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Proctor _ Gamble

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Proctor _ Gamble Powered By Docstoc
					 Proctor & Gamble
Jamelyn Griffith
Crystal Hill
Walter McCone
Ryan White


                   August 1, 2011
History of Company

•   Founded in 1837 in Cincinnati, Ohio
•   First Product: Ivory Soap
•   300 Brands, 180 Countries
•   Operate in three different industries:
    ▫ Personal Care (Beauty & Grooming)
    ▫ Household Care
    ▫ Health & Well-Being
  Company Strategy

• As listed in their annual report:
  ▫   More consumers
  ▫   In more parts of the world
  ▫   More completely
  ▫   Also reaffirms purpose
Statement of the Mission
“We will provide branded products and services of
 superior quality and value that improve the lives
 of the world's consumers. As a result, consumers
  will reward us with leadership sales, profit, and
      value creation, allowing our people, our
  shareholders, and the communities in which we
             live and work to prosper.”
    Statement of Mission
    VALUES
    P&G is its people and the values by which we live.
    We attract and recruit the finest people in the world. We build our organization from within,
    promoting and rewarding people without regard to any difference unrelated to performance. We act
    on the conviction that the men and women of Procter & Gamble will always be our most important
    asset.

    LEADERSHIP
•   We are all leaders in our area of responsibility, with a deep
    commitment to deliver leadership results.
•   We have a clear vision of where we are going.
•   We focus our resources to achieve leadership objectives and strategies.
•   We develop the capability to deliver our strategies and eliminate organizational barriers.


  OWNERSHIP
• We accept personal accountability to meet our business needs, improve
  our systems, and help others improve their effectiveness.
• We all act like owners, treating the Company's assets as our own and behaving
  with the Company's long-term success in mind.
    Statement of Mission
    INTEGRITY
•   We always try to do the right thing.
•   We are honest and straightforward with each other.
•   We operate within the letter and spirit of the law.
•   We uphold the values and principles of P&G in every action and decision.
•   We are data-based and intellectually honest in advocating proposals,
    including recognizing risks.


  PASSION FOR WINNING
• We are determined to be the best at doing what matters most.
• We have a healthy dissatisfaction with the status quo.
• We have a compelling desire to improve and to win in the marketplace.


  TRUST
• We respect our P&G colleagues, customers, and consumers,
  and treat them as we want to be treated.
• We have confidence in each other's capabilities and intentions.
• We believe that people work best when there is a foundation of trust.
  Mission Analysis
1. Does the statement describe an inspiring purpose that avoids playing to
     the selfish interests of the stakeholders? (somewhat= 1)

2. Does the statement describe the company’s responsibility to its
   stakeholders? (yes=2)

3. Does the statement define a business domain and explain why it is
   attractive? (yes=2)

4. Does the statement describe the strategic positioning that the company
   prefers in a way that holds to identify the sort of competitive advantage
   it will look for? (yes=2)

5. Does the statement identify values that link with the organization’s
   purpose and act as beliefs with which employees can feel proud?
   (yes=2)
Mission Analysis

6. Do the values resonate with and reinforce the organization’s
  strategy? (somewhat=1)

7. Does the statement describe important behavior standards
   that serve as beacons of the strategy and the values? (yes=2)

8. Are the behavior standards described in a way that enables
  individual employees to judge whether they are behaving
  correctly? (yes=2)

9. Does the statement give a portrait of the company, capturing
  the culture of the organization? (yes=2)

10. Is the statement easy to read? (yes=2)
Mission Analysis
•   Scored an 18= Exceptional
•   Multiple parts, not just “The Purpose”
•   Must be broad to cover three industries
•   Covered all the bases
•   Strong, meaningful, and effective
Implied Objectives

1. To be an industry leader(s) in market share
 ▫   Already #1 in Beauty & Grooming
2. Become a leader/trend-setter in innovation
 ▫   Large R&D budget
3. To better satisfy consumers on a global basis
 ▫   Listed core strength (Understanding Consumers)
Threats
1. Intense Competition
2. Government Regulations
3. Counterfeit Goods
Opportunities
1. Future growth
2. Increased concentration on core businesses
3. Increase customer base in growth markets
Strengths
1. Strong brand portfolio
2. Significant R&D investments
3. Great worldwide reputation for sustainability
Weaknesses
1. Dependency on Wal-Mart
2. Higher product prices
3. Product Recalls
Financial Analysis

• Consistency in Gross Profit by    Income Statement 2010
  balancing their 6% decrease in                         June        June        June
  Revenue with a 7% decrease in                          2008        2009        2010

  COGS                             Revenue              83,503.00   79,029.00   78,938.00

                                   Cost of Goods Sold   40,695.00   38,898.00   37,919.00
• Consistency in Net Income        Gross Profit         42,808.00   40,131.00   41,019.00
  utilizing a 4 % change in
                                   SG&A Expense         25,725.00   24,008.00   24,998.00
  administration expenses
                                   Discontinuing
                                                          N/A       2,143.00    1,790.00
                                   Operations
• Sale of Folgers in 2008 has      Total Net Income     12,075.00   13,436.00   12,736.00
  resulted in discontinuing
  operations
Financial Analysis
                                  Balance Sheet 2010
                                                        June         June          June
• During the previous 3 years                           2008         2009          2010
  P&G's assets have diminished    Total Assets        143,992.00   134,833.00   128,172.00
  by 10 %
                                  Total Liabilities   74,498.00    71,734.00    67,057.00


• While long term debt has been   Total Equity        69,494.00    63,099.00    61,115.00

  constant short term debt has    Short Term Debt     13,084.00    16,320.00    8,472.00
  decreased by 48%
                                  Long Term Debt      23,581.00    20,652.00    21,360.00


• P&G has an extremely low        Current Assets      24,515.00    21,905.00    18,782.00

  ratio of tangible assets to
  intangible assets               Intangible Assets   98,837.00    93,466.00    90,146.00
Table 1: Proctor & Gamble Liquidity Ratios 2010




       Financial Analysis
        Liquidity Ratios
        • Current ratio- P&G's low ratio is a result of low current
          assets ie. high intangible assets
        • Quick ratio- Minus inventories P&G measures closer to
          its competitors

                                                  Procter &   Kimberly   Industry
                                                   Gamble       Clark

                     Current Ratio                   .77        1.19       1.08

                      Quick Ratio                    .51        .67        .57
Financial Analysis
Profitability Ratios
• Return on Equity-P&G has been reducing their equity by
  repurchasing common stock
• Earnings Per Share- One of the 3 corporate wide
  objectives is to increase EPS

                         Procter &   Kimberly   Industry
                          Gamble       Clark

      Return on Equity    17.91%      32.55%     15.8%

     Earning Per Share     4.11        4.45       N/A
Financial Analysis
Activity Ratios
• Inventory Turnover- Above average turnover means
  that P&G is selling at reasonable rates
• Asset Turnover-A number of P&G's assets are going
  towards future growth

                          Procter &   Kimberly   Industry
                           Gamble       Clark

     Inventory Turnover      5.5        6.0        5.0

       Asset Turnover        .62        1.0        8.0
Financial Analysis
Leverage Ratios
• Debt to Equity- P&G utilized creditors much more than
  their competitors
• Debt to Assets- Other than the Gillette acquisition in
  2005, P&G has successfully kept the ratio low

                        Procter &   Kimberly   Industry
                         Gamble       Clark

       Debt to Equity    48.81%       92%        66%

       Debt to Assets    23.27%      27.5%       N/A
Financial Analysis
Other Ratios
• P/E Ratio- P&G has an inflated ratio due to low EPS
• Dividend Payout- Although P&G has an average payout
  they have been paying dividends for 120 consecutive
  years

                              Procter &   Kimberly
                               Gamble       Clark

      P/E Ratio                 14.59       14.16

      Dividend Payout Ratio      .44         .59
Strategic Concerns


1. Low Assets=Low Liquidity Level=Debt
2. Too much attention on R&D and Advertising
3. Intense Competition
Salient Strategic Concern

 #3: Intense Competition
Strategic Alternatives

1. Sell third industry brands
2. License third industry brands
3. Strengthen assets globally
Strategic Alternatives
1. Sell third industry brands
Advantages                        Logic
1. Discretionary funds in P&G's   • This plan would fulfill P&G's
   pocket                           aim of delivering consistent
2. Increases concentration on       and competitive sales growth
   core-brands                      and it also will improve P&G's
                                    operating margins over the
Disadvantages                       intense competition.
1. Loss of revenues
2. Time consuming process         Feasibility
                                  -Highly Feasible

                                  • brands are reputable
                                  • brands are at the top of their
                                    perspective markets
Strategic Alternatives
2. License Third Industry Brands

 Advantages                           Logic
1.   Enable P&G to keep the brands   •This plan will enable P&G to
     but sell globally               penetrate foreign countries
2.   Little risk & little funds      •P&G would have an existing
3.   Access to new distribution
                                     market share and brand image
     systems
4.   Entry into new regions
                                      Feasibility
 Disadvantages                       -Somewhat Feasible
1. Loss of control
2. Decline in revenues               •Research would be a hassle
3. Brand image and brand quality     •Complications crafting a contract
   could be severely hurt
Strategic Alternatives
3. Strengthen Assets Globally

Advantages                       Logic
1. Enter market with own         • P&G would be strengthening
   resources                       their brands against the
2. P&G has a global reputation     intense competition associated
                                   with global expansion
Disadvantages
                                 Feasibility
1. Consumer response             - Somewhat Feasible
   inconsistency
2. Country specific brand or     • P&G currently has access to
   product                         resources in over 28 countries
3. Laws of the land              • However, P&G would be
                                   hesitant do to the high risk
                                   disadvantages
Recommendation
#1: Sell brands within the Health
    and Well-Being industry!
Plan of
Implementation


Program 1: Sell brands that are not in the personal care
industry, but are high performers in separate industries.
• Task 1: Determine appropriate brands to sell
  ▫ Procedure 1
  ▫ Procedure 2
  ▫ Procedure 3
  ▫ Procedure 4
Plan of Implementation
• Brands chosen to sell:
 ▫ Pet Care- Iams, Eukanuba, and Natura Pet
 ▫ Health Care- Prilosec OTC, Align, Vicks,
   Fibresure, Metamucil, and Pepto Bismol

 ▫ http://www.iamscruelty.com/index.asp
 ▫ http://www.hulu.com/watch/99942/saturday-
   night-live-mostly-garbage-dog-food
 Plan of
 Implementation
• Task 2: Value brands to determine what price to sell at
  ▫ Procedure 1
  ▫ Procedure 2
  ▫ Procedure 3
• Task 3: Find potential buyers
  ▫ Procedure 1
  ▫ Procedure 2
• Task 4: Value which buyer is most beneficial
  ▫ Procedure 1
  ▫ Procedure 2
Plan of
Implementation
• Task 5: Chose one or multiple buyers
 ▫ Procedure 1
 ▫ Procedure 2
• Task 6: Sell the brands
 ▫ Procedure 1
 ▫ Procedure 2
• Task 7: Appropriately allocate funds received
 ▫   Procedure 1
 ▫   Procedure 2
 ▫   Procedure 3
 ▫   Procedure 4
Plan of
Implementation
• Task 8: Create a Six Sigma Training Program
 ▫   Procedure 1: Define
 ▫   Procedure 2: Measure
 ▫   Procedure 3: Analyze
 ▫   Procedure 4: Improve
 ▫   Procedure 5: Establish controls
Budget

   Total Profit

   Pet Care- Iams, Eukanuba, Natura Pet Care                Est. $3,050,000,000.00

   Health Care- Vicks, Prilosec OTC, Pepto Bismol, Align,   Est. $3,800,000,000.00

   Metamucil, Fibrasure

   Total Expenditures

   Liabilities                                              $4,839,976,000.00

   Six Sigma Training                                       $10,024,000.00

   Cash Reserves for                                        $2,000,000,000.00
Evaluation & Control
Procedures

• Tasks 1-7: Meet with Board of Directors
• Task 8: Strategic-funds method
 ▫ Evaluate Executives with Black Belt Certification
   on the Six Sigma program
 ▫ Survey Employees
Questions?

				
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