BA 190:STRATEGIC MANAGEMENTPROCTER & GAMBLE

Paraiso Alta Monica V.Alta Monica V. Paraiso

BA 190 - Strategic ManagementUniversity of the Philippines

Prof. Mita Angela M. Dimalanta

Touching lives, improving life.Vision

“Be, and be recognized as, the best consumer products and services company in the world”Mission

“Two billion times a day, P&G brands touch the lives of people around the world. P&G people work to make sure those brands live up to their promise to make everyday life just a little bit better.”

Consumers moved away from higher priced brands to lower-cost private-label alternatives

Rivals were faster in cutting cost and prices

P&G created most of its phenomenal growth by innovating from within

Connect and Develop Launched more than 100 new products for which some aspect of execution cam from outside the company

Questions1. P&G is pursuing a differentiation strategy. Looking at the value and cost drivers, identify the factors causing P&G’s business strategy to lose its luster. Why is P&G’s differentiation strategy no longer as potent as it once was?

P&G was using the differentiation strategy and focused research and development to create products that are different from the rest. These products have higher prices because of the quality and higher costs incurred in the production.Using Porter’s five forces, I have identified two disadvantages which caused the failure of the differentiation strategy of P&G. First disadvantage is related to the buyer’s power. In 2008 to 2009, there was an economic recession in the United States which caused the consumers to be price sensitive and to be more frugal. These consumers tried to look for substitutes to the high-priced products of P&G. That is why they switched to the P&G’s competitors such as Unilever, Kimberly-Clark, and Colgate-Palmolive. These companies were able to easily adapt to the consumer’s demand because of their strategies. This ability is considered part of the competitive power and threat of substitution in Porter’s five forces. P&G’s products have great differentiation characteristics but if the satisfaction that the consumers will get from these products is the same with the satisfaction offered by P&G’s competitors, there is a huge possibility of substitution which is what happened.

2. Given the discussion about P&G slashing its R&D spending and cutting costs and jobs more generally, does the firm risk being “stuck in the middle”? Why or why not? If yes, why would being “stuck in the middle” be a bad strategic position?

When Mr. Lafley took control again of P&G, he launched the Connect + Develop strategy. This is where they will partner with outside researchers to cut R&D costs. I believe that the company did not risk being “being stuck in the middle” because they have launched successful products due to this strategy.

3. Your task is to help Mr. Lafley sharpen P&G’s strategic position. Which strategic position along the productivity frontier should P&G stake out? Which value and/or cost drivers would you focus on to improve P&G’s strategic profile? How would you go about it? What results would you expect?

I believe that P&G made a good decision to launch the Connect + Develop strategy. R&D costs were reduced, P&G was still able to create products that are innovative which made them successful. P&G should now focus on their expansion and promotions. Products produced through partnership with outside researchers were usually launched only in the United States. I think that launching these products in other countries will help P&G especially since people are more open to international products. The costs for these expansions might be nothing if the products will become market leaders. Promotions will be needed if this is the goal of P&G. Some of their innovative products were not promoted very well. These costs should not be set aside by the company unless they can find a way to outsource them just as they did for research and development.

References Rothaermel, F.T. (2015). Strategic

Management. USA: McGraw-Hill Education

IBS Center for Management Research (2016). Innovation at P&G: AG Lafley’s new challenge. Retreived from http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and%20Organization%20Behavior/Innovation%20at%20P&G-Case%20Study.htm.