Proctor And Gamble Innovations

GENERAL PROBLEM STATEMENT

Can Proctor and Gamble survive and prosper by reinventing existing products in environment that requires new innovations? And will P&G be able to meet their target of 50% of the market share in each segment?

ANALYSIS

General Environment

Which of the general environment segments are most relevant to the consumer products industry? What are the main opportunities and threats affecting the company?

DemographicsвЂ" Proctor and Gamble is one of the largest consumer product companies in the world. They registered in the 2004 fiscal year global sales of $51.4 billion in the segments of fabric and home care, beauty care, baby and family care, healthcare, and snacks and beverages. The products in these segments include Tide, Crest, Charmin, Downy, Pampers, Folgers, Bounty, Ariel, Pringles, Always, Pantene, and Iams. The industry is growing rapidly due to the high demand of these products, because of increased competition. There is a higher population density caused by the increase in households per year. The total population in the US is approximately 300 million and growing. 67% of the population is between the ages of 15-65 years of age, which is the market that P&G is targeting. P&G offers 300 brands in 160 countries and an increase of 500% over the last decade means an increase in consumer activity.

SocioculturalвЂ" Americans are increasingly worried about better products in their industry. They are high-end consumers when it relates to consumer products. They wish to get better innovative products and are willing to pay for them. People are concerned about their quality of life, hygiene, and being able to pamper themselves with luxury. The consumer products industry is based primarily on brand name, and brand loyalty. A consumer will forgo buying a product if it is unfamiliar to them. For example, in Germany, Jager changed the brand name to American style Dawn from the brand name of Fairy. This caused a dramatic decrease in sales.

EconomyвЂ" GDP growth in 2004 was 4.2%, compared to the next 3 years combining for only 3.8% growth. Personal debt relative to the average income is high, making consumers vulnerable to rising interest rates. Inflation rates have stayed about the same since 2004 at 3%. The consumer products industry will capitalize on the economy because of the industry growth.

Political/LegalвЂ" Proctor and Gamble is facing an ongoing investigation on their animal testing for products. There may be legal issues that may take away credibility and product loyalty from consumers. If the government can find proof of animal testing or animal cruelty, Proctor and Gamble could be facing tragic consequences.

TechnologyвЂ" The main roles for technology would be to continue to adopt new technologies to innovate bigger and better products. Proctor and Gamble would need to create these new technologies or collaborate with smaller companies to obtain new technology. For example, the electric toothbrush obtained from an inventor John Osher. Or even the Glad Press’n seal invention, through the joint venture between Clorox and Proctor and Gamble.

GlobalвЂ" Proctor and Gamble offer product in 160 countries and have company bases set up in 81 of those countries. China, India, and England are the biggest buyers of Proctor and Gamble products. The growth potential for consumer products is exponential in the global industry, because as technology increases third world countries continue to grow, allowing for products to be dispensed in many different markets. The quality of life is growing around the world, which will allow Proctor and Gamble to grow in different countries to sell their products.

Industry Environment

In which industry does Proctor and Gamble compete?

Industry Definition вЂ" Proctor and Gamble competes in the consumer products industry.

Five Forces Model of Competition

Threat of New Entrants вЂ" Moderate to High. Anyone that is an inventor can come up with some invention or idea to revolutionize a product or even start a new trend of products. Because of the industries potential being so lucrative, the array of products that one can specialize in is there to be utilized. The only problem would be that the new entrant into this industry, due to the high demand of better products and the established companies expanding to satisfy this demand, would have to enter on a large scale of one product or many products.

Bargaining Power of Suppliers вЂ" Moderate. As the suppliers are the main players in the market, they are able to negotiate favorable terms and conditions for their products. The supplier’s brand loyalty helps with leverage, as these products are one of a kind in this type of market.

Bargaining Power of Buyers вЂ" Low to Moderate. If the buyer does not want a product, they can easily just change to another product in that segment. And as competitions in these markets begin to rise, many companies may be forced to compete with lower prices in the industry.

Substitutes вЂ" Low to Moderate. For some consumers there is no substitute for an electronic toothbrush, but there may be substitutes for certain types of toothpaste. In this industry, a company can have a product where there is no substitute or competition for that product but also have a product where there are so many substitutes that a consumer has the bargaining power.

Rivalry Among Competitors вЂ" High. There is a high rivalry between the powerhouses in the consumer product industry. Johnson & Johnson, Kimberley-Clark, and Unilever are all competitors that have a high market share with Proctor and Gamble. Their sales respectively have rose 15.3%, 5.8%, and 5.9% in this market. If Proctor and Gamble continues to innovate existing products, while not creating new ones as well, the market may catch up to them.

Overall, the consumer products industry is an attractive market to be apart of. The forecast for sales will continue on an upward trend. Proctor and Gamble have established themselves as the company to compete with. Also, Proctor and Gamble’s business strategy for the future will help them gain competitive advantage in many different segments and will