Essay About P&G And Compact Detergents

Proctor & Gamble Case Study
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Proctor & Gamble develops, manufactures, and sells consumer goods. Primary sales
channels are mass merchandisers, grocery stores, membership club stores, and drug
stores, Proctor & Gambles products are sold in over 180 countries.
Procter & Gamble competes through differentiation, and spends heavily on research and
development to create products that are differentiated from that of competitors, and
spends heavily on advertising to signal the value of the companys brands. Due to their
relationship with many retailers and investment in learning about consumer behavior,
P&G has a good sense of what consumers want in a product, and can effectively focus
research and development to create new products, and improve existing products to better
meet consumer needs. P&G is decentralized, with global business units focused on
individual countries. This cuts overhead, and more importantly, lets the business unit
optimize operations for a particular country. The combination of global scale and local
focus enhances the companys competitive advantage
A high absolute value of research and development spending allows the development of
products that actually do add value over the products of rivals, and high spending on
advertising facilitates the signaling of this value. Some examples:
* Detergent optimized for cold water washing (saves energy costs)
* Detergent optimized for single rinse (where clothes are washed by hand)
* Compact detergents to reduce packaging waste
P&Gs three tiered product line helps with pricing power, as the lowest tier acts as a price
benchmark for customers deciding whether the higher tiers are appropriately priced.
There is some retailer concentration, with Wal-Mart accounting almost 20% of sales. But
Wal-Mart needs P&G about as much as P&G needs Wal-Mart, so their bargaining power
is not enough to hurt P&Gs profitability. If the companys on-line sales channel grows
sufficiently (see under “Threat of Substitutes”) then this will give P&G