Turning around fortunes at Procter & Gamble - Essay Example

Turning around fortunes at Procter & Gamble al affiliation Turning Around Fortunes at Procter & Gamble In order to fulfill strategic analysis of P&G company, the two factors are to be analyzed – general environment and industry environment. External environment PESTLE analysis is the best tool used to disclose the balance between the environment factors and the organization. The factors are: political, economic, socio-cultural, legal and environmental. Political environment: The P&G company has Political Action Committee, which is considered voluntary political action committee. The committee empowers P&G workers to pool voluntarily financial and personal contributions aimed at providing support for candidates at all levels. These candidates in their turn have to support matters valuable to the quality of life and business within their communities. The operations of Political Action Committee are transparent and comply all the appropriate laws (Wagner & Hollenbeck, 2014). Social environment: In P&G company, much attention is paid to the social dimension. The main responsibility of the leaders of the company is to build the working environment to welcome and inspire diversity. P&G company is driven by the idea of creating the favorable surroundings where all the employees would feel comfortable being themselves. The major aspects under focus are the equality in terms of access to information, and the equality on opportunities in terms of learning, developing and growing both – professionally and personally. Numerous training, learning and coaching programs are provided systematically and are aimed at enhancing work/life integration, personal productivity and maintaining of the corporate culture. All the employees are monitored through surveys and culture sensing in order to determine the level of competence and commitment (Wagner & Hollenbeck, 2014). Technological environment: P&G’s Global Medical organization advises and assists management and employees to assure a safe, healthy work environment. Global medical delivers preventive health services to all employees, at all sites. It manages health issues that may affect employees, technologies, and brands (Wagner & Hollenbeck, 2014). Laws and Regulations: For all the companies worldwide there are a lot of safety, health, and environmental regulations to be followed. Factories and plants are required to limit their emissions and fulfill all the regulations within a production process, discussed in law, permits and statutes. One of the core principles of P&G company is to comply with the requirements and the spirit of the statutes(West, Ford & Ibrahim, 2015). Environmental dimension: The P&G company, being a global citizen, is concerned about the climate change and pollution issues. The company supports the aims of Climate R.E.S.O.L.V.E. programs which is Responsible Environmental Steps, Opportunities to Lead by Voluntary Efforts. In recent years P&G showed considerable progress in emissions reduction, the actual number was decreased by 1.5 times during the five-year period(West, Ford & Ibrahim, 2015). Procter & Gamble’s management has to rethink the firm’s strategy if it is to regain its stature as a giant in the fast-moving consumer goods industry. Between 2009-2012, the net sales from most of the product segments have been stagnant, except a few categories that have seen marginal changes. It is only the grooming and Baby & Family care segments that saw an overall growth in net earnings, over the period 2009-2012. The two segments registered a growth of USD 0.4 billion and USD 0.3 billion respectively. Worse still, the operating environment appears to place virtually all odds against attempts to turn around the company’s fortunes. From a lowly motivated workforce to aggressive competitors determined to topple Procter & Gamble from its market leadership position, a strategic shift is direly needed. There are recent developments that have suggested that the company’s resurgence has started, exemplifying the need to pursue strategic initiatives that will confer the sustainable competitive advantage, going forward. Procter and Gamble will have to invest heavily in its people - the employees. Under the leadership of Lafley, the former chief executive officer, Procter & Gamble registered a phenomenal growth in its business segments. The phenomenal growth formed the basis for the turnaround from the crisis that had engulfed the firm before Lafley took over the leadership mantle. The successive turnaround has largely been credited to the empowerment of a workforce whose motivation levels had plummeted considerably. Lafley undertook initiatives that led to a paradigm shift in the manner in which the human resource management function was being handled. Indeed, while other capabilities that a firm possesses can be easily imitated by rivals and competitors, it is very difficult to imitate the capabilities held by employees (Barney, 2015; Campbell, Coff & Kryscynski, 2012). Individuals’ traits tend to be idiosyncratic. Where such traits and aptitudes enable employees to serve their company in a manner that confers a competitive advantage, the firm gains the potential for long-term sustainable competitiveness (Wagner & Hollenbeck, 2014). Sustainability in competitiveness emanates from the fact that the capabilities that result into competitiveness cannot be imitated by rivals, and as such, the capabilities will remain unique to the firm. Recent reports suggesting that employees are either resigning in their numbers or moving to Procter & Gamble’s competitors suggest that motivation levels have dropped once again. With a decline in the level of employee motivation, it will be difficult to harness their potential in full, and as such, an important leverage in attaining sustainable competitiveness could end up being lost. Therefore, the existing employee empowerment initiatives may require an overhaul. Overhauling the programs meant to ensure that the employees are always motivated will go a long way in ensuring that the company regains its competitive edge. The other aspect of operations that Procter and Gamble will have to reexamine is the coverage of its portfolio of brands. The firm came up with several innovative products as part of the efforts to address the crisis that faced it shortly before Lafley took over. The aggressive uptake of new product innovations saw the firm expand its product offerings to include services, with car washing & dry cleaning being the flagship areas. Much as it is important for an organization to diversify its offerings so as to enhance the bottom line, diversification may sometimes end up being counterproductive (West, Ford & Ibrahim, 2015). The counterproductive effect of the diversification of a firm’s offerings into new areas lies in the potential for dilution of a brand’s appeal, once line extensions are introduced to original brands. Brands are normally launched on the foundation of a concrete set of appeals and attributes. The appeals and attributes have to resonate with customer needs and desires in particular product categories if the brand is to gain a leadership position in a given product category. When a brand is extended to cover more product or service categories beyond the initial ones on which it was based, the brand risks losing the initial appeal that is possessed. Therefore, it is important that line extensions be carried out with utmost care. On this backdrop, Procter and Gamble will have to focus on the initial areas that made it rise to the level of a global giant. If the company halts the expansion into services, it will be left with more resources to enable it focus adequately on building competencies in the fast moving consumer goods segment. This may protect its brands against losing the appeals that made it gain a market leadership position in its initial business segments. McDonald’s 40/20/10 initiative is indeed a step in the right direction, considering that it will halt the company’s disastrous path to being everything to everyone. Also, the management must revamp product innovation. The phenomenal growth witnessed during Lafley’s tenure was also attributed to continuous product innovation that saw the company’s more than 200 brands updated. In a competitive industry such as the fast moving consumer goods industry, product innovation can confer an advantage over market peers. Consistent changes in socioeconomic aspects of human pursuits imply that consumer needs will always be dynamic (Hesterly & Barney, 2015). The product attributes that made appeal to a consumer yesterday may not be the same today. For example, many consumers are increasingly being concerned about environmental conservation. As such, they are beginning to prefer products and services from organizations whose operations take into account the need to ensure environmental sustainability. Thus, business organizations must consistently seek to embed changing customer desires in their product and service offerings. Leadership in innovation enables an organization to be responsive to the emerging needs of its clientele. Adequate responsiveness to customer needs translates into market leadership, as evident in the period marked by phenomenal growth at Procter& Gamble. During this period, there were more than ten significant innovations across all the business segments. It may be no surprise that net earnings in most business segments have stalled over the years 2009-2012, considering that there have not been major new product successes in the last five years. Emerging trends in consumer insights have to be monitored with much more vigor. It should not also be lost to Procter and Gamble that much of the success that was registered just before Lafley’s tenure elapsed was also founded on a customer-centric business philosophy. The change in the organization’s mantra from “The consumer is the king” to “Purpose inspired growth” is likely to obscure efforts being geared towards turning around future prospects. What is more, the new slogan coined by McDonald has been touted as being too vague to the extent that it does not point out what, in specific terms, needs to be done in order to achieve the much-needed growth. Centering efforts across the entire organization on addressing the needs of the customers ensures that the organization remains up to date concerning key performance indicators in an industry (West, Ford & Ibrahim, 2015). When an organization delivers well in its key performance indicators and does so consistently, it will steadily attain a competitive edge over rivals in the marketplace. Therefore, it is important for Procter & Gamble to continue with the philosophy that placed the customer at the top of all initiatives. To ensure that delivery on key performance indicators is not put into jeopardy, some of the steps that the company has embraced may have to be reconsidered. Under McDonald’s leadership, the company has embarked on a new initiative whose aim is to increase efficiency. A key aspect of the initiative is that it is mainly concerned with cutting down on costs, rather than managing customer value and experience. While high levels of efficiency may improve productivity, the benefits are only likely to last at least over the short term. Over the long term, however, efficiency-enhancing initiatives will lead to minimal resource allocation towards the activities that enhance the customer experience. With a reduction in the level of resource allocation towards enhancing the customer’s experience with the product or service, customer satisfaction levels are likely to fall significantly. Eventually, an organization may end up ceding its hard-earned market share to main competitors. Instead of focusing on enhancing efficiency, the management should get more concerned about the effectiveness of the existing programs that are meant to ensure that the customer experience with the products on offer are consistent with expectations. These programs should be regularly monitored so that changes can be incorporated as necessary. References Barney, J. (2015). 15 Firm resources and sustained competitive advantage. International Business Strategy: Theory and Practice, pp283. Campbell, B. A., Coff, R., & Kryscynski, D. (2012). Rethinking sustained competitive advantage from human capital. Academy of Management Review, 37(3), 376-395. Hesterly, W., & Barney, J. B. (2015). Strategic Management and Competitive Advantage Concepts and Cases. Pearson Higher Ed. Wagner III, J. A., & Hollenbeck, J. R. (2014). Organizational Behavior: Securing Competitive Advantage. Routledge. West, D., Ford, J., & Ibrahim, E. (2015). Strategic marketing: creating competitive advantage. 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