Procter & Gamble Company (P&G) is an American multinational corporation that manufactures consumer goods. The company has invested in a range of products which include fast-moving consumer goods (FMCGs), personal care, and baby care products among others. The company has subsidiaries in over 180 nations. It serves at least 4 billion customers. Currently, Procter & Gamble dominates the global market in numerous product categories. The company has featured in Fortune 50 companies since 1955. In spite of the company being a leader in the production of FMCGs and personal care products, it encounters stiff competition from various enterprises. The main competitors of P&G include Colgate and Unilever. The two are also renowned brands across the globe. Currently, Procter & Gamble experiences competitive challenges. The company suffers from over-centralization, which deprives it of the opportunity to diversify its market. This report will discuss the competitive challenges that Procter & Gamble faces and how it can resolve the problems.
Nature of the Challenges
Today, P&G uses a multi-brand strategy to exploit the global market. The company has over 300 brands. However, not all brands yield high returns. Procter & Gamble invests in innovation and product development to gain traction in existing markets. Besides, the company uses unique selling propositions to encourage clients to purchase its brands. After gaining a foothold, the company uses market penetration strategy to expand market share and oust rival companies. The approach has helped P&G to acquire significant market share. However, the plan can no longer help the company to grow.
Procter & Gamble is vulnerable to the danger of over-centralization in its administration. A majority of the business’s products are inclined towards the high-end markets. Consequently, it is difficult for the company to make a substantial profit in times of economic crisis when clients opt to purchase cheap goods. The diverse product range has led to P&G being inflexible. The company suffers from widespread bureaucracy. Hence, it is difficult to make strategic decisions that would help the company to invest in a market development strategy. The company requires repositioning its products and increasing decentralization of management.
In 2014, Procter & Gamble decided to dispose of 50% of its brands as a strategy to increase revenue and enhance competition. The company dropped the brands that were hard to manage. It gave P&G an opportunity to concentrate on brands that seemed promising. Nevertheless, this was not the first time for P&G to divest non-performing brands. The company had used the same strategy before without success. Indeed, for the last 15 years, the company has dropped over 30 iconic brands. The approach has only resulted in the emergence of novel, more thriving competitors. The company’s problems do not lie in its brands. Instead, the problem lies in P&G’s business model.
Overcoming the Competitive Challenges
P & G’s major impediment to growth is its centralized decision-making and planning. In the contemporary fast-paced business environment, such an organizational structure inhibits novelty. Organizations that use decentralized modes of management witness tremendous success as they can innovate without difficulties. Besides, decentralization minimizes operations costs and boost efficiency. The greatest innovators do not do everything independently. They liaise with clients. They use information from the customers to improve their products and services. Besides, the innovators make quick, viable decisions with limited bureaucracy. Procter & Gamble should come up with independent innovation team for the different markets. Consumer preferences are different across the globe. Thus, the company ought to produce different products for diverse markets. Decentralizing the management of the company would help in decision-making processes. Organizational leaders should work in liaison with the sales team and other employees. It will help P&G to try new ideas quickly without having to go through the tedious and time-consuming bureaucracy. The company will not grow its global market by divesting non-performing products. Instead, it requires changing its business strategy.
Currently, the company’s primary strategic goal is the preservation of its global market share. It would be hard for P&G to win back the market share once the company loses it. However, the strategy that the enterprise is using currently can only bear fruits if Unilever, Colgate, and other rival companies are economically constrained. Unfortunately, companies like Unilever have sufficient fiscal resources. Hence, they can withstand price wars. Besides, P&G cannot leverage differentiation as companies like Colgate and Unilever have the upper hand in the same. Currently, Colgate has invested in product differentiation posing stiff competition. Indeed, the company continues to witness constant growth in brand value. Procter & Gamble should invest in innovation if it wants to remain competitive. The company should no longer focus on growing its market share at the expense of profits. Instead, it should invest in research and development to enable it to come up with unique products. It will enable the company to regain its European market which is currently dominated by Unilever.
Procter & Gamble has limited room for growth. Its primary brands fall under the FMCGs category. They include baby care products, shampoos, beauty and household cleaning goods. Low brand loyalty and margins characterize the market under which theses these products belong. Moreover, the products only satisfy the psychological and safety needs of clients. It would be hard for the company to expand the market share for these commodities. It can only endeavor to retain its current consumer base. P&G should look for ways to diversify its marketing strategies to remain competitive. Additionally, it should come up with the means to satisfy customer needs efficiently. The company ought to invest in societal marketing concept. It will enable P&G not only to enhance society’s life but also offer value to clients. In other words, the company should strengthen its reputation and build brand loyalty by fulfilling consumers’ needs.
P&G should consistently market its brands to remain competitive. The company uses advertising to create brand preference, awareness, and loyalty. Today, many people own mobile phones. Besides, they use social media to interact. P&G use social media to promote its products. The company has Facebook, Twitter, YouTube, and Pinterest accounts. Nonetheless, P&G’s marketing policies force the company to target a small group of customers. P&G targets women aged between 25 and 54. The company believes that women under this age bracket comprise the biggest share of its customers. P&G requires using social media to target other groups of customers. The company manufactures products used by men. They include Dunhill, Hugo Boss fragrances, Zirh, and Gucci colognes among others. Hence, it requires having social media platforms that are exclusively meant for selling male products. Besides, the company should organize for promotional events like sports that target men. It will go a long way towards helping P&G diversify its market and gain competitive advantage.