Final Part 2

Part II: Proctor and Gamble

Company Overview:

Proctor and Gamble is one of the leading companies in the manufacturing of fast moving consumer goods (FMCG) sector. Ever since its establishment in 1837, it has been able to serve the best products to its clients that caters to their changing needs. As a result of this, P&G has incorporated the latest technology into its system to enable them to produce more innovative products as a response to consumers’ demands. The main competitors for the company are Unilever, Coca Cola and other known multinational brands. The last reported annual sales for P&G were $66.9125 billion. Since P&G has ten different categories of product offerings, the direct competitors vary for each of these categories. For the purpose of analysis in this paper, the segment of Family care from P&G’s product offerings (P&G Annual Report, 2018).

Macroeconomic Variables:

There are many different macroeconomic variables that have an impact on the performance of the individual companies. In this section, three different macroeconomic variables have been identified, based on which can significantly impact the supply and demand of P&G products.

1. Inflation rate:

Inflation rate is the increase in the price level and a decrease in the purchasing power of money. The general trend for Inflation rate shows a rising trend in US (Statista, 2019) as a result of which the cost of raw material increases and ultimately translates into increased prices of the final goods and services. In terms of P&G, there has been an increase in the cost of production for the company and there is an increase in the pricing pressure as well. This means that as the prices will increase, there is a general trend that there will be fall in demand leading to lower volume of sales and hence a fall in the sales revenue (Kim, 2018).

2. Exchange Rate:

The exchange rate is the rate at which one currency can be traded for another. The major fluctuations in the trend for exchange rate of US depends largely in which countries P&G is operating and selling its products. For instance, the exchange rate between Canadian dollar and US dollar shows that US dollar is weakening whereas the exchange rate for Euro to US dollar shows a stable pattern but a slight hint that Euro is getting stronger (XE Currency Charts, 2019). This factor is important for P&G majorly because of the operations of the company that are spread across the globe. This also defines how raw material may be transferred by P&G from one country to another to maintain quality. The subsidiaries may make their own financial statements but at the end of the year, the headquarters of P&G must consolidate and produce annual report for the entire P&G’s performance over the years. For this purpose, exchange rates are used to translate the performance of different countries’ heads of P&G into one report.

3. Unemployment level:

Unemployment level is the number of people who are willing and able to do a job but cannot find a job. The data for previous years for employment rate in US reveals an increase over the past three years (Trading Economics, 2019). The level of employment will allow the FMCG companies like P&G to be able to increase their sales volume.

This is majorly because of the increased demand of the greater population which is able to afford and spend more on consumer goods. However, there must be a check for the rival businesses at this point as the increase in consumer disposable incomes mean that the competitors have the opportunity to capture more market share and P&G will need to plan accordingly (Terlep, 2018).

References CSI Market. (2018). PG's Competition by Segment and its Market Share. Retrieved from CSI Market: https://csimarket.com/stocks/competitionSEG2.php?code=PG Kiim, T. (2018). Procter & Gamble shares downgraded by UBS because of rising inflation. Retrieved from CNBC: https://www.cnbc.com/2018/07/19/procter--gamble-shares-downgraded-by-ubs-because-of-rising-inflation.html MacroTrends. (2019). Proctor and Gamble. Retrieved from MacroTrends: https://www.macrotrends.net/stocks/charts/PG/procter-gamble/income-statement P&G Annual Report. (2018). Annual Report. Retrieved from P&G: http://www.pginvestor.com/CustomPage/Index?KeyGenPage=1073748359 Statista. (2019). Projected annual inflation rate in the United States from 2010 to 2023. Retrieved from Statista: https://www.statista.com/statistics/244983/projected-inflation-rate-in-the-united-states/ Terlep, S. (2018). Procter & Gamble, in a Strategy Shift, Moves to Raise Prices. Retrieved from The Wall Street Journal: https://www.wsj.com/articles/procter-gamble-reports-slightly-higher-sales-drop-in-prices-1533040191 Trading Economics. (2019). United States Employment Rate. Retrieved from Trading Economics: https://tradingeconomics.com/united-states/employment-rate XE Currency Charts. (2019). Retrieved from XE: https://www.xe.com/currencycharts/?from=USD&to=EUR&view=5Y