Proctor & Gamble (P&G) Company is the world’s largest consumer-products company and it is unlikely that most Americans and many people worldwide do not use a P&G product of some kind daily (NG, 2014, para 1). Today, P&G’s innovative consumer-product branding strategy allowed it to nurture its premium goods to be able to overcome pricing pressures (Hartley, 2011, p. 31). During the 2008 recession, P&G faced extensive economic pressures that were exacerbated by a weak organizational structure. Robert McDonald assumed the role of new CEO in 2009, facing numerous economic and organizational challenges that included a succession plan (Hartley, 2011, p. 32). As a well-known innovative company, P&G’s old strategy of promoting from within is worthy of debate.
P&G got its start in 1837 when William Procter and James Gamble started making soap and candles on the suggestion from their father-in-law (Horowitz, 2011). According to Horowitz (2011), by 1850 P&G had reached one million dollars in sales and employed eighty people. Now almost 180 years later, P&G is still going strong, but is it as strong as it used to be? The company was going to find out how versatile it could be during the recession which began in 2008 and when Robert McDonald assumed the position of CEO in the following year (Hartley, 2011, p. 32).
The environment at P&G was strained. Consumers were turning to more affordable products that provided results that were substandard to P&G, but worth the savings. The recession was taking its toll on the company. P&G also had a personnel problem. Of its 138,000 employees in 80 countries, the company had a policy of promoting from within. This tactic caused the company to lose many qualified, experienced managers to its competition and other corporations (Hartley, 2011, p. 32). P&G also battled with product cannibalization. Sacrificing its well-known, higher price product for something of lesser value just to maintain a strong market share was difficult for management to digest (Hartley, 2011, pp. 33-34).
P&G still has not made significant gains in the last several years. Therefore, Team D Consulting (TDC) was hired to perform a case analysis to identify weaknesses and provide recommendations for P&G to get back on track and maintain its status as the world-wide leader in household products.
Two of P&G’s key strengths are branding and innovation. P&G built brand recognition with an assortment of 300 different brand names enabling it to be one of the world’s top licensor (Lisanti, 2014, para. 1). This enables a firm like P&G to get its products to markets through licensing with established companies in those markets (Sherman, 2001, p. 3). To develop and sustain its brands, P&G possesses a significant innovation capability. The company spends close to 50 percent more on innovation and development than its closest competitor, giving it the ability to sustain its brands as market leaders (Brown & Anthony, 2011, para. 5).
P&G’s weakness relate to market changes and market growth. P&G has a glaring weakness with its organizational structure where decisions are centralized causing slow reaction to market trends and changes in the external environment. This gives decentralized competitors an advantage when it comes to responding to customers’ demands (Popelka, 2014, para. 11). Additionally, its portion of the United States (US) market is experiencing stagnant growth. Sales revenue in the US represents over half of its overall sales, but it experienced little growth in this market for the past several years. Instead, all of the company’s growth has come internationally. This can be attributed to US consumers snubbing higher priced brand named products in exchange for lower priced generic brands (Housel, 2013, para. 10).