·Technology
New technology in R&D and new material will determine the new product according to the customer requirements, there is no barriers on the locally implementation of the new technology.
·Social culture
Not so important in this regard, because of the homogenous of consuming habit of the global customer.
Five forces analysis
·Threat of entry
There is a high barrier in this, because of the high entry cost on the production, advertisement and R&D, also a economics of scale, further more, the establishment of complex distribution will be costly, the retailing and wholesale exist at the same time.
·Threat of substitutes
There is no substitute in this industry.
·Bargaining power of buyers
This is with low barrier, especially, the retailer and individual.
·Bargaining power of suppliers
It is low, because of so many suppliers for material.
·Competitive rivalry
The rivalry is with very high power. P&G is facing the hyper competition in the market, which is mature, the other manufacturer is with long experience on marketing and production. So many brand in the definite market, the customer has many choices.
SWOT analysis
·Strength
Good reputation in the market.
High expertise in the production and marketing.
Explicit global strategy.
·Weakness
·Opportunities
Providing product with high quality beyond the rivalry to meet the desires and needs from the customer.
·Threatens
From the other giant competitor, which is with unique core competence or distinctive capability, distribute their product in the same market.
On the other hand, the desire of customer is increasing with the development of this industry. How to meet this is a strategic issue.
Generic strategy
·Differentiation
This is achieved through:
- Continuous to improve the distribution channel
- The establishment of the Global Business Units for overall global strategy and planning for P&G brands worldwide, and 8 Market Development Organizations to drive sales of P&G brands in individual markets.
- Thinking globally and locally, and winning locally in every market where the company does business.
- Internationalization and consolidation of retailing, consumer loyalty is retained,
- Category management help to differentiate the consumer offering.
- Dramatic advances in information technology increase the efficiency of the transaction between the manufacture and retailer.
- Though the joint efforts of the retailer and manufacture, maintaining the customer loyalty to the brands.
- Decentralized production, sales, and marketing in many countries
- Global teams work with global customers, regional teams work with regional customers and so on.
·Low cost
- Continuous Replenishment (CRP) System - EDI implementation with objective to minimize stockouts and inventory carrying cost.
- Eliminate costly Less-Than-Load shipments
- Through the use of EDI and Order Service systems to reduce the transaction cost.
- Efficient Consumer Response (ECR) System - Channel innovations that allow grocery chains to compete with mass-market and club stores
P&G supported its generic strategy by organizing its international value chain in the way to:
- Reengineering and identifying its core process and support process to contribute to the generation of value.
- Improvement on the information technology.
- Big investment in innovation and technology.
- Improving the operation of its distribution channel.
- Strong marketing and sales force result in the good brand image.
So P&G can think globally and locally to focus on its production, innovation, distribution and marketing to support its generic strategy.
Core competence/distinctive capabilities
- Facing hyper-competition in the market, P&G must base on its unique of marketing, technology and distribution to differentiate from the competitors.
- P&G invented its LIMS infrastructure to support the global strategy, it diversifies global research and development analytical laboratories. On the other hand, LIMS support local P&G.
- The implementation of new technology and take advantage of any automation technology to take the people out of the process where ever possible.
- Reengineer the core process and support process.
- The utilization of advanced information technology. Including fast search and matching with large databases, massive and accurate data storage and fast, accurate communication of data.
Appropriate the Network Externality (Standardize):
Sale of CRP system to IBM (ISSC) in late 1993; quick adoption by Ralston-Purina and 5 other ISSC clients. It is the source of the "standard," P&G has some control (mainly in initial design) over the features and interface, and can select to its own strengths.
In order sustain the competitive advantage, the firm links the core competence with generic strategy by value chain.
International Value Chain
·Infrastructure
·Logistics
·Production
·Human
Resource
·Technology
·Procurement
·Finance
·Information
system
Operations Distribution Sales & Marketing
P&G’s Value Chain
At present, the firm’s globalization is influenced by the strength of the globalization drivers and pressure for integration.
Globalization divers
According to the Yip’s global drivers, P&G need to link the generic strategy and core competence globally by value chain, which involves configuration and location of value-adding activities, co-ordination and integration of value adding activities, also P&G should consider pressures for responsiveness (Ron Philips, 2003). How P&G did according to that?
Configuration: In
P&G adopt the dispersion method in different country, every global business unit perform the value adding activities to support the local strategy, utilizing the local advantages, analysising the market features, size, growth, behaviour patterns and structural issues, according to the local resource, materials and labour, P&G’s outsourcing is successful.
P&G make the production locally based on the political & legal and socio-cultural environment. It is the orientation on market, supply and cost. In order to serve the individual market, in which the retailers and end-user operate, P&G implement its function to react to the cusomer.
At the same time, P&G is pursuing the optimal architecture to meet the market, the close relationship is founded between the manufacture and retailers by category management, which help retailers differentiate their assortment, pricing and merchandising based on their overall strategy.
Co-ordination: P&G strive to create “strong brand equities, robust strategies and ongoing innovation in product and marketing to build major global brands.” To do this they communicate with customers to ensure their marketing plans are locally understood and fully capitalized. They try to meet customer needs in each country while keeping synergy across the company and ensuring the use of programs that work in their favor.
Through the support of the professional team on marketing, finance and the implementation of logistics to overcome the constrains.
Pressure for co-ordination and integration:
P&G realized the importance of the multinational, decentralized the management according to the different situation to meet the different customer.
Local support team and outsource to face the other mulnational competitors.
Trade-off between labour and other supply costs and productivity, adaptability and manageability is for cost-orientation to reduce the cost.
Reasonable capitalize locally for target market, developing the skills through the training and education.
Technological intensity, quality control of product and process development.
Pressure for local responsiveness:
P&G is fully conscious that the difference in customer needs and in distribution channels.
On the basis of above analysis and the actual situation which the firm is operating, the conclusion is drawn according to the framework of configuration/co-ordination.
High co-ordination of activities
Low co-ordination of activities
Geographically Geographically
Dispersed Concentrated
Configuration
As a multi-national company, P&G faces the global strategy and local strategy option, how to balance the two issues if the key factor during its operation.
Global Strategy Options Local Strategy Options
Centralized decision making Locally responsive
Concentration of key value-adding decision making
activities Dispersion of certain value-
Local sourcing adding activities
Standardization of key local sourcing
Product features
Meet the different
needs of customer
Decentralization of local variations to
marketing marketing strategy
strategy
Global brands and
advertising
Pressure for Pressure for
Globalization localization
Culture
Based on the analysis of the firm, the global strategy options of it is:
XXX is a successful multinational firm, about its “3 Cs” of success:
·Complementary skills
·Compatible goals
·Co-operative cultures
Architecture
Alliance
Network
Collaboration
Brief and recent history of P&G
Major personnel profile
John Millen, Vice President, Customer Business Development at Procter & Gamble
Reference
Griffin, R. W., Pustay, M. W., International Business: A managerial Perspective, 2nd Edition, 1999, Wesley Publishing Company, Inc.
Stonehouse, G. H., Hamill, J., Campbell, D., Purdie, A., 2000, Global and Transnational Business-Strategy and Management, Wiley