Proctor & Gamble - Term Paper Example

?Proctor & Gamble Proctor & Gamble (P&G) is a global publicly traded, fortune 500 company serving 4.8 million s across the world with a wide range of products to suit all categories and ages of people. Headquartered in Cincinnati, P&G was established in 1837 and currently has registered sales of $84.2 billion for the FY 2013. P&G boasts of 50 leadership brands which are common household names and which account for 90 percent of its sales and profits. Leadership brands include 25 such brands that generate more than $1 billion in annual sales. With an eye to enhance business performance, P&G has divided its Global Business Units into four industry-based sectors. These units include Global Beauty, Global Baby, feminine and Family Care, Global Fabric and Home Care, and Global Health and Grooming. All these units focus on common consumer benefits, common technologies and face common competitors. The company has invested $9.7 billion in 2013 and is consistently one of the world’s top advertisers. Sports sponsorship is very popular with P&G while they also engage in social responsibility in various ways. One of the ways that P&G tries to bring the comforts of home to families impacted by natural disasters is by responding to disasters all over the world through product and cash donations. On October 30, 2013, P&G news release states that the company has expanded its partnership with American Red Cross by joining the Disaster Responder Program to support Red Cross Disaster response work worldwide. This represents a milestone in P&G’s commitment to bring relief to the disaster-stricken. In the past decade P&G has created programs like Tide Loads of Hope and Duracell Power aimed at bringing clean clothes, batteries and power to families recovering from disasters. They know some of their products can bring immediate relief and hence P&G employees pack kits containing P&G brands such as Secret, Gillette, Crest, Ivory and Lams, which are then distributed after the disaster through mobile relief units. Their partnership with American Red Cross ensures the victims receive immediate care in critical moments after the disaster. Brands such as Pampers, Crest and Tide help in rebuilding their lives with the dignity that comes with clean clothes. P&G has worked in partnership with American Red Cross for disasters like Oklahoma Tornadoes, Hurricane Isaac and Superstorm Sandy. P&G engages in corporate social responsibility (CSR) activities in other ways. On October 10, 2013, P&G announced that some of its brands such as Duracell, Tide and Secret had underwritten all their production costs for the Nyad Swim for Relief. To support Hurricane Sandy recovery efforts, long-distance swim legend, Diana Nyad organized 48-hour “Swim for Relief” in New York City’s Herald Square. The funds would be donated to AmeriCares, a non-profit global health and disaster relief organization that delivers medicines, medical supplies and medical aid to people in need across the world, including the United States. Established in 1982, AmeriCares has distributed humanitarian aid worth more than $11 billion across 164 countries. Hurricane Sandy had destroyed nearly 125,000 homes in New Jersey alone and caused an approximate damage of $70 billion across the eastern seaboard. Yet another way that P&G demonstrates its responsibility towards the society is by extending educational scholarships to students committed to improving oral health of the Hispanic community. On September 26, 2013, P&G Hispanic Dental Association Foundation (HDAF) announced recipients of their annual scholarship program. These scholarships were awarded to 16 entry-level US Hispanic students that have been accepted into any accredited dental program. The awardees were based on their scholastic achievement, community service, leadership skills and commitment to improve health in the Hispanic community. Apart from providing scholarships to the next generation Hispanic Dental students, P&G and HDAF have also taken up the responsibility to correct misperceptions the US Hispanics face when it come to oral health. They have also partnered with Univision to teach Hispanic families about the importance of oral care and how to enter the profession. While the company is concerned about the society at large, it is equally concerned about its share owners. This reflects in the CEO’s statement as per the news release on 8th October 2013, when the CEO stated that P&G has established consumer and shareowner value creation as its top priority. The CEO’s statements corroborate with the fact that the company has met or exceeded its financial commitments, which includes organic sales growth, core earnings per share and free cash flow productivity. The four areas identified by the company to improve performance include value creation for consumers and share owners, productivity and innovation, significant improvements to operating discipline and investments in research and development and go-to-market capabilities. The company has returned $12.5 billion in cash to share owners. In fact, the company has paying dividends consistently for the past 123 years since its inception in 1890. The company has decided to focus on its core business and leading string brands. Accordingly, while the focus would be on the development of the US market, they would also invest in developing markets where they have the highest likelihood of winning. Resources would be allocated where value creation would be the highest. P&G recognizes its top performing external global partners who are the main contributors towards value creation. The CEO felicitated their external business partners, who according to the CEO, help the company create value for consumers, customers and shareholders alike. Almost 80 top suppliers and agencies attended the annual External Business Partner Recognition Dinner October 28, 2013. The collective capability of the company and its external partners offers competitive advantage. Through collaboration with their supply chain partners, they are able to innovate, drive out costs, and serve the consumers and customers better, thereby creating consumer value and competitive advantage. P&G has more than 82,000 suppliers and agencies, of which 15 received the highest honor of “External Business partner of the Year”. Four of these companies namely, Albany International, Novozymes, Eltex and Superpac, had also received the same honor in 2012. Awards or consistent high excellence was also given to many companies/partners. P&G is consistently one of the world’s top advertisers and one unique way they advertise is through sports sponsorships. On October 26, 2013, P&G announced sponsorship of Canadian Olympic and Paralympic Hopefuls as they prepare to represent the country at the Sochi 2014 Olympic and Paralympic Winter Games. This is in cooperation with the Canadian Olympic Committee (COC) and the Canadian Paralympic Committee (CPC). The company also announced the launch of the “Thank You Mom” campaign, in partnership with the International Olympic Committee. As the “Proud Sponsors of Mom”, P&G will again use its voice to celebrate and thank moms around the world for what they do for their children every day. P&G is committed to excellence and some of the athletes that they have sponsored include Tessa Virtue (Figure Skating), Jon Montgomery (Skeleton), and Tessa Bonhomme (Ice Hockey). When P&G brands support an athlete, they actually celebrate their every day journeys and the amazing moms that helped them achieve these laurels. P&G pays tributes to the moms by releasing new videos in their “raising an Olympian” series. Committed to excellence, P&G keeps upgrading its products. They recognize that journey of every individual begins as an infant. On September 16, 2013, the company celebrated the launch of major upgrades across its entire line of diapers (Pampers brand). Pampers is the world’s leading diaper brand which was introduced after recognizing an unmet need in the market place. They interviewed over 9000 moms and found that mothers sought superior overnight dryness. Today, P&G has been able to give the moms diapers that can protect their child for over 12 hours. Pampers celebrates the launch by joining with BabyCenter which is the number one pregnancy and parenting web and mobile destination worldwide, trusted by millions of moms for tips and advice. At this celebration, P&G will be giving away new diapers and wipes, while also inspiring moms to gift Pampers’ gifts to other moms in the community. A summary of financial standing presented to the Board of Directors in October 2013 is presented below: Sales by geography for fiscal years ended June 30 are as follows: Both net sales and net earnings have increased over the previous year. While net sales have increased by 1 percent, net earnings have increased by 5 percent. The increase in net sales can be attributed to the geographic expansion undertaken by the company in addition to acquisition and divesture activity by the company. Organic sales growth during the period was 3 percent while core earnings per share increased 5 percent. The cash amount of $12.5 billion that the company returned to shareholders was 110 percent of net earnings. This was returned through a combination of $6.5 billion in dividends and $6 billion in share purchase. However, challenges and risks persist in the competitive business environment. To address these challenges, the company has to respond to the competitive environment such as pricing, promotional incentives, trade terms and product initiatives. The company also has to take into account the legal and regulatory laws and changes in accounting standards. Other risks and uncertainties that mark the business include change in current rates, different rates of inflation in international markets, economic growth, political and economic uncertainties and disruptions. It can thus be summarized that P&G is moving towards achieving its core business goals – value creation for shareowners, consumers and customers. This is evident from its efforts in product innovation as it continuously strives to upgrade its products. The company is aware that a change in consumer demand can significantly impact their business. Cost fluctuation and pressures also impact business results and hence they constantly strive to manage this through pricing decisions or reviewing sourcing decisions. In meeting other challenges in the competitive business environment, P&G engages in unique promotional activities such as engaging moms, which helps them gain insight into what the market needs are. They then invest in product development and try to fulfill the requirements of their customers while also ensuring it meets the interest of the shareholders. Other promotional activities include free giveaways of upgraded products because they know satisfied customers would spread the word around. They have also not overlooked their responsibility towards the society and all their CSR initiatives promote their products as well. P&G appreciates and recognizes its partners, associates and suppliers, without whom the company would not have reached where it is today. P&G demonstrates a balanced growth in all business and appears to be well-equipped to meet the challenges of the competitive business environment. References http://news.pg.com/about [Accessed December 01, 2013] http://news.pg.com/press-release/consumer-and-shareowner-value-creation-top-priority-pg-ceo-tells-shareowners [Accessed December 01, 2013] http://news.pg.com/press-release/pg-corporate-announcements/extreme-athlete-diana-nyad-completes-epic-48-hour-swim-help [Accessed December 01, 2013] http://news.pg.com/press-release/pg-recognizes-top-performing-global-partners-0 [Accessed December 01, 2013] http://news.pg.com/press-release/pg-corporate-announcements/procter-gamble-expands-partnership-american-red-cross-throu [Accessed December 01, 2013] http://news.pg.com/press-release/pg-corporate-announcements/hispanic-dental-association-foundation-and-procter-gamble-s [Accessed December 01, 2013] http://news.pg.com/press-release/pg-corporate-announcements/procter-gamble-announces-sponsorship-canadian-olympic-and-p [Accessed December 01, 2013] http://news.pg.com/press-release/pg-corporate-announcements/new-pampers-goes-beyond-ordinary-diapers-deliver-our-best-y [Accessed December 01, 2013] http://www.pg.com/en_US/downloads/investors/annual_reports/2013/2013_AnnualReport.pdf [Accessed December 01, 2013] Read More