P&g Marketing Strategy

-Problems P&G is facing

Procter and Gamble is a world-known company which it got around 50 categories of products. Although it has been proved successful in the scale of the company,  however, there are internal problems of the company. The organizational structures are changing frequently until a project called ‘organization 2005’. Before the launch of this project, P&G is trying different management structures for the whole company, it has been found that there are a lot of problems induced by all of the structures since all of them have not ever been symmetrical. It makes the process of communication slow and inefficient. Pampers, for example, was launched in the United State in 1961, in Germany in 1973, and in France not until 1978. It shows that the information is not flowing through the whole company, and hence not synchronized throughout the whole company including different parts in different countries. Moreover, there are too many roles that are overlapped in management level, it will increase the time for decision making since it has to be gathering all the approval from people in management level. It means the speed of information flow and decision making are slow, and it directly affects the agility of the supply chain of the company. For example, R&D department may want to globalize new technological and brand innovation quickly, however, they still have to be agreed by each regional manager. It greatly affects the competitiveness of the new product, because when it appears to customers, there may already have similar products in the market. Besides, poor communication has increased the cost and complexity to the supply chain from no value added activities such as creating pack-size and formulation variations. By grouping up all the problems above, it is due to the poor management structure of the company that induces poor communication and fragmentation of the company, which brand strategies cannot be applied due to different countries’ managers have different strategies on the same brand.

-Solution to the problems

In 1998, P&G has launched a new project named ‘Organization 2005’, it is a project to restructure the problematic internal management structure of the company. This projects will eliminate six management layers that will cut the total number of 13 to 7. It can improve the speed of P&G’s globalized innovation, which in turn will cut the cost and generate sales growth of 6-8 percent and profit growth of 13-15 percent. It makes the information flow more smooth and faster, it can greatly increase the efficiency of internal communication. Thus, it will reduce the cost and complexity of the supply chain, making it more efficient compare to the supply chain before. Reduced cost of supply chain will then improve the net profit of the whole company. Moreover, reduced complexity of supply chain will make the whole company to get the same information from the head quarter faster and apply the brand strategy more accurate. Besides, company will invest IT system to deal with all the information, such as financial and product category, within the one centre, it will increase the efficiency and counter the problem of slow decision making process. It will also divide the company into different division who will responsible for different part of the business for the company, it avoids messing up the data and increases the efficiency of the decision making process. Furthermore, R&D will be shared from different Global Business Units, it can reduce the cost and increase the agility through accelerating the global standardization of manufacturing process. Production team will get clear information of what they need to do and also have the standardized product sample to follow. Finally, company improves the incentive program to her employees by increasing the performance-based portion of compensation from 20 percent to 80 percent of base pay; furthermore, for stock-option compensation, company increases the limit from 9000 employees to 100000 employees. This act increases the morale of employees so as to increase the whole performance of the company to capture higher profit and better feedback. The project can standardize the production process, streamline the information flow within different levels of the company, consolidate and strengthen the business performance by increasing the morale of employees and faster decision making process. Increased decision making process will make the new products appear to customers earlier, and thus can avoid competitors promoting similar products at the same time, which may harm the sales of the new products.