Procter & Gamble Vs. Gillette

Proctor & Gamble

1. What is Proctor & Gamble’s corporate strategy? Do the company’s businesses seem to be related or unrelated? Are Gillette’s businesses closely related to P&G’s businesses? How will a merger with Gillette provide a 1 + 1 = 3 effect for P&G?

Proctor and Gamble recently completed large restructuring, put new management in place, and cut capital spending needs. Since then they are now focused on increasing top and bottom line results after shifting business mix toward higher margin, less capital-intensive health and beauty care sectors and also gearing towards developing markets and lower-income consumers.

Most of the company’s products are closely related in the sense that they are household products such as Always, Bounty, Braun, Charmin, Gain and Tide. However, there are a few product lines that are completely unrelated like Actonel prescription medication, and newly acquired Duracell batteries and Iams Cat and dog food. They are all related by the fact that 23 brands of P&G and Gillette together make up more than a billion dollars in net annual sales and another 18 have sales between $500 million and $1 billion. Some of their top selling products include:

• Always is a brand of feminine hygiene products, including maxi pads, pantiliners (sometimes called Alldays), and feminine wipes, produced by Procter & Gamble.--See also Brand homepage; related trademarks: Ultra Thins; Flexi-Wing; Maxis; Alldays; CleanWeave.

• Ariel is a brand of washing powder/liquid, available in numerous forms and scents.

• Actonel A brand of Osteoporosis drug Risedronate.

• Bounty is a brand of paper towel sold in the United States, Canada. P&G sold the brand in the British Isles.

• Braun is a small-appliances manufacturer specializing in electric razors, coffeemakers, toasters, and blenders.

• Charmin is a brand of bathroom tissue and moist towelettes.

• Crest is a brand of toothpaste.

• Dawn is a brand of dishwashing detergent.

• Downy/Lenor is a brand of fabric softener.

• Duracell is a brand of batteries and flashlights.

• Folgers is a brand of coffee.

• Gain is a brand of laundry detergent and fabric softeners.

• Gillette is a safety razor manufacturer.

• Head & Shoulders is a brand of shampoo.

• Iams is a brand of dog and cat foods.

• Olay is a brand of skin lotion.

• Oral-B is a brand of toothbrush.

• Pampers is a brand of disposable diapers.

• Pantene is a brand of hair care.

• Pringles is a brand of potato crisps in many flavors.

• Tide is a brand of laundry detergent.

Gillett’s product line was closely related to P&G in a sense that their businesses tend to cater to household personal products with the exception of a few.

Because of their similarities, Proctor & Gamble and Gillette are a good strategic fit. Between the two entities they have the ability to combine operations, technology, resources, distribution channels and research costs in efforts to drastically cut spending. With lower costs, and the merger complete, the collaboration of Proctor & Gamble and Gillette should achieve a 1+1=3 effect.

2. What is your evaluation of Proctor & Gamble’s business lineup? How attractive are the industries it competes in? What is the competitive strength of each of its business segments? Does Gillette seem to compete in attractive consumer segments? Are its business units strong in their respective markets? What does a 9-cell industry attractiveness/business strength matrix displaying P&G and Gillette’s business units look like?

Proctor & Gamble’s business line-up is defiantly one of the most promising around. Its combination of diversity, with its high priority for research allocation makes its attractiveness rather strong in the public eye. Overall many have faith in P&G’s prosperity because of its strong focus of corporate resources to those business units having the most competitive strength in highly attractive industries. Proctor & Gambles business segments can be broken down into the categories; Fabric & Home Care, Baby, Feminine and Family Care, Beauty Care, Food & Beverage, and Healthcare Products. All of these categories are very attractive in the market world and contribute to the strength of the segments because many of them are almost deemed “necessities” and are used on a daily basis. The overall strength of these business segments can be rooted down to the strong brand names, images and reputation associated with all of its products.

Gillette’s target market and consumer segments include teenagers, young adults, adults (both married and single) and seniors. These mentioned segments cover most of population and can be considered very attractive. In order to appeal to these segments Gillett has also created a sense of value and branding that strengthens its name. Below is a 9-cell attractiveness/business strength matrix for Gillette and P&G:

3. Does Procter and Gamble’s business line-up exhibit good resource fit? How do Gillette’s profit margins compare to the profit margins for P & G’s businesses for the 2000 - June 2005 time period? Do both companies have similar growth rates and debt structures? How do free cash flow and free cash flow productivity rates compare between the two companies? Does it seem that the addition of Gillette business units will boost P & G’s bottom line?

Proctor & Gamble defiantly exhibits good resource fit especially in the last few years. In