P&G's Core Competencies

A business must possess some competitive competencies for success in the field of the business world. I would like to give a brief account of Procter and Gamble (P&G) in order to elaborate its core competencies which have resulted in the successful running of the business of the P&G.

CHALLENGING YET OBTAINABLE OBJECTIVES

P&G sets objectives that are challenging but yet attainable for its short term as well as long term plans. For example, P&G has shown enormous gain in the productivity of human resources because of the HR policies of the company. It hires competitive people, takes measures for training and development, and grooming of the HR.

THE STRATEGY

P&G has proven it’s self as unmatched and exceptionally well as an organization in formulation, implementation, and controlling of strategies. Both short term and long term strategies are devised, implemented, and controlled through the HR.

THE LEADER IN INNOVATION

The P&G has been a leader in innovation and creation of new product lines. Most of its products have been as a consequence of its innovative strategies. P&G invest more than twice invested by its competition in the field of innovation. P&G has been a bran-building leader. The company’s billion-dollar brands have been successful to keep sustained the growth of sales at 11% rate per year for the decade.

THE GROWTH STRATEGY

Many strategies have been adopted by P&G but this decade the strategies in terms of growth include: tope line, bottom line, and shareholder growth. P&G has demonstrated a considerable growth in personal care, baby care, and beauty products. P&G takes serious account of its finances for the growth of the business. The following table summarizes the growth result for P&G from the year 2001 to 2009.

Average Annual

Goals

2009

2001-2009

Organic sales growth

4-6%

2%

5%

Earning per share

10%

8%

12%

Free cash flow productivity

90%

102%

112%

LEADERSHIP COMPETENCIES

P&G behaves just like a leader in the business world. So is the case with the management of the company as well. P&G has been lucky to find its top management laden with leadership qualities. Its leadership has taken serious steps now and then for the success of the organization. For example, in year 2000, the P&G’s president took necessary and challenging measures to put the organization back on track. The actions that were taken resulted in sustainable growth of the organization as well as recovery of the lost business activity.

THE CONSUMER AND MARKET RESEARCH

P&G has been a leader in market research investment. The company interacts with more than five million consumers each year in 60 countries around the world. P&G invest 350 million dollars and more in consumer understanding.

Hence the organization takes necessary measures for finding the tastes, needs, and wants of the consumers and customers. The investment in the field of research on consumers pays back much in terms of high sales and satisfied customers.

RIGOROUS COST AND CASH DESCIPLINE

P&G has increased its cash productivity to the extent that it has reached 100% for the decade. It has resulted in high earning per share, high credit rating of the company, and allured the potential investors to invest in the businesses of P&G. The company has maintained a strong cash management vis-à-vis working-capital management.

Sales per employee have grown from $363,000 to $585,000 while profit per employee has increased from 32,000 dollars to 84,000 dollars from the year 2000 to 2009. Similarly the productivity of R&D Organization have doubled from the year 2000 to the year 2009.

THE ON TIME ACTION

P&G takes decision as and when needed. This has been the core competency of the company among its core competencies that the company enjoys as a competitive advantage of the P&G. A right decision in the wrong time will prove useless. Therefore, it is very important to take preventive as well as corrective measures in order to cope with the potential problems well before the time of incidence. P&G has been much active to take preventive and corrective steps to address problems and devise solutions to the problems.

THE HR, A COMPETITIVE ADVANTAGE

P&G makes plans for careers. The company tries to hire the best Human resources. It works on business and functional leaders’ activity on how to recruit, teach, and coach.

THE MARKETING STRATEGY

Apart from working on the present consumers and customers, P&G keenly strives on improving its competencies in the field of under-served and un-served consumers. P&G invests twice that of its competitors in marketing. For example, when one of its competitors was market testing its liquid soap, P&G launched the Tide in Europe market to win over the market from its competition.

In a nut shell, the history has show that P&G has proved its self a leader in marketing strategy formulation, implementation, and control. Therefore, P&G has beaten its competition by virtue of competitive marketing strategies. P&G has been successful in putting forth marketing strategies that ensure “how to win!”

THE MARKET LEADER

P&G’s well known, trusted brands touch the lives of consumers in more than 180 countries. Some of its brands have crossed the billion dollars target. P&G has been successful in launching innovative products with a competitive edge over its competitors.

P&G top 43 brands are responsible for 90% profit and 85% sales. Therefore, P&G has proven its self as leader in brands. For example, P&G’s market leader products include: Pampers, Tide, Ariel, Cest, head and shoulders, etc.

DIVERSIFICATION

P&G has attained high level of diversification in its lines of products. Some important ones have been shown below in terns of its sales, segment of products, and the category of products.

CBU

Segment

Key Products

Billion-Dollars Brands

Net Sales (in Billion Dollars)

Beauty

Beauty

Cosmetics, Deodorants, hair care, cleansing, Fragrances, skin care

H&S, Olay, Pantene, Wella

$26.3

Grooming

Blades and Razors, Hair Removal devices,Shave products, Home appliances

Braun, Always, Gillette, Mach3

Health and Well-being

Health-care

Feminine care, oral care, dish care, fabric care, surface care

Lams, Pringles

$16.7

Snacks and Pet care

Pet food, Snacks

Ariel, Dawn, Downy, Duracell, Gain, Tide

Household care

Fabric, home

Baby Wipes, Bath tissue, Diapers, Facial Tissue, Paper Towel

Bounty, Charmin, Pampers

$37.3

OFFERING BRAND FOR THE BRANDED PEOPLE

An overview of product line has been given in terms of % net sales and % net earning of P&G.

GBU

Segment

% of net sales

% of net earning

Key Products

Billion-Dollars Brands

Beauty

Beauty

23%

22%

Cosmetics, Deodorants, hair care, cleansing, Fragrances, skin care

H&S, Olay, Pantene, Wella

Grooming

9

13

Blades and Razors, Hair Removal devices,Shave products, Home appliances

Braun, Always, Gillette, Mach3

Health and Well-being

Health-care

17

21

Feminine care, oral care, dish care, fabric care, surface care

Lams, Pringles

Snacks and Pet care

4

2

Pet food, Snacks

Ariel, Dawn, Downy, Duracell, Gain, Tide

Household care

Fabric, home

29

26

Baby Wipes, Bath tissue, Diapers, Facial Tissue, Paper Towel

Bounty, Charmin, Pampers

TARGET MARKETING

P&G uses target marketing. To put in other words, P&G innovatively launches products for specific segment of the society. Therefore, it offers a wide range of products in its product line on demographic basis. For example, the shampoo range covers many brands that target different people of the society. Head and shoulders shampoo for dandruff while Pantene for shiny and soft hair as the company claims. The segmentation is made on the basis of demography, psychographic, and geography.

PROMOTIONS

P&G has established its position as a leader in promotion campaigns. The company utilizes and invests a considerable amount annually for promotion of its brands. Advertising costs include advertisement on TV, Dish, Cable, Net, Radio, Magazine, and other media.

P&G utilizes the local media as well to advertise its brands on the local Television, Radio, and other print media.

STRIVING AGAINST THE STRIDES

P&G has had bad times during the course of its history. However, it has fought against the tides successfully by virtue of un-defatiguable efforts, effective plans, post mortem analyses, and taking necessary corrective steps to over come the shortcomings, and putting the company back on the business tract ensuring efficiency and effectiveness.