MKT1003

Case 2
Sectional B6 Group 1

Alaric Ng Mao Xuan

Ang Xin Yi Marjorie
Chua Han Hong Sebastian
Ernest Sim Chun Kiat
Justin Wong Yu Quan
Li Cheuk Kwan Jeremy
Ng Hui Ting Michelle
 1. Introduction

The Procter & Gamble Company (P&G) is a multi-billion dollar MNC which specialises in
consumer packaged products. Its business units encompass a variety from Beauty & Cosmetics
to Baby Care to Fast-moving Consumer Goods and its operations serve more than 4 billion
people in 180 countries. It generated USD$ 83.68b in revenue in 2012 (P&G Corporate
Newsroom, 2012), 1.3 times that of its closest competitor,
Unilever, at USD$66.33b (Yahoo Finance, 2012). With 26
billion-dollar brands (P&G Corporate Newsroom, 2012)
including household names like Gilette, Tide and Pantene,
P&G is certainly the market leader across various product
categories. This explains why of the Fortune 50 firms
which first made the list in 1955, P&G is one of only 10
still in existence today.

However, since 2009, P&G has suffered from a declining growth rate, being outdone by its few
competitors in terms of growth rate. (The Motley Fool, 2013) In answering the 3 questions in the
case, it is important to get a more holistic view of the marketing environment of P&G to understand
its challenges going forward in the long run.

1.1 SWOT Analysis

In order gain a deeper understanding of P&Gs internal and external environment, a SWOT analysis
can be done to look at the companys Strengths, Weaknesses, Opportunities and Threats.

Strengths

i) P&G is dedicated to understanding its consumers, spending $350m annually on market

research (Neff, 2011)
ii) Invests heavily in R&D for product innovation. In 2012, spent $2b on research (P&G,
2012), 50% more than its closest competitor, Unilever (Brown, 2011).
iii) Its core business is in Home Care and Fabric Care which constitutes 32% of Net Sales
and 26% of Net Earnings (P&G, 2012) e.g Febreeze, Tide, Duracell. These products are
non-cyclical consumer goods; the price elasticity of demand is consistently high.
iv) Great brand outreach with huge public visibility, with 250 brands in at least 6 main
product categories. (Corporate Watch, 2012)

Weaknesses

i) Declining expenditure on innovation, one of P&Gs core competencies. (Coleman-

Lochner, 2012)
 ii) Sales of new launches decreased by
half between 2003 and 2008; the big
product breakthroughs fell to an
average of 6 per year. (Severin, n.d.)
iii) Net earnings from core product
category (Home Care and Fabric Care)
fell 6% from 2011-2012 (P&G, 2012)
iv) 14% decline in Operating Income and
20% decline in Net Earnings from Continuing Operations from 2011-2013 (P&G, 2012)

Opportunities

i) Emerging markets with rapidly rising incomes: great demand potential. Sales from
developing markets represent 32% of P&Gs $78b annual revenue, up from 23% 4 years
ago; these sales are doubling every 4 years. (Seeking Alpha, 2013)
ii) By 2020 the collective GDP of the emerging markets will overtake that of the developed
economies. Consumer spending in emerging markets is expected to grow thrice faster
than that in developed nations, reaching $6 trillion by 2020. (Cincinnati.com, 2012)
iii) Growing global populations present greater demand for non-cyclical consumer products
which P&G specializes in.
iv) The rise of social media provides a new platform for marketing

Threats

i) Competitors e.g. Unilever & Colgate are eyeing the same markets. (Ziobro, 2011)
ii) Increasing availability of generics store brands of consumer products, making it harder
for P&Gs brands to compete.
iii) Rising commodity prices and costs of production.

2. P&Gs impressive portfolio includes some of the strongest brand names in the world.
What are some of the challenges and risks associated with being the market leader in so
many categories?

P&G adopts a multi-brand approach a portfolio of over 300 brands, with 25 brands making over
US$1billion in annual sales in 2012 (P&G, 2012). With upward stretching brands like Dunhill and
Lacoste Fragrances, to brands targeted at mass consumption like Pantene, P&G has claimed market
leadership in numerous consumer product categories worldwide.
In attempts to gain foothold in already existing markets
P&G has not entered, P&G engages in heavy product
development and innovation, creating innovative
products with unique selling points, attracting consumers
to switch from the incumbent brands. Once P&G gains
market presence, it uses the market penetration strategy
to maintain or increase market share of current products,
secure dominance of the market, and attempt to drive out
competitors, using a combination of advertising, sales
promotions, and competitive pricing strategies. These have brought P&G massive success thus far.
But moving forward, how does a market leader grow further?

One answer according to the Ansoff Matrix would be Market Development New Markets with
Existing Products. Whether through new geographical or demographical markets, or new
distribution channels like online retail, it can sell already successful products. Another way is
Diversification into new markets with new products. Engaging in heavy R&D to create new
products for new markets, is a way for a dominant market leader to secure growth outside of the
already mature markets it has dominated.

2.1 Rigidity in changing product portfolio to enter new markets (Over-Centralization)

Being a multi-billion dollar MNC with a high degree of

diversification in its products, P&G runs the risk of over
centralization in its management. Recently, P&Gs
product portfolio is largely skewed towards the high-end
markets, with upward-stretching brands like Dunhill
Fragrance and SK-II, looking to obtain higher margins.
This seems like a logical development, with 62% of its
operations sited in more lucrative developed markets.
(P&G, 2012) However, it puts P&G at a disadvantage during times of economic weakness, when
consumers are forced to switch to cheaper options. (Brewer, 2012)

Being a market leader with such a diverse portfolio, P&G has been inflexible due to the size of its
organization and extensive bureaucracy (Bernard-Kuhn, 2012) in shifting to emerging markets.
This ill-timed shift in focus meant that P&G forgone the opportunity to engage in either a market
development strategy (selling existing products to new markets), or a diversification strategy (new
innovative products brought into new and growing markets). To make up for this strategic product-
mix mismatch, P&G has to reposition their products and increase decentralization of management,
ensuring that they have the required marketing intelligence, in order to better understand and
customize for the local needs and preferences of each emerging market. Despite efforts that have
been made to penetrate these markets, with sales from developing markets making up 37% of
P&Gs total sales in 2012 (Ziobro & Glazer, 2012), an increase of 20% from 2000, it still trails
behind competitors Unilever (55% of sales) and Colgate (50% of sales) (Daltorio, 2012). Lack of
price sensitivity also hampers the companys long term growth, since a growing middle class might
not be willing spend on premium household products despite higher disposable incomes, with
cheaper local alternatives available (Brewer, 2012). Slipping market shares and profits in leading
segments have been the consequence P&G has borne (Daltorio, 2012).

2.2 Prioritizing market share over profits

P&Gs main strategic focus is the retention of its

market share; it is difficult to get it back once it is
lost. (Hrebiniak, 2012). Despite a steady increase in
net sales from 2010 to 2012, diluted net earnings per
common share experienced a steady drop from 4.11
to 3.66 (P&G, 2012), suggesting a compromise in
profits through price reductions to maintain sales and
market position (Hrebiniak, 2012).

This strategy is only effective if major rivals are

financially constrained and are unable to keep up with
the price cuts undertaken by P&G (Hrebiniak, 2012). However, this is not the case as key
competitors like Unilever have adequate financial resources, resulting in extended price wars. As
the market leader, P&G will sustain greater losses in profits.

Also, other firms are able to invest in research and innovation to develop new and improved
products to increase their brand value (Hrebiniak, 2012), like the case of Unilever and Colgate, with
successful innovation efforts. They have created unique selling propositions for their products; this
allows them to place their products (against P&G) in value propositions that bring more benefits for
the same at a lower price. E.g. Colgate has continued to position many new products, like the
Colgate Sensitive Pro-Relief (toothpaste to treat tooth sensitivity), aggressively by playing up their
unique Points-of-Differences against P&Gs competitors. As such, Colgate has been experiencing a
steady increase in its brand value throughout the years (Best Global Brands 2012, 2012) P&Gs
competitors are rapidly increasing the Brand Equity that consumers receive from their products.

Exacerbating the issue, P&G has slowed innovation efforts by relating research expenditure to
immediate revenue concerns. By 2009, the number of big breakthroughs invented for the company
had decreased to an average of less than six per annum, as greater emphasis was placed on short
term results and small inventions (Hymowitz, 2012). Consequently, P&G has lost its customers in
developed countries like Europe to cheaper and equally capable products made by rivals such as
Unilever (Hymowitz, 2012). As such, rivals have gained significant market share with more
successful innovations and improved their market positioning, threatening P&Gs market leadership.

2.3 Brand Erosion and higher profile of company mistakes

As the market leader, consumers pay closer attention to

the company; as such, mistakes committed by the
company would usually gain more negative publicity.
This can be classified as an external threat in SWOT
analysis. The sheer size of P&G means any mistakes are
magnified and exposed to be larger than they really are. E.g.
the six-month delay of Tide Pods and supply problems with
Fusion ProGlide razors and Old Spice body wash has gained
greater attention than a normal company would warrant. (Neff, 2012).

P&G uses a multi-brand strategy, creating new brand names in existing product categories. It allows
P&G to dominate a resellers shelf space with multi-brands. However. there are drawbacks: with
this multi-brand strategy, one brand could easily affect another through association. A scandal
relating to another P&G brand could undo all the good customer relationships built by another
brand with a customer. This is potentially disastrous, because if one or more of P&Gs brands erode
significantly, their financial status and market positioning will be adversely affected. (P&G, 2012)

2.4 Limited Room for Growth

P&Gs major brands are in the fast-moving consumer goods, e.g.

shampoo (Head & Shoulders), baby products (Pampers),
household cleaning
(Tide), beauty products
(Olay). The markets
these products are in are
characterized by frequent
Mature Markets: The bane of
sales per consumer, low
growth?
margins and low brand loyalty. Also, these markets are
relatively mature. Innovation on these goods have very
much been in stasis, and given that these products are
targeted at fulfilling the lower layers in Maslows
hierarchy of needs (Safety, Physiological), it also means that there is an absence of significant
growth in the market size as it already encompasses almost every consumer.
P&G, as the market leader for most categories, has limited room for growth it can only try and
maintain market share. Even that is a daunting task, against well-heeled competitors such as
Unilever and LOreal in hair products. To overcome this threat of reaching a growth ceiling, P&G
must look to expand its marketing strategies, to move beyond the marketing concept; to meet the
needs and wants of the consumer better than their competitors P&G must employ a societal
marketing concept to deliver value to the consumer and also improve societys well-being. Their
marketing mix must adjust to fulfil these, and allow them to build relationships and brand loyalty
through the fulfilment, in the customers eyes, a higher and noble need.

2.5 Lack of a P&G Identity

Adopting a multi-brand approach does mean that P&G is practically everywhere in everybodys
lives that has its advantages, as evident in P&Gs strong numbers in many markets. However,
being everywhere at one time could well dilute P&Gs identity in the eyes of the consumer. To the
average consumer, P&G is remembered as a multinational conglomerate that makes many
household items we use. The sheer number makes it difficult for one to associate brands with P&G.
The lack of identity may lead to low brand equity, with consumers failing to understand the values
of the P&G brand positioning. Huge diversification has resulted in P&Gs market leadership in
many markets, but with that it has lost the ability to build a strong, singular identity.

2.6 First-Movers Disadvantage

P&G is a market leader that prides itself on product innovation, spending $2billion annually on
R&D alone (60% more than its closest competitors (Neff, 2012)), resulting in about 3,800
applications for patents per year. One of its innovations is Cascade packets of detergent powder
and gel mixture designed to get rid of stains without pre-soaking. These are Stars in the BCG
Growth-Share Matrix. With this dare to innovate and invest into new possibilities are risks of free-
riders. For example, Finish Quantum is a competitor to the Cascade Complete Pacs, positioned and
designed very closely to P&Gs product; it performed well in the US market.

As market leader of saturated markets, the way to expand a leading brand is through product
innovation. However, competitors have the opportunity to make similar improvements to their
products, without incurring nearly as much R&D cost. This causes P&G to suffer in terms of market
share and profits than what they should have, as a result of free-ridership. Yet, not innovating could
leader to erosion of market share through price competition from rivals.

3. Managing Brands Amidst Growing Popularity of Social Media

P&G must continuously communicate its brands to consumers in order to maintain its strong brand
positioning. It has been spending a lot of capital on advertising (Neff, 2012) to create brand
awareness, build preference and loyalty. In many societies worldwide, social media has become
increasingly more popular than television, amongst not only the young, but also the mature
populace (Heaney, 2012). It is therefore unsurprising that P&G has gradually shifted a larger
portion of their advertising budget onto social media (Coleman-Lochner, 2012). It now boasts a
significant presence on major social media websites such as Twitter, Facebook, Youtube (P&G,
n.d.), as well as niche sites like Pinterest (Edwards, 2012). Yet the question remains if P&G could
further leverage on this growing trend to build strong brand images.

3.1 Status Quo of P&Gs Marketing Policy on Social Media

P&Gs social media efforts are mainly targeted at 25- to 54-year old women (Coleman-Lochner,
2012). This is due to two reasons. Firstly, this is the most active group of social network users,
making up 70% of all women accessing social networks from their phones (Twittown, n.d.), thereby
making social media a viable option. Secondly, this group coincided with the majority of P&Gs
customer base, since many of its products are household items or personal hygiene products, which
are purchased by women. In addition to targeting women, P&G also organises specific marketing
campaigns online to target other market segments. For instance, P&G hired Antonio Rosales, one of
the top ten Hispanic hairstylists in the US, as its brand ambassador on the Head and Shoulders scalp
care blog. This was noted as an effort to target the growing Hispanic market (Bird, 2008).

P&G continues its brand position based on beliefs and values in its social media marketing,
emphasizing on its care for consumers. E.g. The brand positioning of Pampers used to be just its
physical attributes and benefits, now it is positioned as an aid in helping mothers manage babies
development; that every baby deserves the best. The current social media efforts reflect this shifting
brand positions to reflect P&Gs increasing care for its customers. For instance, the promotion for
its Secret deodorant goes beyond the product itself, in a campaign coined Mean Stinks, to rally
netizens behind the issue of bullying that is often faced by the mainly teenage girl users of the
product (Ukman, 2011). In doing so, P&G aims to build the self-confidence of its users beyond the
self-confidence boosting effect of the deodorant itself. Such a personal touch enables P&G to
engage its customers on a deep, emotional level, building stronger brand images.

One issue faced is that P&Gs products are mainly convenience products for which consumers
spend little effort to compare and research, and therefore are unattractive topics for conversation on
social media. In response, P&G organised online advocacy campaigns, such as the aforementioned
Mean Stinks, to spark activity on its social media pages. Another method frequently used by P&G
is to use ambassadors, with the aim of using the characters appeal to promote their products. For
instance, in 2005, P&G created a blog for Tyler, a rescue-shelter dog to promote its Iams Pet Food.
Its Cover Girl makeup, on the other hand, was promoted using celebrities such as Sofia Vergara
(Coleman-Lochner, 2012).
Another issue is the difficulty of breaking through the advertising and promotion clutter on social
media. Social media is increasingly seen as an important outlet for advertisements by companies,
resulting in consumers often either tuning out to the advertisements or being diverted to other
companies advertisements, sometimes its competitors. For instance, while P&Gs Thank You
Mum campaign was highly successful on the website Pinterest, the very same website has large
numbers of users pinning up Unilevers products (Edwards, 2012).

3.2 Recommendations

P&G uses the major social media sites Facebook, Youtube and Twitter. It has only a minor presence
on other sites such as Pinterest and Google+. Also, none of the Chinese sites are used, despite China
being a big market for P&G, and that the Chinese have no access to the three sites due to
government ban. Therefore, P&G has to channel more resources towards the other major sites such
as Google + as well as Chinese sites in order to achieve enough reach. Also, inherent in online
advertising is the lowered media impact. Although social media allows P&G to interact with its
customers, the degree of exposure remains controlled by the user. For instance, it is up to the user to
decide to join P&Gs Facebook group and thereby be a target of P&Gs marketing. As such, P&G
needs to raise the media impact beyond using ambassadors or advocacy campaigns. For instance, it
can link the
online campaigns
to offline activity.
The purpose of
social media is to
allow sharing of
events in life with
friends. P&Gs
current catalogue of largely product advertisements is poor sharing material and may portray a
negative, overly monetarily-oriented brand image. Instead, it should harness this desire of users to
share experiences to sculpt positive brand experiences. Through the websites, it can invite users to
real-life product-related events, and subsequently post positive images of customers in the event. In
this way, the event material becomes personal for the users, spurring sharing and positive online
word of mouth, thereby building positive brand images.

Another action that P&G should consider is to expand on the market segments targeted on social
media. Currently, the main segment targeted is 25- to 54-year-old women. While this may be
suitable for a majority of its products, there remains uncovered ground. The existing groups that
P&G has are may not have sufficient appeal to retain the attention of the uncovered segments. It can
consider having separate social media groups to deal with other significant market segments. For
instance, it can have a group to handle the male market for brands.Examples of such brands include
Old Spice, Zirh, Art of Shaving, Dunhill, Gucci colognes and Hugo Boss fragrances. In this
instance, it could hold events that appeal to men, such as sports events, and subsequently post the
event pictures on the groups. Other possible segments include the singles for its fragrances and the
various specific regions in the world to handle region-specific products.

P&G should also use social media to manage the online word of mouth. According to an online
study, consumers are relying more on online reviews for purchases (Biko, 2012). Negative word-of-
mouth therefore has a huge impact on P&Gs sales and brand image. Currently, it uses social media
sites mainly as a product promotion platform. There is no official avenue for customers to voice
their complaints on the website. A solution is to develop forums in the social media sites where
users can share their product experiences, write reviews and ask questions. P&G moderators can
then manage public relations by answering queries, addressing grievances and interacting with users.
They can also gather consumer feedback so that product faults could be rectified before damage
occurs to the brand image. Such responsiveness will also be appreciated by customers as good after-
sales service, augmenting the product and improving brand image.

P&G can develop good word of mouth to use social media as a platform to disseminate usage
instructions and tips so that customers can achieve a better effect with their purchase. This way,
they will be less likely to have negative experiences with the product due to misuse, and are more
likely to give positive reviews. A more subtle method involves P&G organising campaigns that help
to improve society as a whole and publicising them on social media. This would also help
strengthen its brand positioning based on beliefs and values, adding the element of caring for the
society on top of their current positioning of carrying for consumers. Survey has shown that
consumers put significant emphasis on the social purpose behind a product in making a purchase
(Garton, 2011). As P&Gs products tend to have many substitutes, establishing such a good cause
image will help to differentiate P&G from the competitors. Since social media is widely used, by
organising social campaigns on them positive images can be circulated rapidly among the users to
effectively build on the brand positioning. The Body Shop is one example of such a success. It is
seen and valued by people for being a retailer that goes against animal testing, supports community
fair trade, defends human rights and protects the planet. Such efforts are widely publicised on its
social media sites, to great effect, as 98% of the users surveyed after its online petition in Facebook
to stop sex trafficking perceived it as ethical (Hannah, 2011).

4. Risks Faced Going Forward

As a multi-national corporation (MNC), P&G faces many potential risks as it moves forward. This
section examines these risks in a macro and micro-environment conceptual tool framework.
4.1 Macro-environment risks in a PEST Framework

Political Managing Cross-Border Regulations

P&G has significant international operations, and especially since the markets with the most growth
are overseas, they face many potential risks in the global macro-environments political arena such
as compliance with foreign country regulations, foreign currency fluctuations, fiscal policies,
difficulties enforcing intellectual property rights abroad, difficulty ensuring quality control in its
international manufacturing plants and protectionist trade barriers. Examples of such can be seen in
the mandated price cuts in Venezuela and import curbs in Argentina. (Dorfman, 2012)

Economic and Social-Cultural Changing Consumer Demand due to Recession

The recent economic recession in USA, P&Gs most important market, brought down the
discretionary income of USA family households and depressed citizens spending power, especially
the middle class. This has prompted a change in the social aspect of peoples lifestyles and
preferences and made them even more value conscious, resulting in a switch from mid-range to
lower end products, a range which P&G does not have, thus detrimentally affecting its profits
(Byron, 2011). The recession may be long-term, prompting P&G to rethink its positioning in the
market to cater to the lower end. P&G historically has always used product differentiation and
innovation as its competitive advantage, putting forward to consumers its value proposition of
more for more, charging a premium on its products for their added benefits, and targeting them
towards the middle class. With cash-strapped people rethinking whether high-quality is a necessity,
there is a general
switch to cheaper
alternatives. This is
a great potential
risk to P&Gs
future success and
dominance as a
market leader.

Thus P&G may need to reposition itself to cater to the

change in customer spending power and offer more for
less to customers, offering value for money at lower
prices. This in fact could be seen as downward stretching
product line decision by P&G to snatch market share at
the lower end. Of course this may pose risks of
cannibalization of its existing high end products as well as image dilution of its established brands,
but it may be a cost worth paying if it can gain back its market share in the developed markets.

Economic Rise in Commodity Prices

Given the nature of its business of (Fast Moving Consumer Goods (FMCGs), P&G is affected by
fluctuations in the commodity market, especially for fuel and oil which is used heavily, from
producing its beauty line to distribution for almost all of its products. This was previously
demonstrated when P&G was forced to increase prices to reflect the jump in commodity prices a
few years ago (Jopson, 2011). P&G can introduce smaller-sized packages for their products, or
substitute for materials less sensitive to commodity costs to overcome this risk.

Socio-Cultural Shift of Focus to New Market Target Segments

Another potential risk that P&G faces would be the new shift
of focus towards the new developing markets. According to
the Boston Consulting Groups (BCG) Matrix, the developed
market has matured, resulting in low market growth. With
regard to many of P&Gs brands, they hold a high market
share there, thus attaining Cash Cow status. P&G has
realized this and is using the profits enjoyed from the Cash
Cow market to fund entry into new markets (Question Marks) (See BCG diagram).

This, coupled with the decline of USA and Europe due to recession, has given P&G ample incentive
to shift focus to developing countries emerging markets, namely India and China, in order to prop
up its dropping net sales volumes (Hrebiniak, 2012). In an effort to penetrate into this new market
with new product lines, P&G, according to Ansoffs Matrix, has adopted a diversification strategy,
riding on its established brands while engaging in micromarketing to tailor its new products to meet
needs of the local populace. An example of such would be Tides soap bars to cater to Indian
women who traditionally use soap bars to wash clothes and are not rich enough to own a washing
machine, a prerequisite of Tides liquid-based laundry detergent products. Emerging markets
demand centres on low-cost consumer goods, thus P&G needs to position itself in developing
markets with a less for less value proposition to capture market share. An example would be one
of its products, Tide Basic. Basic is a new laundry detergent product with less features at a lower
cost to target consumers looking for better-value alternatives (Osak, 2009). That being said, much
still needs to be done to dominate in the new developing markets and P&G is actually lagging
behind its rivals in this area. P&G has previously done well in its product mix decisions to lengthen
existing lines by acquiring multiple established brands under its umbrella. However to succeed in
the new market, it needs to change focus to widening the mix and adding more depth by adding new,
cheaper lines to cater to this new market.
Technological Changes in Channels of Distribution

P&G has historically focused on selling at retail outlets, but with technological progression and the
rise of E-commerce, consumers may start demanding online avenues for shopping. P&G needs to
keep up with the times and provide such avenues in order not to give opportunities to other
competitors. Opening online stores could also be seen as a way to bypass traditional retailers like
Walmart and Target, allowing customers to enjoy lower prices online and shop from the
convenience of their homes. New channels of distribution could even be used as a means of further
differentiation from competitors to appeal to consumers, though by this time, developing E-
commerce is seen more of a necessity to be on par with competitors rather than a point of difference.
P&G has indeed realized this and experimented with an initial online store opening, but they need
to expand faster online if they are to dominate as market leaders in this arena, or risk being
overtaken.
4.2 Micro-environment Risks in a Conceptual Framework

Company Risks of Brand Extension

P&G often does brand-extension and they must be

careful not to have a new product flop or it may
adversely affect the original product. One current
brand extension example is the Pampers brand rolling
off its Dry Max version of the original Pampers
Swaddlers and Cruisers. Apparently the Dry Max
version started to cause rashes to babies who wore them and this soon negatively affected Pampers
as a whole with boycotts on even its original products due to consumer fear that the rashes may be
caused by all Pampers Brand products as a whole (Reuters, 2011). This highlights the potential risk
that brand extension brings to whole product groups as a flop on one would spark a boycott on all.
Also, the introduction of the earlier mentioned Tide Basic also devalues the brand name of Tide, a
brand long known for being a premier laundry detergent choice. This in turn hurts the brand image
(Osak, 2009). This indeed is one of the disadvantages of family branding as failure (or cheapness in
this case) may cause association with the rest of the brand and lead to peoples doubts on the quality
consistency of the brand.

Suppliers Supplier-Side Shortages

P&G purchases almost all its raw materials from outside suppliers and it has some key sole supplier
or sole manufacturer supply arrangements (P&G, 2012). As such, the supplier may have superior
bargaining power or it may not have enough supply to fuel P&Gs ever-growing sales demands.
This is evidenced by the recent supply side delays in its Tide Pods and Gillette shavers leading to
shortages (Glazer, 2012). To prevent suppliers from taking advantage of P&G, they have healthy
relationships with their suppliers, and also have many performance metrics for their suppliers. P&G
should also have in place a contingency plan in the event a supplier fails. With new innovations
such as the Tide Pod, there are often complex and new manufacturing systems needed. As a result,
it is difficult to source for many suppliers, and P&G often has to rely on a key manufacturer to
provide for all the demand. This posed a problem for P&G when they had to delay the launch of
their Tide Pods due to insufficient supply from their key manufacturer. They could possibly delay
the launch of a new, highly anticipated product, if they foresee a demand shortage to ensure that
every consumer would have sufficient quantity, thus resulting in an increase in consumer
satisfaction, although the trade-off maybe the initial disappointment from a delayed product.

Competitors Intense Competition in Emerging Markets

Another problem is revealed by a competitor analysis of new emerging markets using Porters Five
Forces. Other heavy-weight MNCs, such as Unilever, have also started to jump on the emerging
market bandwagon, leading to intense competitive rivalry in these markets. The degree of
substitutes for household items such as razors and shampoo is thus high with multiple MNCs
selling the same thing. Though P&G is still considered a large player in the new market, it is
currently lagging behind Unilever in India. In addition, not only is the competition against other
MNCs, but also against the developing economies own home-grown businesses who have
established themselves to be comparable to the MNCs in those markets and have a stronger home
following due to locals customer loyalty (The Economist, 2012). Competition has and will always
be a prevalent problem and P&G needs to unceasingly innovate and distinguish itself if it hopes to
remain at the top.

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