also to win the heart of their customers. Regarding the case, Procter & Gamble are more
focusing on their customers where they aim to focus on more customers by innovating products
lines and business portfolio. They also had focus on and serve price-conscious consumers with
lower priced products, offering superior performance compared to competing products. Other
than that, the company also improves quality of their existing products lines by focusing on
consumer needs. It helps a lot in increasing their profit as well as to compete with the others
substitute products in markets. These strategies will help the consumers to recognize their
products in market because the quality in Procter and Gamble products is always maintained
and it ensures costumer trustworthiness and value for their money. Even though some of the
Procter and Gamble products are being substitute by another competitors, but they are still can

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maintain their customers by delivering such a good quality of products and also because of
their reputation remain constant over the years. That is why the consumers trust on their brands.

P&G needs to place high priority on continued growth and research and product development
activities. It is stated that Procter and Gamble had invested nearly 2 Billion in research and
product development, which is 50 % more than their closest competitor. Marketing strategies
and brand name awareness will set the Company apart from its competitors. Due to brand name
recognition and developed a good relationships, it is not likely that a buyer will switch products
to another brands. Instead, they will loyal to the Procter and Gamble products. The added
benefit, due to the higher price, is usually enough to keep customers happy with the brand name
by Procter and Gamble. For example, there is no substitute for laundry detergent besides
different types of laundry detergent. It is similar for baby care business, which consists diapers
and baby wipes, has about 35% of global market, making this company being number 1 or 2
manufacturer where the sales approximately 9 Billion. However, some of the business
segments for example, snacks and beauty do have substitute products. That is why the threat
of substitutes is low to moderate products.

b) The intensity of rivalry among competitors in an industry.

Firms use tactics like price competition, advertising battles, product introductions, and
increased customer service. Rivalry occurs when competitors sense the pressure or act on an
opportunity to improve their position. It is about the threat that customers will switch their
business to competitors within the industry. Rivalry between firms is often based solely on
price, but it can involve other factors such as numerous or equally balanced competitors, slow
industry growth, lack of differentiation or switching costs and others factors.

Procter & Gamble is a large, successful and also established company over the years. So, it
seems that the threat of new entrants is low. Large companies like Procter & Gamble in the
personal products industry have a huge competitive advantage over new entrants because of
their size and experience that the company have. The company itself had entered into this
business of personal products industry long time ago that giving them many years of experience
and knowledge to be able to create barriers that a new entrant would have to overcome to be
successful. It is one of the advantages that Procter & Gamble have. It is hard for the other
competitors to beat the tramp of Procter & Gamble. If they want to do so, they need to come
out with an excellent idea. As stated in the cases of Procter & Gamble, there have a few brands

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still cannot compete with Procter & Gamble as even though they had provide a relevant and
new features of products to consumers. It is because of the quality of the products and also
because of the trustworthiness towards the brands of Procter & Gamble.

It is proved that, it is a low probability for a new entrant to become as big and as well capitalized
as Procter & Gamble. The biggest barriers to entry are derived from research and development
where they had invested almost 2 Billion on that part. Since the competition is intense, a new
entrant must enter the market with a product that is differentiated with Procter & Gamble. Other
than that, it is because of their reputations that they have plus their successful brand names
have established relationships with retailers and have advantages when competing for place in
markets. All the markets that P&G participates in are mature markets making it less attractive
and a big threat for new entrants to enter in the market.

In addition relating to the legal matters, the new entrants itself cannot compete with Procter &
Gamble because it hard for them to enter into the personal products industry. it is because, the
new entrants has many regulations, laws, patents, and copyrights that they have to comply by
when they are entering into an industry. The personal products industry is very research-
intensive. This produces many patented products that cannot be copied by new entrants. It
makes them hard to enter into market. What they need to do is to come out with an innovative
idea so that they can survive in the market. If not, it will make them down. So, it shows that
the threat on the rivalry is low.

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QUESTION 3

Discuss how the two primary value-chain activities below could create value for both the
business and customers:

a. Operations
b. Research and Development

A value chain is a set of activities that an organization carries out to create value for its
customers. Porter proposed a general-purpose value chain that companies can use to examine
all of their activities, and see how they're connected. The way in which value chain activities
are performed determines costs and affects profits, so this tool can help us to understand the
sources of value in organization. Manufacturing companies create value by acquiring raw
materials and using them to produce something useful. Retailers bring together a range of
products and present them in a way that's convenient to customers, sometimes supported by
services such as fitting rooms or personal shopper advice. Here, they're packaging these larger
policies in a customer-friendly way, and distributing them to a mass audience. The value that's
created and captured by a company is the profit margin. The more value an organization
creates, the more profitable it is likely to be. And when you provide more value to your
customers, you build competitive advantage.

Primary activities relate directly to the physical creation, sale, maintenance and support of a
product or service. In operations, it describes the transformation activities that change inputs
into outputs that are sold to customers. We can conclude that, operational systems create value.
P&G begins with the acquisition of raw materials, packaging materials, and the fuel. P&G uses
suppliers to provide almost all inputs to the manufacturing process with the exception of a few
chemicals that it produce in-house. Currently, the firm uses a network of over 30,000 suppliers.
In the past, the company has operated using a push-supply system requiring local teams to
forecast regional sales and conduct production runs in the same location, but recently the
company has implement a digital integrations strategy that enables it connect with plants
around the globe and select the optimal production location that consist of logistics, shipping
costs, supply costs and distribution cost. P&G has recently introduced a third party logistics
company into the digital integration network in order to improve the actual support of needed
input materials from suppliers.

Apart from that, P&G’s operations had four business units which is a health and beauty, babies,
snacks and beverages, and fabric and home care. It offered more than 300 products including
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major brands like Tide. It has been aggressively using product lifecycle management software
since 2000 for new product development. The company uses MatrixOne software for
mechanising and automating the knowledge components, and flow components, within the
bringing a product to market phases. In addition, the company is planning to expand its use of
agent-based modelling to actually run important aspects of its operations so that end to end
replenishment cycle for products could be shortened drastically.

In Research & development (R&D), the development of new products plays a vital role in the
company success. It holds collaboration agreements with many external partners. More than
half of all product innovation come as a result of such agreements. Currently the company
holds about 25,000 active patents. Hence, the strategy that need to be develop is increase the
massive advertising and promotional campaign as well as develop distribution to reach a
product maturity. It can develop a customer satisfaction. The enhancement of product quality
to come up with the best product differentiation to be offer to the customer on which the
research and development is the task to execute. Firstly, P&G would enhance the
comprehensive advertising campaign using print advertising, TV/Radio media, flyers, banners
and etc. Second is, the image model, each product lie would have a model that would wrap-up
the differentiation. The endorser should take a talent like popular star, beauty and elegance in
all aspects. For hair conditioner, the image model should be a poplar star that is being adored
by young and old age.

Furthermore, P&G has drastically changed its innovation approach over the last decade. The
‘Connect+Develop’ initiative is an innovation model by P&G, which goes beyond pure
consumer value co-creation and extends to a more holistic innovation model. Traditionally,
companies like P&G relied on in-house research and development (R&D) labs to develop new
innovations known as bricks-and-mortar R&D. This open innovation approach exemplifies the
shift in integrating stakeholders into the process of co-creation and making use of more external
resources and capabilities.

Open innovation, which relates to concepts of co-creation and crowdsourcing, makes use of a
technology enabled platform to innovate with consumers, universities, startups and important
network partners. One major example of P&G’s Connect+Develop results is ‘Live Well
Collaborative”, which develops products for the aging population actively incorporating
consumers, corporates and universities. End-consumers provided a first-hand knowledge of the
limitations and were able to find solutions with experts from universities and P&G’s network

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partners. The effectiveness of this open innovation model can be observed by 35% of products
originating from outside P&G. R&D productivity has increased by 60 percent and innovation
success rate has doubled, while the cost of innovation has fallen. The early realization of the
need to re-define innovation and its underlying business model enabled P&G to become a
pioneer in the field of open innovation and to continue to boost industry firsts. The success of
Procter & Gamble is not only due its innovation model but also accelerated its aim to be even
more customer-centric by providing a platform that can act as a coordination mechanisms for
its new ecosystem.

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QUESTION 4

Identify two (2) intangible resources of P&G that the management is focusing on.

Intangible resources is the assets rooted deeply in the firm’s history in which it accumulated
over time. It cannot be seen or touched and it is the most superior source of core competencies.
There are several category of intangible resources. As for P&G Company, they tend to focus
on the human resources as it main intangible resources. They have the knowledge skills,
managerial capabilities and organizational routines that could make them sustain in the
business. Different approach was used by different CEO in P&G lead P&G was ranked number
one in the Soaps and Cosmetics industry. For example Mr Lafley the previous CEO was
focusing on innovation during his time. This could possibly make P&G Company having its
own competitive advantage as they always concern on the innovation in which the scientific
innovation and having the capacity to innovate helps them to adapt to changing workplace
dynamics and trends besides they also can respond to increasing customer expectations and
choices. By increasing consumer expectations a choices are impacting organizations to become
increasingly customer centric through innovative change while by using human centred design
to improve the customer experience, it does increased value and new ways to create and invent
products and services as well as to execute plans in ways that people value and cherish. While
the recent CEO Mr. McDonald are focusing on lower end products aimed at customer looking
for discounts. In this case, P&G can attract and targeted at a wider market segment since all
level income customer can possess their product at low cost and in turns they can get customer
loyalty because of the product offered.

Besides, P&G also focusing on reputational resources as their intangible resources. As stated
in their mission statement in which said that P&G will provide branded products and services
of superior quality and value that improves the lives of the world’s consumers now and
generations to come, this statement shows that P&G only provide branded product in which
possess their own brand for example Fusion, Always/Whisper, Downy, Olay, Pampers,
Pantene, Gillete and etc. All those products are the annual billions-dollar sellers in which they
are famous with its own brand and recognition are widely advertise on the media. Thus create
customer loyalty. Furthermore, P&G also create a positive reputation with stakeholders for
example it is showed through their donation to the NFL Play 60and Youth Health and Wellness
programs and pursues LEED certifications (green buildings) for all new global sites. This is

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consider as the corporate social responsibility by P&G Company towards its stakeholder and
thus create added value to the company.

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QUESTION 5

Suggests two (2) approaches each for P&G to i) attract and ii) retain human capital especially
by using the approach of Global Business Unit (GBU) that applied by P&G.

There are three approach of Global Business Unit (GBU) that have been applied by P&G are
beauty and grooming, health and well-being and household care. According to the global
business unit, we would like to suggest that two approaches that are contemporary approach
and reward approach. In the contemporary approach is, information control is part of an
ongoing process of organizational learning that continuously updated and challenges the
assumptions that underlie the organizations strategy. The organization assumption, premises ,
goals and strategic are continuously monitored, tested and reviewed to make sure that the
customer can be attracted to the product of P&G. Contemporary control system should have
four characteristics to be effective that are the focus is on constantly changing information that
has potential strategic importance , the information is importance enough to demand frequent
and regular attention from all levels of the organization, the data and information generated are
best interpreted and discussed in face to face meetings and the controls system is the key
catalyst for a ongoing debate about underlying data, assumption and action plans.

According to the P&G one of the attraction to attract customer is by using the social
responsibility. That is under the contemporary approach. It is naturally woven into the way
they work every day such as paying competitive wages, working consistently with they are
retailers and suppliers, preventing conflicts of interest, ensuring the customer privacy and
maintaining the financial stewardship. This approach to business is the heart of all they do at
P&G. The P&G Social Responsibilities programs aim to improve lives by providing superior
performing products and brands where and when he customers are needed most and perform
at their best, responding to disasters a do their extreme needs.

Other than that, according to the approach of Global Business Unit that applied by the
P&G .they have produce the product that are health and well- being. So, how that they should
to attract the customer is by using the vigorous of the marketing the product. They should make
the marketing by using the social media, house to house or others. This is for increase the
customer that will buy the product and then, the another way to attract the customer to maintain
to buy the product or using the variety of product of P&G is buy recheck or restructuring the
quality and quantity of the product. The good quality of the product will attract many customer

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and make the customer more confidents to buy the product especially on the product of health
and well-being.

Next, another approach that can be used to retain the human capital amount the
employee in the company, the organizational should use their power to make sure that retain
of the human capital is in good conditional. The approach is the rewards approach of the
maintaining the human capital. The reward of the human capital should use the performance
based incentive system to motivate. The measurement of the performance of the human capital
is importance to make sure that the rewards that have been given by the organizational is
suitable with the effort that have been done by the human capital. According to the approach
of Global Business Unit, the human capital should be divided into their approach. It is because
the segregation duties of the human capital has make the system of the company more smooth
an efficient.

Reward and incentive systems represent a powerful means of the influencing an

organization culture, focusing efforts on high priority task and motivating individual and
collective task performance. The P&G support paying the employees a competitive wage, as
benchmarked against other leading companies. Consistent with their principle of their valuing
personal contribution and mastery. They provide employees opportunity to develop their skill
and capabilities to enhance their employee ability to success in their career , consistent with
the needs of the business. Other than that, it also can retain the human capital of the company
P&G.

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