Procter & Gamble Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Procter & Gamble (P&G) is an American consumer packaged goods corporation headquartered in Cincinnati, Ohio. It manufactures a wide range of consumer goods such as Ivory soap, Crisco oil, Tide detergent, Crest toothpaste, and Gillette razors. In 2007 it was the 25th largest U.S. company in terms of revenues, with $76.5 billion in sales and close to $10.3 billion in total revenues. P&G was created in 1837; its products are present in more than 180 countries. These products are sold primarily through mass merchandisers, grocery stores, membership club stores, drug stores, and, soon, e-retailing. P&G is credited with many business innovations, including brand management, sponsoring television shows, and profit-sharing with its employees, and it is constantly ranked as one of the world’s most admired companies.

Procter & Gamble was founded in Cincinnati in 1837 by William Procter (a candle maker) and James Gamble (a soap maker). The company produced both candles and soap for the better part of the 19th century, but it moved away from producing and selling candles with the advent of electricity in the 1920s. Soap continued to be an important revenue stream for P&G. At one point, the company sold over 30 different brands of soap; Ivory, one of P&G’s most recognized brands, made its appearance during the late 19th century.

P&G continued expanding its operations into other consumer products such as cooking oil (Crisco), health products, cleaning products (Tide), and toothpaste (Crest). Simultaneously, P&G expanded international operations, opening manufacturing offices in Canada (1915), Mexico (1948), France (1954), and Saudi Arabia (1961).

The company has had a long tradition of organic growth for its product line, but it shifted its strategy to complete a series of acquisitions in the second half of the 20th century to broaden its product line. These acquisitions included Folgers Coffee, Old Spice, Richardson-Vicks, and Iams Company. The latest acquisition was the Gillette Company, which made P&G the biggest consumer goods company in the world. It also added many household name products to P&G’s product line such as Gillette razor, Duracell batteries, and Oral-B toothbrushes. In 2007, 23 of P&G’s brands had more than a billion dollars in net annual sales, and another 18 products had sales that ranged between $500 million and $1 billion.

Since 2007 the company has been structured into three global business units (GBUs). Each of these GBUs is responsible for its own business segments. The first is the Beauty GBU, which includes both the Beauty and the Grooming Segment. The Household GBU comprises both the Baby & Family Care Segment and the Fabric Care and Home Care Segment. The third Unit, Health & Well-Being, includes the Health Care and the Snacks, Coffee, and Pet Care Segments.

Contributions to Management Practices

Procter and Gamble is often described as a key innovator in the way companies interact with their consumers. Hence, they are believed to be among the first companies to engage in brand management as well as media sponsorship. P&G created its marketing department in 1931. The department focused on creating specific brand messages for each of the company’s products. It also invested heavily in marketing research so P&G could understand how to make its products much more appealing to the consumer. Both of these approaches, quite common today, were revolutionary when they were developed by Procter & Gamble.

Following these developments, market research found that there was an opportunity in sponsoring radio shows. These shows became known as soap operas (a tribute to Procter & Gamble’s soap product lines). In the 1930s, P&G heavily sponsored radio shows, and progressively moved to sponsoring television shows in the 1950s. Two of the first series P&G sponsored (As the World Turns and Guiding Light) are still on the air today and are produced by a division of P&G called Procter & Gamble Productions. This approach to sponsorship and production extended into many other types of shows, including prime-time shows (such as Our Private World), comedy series (such as Down to Earth), as well as supporting many Spanish-language novelas. Even today, P&G continues to invest heavily in soap operas as a major marketing channel.

On the employee relationship side, P&G developed some remuneration programs that were uncommon at the time. In 1887 it established a profit-sharing program for its workforce, hoping that giving a stake in the company to workers would reduce chances of them going on strike. It continued to incorporate the interest of workers into its constituting charter, and continues today to be viewed as a prime location to work.

Bibliography:

Davis Dyer, Frederick Dalzell, and Rowena Olegario, Rising Tide: Lessons From 165 Years of Brand Building at Procter & Gamble (Harvard Business School Press, 2004);
Ingird Farasyn, Koray Perkoz, and Wim Van De Velde, “Spreadsheet Models for Inventory Target Setting at Procter & Gamble,” Interfaces (v.38/4, 2008);
Jay R. Galbraith, Designing Matrix Organizations That Actually Work: How IBM, Procter & Gamble, and Others Design for Success (Jossey-Bass, 2009);
Tuomas Sandholm et al., “Changing the Game in Strategic Sourcing at Procter & Gamble: Expressive Competition Enabled by Optimization,” Interfaces (v.36/1, 2006);
Brian Steinberg, “P&G Comes to Rescue of Soaps on the Ropes,” Advertising Age (January 2008).

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