Preliminary Strategic Audit for Clairol Company - Proctor and Gamble - Case Study Example

Preliminary Strategic Audit for Clairol Company (Proctor & Gamble) Executive Summary Proctor and Gamble is the biggest world renowned household goods company with a wide range of products. There is an increase in the level of competition in the market in view of the companies coming up in the same industry. The level of innovation in the market is immense and the key rivals are pushing hard to gain relevance in the market. Proctor and Gamble is indeed being given a run for its money in the industry by the companies coming up making it hard for Proctor and Gamble to maintain a stable position within the market.  Considerable efforts are being made by the company to come up with strategies that will help in mitigating the challenges they are facing in order to give it a competitive edge above the competitors. There are many options that the company can adopt in order to create a competitive advantage over the rivals through rebranding the present product lines mainly by lowering the prices of products. In addition, Proctor and Gamble will have to expand the new markets through collaboration with the businesses in the local market. In addition, the company can also give the clients the products made from natural ingredients mainly in wellness and health and also manufacture products for the men. Table of Contents Table of Contents 3 Introduction 4 External Environment (Current Environment) 5 Political Factors. 5 Economic Factors 5 Socio-cultural Factors 6 Technological Factors 6 Legal Factors 7 Environmental Factors 7 Porter’s Five Forces 7 Bargaining Power of Suppliers 7 Threat of New Entrants 8 Bargaining Power of Buyers 8 Threat of Substitutes 9 Competitive rivalry 9 Strategic Issues 10 Maintaining Market share 10 Customer Retention 10 Key Findings 10 Recommendations 11 References 12 Introduction Proctor and gamble is one of America’s biggest producers of household goods. It has a total of 250 brands in six key categories; nutrition, laundry and hygiene, beverages, skin care products particularly feminine products, healthcare products. Some of the products from the company include pampers, Ariel, Fabreze, Pantene and the Oil of Olaz. A number of the sales of the products are mainly among the high number of brands that are sold within the market. Value proposition The management ensures that the clients get nothing less than quality product and thus a rise in the value addition adopted by the firm. Market Position Proctor and gamble currently is considered the best Fast Moving Goods Company due to the different categories of products it produces in order to attract all the market segments. In addition, the company also has an effective R&D system value of products within the firm. Competitive Advantage The products management department is proactive and puts in place measures to ensure that their products are effectively improved and thus ensuring that the competitors are kept at par. This report provides a strategic audit of the external analysis of Proctor & Gamble that identifies the mandate and various strategies that help in increasing the will help in improving the profit growth of the company in a bid to sustain a competitive advantage in the developing markets within the market. The report clearly describes the main strategies that should be adopted by the company within the firm. External environment Current Environment Political Factors The regulations by Food and drug administration show the ingredients that should not be used in the product, shows the place and what can be used in products. Waste management regulation is also another issue that has to be considered and ensure proper environmental care. The companies must also label the nutritional information on the product (Fifield, 2012). The employees must also get a minimum wage after working for a period. In the event there is an increase in the amount of tax, the consumers will reduce due to an increase in the price while increase in the event that the prices go down. This shows how effective the political factor is to the performance of Proctor & Gamble in the market (Grant, 2010). Economic factors The fast moving goods industry experiences changes in the market mostly during recession. Ever since 2008 companies have found it hard to retain the market share they controlled because of a change in the economic situation; the clients change the various purchasing decisions within the firm. The rise in the interest rates hinders Proctor & Gamble from making profits and expands due to the high cost (Grant, 2010). The rise in the interest rates affects Proctor & Gamble’s expansion cost because the rise in interest rates leads to a rise in the cost within the environment. This leads to a rise in the pricing of the products due to the probable rise in the amount used in operation (McDonald, 2010). Socio-cultural factors Most brands are associated with customers of different age groups. Therefore, the fast moving goods industry should meet the tastes and preferences of the various market segments. For instance, the elderly tend to stick to the nutritional part because of diseases like diabetes because they have to watch on the amount of sugar they consume. This affects the products negatively because most products are sugary (Kate, 2010). The youths stick to what symbolizes fun and more of celebrity endorsements because that is what they are mostly identified with. The increase in the habit of snacking is a big boost to the company since they will tend to buy more of the products produced by Proctor & Gamble (Lamb et al., 2011). Technological factors New advanced technology, and quality improvement factors help in improving the efficiency of operations at Proctor & Gambles. The technological advancement has indeed led to an increase in capital. According to McDonald (2010), the introduction of new technology has led to the production of quality products at a cheaper cost. This ensures effective and efficient production within the market. The use of technology however leads to decline in the amount of employment because of the introduction of a machine that can do similar work and achieve more than an employee (Lamb et al., 2011) Legal Factors There is more legalization put in place to ensure the workplace is safe, and there is better protection of the employees within the firm. However, it is expensive to implement within the environment. The implementation of these laws takes time to implement and may interfere with the production process of the company. The laws set by the host country will have to affect Proctor & Gamble’s operation within the environment. For example, if a country decides on a minimum wage then Proctor & Gamble’s has to comply because those are the main principles of operation. Environmental Factors Just as other companies have to ensure proper waste disposal, so does Proctor & Gamble has to get a way through which the disposal of wastes from its production process and ensure they do not pollute the environment (Frynas & Mellahi, 2011). This leads to an increase in the cost of production since Proctor & Gamble has to come up with a method for proper wastes disposal. In the event Proctor & Gamble disposes the wastes on the environment, it leads to pollution and ruin the company’s reputation (Kate, 2010). Porter’s five forces Bargaining Power of Suppliers Procter and gamble is forced to comply with the demands of the suppliers because it is hard to come by the substitutes of the raw materials in the fast moving products industry. The suppliers, therefore, have a high bargaining power although the demands of their competitors tend to be raising the power of the suppliers and in turn influences role of the competitors. This thus makes the power of the suppliers at a medium point (Porter, 2006). Threat of new entrants The threat of new entrants into the market has led to the loss of the position within the market mostly by the competitors that have conquered the market by taking advantage of the economies of scale (Porter’s, 2006). Competitive rivalry from other FMCG companies in the market poses a threat to Proctor & Gamble thereby making it hard to retain the market share (Porters, 2006). The threat of substitute’s leads to loss of clients as they can seek the same product elsewhere for example Virgin Atlantic is active in the market (Porter, 2006). Bargaining Power of buyers The bargaining power of buyers is high where Proctor & Gamble produces the product that meet customers requirement. Apart from that, the process of introducing an innovative product, for instance, an eco-friendly television wins the loyalty of various customers and, therefore, the clients can choose to stay with the company and always purchase the products that it avails in the market (Peter & Susan, 2012). The moment a client gets the key products that they value, they can opt to stick with the organization and are thus retained. This thus boosts the profits of Proctor & Gamble and being end up holding a large market share making it hard for the competitors to match them in the market (Frynas & Mellahi, 2011). Threat of Substitutes The threat of the substitutes also interfere with the performance of Sony within the market since the clients will opt for cheaper products that provide the same satisfaction as the once that Sony provide (Grant, 2010). Most employees look for a means of spending wisely so that they can get to save for their future needs. This, as a result, will lead to a rise in the level of buyer power thereby resulting to a rise in the level of the clients seeking to be associated with a particular brand and thus Proctor and Gamble may have a hard time meeting the demands in the environment (Frynas & Mellahi, 2011). Competitive Rivalry Finally, the competitive rivalry among the firms within the market is highly affected by the other forces within the market. The level of competition depends on the extent to which the clients are influenced by competition (Trapp, 2009). The demand for various beauty products are on the rise due to the rise in the economies of developed countries and thus an increase in the market share for the products. Strategic Issues The major strategic issues that Proctor and Gamble faces include: Maintaining Market share Procter and gamble has to come up with a means through which it can maintain its market share in order to maintain its relevance within the market. This goes a long way in meeting the goals of the organization in the end. Moreover, this will also help in keeping the competitors at bay. Customer retention The company also has to come with a means through which it can retain its clients to ensure that it can maintain the level of profitability in the market. The company, therefore, needs a customer relationship plan since it would help in attracting more clients through referrals. Key Findings Proctor and Gamble leads in the industry although the competition in Fast moving goods industry is stiff. The company can also be successful if it concentrates on the needs of the clients within the industry and thus the need for ensuring that the products are tailor-made to meet the needs of the clients. The change in the state of the economy greatly influences the level of purchase from the clients since some of them use the funds to sort the loans the loans they may have acquired. Recommendations In view of the above factors, Proctor & Gambles needs to have a consistent marketing plan through which it will be able to remain relevant within the market and surpass their competitors. The management should be sensitive to the customers tastes and preferences since this leads to the achievement of customer loyalty and further leads to winning customer loyalty within the market and the attainment of more profits within the market is guaranteed in the long run. They should, therefore, work towards tailor-making the products to the customers preference within the market so as to effectively meet their needs. References Fifield, P(2012). Marketing Strategy. New York. Cengage Publishers Frynas G, J. (2011). Global Strategic Management. New York: Prentice Hall Grant M, R (2010). Contemporary strategy Analysis and Cases. Chicago: Oak Ridge Kate, G (2010). David Hennessey. Global Marketing. New York: Prentice Hall. Lamb C, Hair J, ‎Carl M (2011). Essentials of Marketing. New York: Prentice Hall. Peter D, Susan B (2012). Innovation in Marketing. Newyork: Prentice Hall.  Porter M. (2006). How competitive forces shape strategy. Chicago. HBR Trapp L. (2009). The persuasive strength of values, reputation, and interest arguments for promoting ethical behavior in a global corporate setting. Denmark. Arhus Business School Read More