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The full name of P&G is Procter and Gamble Company, it was founded by William Procter and James Gamble, in 1837, in Unite States. P&G is the leader of making household products in the world. Its products cover three series 'Beauty and Grooming' 'Health and Well-Being' and 'Household care', about 300 brands is selling over 160 countries.
Under the leadership of the previous CEO (Durk Jager), he was the on P&G CEO position on September 1, 1999, his tenure only last 17 months, but during the 17 months, the company lost $50 billion in market capitalization and the stock price declined 50 percent.
A.G Lafley started his CEO job in P&G in 2000.
What changes he did in to P&G?
He brought five changes into P&G:
He set a goal to make knowledge throughout P&G more easy and smooth.
He emphasized listening more than lecturing.
He required regular interactions between manager and non-manager.
He changed leaders work environment style, simple style replaced plush.
He take the employees as company's core success factors, he give tangibly reward to frontline employees.
What are changes' reasons?
The direct reason is that under ex-CEO's (Durk Jager) lead, P&G lost $50 billion in market capitalization, its stock price declined 50 percent and half of its brands were losing market share, all of these mean that P&G company was facing some problem. The CEO Lafley did the changes to try to fix them and bring company to another growth period.
Case 2--Vanust Restaurant
Vanust Restaurant located in Melbourne, it was purchased by John and Mia in 2001, it's a partnership company, the site had previously been a restaurant for some years, before John and Mia purchased it, it already closed for several months. They refitted it, it could seat around 40 customers at a time. After they opened, they served breakfast, lunch and dinner.
Changes and reasons
These changes were not taken place at a time, they came in different time with different reasons.
They stopped breakfast and lunch, only dinner were available.
No profit for breakfast and lunch
They don't take booking, customer should come and wait be served.
Many lost sales when encounter patrons cancel.
Another partner(Jennifer) was invited in 2006.
They brought a third business, and their workload were great in management.
Jennifer planned to increase prices and renegotiate trade terms.
Jennifer want get more profit
Jennifer was going to increase the seat capacity and open further restaurants.
Part B Role of leadership, ideals & concepts
Case 1-Role of leadership
After Lafley came to P&G, he took the responsibility to restore marketing powerhouse of the company, increase the company's values for shareholders, he also took responsibility for public and staffs. But he was not only person in this company doing these, he was trying to let all of the employees to take company's responsibility. The difference with the ex-CEO, in his changes, he chose to trust employees, he thought that they were not useless, they were the core of company's success and they were the core of making company growth. He figure out five new strategies, his new strategies gave company a blast fresh air, the bureaucratism was taken off with the older plush offices, without bureaucratism manager like to communicate with staffs, and staffs could communicate with manager easily and smoothly, listening skill was enhanced by Lafley in this company as well, all of these worked together and helped P&G turning into learning organization. He have a great vision on company's development, he is also a greater thinker, he didn't think company's problems in market were just market problems or production's problem, he dug deep, he found all of these problem came of organization system. He changed them, now knowledge could pass the organization fast, it means staff could get company's new decision more easy and understand well, company can react fast.
What ideals or concepts were used in changes?
He trusted their search the best profit for shareholders and company.
Lafley thought their employees were the right people who could restore P&G's market position.
He thought listening was more important than lecturing.
He thought communication is very important to company's development.
He thought leader should set a good example to staffs.
Case 2--Role of leadership
There were three partners, they were Mia, John and Jennifer. Both Mia and John were restaurants founder, Mia and Jennifer were autocratic leadership style, they like to control others, they didn't like be controlled, they were part of laissez faire leadership style, they didn't have long vision, they were easy satisfied with immediate interests, e.g. when Jennifer suggested to increase the capability of restaurants to get more profit, but Mia and John thought customer waited for table that was a kind of pride and a kind of restaurant's tranditional. they didn't have system management to the company, they didn't have a goal for development of restaurants, they want to keep restaurant's traditional. E.g. they used manual accounting system, in a way, manual accounting system could be used to account a small restaurant, but it much more slower than computer system. At last, Mia and John became the resistance of company's development.
Jennifer had a rational leadership style, she took change to restaurants, she brought system management to restaurants, and she took new technology to accounting system that made accounting easier and clearer, She didn't care people's feeling. she didn't care the culture of restaurants, e.g. when she suggested to increase restaurant's seat capability to reduce customer's waiting time, she was not cognize of Mia and John prided with customer waiting. She analyzed and trusted data, she made decision from analyzing of data, she was going to get the best profit for restaurants. she mended the lack of leadership of Mia and John, but at the same time, she also became the unstable factor in restaurant's partnership. E.g. each of the owners agreed with Jennifer's new strategies in principle, but they didn't like them.
What ideals or concepts were used in changes?
Mia and John cut off low profit production, keep cash cow.
Mia and John thought customer's waiting was counted as an honor.
Mia and John thought a new partner was better than a manager.
Jennifer preferred new technique.
She thought business should search the best profit.
Part C comparison between P&G and Vanust
In the big business case, P&G CEO's ultimate goals was to bring company back to former greatness and get profit as more as possible, he didn't go straight to archive them, he didn't with an eye on productions, he implemented changes in company's organization and workflow, he through enhance communication channel in company to let people to get knowledge fast, knowledge not only means knowledge, it could be leader's ideal, company's new strategies, new technique coming with new products and anything can be passed as knowledge, after communication channel was set up, company would run more efficiency, efficient running could bring more profit. There are a relationship between efficiency and profit. We can see this from P&G's annual report in 2007, there are some impressive data.
Up or Down
Annual sales $30 billions
Annual sales $76 billions
11 brands single annual sales >=$ 1 billion
23 brands single annual sales >=$ 1 billion
Market capitalization $148 billions
Market capitalization > $200 billions
2007 compare with 2000
Through above data we can see Lafley got big success for P&G in six years.
In the second case, they were running a small business, their organization structure were not complex, when their needed changes, their focused on their production, they had simply product line, their through change production strategies to get profit. E.g. their just cut off low profit products(breakfast and lunch), they didn't think system management was necessary, they chose a 'friend of a friend' to join their partnership, that's more like family business.
Both have same goal that was to get more profit.
They all through changes to fix problem.
They all tried useful and suitable strategies to match their fact needs.
For the P&G(big business), it was long time before the changes took effect, normally use year as measurement.
For the Vanust(small business), the changes took effect fast, normally use week or month as measurement.
For P&G, due to complicated organization structure and broad product line, the CEO chose improve communication and production efficiency to get more profit.
For the Vanust, partners through changed major product to reduce costs and increase economic efficiency.
P&G's CEO took attention on macroscopic, the restaurant's owner focus on details.
From the leadership, P&G CEO Lafley had a great vision, his change strategies were long term strategies. The owner of restaurant had a narrow vision, all changes were used to fix the problem right in front of them.
After five years, Mia and John opened the third restaurant, P&G's annual sales increased 153% in six years later, both of them got big success, even their had different leadership and strategies. So, we can see that no leadership and strategy suit for every business, only suitable leadership and strategy. P&G' CEO and restaurant's owners had different leadership, even Mia and John had a narrow vision, no one is wrong. Recalled hundred years ago, P&G's founder Procter and Gamble, they also had no idea how big their company could be. Different business and different stage needs different leadership and strategies.