by: James Connaughton, Know Nothing Digest staff writer
Procter & Gamble, a firm founded by a British American and an Irish American in 1837, produces and distributes hygienic and personal care and products as well as popular cleaning agents. Tide laundry detergent is one of the best-known cleaning agents on the market and of Procter & Gamble’s products. Always menstrual hygiene products, Bounty paper towels, Crest toothpaste, and Dawn dish soap are just a sample of the household names that are currently offered by P&G on the global market. Procter & Gamble’s product names do vary in different countries, as Tide is known as Ace in Puerto Rico, Alo in Turkey and Vizir in Poland.
The International Association of Outsourcing Professionals (IAOP) has awarded Procter & Gamble the “Global Excellence in Outsourcing Award” for best practices in outsourcing. P&G products net sales have exceeded 50 Billion USD in the past 5 years, with on-the-ground-services spread over 80 countries. Procter & Gamble’s products are sold in at least 180 of the 195 countries on the planet.
As if offering their products all over the planet were not enough, Procter & Gamble has even gone to outer-space in an effort to improve the particle dispersion of their products. P&G has utilized the International Space Station (ISS) as a science laboratory for an investigation into advanced colloid experimentation with Microscopy technology. Researchers study how to use colloidal particles as stabilizers in P&G products to improve shelf-life stability. The colloidal particles are used to keep large and active particles from settling to the bottom in a self-descriptive process known as sedimenting (NASA.)
Colloids are used in gels that make-up everyday products like medicine, shampoos, liquid detergent and other various cleaners. When such products sit on the shelf for an extended period of time the gels start to coarsen and separate. This texture alteration occurs when smaller particles that are suspended in liquid join together to become larger particles. The Procter & Gamble research and development department hope to learn from the microgravity space experiments and improve 4.8 billion people’s favorite cleaning products here on earth.
Procter & Gamble began its global expansion in the 1990s and soon after, set up a Shared Services organization to reduce redundant personnel and build strategic alliance management. During the first stage of Procter & Gamble’s best-in-class service management organization development, there were three service centers set-up in Manila, Newcastle and Costa Rica. Procter & Gamble then explored the value derived from outsourcing relationships with IBM for employee services, Hewlett Packard for IT infrastructure and Jones Lang LaSalle for facilities management.
Through developing outsourcing relationships and practicing related industry diversification, Procter & Gamble developed a Global Business Services (GBS) organization. The GBS organization services are provided through a set of alliance partnerships and range from people management, travel services, meeting services, facilities, financial services, supply network solutions, and as discussed in the space about Space above: product innovation.
The Procter & Gamble Global Business Services organization creates value for the firm and improves the consumer experience by improving efficiency within the firm and the firm’s interactions with outsourced firms. Successfully managing the end-to-end relationships reduces risks associated with third party service organizations.
In 2016 Procter & Gamble’s volume shrunk by 1% by mid-year, while competitors Unilever and Kimberly-Clark were up 2.2% and 4% respectively. Innovation was seen as lacking that year in comparison to competitor Johnson & Johnson, who got ¼ of its 2016 sales from products that Johnson & Johnson introduced over the past five years. The shrinkage in Procter & Gamble’s sales is problematic despite the success of Pamper’s diapers innovation, Gillette (which was actually sold off), and Tide pods. Innovation at P&G is indeed in trouble considering the firm sold off one of its 2016 innovation lines (Gillette) and its other market share winning line is now considered a teenage delicacy (Tide pods.)
A further fiscal death rattle could be heard from the Procter & Gamble R&D department as Johnson & Johnson pushed 9 Billion USD in research and development as Procter & Gamble continued with preceding years’ 2 Billion USD research and development budget (Kalogeropoulos.)
Although P&G was still on track to lose market share to rivals in 2017, it was felt that Procter & Gamble was in better shape after passing Kimberly-Clark in sales and almost equaling Unilever’s. A 10 Billion USD cost-cutting program pushed P&G’s gross profit margin up nearly a full percentage point making Procter & Gamble one of the most profitable in its peer firm group. Procter & Gamble continues to succeed in large part because of the firm’s 5 Billion USD advertising budget.
One strategy that Procter & Gamble has utilized in 2018 was to reach out to Bottom-of-the Pyramid consumers in their Olympic advertisements aired during the Pyeongchang Winter Olympics in South Korea. North Korean human rights violations have become as contentious as globalization itself, but in a surprising show of regional unity North and South Korea came together to compete in the Pyeongchang Olympic games. Procter & Gamble took the opportunity to reach out to the global audience and make a statement about corporate social responsibility in the style of management consultant Peter Drucker. Drucker emphasized the need to turn social problems into economic opportunities. Procter & Gamble shows the way to liberate the citizens of North Korea is not with the threat of nuclear confrontation, but by giving the people a chance to build productive capacity and build human competence. P&G’s Millenial strategy is to show that managing social responsibility is the next step our leaders need to take in addition to just managing the message of being a good corporate citizen or leader of nation (Igel.)
As entrepreneurs, our strategies must follow the swing of the globalization pendulum. As policy-makers we must seek to improve and enforce existing laws and encourage nations to become better global citizens. All of us in the business community must strive to better the lives of our global human community. I would like to think the underlying idea behind globalization is that we are all a global family. We have the opportunity to empower our family members to better their local communities using the strategies we and others have learned. Procter & Gamble should succeed in increasing market share in the emerging economies moving forward with this message.
- World economic outlook, October 2017, International Monetary Fund, https://www.imf.org/en/Publications/WEO/Issues/2017/09/19/world-economic-outlook-october-2017
- Vitasek, K., Tillman, J., Vested outsourcing, http://www.areadevelopment.com/siteSelection/December-2013/Proctor-and-Gamble-outsources-facilities-management-32627252.shtml
- George, Dr. B, Best practices in outsourcing: the Procter & Gamble experience, https://www.iaop.org/Download/Download.aspx?ID=1920
- Giannone, (2014), ACEs are high with space station colloidal research, NASA, https://www.nasa.gov/mission_pages/station/research/news/ACE
- Kalogeropoulos, D., (2017), 3 ways Procter & Gamble Co. is beating the competition, https://www.fool.com/investing/2017/02/13/3-ways-procter-gamble-co-is-beating-the-competitio.aspx
- Kalogeropoulos, D., 3 ways Procter & Gamble Co. is losing to the competition, https://www.fool.com/investing/2016/10/02/3-ways-procter-gamble-co-is-losing-to-the-competit.aspx
- Igel, L., Latest P&G ad for 2018 Winter Olympics teaches business lessons aout Millenials and moms, (2017) Forbes, https://www.forbes.com/sites/leeigel/2017/11/03/latest-pg-ad-for-2018-winter-olympics-teaches-business-a-few-lessons-about-millennials-and-moms/#2a5ca10733e1