OAM 331 P&G (11 11) - Summary Strategic Management PDF

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This is a summary of the consulting case discussing P&G....

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OAM 331: P&G, AG Lafley Interview (11/11)

1) From 1945-1980s, P&G organized the US business by product group. What advantages does this have? -

P&G: organized around 10 category-based Global Business Units. These individual operating divisions would: - Better manage its growing lines of products - Create separate line and staff organizations.

2) During the same time, P&G Europe was organized by countries, why? What advantages does this have? -

Organizing it this way allows P&G to have a better understanding on what to deliver to their customers, the actual value they’re seeking, etc.

3) In 1980s, P&G introduced category management and a globalized product supply system (supply chain). Why? -

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In the 1980s, P&G grew into one of America’s largest multinational corporations. - Company emerged as a huge player in health care and in cosmetics and fragrances. - Company expanded its globalization plans and established a worldwide research and development network with research hubs in the United States, Europe, Japan, and Latin AMerica. In the 1980s, P&G announces several major organizational changes with the creation of category management and a product supply system that integrates purchasing, manufacturing, engineering, and distribution. Category Management: promised to revolutionize consumer marketing; focused on the “global” branding strategy in the early 1990s and made changes in its brand management system. - Divided the company into 39 product categories and named category managers. - Brand managers were so focused on a single product that they lost sight of the marketplace; now, brand managers reported to category managers. - The creation of these category profit centers was a continuation of the ideology that “small is good, that you bring focus to a specific business when you create a stand-alone operation.” Key to P&G’s success is the position of a product supply manager and has responsibility over the manufacturing, engineering, purchasing, and distribution. - Before the addition of these supply managers, progress was slow and awkward. - Product manager is able to assess the problems that the category manager many bring up, work out all the cost, design, and manufacturing problems and relay feedback into actual actionable progress.

4) From the website, what is the current organizational design? What is the purpose of this structure? -

Currently, P&G’s organizational structure is comprised of Global Business Units, Selling and Market Operations, and Global Business Services and Corporate Functions.

Global Business Units -

10 Category-Based Global Business Units Category: - Business units have full decision-making authority for their businesses. P&G has leading market positions in all of these categories. - All product technologies deliver performance differences that bring value to consumers. These individual GBUs are responsible for developing overall brand strategy, new product upgrades and innovations, and marketing plans.

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10 Categories Include: - Baby Care, Fabric Care, Family Care, Feminine Care, Grooming, Hair Care, Home Care, Oral Care, Personal Health Care, and Skin and Personal Care

Selling and Market Operations -

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Selling and Market Operations (SMOs) are responsible for developing and executing go-to market plans at the local level. - Includes dedicated retail customer, trade channel, and country-specific teams. Six Regions - Asia Pacific - Europe - Greater China - India, the Middle East, and Africa - Latin America - North America

Global Business Services -

Operates and supports infrastructure, operations, systems, and shared services that run P&G. GBS discovers, develops, and implements technologies to accelerate and advance the work of P&G brands.

Corporate Functions -

Provide company-level strategy and portfolio analysis Provide corporate accounting, treasury, tax, governance, human resources, information, technology, and legal

5) What does A.G. Lafley think of most CEOs’ strategy? -

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Lafley defines strategy as “winning.” Winning means uniquely positioning your firm in its industry, creating a sustainable advantage, and delivering superior value compared to the competition. - Winning means uniquely positioning your business to deliver a better experience and better value to a certain group of customers to attain a competitive advantage. - Winning = with “those who matter most” = specific segment of customers - Winning = “against the very best competitors” = against the best - Deliver superior value to stakeholders: shareholders, employees, etc. He believes most CEOs don’t like to make discerning choices; they like to have options. - CEOs have to decide where they’re going to play and how they’re going to win; and more importantly, define what winning means. Most CEOs choose to play but not to win. - Strategy is not the same as planning. - Vision is not the same as strategy. It’s integral to focus on understanding the industry, consumers/customers, firm’s capabilities and costs, relevant competitors, define what winning means. A winning strategy leads to serving a very specific consumer/market segment through a specific way to go to market (distribution channel). -

6) What is your point-of-view on A.G. Lafley’s perspective? -

Purpose of a business is to create a customer. - Develop customer insights (learn more about the target market and what they want) and deliver to that niche customer.

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Focus your strategy on consumers - not on profits. - “Reframe your strategy to focus on the customer.” Metrics to measure success: - Revenue growth - Gross and operating margin growth - Measurements of cash flow productivity (return on capital, return on inventory) Most important to a business: - Strategy and capabilities. Recent shift to capture the benefits of both scale and focus, creating a business that is both larger and more reliant on a smaller portfolio of stronger brands. - Streamlined and strengthened the portfolio into ten categories of 65 brands.

7) What are examples of P&G making trade-offs? -

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With P&G strengthening their portfolio, they had to consolidate the number of brands they carry. - P&G strengthened and streamlined their portfolio into ten categories. - These categories now leverage their core strengths including consumer understanding, branding, product/packaging innovation, and go-to market capabilities. - Faster growing, higher margin businesses - Only involved in categories where P&G is market leader P&G also transformed their supply chain. - There is now one organizing principle of P&G: product category - Product categories are responsible for innovation, manufacturing and marketing. - Categories own/held accountable for everything in their category. - “Freedom in a framework” approach for countries where “end to end” categories don't make sense - Flexibility that enables certain markets to be faster and more agile....