P&G
Case Facts
A strategy is needed for P&G management to continue to compete in the market for one of against competitors. P & G. has a long history of success however there had been little change in their product lineup from the mid 1980s. This allowed competitors who listen to the voice of the customer to move ahead of P&G in the market. Competing companies have taken away market share from P&G. The competition has responded to the trend of using the Internet, inventory management systems, and Point of Sale systems, taking advantage of the latest technology to improve processes that reduce labor and supply chain costs. P & G. has remained stagnant by maintaining present product lines, and using outdated technology and managerial practices for its global operations. Brand management at P & G. begin realizing that in order to regain its market share it was essential to innovate its top product lineups. They also understand that key decisions to improve operations require a strategy that may include reviewing retailer purchasing practices along with manufacturing to reduce inefficiencies and improve business process distribution. Proctor and Gamble (P&G) had a long history of promoting their packaged products through coupons and discounts. Retailers would purchase extensive inventories of these goods at a low cost due to long shelf life. This would cause problems by distorting actual sales and marketing data. It would also increase production during at times when the actual market may be down further distorting decision making by P&G brand management. As P&G responded to these spikes in sales, there were internal controls put in place adding more resources and overhead costs. Eventually this caused greater inefficiencies to which P&G decided to make major changes in technology and business processes. First with the Efficient Consumer Response System (McKinney & Clark, 1995), designed to improve efficiency in consumer pricing. Secondly with Category Management, requiring restructuring of the organization to align operations with successful brands.
Main Issues
The main dilemma was inefficiencies due to stockpiling inventories by retailers causing spikes and inaccuracies in market data projections. The present business processes for acquiring inventory and distribution of products are simply too slow to respond to retailers and consumer demand. Lack of technical support in understanding retail operations and market trends is also of great concern.
Brand management was depending on outdated technology to support a global market requiring real time processes and up to the minute marketing data for decision making by management. This was leading to inefficient use of resources and faulty data reporting.
Restructuring of the organization is what is necessary to accurately manage the contribution or lack thereof for each distinct brand. Use of Category Management is necessary to align managers with the power and authority to respond to changes in global markets.
First Alternative: Remaining in present market with no changes.
Pros
P&G is well recognized and an industry leader representing quality products at a value price. P&G has 32% of market share which is nearly a full third of market share.
P & G. has several well-known brands that continue to do well in the market.
Food Retailers which is one of the largest distribution channels, is profitable for P & G.
Revenues of $30 billion dollars annually.
Cons
Continued loss of market share due to problems in manufacturing and inventory management.
Product replenishment unorganized and out of sync with actual consumer demands.
Slow response to changes in the market.
Managing suppliers of resources and raw materials using manual processing causes delays in productivity and reliability of accurate reporting.
Inability to manage inventory levels and manufacturing causes costs overruns, shortages, and problems with productivity.
Being a global company, any inefficiency in manufacturing can result in millions of dollars in lost revenues.
Second Alternative: Investing in new technologies and business processes to monitor inventories, understand consumer trends, and manage retail operations.
Pros
Opportunity to increase market share by getting an accurate assessment of inventory, ordering, and manufacturing processes.
Brand management aligned with operations to track and monitor each product line category.
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