Procter and Gamble Case Study

Procter and Gamble Case Brief

Background:

Procter & Gamble is the world's largest maker and distributer of household items and consumer goods. The company markets its brands in more than 140 countries and had net earnings of $1.6 billion in 1990. P&G was recognized as the market leader in Canada as its Canadian subsidiary alone contributed $1.4 billion in sales in the year 1990. One of their mouthwash brands is "scope", which is a market leader in Canada with a share of 33% since 1970. In 1998, Pfizer Inc decided to enter the market with "Plax" which currently hold 10% market share. As scope has started showing signs of losing its market, P&G needs to make 2 decisions – how should P&G respond to the newest competitor in the mouthwash market and what strategy should be adopted to ensure continued profitability in the future.

Analysis:

It is obvious that 75% of Canadian households use one or more mouthwash brands, hence the rest 25% do not use mouthwash(Exhibit1). Mouthwash market has been growing at a rate of 5% and scope holds 33% of the market in Canada which is the largest. 42% of its sales come from supermarkets and 27% through drugstore. 3 main reasons for using mouthwash are oral hygiene, get rid of bad breath, kill germs. On the basis of frequency of usage, another very important segmentation of mouthwash buyers is done as heavy users(used once a day or more), medium users(used two-six times a week), and light users(less than once a week)(Exhibit 2). There are 7 major players constitute 95% of market share. Now, Plax has taken over 10% by positioning it as a pre-brushing plaque removal product which is unique in its own segment.

Opportunities: P&G's Scope has been in the health care industry since 1967 and it tastes better, so they could move into a different segment and increase profits. They expand and maintain the market share in mouthwash industry.

Threats: Industry is saturated by competitors, as the growth rate has declined from a 26% increase to 5% and they have duplicated the products.

Competitors: There are 5 major competitors – Listerine (plaque fighting product), Capacol (germ killing mouthwash), listermint (good-tasting mouthwash), Colgate fluoride rinse (cavity fighting mouthwash), and Plax (plaque-fighting, pre-brushing). (Refer Exhibit 3)

Strategic Alternatives:

1) Do nothing strategy- According to this strategy, P&G should not be worried about the competition and they should not do anything. This will cause an increased risk in the long term position of Scope, however, this may avoid strategies that may potentially backfire or are too risky.

2) Expansion using current product: If the company only relies on market expansion 5% based on past sales data then