Swot P&G

SWOT ANALYSIS

P&G is a global manufacturer and marketer of consumer products. It operates in five distinct business segments: fabric and home care, beauty care, baby and family care, health care and snacks and beverages. It has some of the most well-known and established brands in its portfolio but faces intense competition from other global consumer giants as well as local companies.

Strengths

Large scale of operations

P&G has significant scale advantages. It is the global leader in all its four core categories - fabric and home care, beauty care, baby and family care, health care. Its products are sold in over 160 countries worldwide with manufacturing capabilities in over 42 countries. The company manufactures and markets close to 300 products. It derives substantial economies from its scale of operations in finance, logistics, marketing, research, new product development, innovation, technology and other functions. The company’s huge buying power (from commodities to media) is being progressively leveraged through global procurement and services. A large scale gives P&G significant competitive advantage against the smaller, unorganized players in local markets.

Strong branding

P&G is one of the world's most successful brand creation and brand building companies. The company participates in more than 40 product categories with 300 brands in roughly 60 markets. Some of its very well-known brands include Tide, Pampers, Bounty, Charmin, Cover Girl, Pantene, and Clairol. Moreover, as of 2004, the company had 13 brands with sales exceeding one billion dollars. Together, these brands have sales of over $24 billion. P&G continuous involvement in consumer research helps it understand, anticipate and respond to consumer needs and wants and hence create marketing and advertising innovations more effectively and efficiently than many other companies. P&G brand leadership helps it implement brand building innovations with retail and media partners in ways that few companies can match. It has one of the largest and strongest portfolios of trusted, quality brands, including Pampers, Tide, Ariel, Always, Whisper, Pantene, Bounty, Pringles, Folgers, Charmin, Downy, Lenor, Iams, Crest, Clairol Nice 'n Easy, Actonel, Dawn and Olay. These brands have leading market share in their respective categories, an offer the company a significant edge over its competitors.

Product innovation

P&G creates more new brands and categories than any other consumer goods company. In 2003, three of the top 10 new non-food products introduced in the US were P&G products. Over the past eight years, P&G has introduced the number one or number two new non-food products in the US every year. P&G's brand-creation and product development leadership is driven by the company's enormous research and development capacity. The company has nearly 7500 researchers working in 20 technical centres on four continents. It has more than 29,000 patented technologies for its products.

Strong performance in core categories

On a worldwide basis, fabric & home care, beauty care, and baby & family care products are Procter & Gamble’s largest businesses, contributing a total of roughly 80% of sales. P&G’s fabric and home care is also its largest and oldest business and it continues to grow to record levels. The segment’s net sales grew 10% to $15.26 billion in 2005. The baby and family care and heath care divisions recorded an even higher growth in net sales. The net sales from the baby and family care division grew 11% to $11.9 billion while health care business recorded net sales growth of 11% to $7.8 billion in 2005. Strong performance by its core business groups is one of the prime reasons contributing to the company’s above industry average revenue growth rates, and has significantly helped the company to grow to a stage where it is virtually hedged against threat from smaller new entrants.

Developing markets infrastructure

P&G’s developing markets infrastructure is a huge strategic advantage. The company has developed a best in class distribution infrastructure consisting of exclusive distributors in fast growing markets like China, Russia, Poland, the Philippines and India. Unlike most of its competitors, who use agnostic wholesalers that sell a variety of competing products, P&G’s network, while independently owned and operated, sell only P&G HPC products (although often they carry various no competing food products). P&G’s scale allows these distributors to achieve higher dollar profit (not profit margin) while insuring that P&G’s products get all the distributors’ attention. Moreover, because of the large distribution pipe (unlike the multi-tributary wholesaler system), P&G is able get the breadth of its products to market faster and more efficiently, even in the outer reaches of some of these developing markets, without multiple wholesaler markups that typically occur under the wholesaler system. The company’s highly efficient markets infrastructure has helped the company in considerably increasing the speed at which its products reach the market and the company’s overall market scalability vis-Ð" -vis its peers.

Weaknesses

Customer concentration

The company’s operations are heavily concentrated among its top customers. P&G’s largest customer, Wal-Mart, accounted for 18% (2003), 17% (2002) and 15% (2001) of sales. P&G’s top 10 customers account for 35% of its sales. A financial hardship experienced any of these customers; or a substantial decrease in sales to any one of the top customers could materially affect revenues and profitability of the company.

Performance of the Clairol business

Since the acquisition of Clairol in 2001, P&G has been aggressive in using its distribution channels overseas to expand Clairol Herbal Essences shampoos and conditioners into new markets. In the US, however, the brand’s rapid growth before P&G acquired Clairol has proven difficult to maintain and Herbal Essences has lost share in an environment of aggressive competitive promotional spending. With regard to the hair colorants side of Clairol, its 35% market share (approximately) in the US (number two position) has slipped further to market share leader L’Oreal. This in a scenario where