Strategic Management and Strategic Competitiveness in Procter & Gamble - Essay Example

Strategic Management and Strategic Competitiveness Table of Contents Table of Contents 1 Proctor & Gamble 2 Globalization and Technology Changes in Proctor & Gamble 2 Industrial Organization Model (I/O Model) 4 Resource Based Model 6 Vision Statement and Mission Statement 7 Stakeholder’s Impacts 8 References 9 Proctor & Gamble Procter & Gamble has been selected in this study to continue further analysis. P&G (public listed in Securities and Exchange Commission) is a renowned American consumer goods company. The organization is headquartered at Cincinnati, Ohio, USA. Proctor & Gamble was established by William Procter and James Gamble in the year 1837. The company serves more than eighty countries across the globe. Sales volume has touched a record mark of more than $80,000 billion in the year 2011. They have established category leadership in various segments like House Care, Skin Care and Oral care. Employee base for the company is over 127,000. The Cincinnati based consumer goods company markets of more than two hundred and sixty brands across the world. The company enjoys leadership in almost twenty four brands in its category and is able to fetch a billion of dollars annually from each of the brands. The consumer goods organization has established twenty eight technical centers across the world (PG-Global, 2012). Globalization and Technology Changes in Proctor & Gamble The company has understood the importance of globalization in business and adopted itsself in accordance to the requirement of situation. The company has shifted focus from serving American people to establishing maximum number of strategic business units across globe. They have increased plant capacity level in order to achieve economies of scale and offer product mix in cost effective manner (Löfgren, 2005, pp. 102-115). Globalization strategy has helped the company to achieve higher return on investment and maximize annual revenue. Lafley (CEO of the company) has changed standardized global product structure of the company into hybrid product system. Hybrid product structure puts an emphasis on design product category in accordance to demand of particular market and changing value chain in product specific manner. This model is often termed as Front Back Hybrid Matrix by research scholars. The company not only changed product system in accordance to local demand but changed customer relation management also. Strategic business units work under the supervision of GBU or Global Business Units of the company. Although research and development functions remained centralized, sales operation in individual local market is classified as decentralized function. During 1999 the company has adopted the change in the fields of managing and reporting in order to achieve business excellence. The company took six years to implement global restructuring model while they have invested $2 billion during the time frame. Global business model can be understood by using the following model. (Source: Dyer, Dalzell, & Olegario, 2008, p. 295) The company has implemented electronic document management system and enterprise resource planning (ERP) to gain competitive edge over competitors. Successful OTC medication of the company has the ability to earn $1 million everyday while OTC medication needs sharing huge amount of data between researchers, sales persons, staff members, and quality control personnel. The company has implemented electronic document management system to maintain all transactional data related to OTC medication. The company has implemented IT Integrator Cardinal Solution to increase their efficiency in process management (Rainer & Cegielski, 2010, p. 155). The company took help of IBSG, or Internet Business Solutions Group of Cisco, in order to develop a collaborative network across all the strategic business units. Cisco has implemented forty three video collaboration studios (based on Tele Presence of Cisco) for P&G within eight months. Video collaboration studios helped the company to synchronize business units through video conferencing. In this way P&G has incorporated technological changes to move forward in global competition (Cisco, 2010). Industrial Organization Model (I/O Model) Theory of economics suggests that I/O model can be implemented by giving importance on four assumptions. External business environment puts pressure on the organizations to decide strategy in order to achieve above average return. Competing firms are adopting same strategies with similar kind of resources. Resources are used during the strategy implementation must be mobile. Leaders of the organization must show profit maximizing behavior. Industrial Organization Model for P&G can be explained in the following manner. Next part of the study will discuss business strategy of P&G to enter Russian detergent market (Ahlstrom & Bruton, 2009, pp. 148-152). (Source: Author’s Creation) Resource Based Model In management resources are known as inputs required facilitating production process. Resources like capital equipment, financial resources, talented human resource pool, and state of art technology help firms to achieve business excellence. Economics theory suggests business leaders need to give importance on three assumptions before planning Resource Based Model. Resources are costly to emulate. Competitor firms cannot obtain company’s resources in a cost effective manner. Resources are non substitutable due to their structural non equivalence. Resource Based Model in P&G Key Resource - Talented Human Resource pool, financial revenue, strong research and development team. Capability integration - The company has invested financial resources on research and development to invent new products. Potentiality of resources - The company spends more than $ 5 million on research and development facility on a daily basis. Research and development helps the company to increase product line. Selection of industry - The company has implemented business strategy in order to gain competitive edge in detergent industry. Return - The company has already established their brand Tide internationally with average return more than 30%. Vision Statement and Mission Statement Vision statement of the company is similar to their purpose statement. Mission statement of the company is to provide branded products and service complemented with superior quality to improve the lives of customers. Vision statement of P&G is to become best consumer durable company in the world. The company emphasizes on producing quality products in order to satisfy demand of customers. The company spends more than $100 million annually to conduct market research to understand consumer purchase pattern. They give high importance on designing value delivery model, and also every steps of value chain is monitored by them to create strategic advantage over their competitors. The company spends more than four percent of sales revenue on research and development in order to deliver quality products to customers. Value driven vision and mission statement has encouraged P&G to become world’s best consumer durable company (Kotler, 2009, p. 253). Stakeholder’s Impacts Researchers and Scientists - domain knowledge and expertise of the scientists has played vital role for creating superior consumer durables for P&G. Employees - employees of the company always thrive for excellence and want to perform better for the company. Their effort has helped the company to achieve business excellence. Retailers and Distributors - wide distribution network of the company complemented with enthusiastic retailers helped the company to expand business internationally. Suppliers - suppliers of the company always try to improve value chain for the company. Customers - the company has achieved business excellence in order to fulfill demand of customers. The company has created sustainable research & development team in order to satisfy ever changing product demand of customers (Rainey, 2006, p. 288). References Ahlstrom, D., & Bruton, G. D. (2009). International management: Strategy and culture in the emerging world. Stamford, Connecticut: Cengage Learning. Cisco. (2010). Procter & gamble transforms the way business is done. Retrieved from http://www.cisco.com/en/US/services/ps6887/ps10672/External_CaseStudy_Procter_Nov2009.pdf. Dyer, D., Dalzell, F., & Olegario, R. (2008). Rising tide: Lessons from 165 years of brand building at procter & gamble. Harvard: Harvard Business Press. Kotler, P. (2009). Marketing management. (13th ed.). Upper Saddle River, New Jersey: Pearson Education. Löfgren, M. (2005). Winning at the first and second moments of truth: An exploratory study. Managing Service Quality, (15.1), 102-115. PG-Global. (2012). P&G global. Retrieved from http://www.pg.com/en_IN/company/pg-global.shtml. Rainer, R. K., & Cegielsk, C. G. (2010). Introduction to information systems: Enabling and transforming business. Hoboken, New Jersey: John Wiley & Sons. Rainey, D. L. (2006). Sustainable business development: Inventing the future through strategy, innovation, and leadership. Cambridge: Cambridge University Press. Read More