SWOT ANALYSIS of PROCTER & GAMBLE (P&G)
Procter & Gamble is a leading consumer goods brand of the world with a large and global sales and distribution network. Apart from its large portfolio that caters to the needs of diverse customer segments, it has focused on creating a distinct image and maintained a strong market presence. While the consumer goods industry is seeing intense competition, focus on innovation has become all the more essential for consumer goods brands like P&G to retain high operating and net income margins. P&G spends a large sum each year on marketing and promotions to retain its market share and customer base. Being a globally popular brand, its main strength lies in its brand equity. However, still it focuses on innovation for higher operational efficiency, effective marketing as well as for continuous product improvements. In the recent years, it reduced its number of brands to focus only on ten product categories and 65 brands which were the most profitable. The U.S. economy is performing well and consumer spending has gone up. In such a scenario, P&G is thinking of raising prices on some of its key products. US market accounts for a large part of the total sales and revenue of the company.
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Read more about P&G (Procter & Gamble) and its key Strengths and Weaknesses in this SWOT analysis :-
Brand image is among the most important strengths of Procter and Gamble. It is a leading global consumer goods brand with a strong image. Millions of customers around the world trust P&G. A strong image also means higher popularity and better sales. The reason is that the company has focused on product quality and invests in making continuous improvements to its products and brands.
In the recent years, P&G has largely limited its product portfolio to just ten product categories and 65 brands. It has done this to manage its product portfolio more strategically and to derive better results from its existing products. This also allows the brand to focus upon the most profitable product categories. The ten product categories include baby care, fabric care, family care, feminine care, hair care, home care, grooming, personal health care, oral care & skin care personal care. The fabric and home care products accounted for the highest part of its net sales in 2018 followed by baby, feminine and family care products. Many of the brands in its portfolio are very popular and enjoy high level sales and customer loyalty across the world.
P&G is a global brand with sales and operations around the globe. It is a global brand with headquarters in Cincinnati, Ohio. P&G products sell across more than 180 countries and territories. The company uses several channels to reach its customers. It sells its products mainly through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, specialty beauty stores, high-frequency stores and pharmacies. Apart from a large and global distribution network, the company has manufacturing sites located in various parts of the world. In US, it owns and operates 25 manufacturing sites located across 19 states. Around the world, it owns and operates 85 manufacturing facilities across 37 more nations. It manufactures beauty products at 24 of these locations and grooming products at 20, health care at 18, fabric and home care at 41 as well as Baby, Feminine & Family Care at 39. P&G’s principal regional general offices are located in Switzerland, Panama, Singapore and China. In this way, the company has managed a strong global presence.
The consumer goods industry has grown highly competitive and because of the stiff competition in the industry, every brand invests a large sum in marketing each year. P&G uses both traditional and modern channels for advertising and promotions. Apart from print and TV advertising, as well as online advertising, the other channels that it utilises for promotions include its own website as well as e-commerce websites. The company spent 7.1 Billion dollars on advertising in 2018. Apart from demand creation, consumer goods brands use marketing for brand recall and to drive sales and revenue. However, apart from advertising and promotions, they also use other marketing tools like discounts and trade shows.
Innovation is also a very important focus at P&G. The company apart from product innovation also focuses on innovation in other areas for efficient operations and marketing. Product innovation is also a method of creating demand in customer goods industry. It can help drive popularity and sales high. Moreover, changing market dynamics and consumer preferences also require the brands to focus upon innovation.
Growing online presence:-
In the recent years, the company has seen increased revenue from online sales. E-commerce sales of P&G have grown faster in recent years. Apart from e-commerce channels for online sales, the company is also using online channels for marketing.
Higher dependence upon US and Walmart :-
Walmart is the largest customer of Procter & Gamble. The company derives the largest part of its sales from Procter and Gamble. Sales to Walmart Inc. and its affiliates constituted approximately 15% of P&G’s total sales in 2018, 16% in 2017 and 15% in 2016. However, this also leaves P & G dependent on Walmart for a very large part of its revenue. Similarly, P&G depends upon the US market for a very large part of its net sales. Net sales in the United States accounted for 41% of total net sales of P&G. No other individual country exceeded 10% of its total net sales.
Stagnant Growth :-
P&G is not enjoying fast growth in the recent years. Growth has stagnated at P&G due to several reasons. After having reached 74.4 Billion dollars in 2014, the company has seen its net sales declining in the recent years. Revenue has kept declining till 2017 to reach 65.1 Billion dollars in 2017. Then in 2018 its revenue grew to 66.8 Billion dollars. However, over the last 5 years, revenue of P&G has kept falling, the company’s growth has nearly stagnated.
Years of Management related problems :-
P&G has been facing management related problems for last several years. For years, the company has faced management turmoil as well as poor strategic decisions. Apart from that unhelpful macroeconomic trends and a stronger dollar have also become a problem for the company. A. G. Lafley returned as its CEO after Robert McDonald left amid intense criticism. David S Taylor is the current CEO of P&G. However, the company is still facing management related issues. The result has been that despite reducing the size of its product portfolio, the company has not been able to see impressive growth.
– Marketing innovation:-
The consumer goods industry is seeing intense competition and each brand is intensely focusing on marketing and product quality for sales and revenue growth. Apart from creating demand, marketing is also essential for consumer goods brands for more reasons. They need to engage and retain customers. Apart from a strong marketing strategy, the company needs to employ innovative marketing techniques which help it emerge from the heavy competition.
– Product innovation :-
P&G is a leading consumer goods brand that has focused on 10 key product categories and just 65 brands. However, most of the products it sells have several substitutes and the company does not enjoy any major advantage from differentiation. Lack of differentiation leads to higher competitive pressure and low organic growth. Product innovation can help the brand differentiate its product offerings from those of the competitors. Apart from that it will help the brand improve its products’ quality and also charge better prices. Under the current scenario, where the company is facing stiff competition and cannot increase prices, product innovation is the only good option before it to find faster growth.
– Mergers and acquisitions :-
Mergers and acquisitions are also a great method of achieving faster growth for the company. It has made several acquisitions in the past apart from the latest consumer Health Unit of German Merck KGaA. Mergers and acquisitions do not just help it grow its product line and expand its consumer base but also allow it to diversify into new segments and differentiate its product line from its competitors.
– Rural & emerging markets :-
The rural and emerging markets also offer significant opportunities of growth for Procter & Gamble. There is a large customer base for the consumer goods products in the rural markets. In the Asian countries with growing modernisation and advancement of Information Technology, there is a larger customer base for consumer goods brands in their rural markets. There are several emerging economies which also offer attractive potential for sales growth.
– Competitive pressures :-
Rising competitive pressure is a major threat before the consumer goods brands. Apart from Unilever, there are other smaller brands tat are also adding to the competitive pressures. Several local brands in the Asian and other markets are also competing with P & G for market share and sales. Rising competitive pressure has led to higher marketing as well as R&D costs. The pressure related to product and marketing innovation is also higher on the brand which already spends quite a fortune on advertising and promotions each year. Higher competitive pressure also means higher pressure related to customer retention. Overall, competitive pressures are leading to higher operational costs for consumer goods brands like P&G.
– Regulatory pressures :-
Regulatory pressures are also a major threat for the consumer goods brands. Higher level of political and legal regulations are leading to higher cost pressures for brands including consumer goods brands like P&G. Internationally, the laws vary from one country to another. Compliance is an important focus for international businesses since noncompliance can result in heavy fines. From product quality to labor and other areas, there are laws in every area that require compliance.
– Growing costs of raw materials and labor :-
The costs of raw material and labor have kept rising leading to higher operational costs for the consumer goods brands. Rising costs are adding to the operational costs of P&G also. This is also an important threat for the brand since it affects the company’s revenues and net earnings.
P&G is a leading consumer goods brand with a strong global presence. While the consumer goods industry has grown highly competitive, the company has to invest a large sum each year in marketing as well as research and innovation. The company is experiencing stagnant growth in the recent years. Moreover, it has faced management problems for several years. The company is trying to find faster growth by investing in product innovation as well as marketing. There are several more challenges facing the consumer goods industry. Competitive and regulatory challenges as well as a stronger dollar are also affecting the consumer goods industry. However, the US economy is performing very well and this has led to healthier consumer spending. P&G has decided to raise the prices on some of its products. However, profitable growth will also require the brand to overcome several other challenges.