P_G Disposable diapers- value chain analysis by opal2609

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									P&G DISPOSABLE DIAPER CASE STUDY

PROCTER & GAMBLE
COMPANY BACKGROUND:
 Started in 1837 by William Procter and James Gamble  First products were soaps and candles  Procter and Gamble has nearly 300 brands in more than 160 countries  Main Headquarter in Cincinnati, Ohio  Employ 138,000 people

INDUSTRY ANALYSIS:
Growth in Disposable Diapers 1966-1973
 By 1973 the disposable diaper industry reached $370MM in sales  Manufactures enjoyed sales growth in excess of 25% YoY  P&G had 69% of the market share  K-C had approx 15% of the market share

Birth rate trends
      Growth rates had started to decline in the early 1970’s Birth rates were expected to increase by 1976-77 By the late 1970’s 1980’s, births were expected to increase by as much as 300,000 to 500,000 per year, reaching 3.9MM by 1980

COMPETITIVE ANALYSIS:
 P&G has been the major player starting from 1967-1973  In 1973 it had the market share of 69% followed by K-C with market share of approx.18%

PEST ANALYSIS:

VALUE CHAIN ANALYSIS AND VALUE CREATING ACTIVITIES:

Inbound logistics:
 P&G obtained a portion of their diapers’ fluff pulp needs from a wholly owned subsidiary, cutting their costs

Operating activities:
 Most efficient manufacturer of disposable diapers  Highest sales per manufacturing machine  Early capital investment in design of diapers (switch to adhesive tabs and fluff pulp) to maximize manufacturing efficiency in the long run  Pleated diapers conformed to babies’ bodies better  No adhesive tabs to throw away

Outbound logistics:
 P&G is able to defray some freight costs (which run up to 10% of retail price) because of their 4 regional manufacturing plants with 5 more on the way  P&G’s size made it the only player able to reap the benefits of full carload and trainload shipments

Marketing and sales:
 Sampling Programs  Relationship with Gift Pax to get their products to new mothers, including a coupon for the first purchase  Consumer Advertising  P&G and K-C were outspending everyone here by almost 500%, and P&G spent 35% more than K-C  Network television and Spot TV ads  Local Newspaper Ads  Couponing Used to improve sales in problem markets  Promotional Allowances to the trade E.g. One free case for every three the retailer buys  Test Marketing

Post-sales service:
Coupons were sent to homes with children at an age where they would need a new size of diaper


								
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