STARTEGIES PURSUED BY PROCTER & GAMBLE
In the late 1990s and the early period of the following decade Procter and Gamble had been pursuing a global strategy, it was producing standardized products for all its markets globally. In this approach, the company focused on attaining the benefits of economies of scale, whereby it was able to mass-produce for all its markets worldwide. This led to the cost leadership strategy, whereby the management used tactics directed towards reduction of costs. This helped the company to make high sales and increase significantly in its profitability. However, as competition increased, the company had slackened in its pursuit for cost leadership. This resulted in a decrease in profits and stock prices subsequently plummeted (Madapti & Hasan, 2003).
When the new CEO, Allan Lafley, was appointed, he embarked on the cost cutting strategy. However, the strategy was no longer effective on its own as competition was increasing. The company needed to focus on innovation – a diversification strategy that made the firm successful in the 19th and early 20th centuries. The firm focused on developing new products as well as exploiting the potential of its existing products. Although Lafley tried to incorporate the innovation strategy, his efforts did not meet the expected targets, because they stuck to the global product strategy. This strategy did not address the local needs where they had subsidiaries. For instance, beauty products developed in Japan with research on Japanese women was only fit for that market (Madapti & Hasan, 2003).
Today the firm pursues innovation strategy whereby products are developed based on the needs of the target market (Grant, 2010). The company focuses on developing innovative products that meets the changing needs of current and potential customers. For instance, in 2009 the company used $2.4 billion on research and development. This was approximately $1 billion more than Unilever, its closest competitor. Through the SWOT and PESTLE analysis, the company has been able to identify its core competencies, which it is exploiting to have an edge over its competitors. Investment in research and development as an innovation strategy has enabled the company to maintain the largest and broadest portfolio of products in the industry – personal care and household products industry (P&G, n.d).
The company not only uses innovation for developing new products and process but also as a source of competitive advantage. This is called strategic innovation, whereby it develops new approaches of doing business including new business models. It entails creating value for customers from novel products and experiences as well as modes of product delivery (Grant, 2010). Ways in which the company has formulated its innovative strategies is by creating new customer markets for its existing products concepts. In the recent past, it has been focusing on emerging markets. For instance, in 2010, the company’s CEO was quoted saying that the company’s strategy was to have over a billion sales in India and China by 2014. To achieve this goal the company introduced its hair colour products branded Wella in India on September 2010 (P&G, n.d).
The firm has also maintained differentiation strategy, whereby it strives to distinguish its products from those of competitors (Porter, 1998). For instance, the company competes with Clorox as one of the direct competitors in the household industry. However, P&G has been able to differentiate its products to reduce the direct competition. A case in point is whereby P&G has added beauty products to its cleaning products as opposed to Clorox that only focuses on Clorox bleach products (P&G, n.d).
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