capstone

Executive Summary

This report conducts a strategic audit on one of P&G Company’s product unit/line, which is Gillette that comprise of grooming, oral care and power battery products. The analysis of the value preposition, market position, competitive advantage, external environment and strategic issues show major concerns that the company must address to improve the performance and success of the product line. Some of the issues include lack of definite value preposition, as well as, competitive advantage in oral care and power batteries. This also goes for an organizational structure inhibiting decision making among others. Redefining/redesigning the purpose of the company’s strategy and specifically the Gillette product line is recommended to provide a platform for addressing all the issues highlighted.

Table of Contents

I. Introduction 4-5

II. Value Proposition 5-6

III. Market Position Analysis 6-7

IV. Competitive Advantage 7-8

V. External Environmental Scan/Five Forces Analysis 8

i. Current Environment 8-9

ii. Porter’s Five Forces Analysis 9-10

VI. Strategic Issues 10-11

VII. Summary/Key Findings and Recommendations 11-12

Preliminary Strategy Audit: Procter & Gamble Gillette India Unit

I. Introduction

A strategic audit helps in reviewing the business plan, as well as, the strategies that a company employs to help examine shortcomings, weaknesses and opportunities to facilitate the development of a company towards success. The results drawn from the audit helps the management to make adjustments to operations and shape strategic thinking to ensure that all the decisions made towards strategy building maximize the potential of the business in reference to performance, growth and generating profit. Strategic audit is also critical as it could help businesses reposition in a manner that gives them competitive advantages over competitors, thus becoming top performers in an industry (Ireland, Hoskisson & Hi, 2008).

For some companies, strategic audit is a critical part of risk management, as it helps identify the risks that the business is facing in its strategy. In this case, the company can anticipate the risks and mitigate them to ensure the sustainability of the business in the long-term. For example, finding gaps in business process, which could sabotage employee safety, as in the case of absence of a protocol to confirm that all employees in a construction company were protective gear when entering and leaving a worksite is critical. Such gaps could inform a change in managerial practices in regard to establishing strict policy and guidelines mandating adherence of the protocol to safeguard employees and prevent occupational risks that may jeopardize the operations of a company. This paper conducts a preliminary strategy audit for Procter and Gamble’s Gillette India Unit in India. The focus will be on examining the appropriateness of the units value preposition, market positioning, competitive advantage, the external environment, as well as, the current environment in which the unit/company operates, as well as, the strategic issues that the company is facing. This will be critical in informing the areas that need change to improve on the business unit and make it a critical success factor for Procter and Gamble Company in reference to revenue generation and improving the overall performance and brand image of the company (Ireland, Hoskisson & Hi, 2008).

II. Value Proposition

Value preposition refers to the promised value that a company delivers to customers. P&G value preposition that applies to all product lines, including Gillette is making products that delight customers while upholding their sustainability goals while at the same time ensuring that the company does not sacrifice product profitability and performance. A key focus in delivering the value preposition, which most people would presume are critical factors such as quality among others, through the Gillette line of products has been using high performance computing (HPC) simulations that help the company to formulate “designer” molecules exhibiting unexpected and new properties of the product line. This has enabled the company to create new products, as well as, improve on existing products. The outcome is highly effective, consumer safe products, which have the least impact on the environment and tend to meet the goals of the company in reference to building sustainable ecological system.

In addition, delivery-delighting products, in reference to quality and performance, P&G has implements The Innovators Dilemma strategies through collaboration with innosight team to help create innovation capabilities, which help create new business model for the Gillette product line and new brands. This has made innovation in Gillette line of product repeatable, reliable and systematic to ensure sustainability, performance of products created and quality of the products, which are crucial in providing customers with a delightful experience. For example, the company has developed Gillette Fusion, an innovation that has enabled the production of razors that deliver the value preposition in reference to quality, having outstanding shaving performance as it can be used by persons with sensitive skin, as well as, ensuring smooth shave and less irritation (Council on Competitiveness, 2010).

Nonetheless, as Mascarenhas, Kesavan and Bernacchi (2004) note, value preposition the value preposition should be precise in reference to what it intends to deliver, easy to comprehend, communicate concrete results that customers get upon purchasing a service/product and differentiate the company’s products/services. In the case of P&G, the value preposition is easy to comprehend, but although it communicated what it intends to deliver, it lacks precision that would help differentiate the products from that of competitors. Indicating that it will offer products ‘delighting’ to customers is ambiguous, as what may be delight one consumer may not delight another. It is up to a consumer to decide what delighting products may be, of which they could be products with characteristics, such as attractive packaging, quality, improved performance or a luxurious feeling. In this case, the company should redesign its value preposition to make it more precise and help differentiate the value it delivers from that of competitors.

III. Market Position Analysis

The Gillette products are fairly well-positioned in the market because it targets a growing set of consumers among them the rising middleclass in India, the growing youth, as well as, all individuals as Indians are experiencing an overall rise in income levels. In year 2030, Indian consumers are expected to incur expenditure amounting to 13 trillion with most of the money being spent on home and health products. The targeted consumers in the Indian market exhibit three broad needs, which are homecare, dental care and personal grooming/hygiene. This aligns to the Gillette line of product, which focuses on personal grooming products, portable power and oral care (Sharma, 2014). The product line, which has products such as Shaving Razor, and Shaving Creams for grooming, Duracell Batteries for power and Colgate Palmolive for oral care meet the wants and needs f the growing middle-class in India. Unlike the poor, the middle-class in India is concerned about class, thus seeking fairly quality products, such as those offered by Gillette line of products that tend to represent their class (Majumdar, 2007). It is apparent, from the figure below that P&G sells more grooming products compared to oral care and Duracell batteries. This reflects its market positioning in the various products. The company is well positioning in offering grooming products, but poorly positioning in oral care and Duracell batteries. In the case of batteries, marketing position is poor because most competitors, such as Eveready Company are selling much cheaper batteries, thus providing a viable substitute for Duracell batteries. In the case of oral care, there are companies producing much cheaper toothpaste that have saturated the market (NPCS Team, 2014).

Figure 1: Showing the Gillette products and the product it sells based on percentage (source: Majumdar, 2007)

IV. Competitive Advantage

Gillette product line competitive advantage lies in producing highly innovative products in a mature market with minimal competitors capable of innovating equally as well as P&G Company. This is specifically true in the grooming section, where it produced shaving razors and creams. Gillette has continually produced razors with new innovation to stay ahead of competitors. It initiated the first disposable razors, the twin-blade shaving system, the Atra/contour system, Atra plus razor with lubricating strip, M3Power wet shaving system, Gillette Fusion razors with five blades as introduced in year 2012 and Gillette Body in year 2014, which altered the manscaping landscape to facilitate shaving the male terrain. Such innovations have made people prefer Gillete grooming product to others (Fleisher &‎ Bensoussan, 2015).

In the case of oral care products, P&G has focused on providing alternatives, such as Oral-B to cater for the different needs that customers may have. Nonetheless, competitors have duplicated the idea making the approach lack any competitive advantage. The same case applies to the issue of power batteries, as there is no significant competitive advantage present. Nonetheless, overall, the competitive advantage that drives the sales made although minimal is the brand image of the company, as a company that offers the most outstanding premium products compared to competitors (Osarenkhoe, 2008).

V. External Environmental Scan/Five Forces Analysis

i. Current Environment

Gillette’s product portfolio operates in an environment that is currently experiencing positive and negative changes that could impact it business. It operates in a mature market, with few but very stable competitors who could act as a major threat. India is currently facilitating the growth of foreign businesses and investors by coming up with lesser strict laws to facilitate business operations. Such laws are facilitating increased mergers and acquisitions, and the ability of foreign companies to set they base in the country. This change is accompanied by a change in the income levels, as wages increase and India’s middle come earners continue to increase. In this case, the current environment presents immense opportunities that the company could exploit. Nonetheless, the challenge lies in attracting more investors with the capacity to compete with Gillette products, as well as, lead to the disruption of the market through innovation of new product and business strategies that change the current approach of major competitors in the market (Davis, Nikolov & George, 2013).

ii. Porter’s Five Forces Analysis

In reference to threats of new competitors, Gillette faces competition from new private labels entrants that offer low-cost products with the capacity to disrupt the market. In this case, even though the high capital and a mature market may limit a huge number of entrants into the market, the private labels are a major risk (Davis, Nikolov & George, 2013). In the case of substitute threat, the products have variations in reference to the challenges they face. The razorblades and grooming products, such as shaving crèmes have minimal substitutes because Gillette has a unique technology that is patented and cannot be replicated by others. In this case, despite having numerous products that could deliver the same service, not offer the same value, thus making customers likely to purchase the grooming products over the available substitutes. Nonetheless, in the case of power batteries and oral care products, there are numerous substitutes, as the products lack major innovations that could differentiate them. In addition, even small companies find it easier to manufacture toothpastes and power batteries, which are readily available at a cheaper price (Davis, Nikolov & George, 2013).

In the case of buyers bargaining power, it varies based on the type of buyer. Recreational buyers focus on price while professional buyers, such as hospitals give much focus to the quality when compared to the price. In this case, the challenge is serving both customers without seeming unfair in both the pricing mechanism, as well as, in producing quality products. In most case, this s a challenge because the production of quality, premium products often require high cost production which translate into high prices. In addition, it is difficult to lower prices or lower quality to accommodate both users because this would mean damaging the company’s image, as a mark of premium products, which are normally highly priced and of higher quality. Gillette experiences minimal supplier bargaining power, as it is able to offer competitive prices to Indian suppliers owing to the economic conditions, which are not yet fully, developed (Davis, Nikolov & George, 2013).

Nonetheless, the intensity of competition is a real challenge that the company must counter. Companies such as Schick, Costco and Wal-Mart have low cost products, such as razor, thus cutting down Gillette’s product market share. The company has to contend sharing its Duracell market with Energizer label among others, which are doing well. In this case, its market share for batteries has been reduced to 30%. In the case of oral care products, the market is thinning out, as the market for power batteries has done due to the introduction of competitors offering cheaper, yet functional and quality products. This highlights the need for the company to reexamining its approach for competing against both huge and smaller competitors who are slowly taking over the company’s market share (Raider Group Investors, 2012).

VI. Strategic Issues

One of the strategic concern include losing its market share to competitors, as its market share for some products has been thinning out by sharing it with competitors. Another strategic issue relate to adaptability to change, which seems to be non-existent in the Gillette product line. The stiff competition and the probability of low-priced products disrupting the market is not just a major risk, but also a critical change factor in altering the business environment. Nonetheless, the management has not come up with any solutions, such as development of low-priced products among other that could help deal with the change. Remarkably, this could be attributed to its brand image of developing premium products, but is important to note that even a recreation of brand image is warranted to accommodate changes in the market, else a business will be rendered absolution (Ireland, Hoskisson & Hi, 2008).

The company also faces that challenge of coming up with precise value preposition and define the distinct expectations of what it will deliver to clients in a manner that differentiates it from competitors. Else, the value preposition will remain ambiguous and so will the benefits customers get from the product line, thus making it possible to substitute the brand value with products from other companies. The company has also been facing a critical strategic issue in relation to making lesser efforts to promote its product line compared to competitors. It has reduced is media efficacy by cutting down on ad spending, and this has contributed to the decreasing market share. Another challenge is the centralized organizational structure of the company that limits decision-making and the capacity of the Gillette line of products to innovate and alter strategy to respond to changes in the specific market. This is a major setback because the bureaucracy in such a structure makes it impossible for business units to be proactive about the changes happening in the market and within the organization (Ireland, Hoskisson & Hi, 2008).

VII. Summary/Key Findings and Recommendations

It is apparent that the company faces major issues in operating the Gillette products line. Major concerns include the stiff competition, making the value preposition specific, as well as, poor market position because of the inability to offer products that compete with competitors and address different needs of consumers in relation to price. This also goes for the issue of leveraging ob buyers’ bargaining power and solving strategic issues mentioned. Solution lies in revising the strategic purpose of the entire business and specifically the Gillette products line, to shift focus from just developing premium products to developing products that accommodate client needs and changes in the market, reposition the business and ward off stiff competition. This also goes for redesigning the value preposition, products with capacity to counter the stiff competitions, redesigning the organizational structure to give the product line more independence in managing its business operations, focusing efforts on promotion and other strategies to regain its market share from competitors.

References

Council on Competitiveness. (2010). Case study. Procter & Gamble’s story of suds, soaps, simulations and supercomputers. Retrieved from http://science.energy.gov/~/media/ascr/pdf/benefits/Hpc_pg_072809_a.pdf

Davis, E., Nikolov, D., & George, E. S. (2013). Strategic report: The Gillette Company. Retrieved from http://economics-files.pomona.edu/jlikens/SeniorSeminars/PAC2004/Drafts/gillette.pdf

Fleisher, C.S. &‎ Bensoussan, B.E. (2015). Business and competitive analysis: Effective application of new and classic methods. New York, NY: FT Press.

Ireland, R. D., Hoskisson, R., & Hi, M. (2008).Understanding business strategy: Concepts and cases. London, LND: Cengage Learning

Majumdar, R. (2007). Product management in India. New Delhi: PHI Learning Pvt. Ltd.

Mascarenhas, O. A., Kesavan, R., & Bernacchi, M. (2004). Customer value-chain involvement for co-creating customer delight. The Journal of Consumer Marketing, 21(7), 486–496.

NPCS Team. (2014). Market research report on detergent industry in India- market size, opportunities, comparative financial analysis, demand-supply scenario, outlook and forecasts upto 2017. New Delhi: Niir Project Consultancy Services.

Osarenkhoe, A. (2008). What characterizes the culture of a market-oriented organization applying a customer-intimacy philosophy? Journal of Database Marketing & Customer Strategy Management, 15(3), 169–190.

Raider Group Investors. (2012). Procter & gamble equity valuation & analysis. Retrieved from http://mmoore.ba.ttu.edu/ValuationReports/Fall2007/ProcterGamble.pdf