Friday, May 24, 2019
Case Study About Procter and Gamble Company Essay
Procter and Gamble Company Case AnalysisThis case study abridgment focused on Procter and Gamble Companys merchandise plans and strategic wefts on its light-duty lucid brands (LDL). Procter & Gamble is the worlds largest producer of household and hygiene yields. By 1981 P&G operated in 26 countries and sales totaled $11.4 billion with 90 consumer and industrial products manufactured in the United States. The case study provided almost very detailed data analysis and reports in terms of the company history and background, organizational structure, key factors to its success in the marketplace, the relationship among publicize, sales, product development (PDD), manufacturing, and finance departments, and its light-duty liquid brands (LDL). sidle up of Company History, Organization, and Key Success Factors * In 1890, Procter & Gamble Company was incorporated with a keen stock value of $4,500,000. The capital allowed the company to build plans, vitiate clean equipment, and dev elop stark naked products. * Sales book doubles every 10 yrs.* Success factors are 1) dedicated and talented human resources, 2) a account for honesty and trust, 3) prudent and conservative management philosophy, 4) innovation in superior quality of products at competitive hurts, and 5) substantial marketing expertise. * The company organized its products in terms of 8 categories 1) package soap and detergent, 2) bar soup and household cleaning, 3) toilet goods, 4) paper products, 5) food products, 6) coffee, 7) Food Service and lodging products, and 8) special products. * inciter group planned, developed, and directed the total marketing effort for its brand through development of the annual marketing plan.* target group worked closely with other iv lines. Sales department provided important perspective on consumer and trade promotion acceptance, stock requirement to support competitive pricing. * Product development department ensured go along improvement on brands qualit y through extensive consumer and laboratory tests. * Brand group worked with manufacturing department on detailed brand volume estimates. Their interaction was crucial to new product development process. * Based on the volume and marketing expenditure forecasts provided by the brand groups, financial/cost psychoanalyst developed and fed back brand profit and pricing analyses as well as profit and rate of return forecasts on new products andpromotion. exploitation the information, Mr. Chris Wright, associate advertising manager of the Packaged Soap and Detergent Division (PS&D) of the Procter & Gamble Co., was trying to determine how the division could growth volume of its light-duty liquid detergents (LDLs), capture much shares from the market, and increase long-term or short-term profit. The three options that Wright considered are new brand introduction, product improvement on an subsisting brand, and an increase in marketing expenditures on existing brands. Each option is anal yzed as follows New Brand IntroductionPros* P&Gs latest LDL played a leading role in the market place. The success of its Dawn brand clearly indicated a likelihood of another new brand with a distinctive gain ground could increase further P&Gs LDL Volume. * Wright saw new product potential in all three market segments (performance, mildness, and price brands) * For performance brand, market research indicated that 80% of U.S. households scour and scrub their dishes at to the lowest degree once a week. H-80 invented by new technology as a high-performance product which can fulfill a clear consumer need based on research. The 4-week blind in house use test of H-80 and established competitive LDL, was a strong indicator of its potential success. * For mildness segment, a new brand which differentiates its mildness benefit can help the declining segment recapture the consumers. * Although P&Gss price segment had been in decline, it was expected to stabilize at its underway share lev el due to the increasing consumer sensitivity to price resulting from the depressed state of economy. * Wright considered the potential of producing a brand with parity performance benefits to existing price brand competition at a cost that allowed PS&D to maintain a good profit. Cons* The new brand would require $20 gazillion in capital investment to cover additional production capacity and bottle molds. * The new LDL brand also needs at least $60 million for first-year introductory marketing expenditures. * The introduction of new product would take about two years plus one year if test market was needed. So three years indicated that the profit return would be a long-term investment. Product Improvement on anExisting BrandPros* Unlike new opportunity, product improvement such as introduction of H-80 formula to one of the current LDL brands would require less investment. It would cost $20 million for the improvement and $10 million as incremental marking expenditures, which was $ 50 million less than a new brand. * On top of it, mirth brand could cut its cost of goods by $3 million per year if this new formula was introduced. The brand relaunch would cost $10 million in marketing expense with no capital investment. Cons* Although there is a data supporting how H-80 formula would capture the market, there was lack of data of the introduction of H-80 formula to the existing current LDL brands. * If consumers have already established a certain image of Joy brand group, can the change of formula attract new consumers and retain the existing consumers? * The introduction of new product would take about one year plus two year if test market was needed. So three years indicated that the profit return would be a long-term investment. Increase Marketing Expenditures on Existing BrandsPros* Since the market has been static with the LDL category, Wright tycoon avoid increasing the capital investment and reduce investment risk. * Wright could expand the overall profit s by capturing larger market shares using extra advertising and promotion techniques. Cons* There was lack of data supporting the increase in marketing expenditures on existing brands could produce the desired market share increase. * For some segments such as price brands, increasing advertising and promotion would not increase sales and market share if the price didnt decrement accordingly. This was peculiarly true in the depressed state of economy. RecommendationsThe recommendation was to go with the combined feature of having both long-term and short-term investment. Introduction of a new product such asH-80 appeared to be a too costly investment. In such a depressed state of economy, it was not a smart finale to invest $80 million for the new product. Out of $80 million, $60 million was only used to cover the cost of the first year, not to key out incremental cost for the next few years. The product would require 3 years in order to be introduced to the market. Using the cos t/benefit analysis, I think the first option of new brand introduction was too risky. We could combine option 2 (product improvement) as a long-term investment with the option 3 (increase marketing expenditure on existing brands) as the short-term investment. Combining these two options could increase the sales volume with very minimum capital investment. In return, it meant less risk for Procter & Gamble. The timeframe with one long-term investment and one short-term investment allowed Procter & Gamble the time, resources, and capital to focus on two endeavors strategizing more efficient plans to tackle the charging and competitive market. Especially the case also indicated that increased marketing expenditures could be approved almost immediately if the plan was financially attractive.