Proctor Gamble Company

Scope of the Report. This report is designed to address the economic, political, social and environmental opportunities and risks facing Proctor and Gamble Company in the next ten years.Advertising We will write a custom report sample on Proctor Gamble Company specifically for you for only $16.05 $11/page Learn More Executive Summary. Several decades ago, organizations have been exposed to limited regulations and existed in less competitive environments. As a result, several companies may not have observed the utmost care in the provision of goods and services to their customers. In the recent world, however, more regulations have been imposed and competition has stiffened due to increasing business competitors. As a result, there has been improvement in the quality of goods and services, as well as, adherence to environmental sustainability. Therefore, the objective of this study is to assess the economic, political, social and environmental opportunit ies and risks facing Proctor and Gamble Company in the next ten years. In the first section, the overview of the company and stakeholder analysis is given. In the second section, the current issues facing the company are analyzed in detail. Lastly, the issues that the company would face ten years to come are explained in detail and a conclusion given. Overview of the Company. Proctor and Gamble Company is a multinational company that ranks highly among the fortune 500 companies (McGowan 24). The company deals in the manufacture and production of several household products that are affordable. In 1837, William Proctor and James Gamble dealers in candle production and soap making respectively, met and started the company (Funding Universe 7). Several years later, the two business partners successfully started their first laboratory within the United States of America (Funding Universe 7). Roughly 58 years later, in 1930, the company acquired a British soap manufacture and went on to e stablish a new manufacturing plant in the Philippines. Currently, the company is a market leader and sells over 300 products in several countries on the globe. â€Å"Some of these valuable products that the company boasts of include Pampers, Ariel, Tide, Gillette, Oral-B, Max Factor, and Mr. Clean† (Funding Universe 7). Proctor Gamble conducts intensive research and marketing all over the world, reaching in excess of 160 countries, and owns 115 factories in over 80 countries (McGowan 24). As mentioned earlier, the company was founded and is headquartered in Cincinnati, Ohio, in the United States of America. In all the worldwide plants, Proctor and Gamble possesses average of 138,000 employees and still growing. Besides the company’s capitalization in products, other fields such as the organization of radio and television shows have been exploited. Some of the aired shows include Down to Earth and Shirley Jones which have also played a significant role in marketing the company as a whole.Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Proctor and Gamble’s products are classified into five segments according to the functions of the products. â€Å"These five segments include fabric and home care, beauty care, baby and family care, health care, and snacks and beverages, which, allow for the easier application of various marketing techniques and strategies† (Funding Universe 7). The profitability of the company is attained through marketing all segments especially fabric and home, and beauty care that form the largest and second largest segments in terms of revenue. However, as the world population increases and intermingle, people’s needs, tastes and preferences, and loyalty tend to change with time. As such, existing and new entrants in the industry have kept increasing the competition forcing Proctor and Gamble to take appropriate measures to maintain a competitive edge in capital market zones. For instance, implementation of the ‘Organization 2005’ is one key strategy that is used to increase its global market share of the company. As such, this paper aims at giving the current political, economic, social, and environmental issues affecting the organization of Proctor and Gamble. Furthermore, the paper will address the political, social, economical, and environmental issues that will most likely affect the company 10 years from now, as well as, give the associated risks and opportunities. Key Stakeholders Proctor and Gamble has several partners who own key shares in the company according to the company rules of ownership. However, there is no significant evidence of the actual percentage of ownership in the company. Current Issues Economic Issues Since the 2007-2008 global recessions, the Gross Domestic Product of several nations both in the developed and developing countries, including the Unit ed States, have gradually decreased. For instance, the GDP in the United States experienced a reduction at an alarming rate of over 6 percent in the year 2008, and more people lost their jobs as a consequence. The GDP is the total value of all the goods and services produced by an economy in an annual basis and indicate the overall performance of the economy. Therefore, when the GDP of a country drops, fewer goods and services are produced; hence, people stay out of employment because organizations will try to reduce the workers (Isidore 1). Since the global recession, this has been the situation on the ground resulting in the weakening of consumer purchasing power. As a result, organizations will experience less profit due to reduction in the volume of sales (Isidore 1).Advertising We will write a custom report sample on Proctor Gamble Company specifically for you for only $16.05 $11/page Learn More According to Ben Bernanke, the Federal Reserve Chair man, the situation would continue to exist until an improvement in its exporting destinations in several other parts of the world occurs. Further, he asserts that the rate at which the United States Economy recovers is dependent on the economy abroad because the country expects to rejuvenate through export revenues. Proctor and Gamble Company serve a vast market both in the United States and abroad, selling in excess of 300 products to more than 80 nations of the world (McGowan 24). As such, the economic hardships of such economies have negatively affected the operation and general profitability of the company. This is because the global economy plays a key role in ensuring that the company’s products move smoothly in all the target markets (Wohi 1). Despite the slight improvement in the economies during the recent years, the cost of oil has continued to shoot up leading to a second phase of inflation. This again, impacts the ability of potential Proctor and Gamble customers to purchase their products; hence, reduced profitability has continued to exist. Furthermore, Proctor and Gamble imports most of its raw materials from other countries and in the recent years, this has hugely impacted the performance of the company. For instance, commodity prices have drastically surged by more than 50 percent since 2002. As a result, close to half of Proctor and Gamble product costs are directly related to the cost of raw materials. In order to remain in business and make reasonable profits, the company resorted to increase the prices of several brands. However, being a market leader, Proctor and Gamble enjoys the economies of scale and can effectively moderate inflation of raw materials as compared to competitors (Shailaja, 2). The raw materials adversely affected by the inflation include coffee pries, growing paper pulp prices, fuel prices, and natural gas prices among several others that are not mentioned. As a consequence, the associated product prices such as coffee brands, fabric, and diaper goods have experienced fluctuations in expenses, as well as, generated reasonable profits for the company (Wohi 1). Despite the economic hardships being experienced in several nations, Proctor and Gamble has set up strategies that ensure success in its operations (Shailaja, 2).Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Political Issues The current economic situation in the United States and the other leading economies trigger various government reactions (Shah 5). As such, several governments including the United States Government has imposed some regulations in order to allow the smooth recovery of the economy. Apart from leading economies such as the United States’ economy, Japan’s economy, Britain’s economy, Spain’s economy and the economy of Singapore, other emerging economies of the world such as China have continuously been exposed to the effects of the global economy deterioration. With the United States economy being affected, China also experiences the economic strain as their exports to the United States significantly reduce. This scenario calls for political intervention by concerned governments in order to drive their economies towards the right direction. For instance, the gradual economic deterioration, inflation and unemployment put pressure on Ben Bernan ke to speed up the interest rate cuts in the United States in order to reduce the benchmark rate 0.75 percent down. This move was quickly adopted by central bankers in several other nations such as Japan and the UK region in order to allow their economies to thrive in the current economic difficulties. According to the IMF, the economy of the United States accounts for approximately 21 percent of the global economy; therefore, the deterioration of the economy put significant trickling effect to several other economies of the world. The reduction in the spending ability of American consumers has necessitated organizations to limit their importation budgets in order to avoid incurring losses. According to relevant sources the uncertainty of the United States stock prices has also negatively impacted other markets in several countries (Isidore 1). Apart from economy deterioration and inflation effects, there are other government regulations and policies that have significantly influenc ed the operation of leading organizations such as Proctor and Gamble Company. In recent occurrences, different consumer protection bodies have raised concerns over the dangerous chemical compositions of certain cosmetic goods. Additionally, researches conducted on the chemical compositions of cosmetic goods have indicated that 0.33 of these goods have carcinogens. In connection to that, the United States Food and Drug Administration imposed strict quality adherence rules that all cosmetics manufacturers must follow. These quality adherence regulations were imposed to ensure that consumers are protected against harmful products. These recent governing rules on product quality adherence impose significant delays in product launches within companies. Furthermore, the regulations lead to higher costs of finished goods due to a high cost in the product development process. As such, companies will have to ensure they meet such regulations; otherwise, they stand a risk of getting enormous fines or being banned from operation. In Europe, for example, the European Chemicals Agency was created in order to provide regulation on the quality of finished goods within the entire European markets. In order to comply with the strict rules and regulations, companies have to incur more costs. As a result, there is the creation of new barriers of entry that leads to a steady rise in fake household goods that put the general consumer population to new health risks. Proctor and Gamble, however, has set up new strategies to ensure the cases of counterfeits in its products are minimized so as to avoid revenue reduction and weakening of its brand image. Another political issue that has influenced the running of Proctor and Gamble is the change in the rules that govern the disposal of solid wastes. In order for the company to adhere to the strict rules, it changed to manufacturing some of its products such as diapers with biodegradable materials rather than PVC plastics. As a result, t he creation of recyclable diapers has been remarkably successful and enabled the company to realize substantial profits. Social Issues From the onset of the 21st century, key demographic changes took place in the American society and the world as a whole. As such, more and more women started going to work, and even some of them became the sole bread winners among their families. As years went by, families became more stable than in the earlier years; hence, the purchasing power of consumers significantly improved (Shah 5). Furthermore, mothers could take care of even larger families without straining their budgets as hard as it used to be several years back. On the other hand, companies such as Proctor and Gamble immediately identified the potential that existed in these consumers and took a positive step to market itself. The company identified women as their target group for household, beauty and other personal products; therefore, advertised directly to them. By using this techni que, Proctor and Gamble successfully entered the market and controlled a bigger market share than other competitors. Procter and Gamble went ahead to use women as decision influencers in the remaining product categories like food and beverage, and detergents. Additionally, Proctor and Gamble effectively applied the use of media such as radio and television shows as a way of promoting its brand name and products to the entire consumer population. This process involved the selection of proper media and programs in order to get sufficient conversions from the targeted consumers. Some of the aired shows that have played a significant role in marketing the company products include Down to Earth and Shirley Jones. In comparison to other competing organizations, Proctor and Gamble has consistently enjoyed the benefits of its innovations in most of the markets, both in the United States and abroad. Despite the various benefits that Proctor and Gamble has gained, there are cases where they h ave underperformed. From a general perspective, social concerns, lifestyle, and attitude play a crucial role in determining the success, failure or reputation of any organization that deliver goods and services. Over the recent years, for example, Proctor and Gamble experienced several boycotts that are linked to the exploitation of animals by the company. According to relevant sources, the company uses animals to conduct tests for products in order to ensure they are safe for use by their consumers. As established by animal rights organizations, the company and its leadership have engaged in unworthy practices that create an attitude that transfers fame and profits to the strong at the expense of the environment, people and animals. This scenario led to widespread trust issues about the company’s ethical standing, and the management had to step in to save the situation. â€Å"During the 5th World Congress on Alternative and Animal Use in Life Sciences (2005), the company ac cepted that it engages in animal testing as the last option in order to ensure products are fit for use by consumers† (Federal Institute of Risk Assessment 3). However, the company management insisted that they are making plans to remove the use of animals in conducting their product research (Federal Institute of Risk Assessment 3). As a resolution, the company stated that it has commits itself to employing other means of conducting product research within the company. This is depicted in its collaboration with government bodies and academia to promote the acceptance of alternative means for product research and testing in the company. Environmental Issues In all countries, there are several environmental concerns that are addressed for a peaceful coexistence between man and the environment to be realized. These environmental issues are addressed through the creation of environmental laws that control the activities undertaken (Shah 5). In most scenarios, these laws significa ntly influence the operation of key organizations both positively and negatively. In the United States, for example, there are several environmental laws which have been drafted to ensure the environment is kept clean and conducive for habitation now and for future generations. For example, the passing of the Solid Waste Act (1976) was intended at eliminating the causes of environmental dereliction that worsened due to increased population growth. Several companies had to respond to this environmental law or risk being penalized. Furthermore, the damage caused by disposal of diapers was counteracted by strictly following the established environmental laws. The rise of recyclable diapers also had some implications on the manufacturers such as the strict regulations and changes in consumer preferences. Furthermore, operating companies like Proctor and Gamble had to deal with increased levels of consumer awareness concerns and resentment for buying disposable diapers. In response, Proc tor and Gamble came up with the idea of using pulp to manufacture diapers rather than using PVC plastics and claimed their diapers are recyclable (Sewell 2). Since the diapers were biodegradable they eliminated cases of health hazard arising from non-biodegradable PVC diapers; hence, resulted in a cleaner environment (Sewell 2). In more recent years, newer regulations have been created such as the need for the provision of high health standard products, energy saving options and control of exhaust gases into the atmosphere. As a result, several organizations have strived to meet these regulations and global objectives by carrying out the best associated activities. Proctor and Gamble engaged in the 2005 Clinton Global Initiatives that are intended at providing the world with the best services for better live (Stockhouse 1). As such, the company committed itself to offering clean drinking water to millions of children in developing countries such as in the sub-Saharan Africa and Asia . According to relevant sources, more than 13 million children in the United States have inadequate food supplies, but Proctor and Gamble strives in to offer the necessary support (Proctor Gamble, 22). Through the leadership of McDonald (CEO) several environmental objectives have been realized depicting his excellent leadership skills and ability to serve without bias (Shedlock 2). For instance, the company successfully lowered water usage by 7 percent, energy consumption by 6 percent and carbon dioxide emissions by 8 percent in the year 2008. According to relevant sources, these results are exceptional and can only be realized through complete sacrifice and the ultimate determination to succeed. Furthermore, Proctor and Gamble helped to supply and distribute 430 million liters of safe drinking water in several parts of the world in its initiative to reach needy children in 2008 (Stockhouse 1). As a result, the company has continued to show its commitment to reach, support and impr ove the lives of people in the global scenario (Shedlock 2). Such initiatives also uphold the ethical drive of the company and in the long run may help to strategize its marketing capabilities in new markets. Future Opportunities and Risks. In the next 10 years, Proctor and Gamble Company will continue to experience significant changes in the political, economical, social and environmental issues. These changes will force the company to respond by creating strategies in order to remain competitive within the market and retain its market leadership (Proctor Gamble, 20-52). In the following pages, the possible issues, opportunities and associated risks that may impact the company are discussed in detail. Economic Issues By assessing the current global development trend, there are significant indicators of an increased economic performance in several countries. For example, various developing countries have established global goals and strive to meet these goals in order to have a rat ing on the global scenario (Shah 5). As a result of these initiatives, there are increased chances of better performance in developing countries within the next years. In response to this effect, various multinational companies have already started establishing their roots in such countries so that they can enjoy the benefit of first investors. These potential future economies are referred to as emerging markets and have the capacity to change the rating of an organization. Proctor and Gamble, for that matter, has started laying strategies for opening and establishing its operations in emerging markets such as in countries like India and Malaysia (Proctor Gamble Company 5). As such, the company’s idea is to locate itself close to the future consumers, as well as, win a bigger share of the market. These plans became clear in 2008, when the company announced its intention of establishing 19 factories in developing countries that have experienced exponential growth in their GDP over the recent years. Such strategic moves give the company a better chance of utilizing the new economic opportunities before other competing companies enter the new markets. Other opportunities associated with establishing itself in new markets include the enjoyment of free markets with less competition and still offer the best products. Considering that 80 percent of the world’s population resides in the developing countries, the potential of Proctor and Gamble to remain a market leader for several years to come is undoubted. However, despite the fact that there are numerous opportunities in establishing the company’s future in emerging markets, there still exist risks that should be put into consideration. First of all, competing companies such as Unilever and Colgate-Palmolive have already established factories in some of these markets; hence, Proctor and Gamble is expected to receive some form of competition during the implementation process. Furthermore, the c ompetition to offer the best products at the most affordable costs will have a significant effect on the reduction of overall profit margins. Second of all, developing countries tend to have unstable economies and the markets would vary with little uncertainty. As such, Proctor and Gamble may be in a risk of losing potential income trying to maintain its operation in such markets. Social Issues. Demographic factors such as population play a key role in creating a stable market that multinational companies can thrive in well. In most developing countries, the population growth rate is high and more children are being born (Shah 5). As such, the continued population growth increases the size of the potential market in the target developing countries. Therefore, in the coming 10 years, Proctor and Gamble will explore this excellent opportunity in the developing markets. With continued population growth, the demand for household products will increase; hence, a significant increase in t he volume of sales will be realized by the company. In addition to that, the social services that the company has been offering in the developing countries such as provision of safe drinking water and food in sub-Saharan Africa will live a lasting impact on the people (Proctor Gamble Company 5). As a result, the company will be appreciated for its ethical moves and potential consumers will always value being associated with the company. Therefore, the company’s name and brand will ensure it thrives well against other competing organizations. Furthermore, developing countries have an increased awareness in the value of education and more children are being taken to school. In Africa, on the other hand, education barriers and bias against the female gender is slowly diminishing and more females are being taken to school. As such, the level of literacy in the developing countries is going to improve, and the society will appreciate several development issues. According to relev ant information, literacy tends to increase the value of an economy because more people get into employment and are able to become financially independent. Ten years from now, this will be the likely scenario in developing markets because more people will be financially worthy due to created employment opportunities. As such, Proctor and Gamble is bound to operate within profitable margins because the purchasing power of the local citizens will have improved. Despite the potential opportunities, Proctor and Gamble will still be exposed to various risks during the implementation process in the emerging markets (Monks, Minow 32). For instance, other societies have various preferences and attachments to products. This might be the scenario in Asian countries where social values and culture play a crucial role in the behavior and lifestyle of the people (Puckett, 6). As such, Proctor and Gamble may have a rough time convincing or even changing certain products to march their tastes and preferences (Puckett, 6). Furthermore, existing competitors in developing countries will trigger strong product wars because the existing organizations will have studied the market and the needs of consumers. As a result, Proctor and Gamble will need to be more innovative in order to realize substantial market capitalization. Political Issues. In developing countries, there are several political factors that determine the success or failure of an organization. As such, the factors can positively influence or hinder the progress of a company in the territories (Shah 5). Governments in the Far East, India, Malaysia and China have strict government regulations that operating companies have to follow. However, there are both opportunities and risks that are associated with these regulations. As a result of the global wave, however, most governments have removed some of the strict regulations in order to allow global operations and businesses to thrive well in their countries. With this trend spreading to various developing countries, Proctor and Gamble will have an opportunity to trade without strict restrictions that would prevent smooth operation of the company. Proctor and Gamble has already started making advances that would enable maximization of these opportunities. For example, the company has already declared its intention in setting up an oleochemichal plant in Indonesia in order to secure a stable future supply for its fatty alcohol requirements (Proctor Gamble, 20-52). According to relevant sources, Proctor and Gamble has secured $100 million for the future investment in the Indonesian soil. On the other hand, Proctor and Gamble will have to face various risks that are usually associated with developing countries. Political instability is a leading cause of instability in developing countries and may negatively impact the operation and profitability of an organization (Sullivan 43). Several developing countries experience political instability due to an unstable government, civil wars and corruption among government officials (Puckett, 6). Such occurrences may hinder businesses operations and cause damages, overheads and other management issues. As Proctor and Gamble plans to enter the markets, it should be ready to face such risks in the near future. Additionally, other countries impose unusually high tax policies that would impact the profitability of the operating companies. In most African countries, for example, government imposes heavy taxes on the working population and operating companies. As a result, both the purchasing power and the profits margin of the operating companies are negatively affected. In the long run, some companies may fail to break even in the planned duration or even shut down due to excessive operating costs. Therefore, Proctor and Gamble will be exposed to this risk of operation and should be prepared for the worst case. Environmental Issues. In the current world, environmental issues are a serious concern and in many countries, the global perspective is preferred. For instance, several projects are undertaken with regards to their sustainability and value to the environment. In line with the global sustainability requirements, several governments have established their environmental laws to cater for efficiency such as the reduction in energy consumption, water consumption and reduction in carbon dioxide emissions (Proctor Gamble, 17). As a global initiative, several countries are taking part in these movements. Therefore, the governing laws encourage people and organizations to help make the world a more habitable place now, and several decades to come (Shah 5). Through such activities, the people are informed and learn how to use and manage resources. In the long run, the people will lead healthy lives; hence, save on hospital bills, medications and other associated costs. All these occurrences will enable the population in developing countries to be more sustainable and a ble to support their families because of improved living standards. As a result, the resultant population will eventually increase their ability to spend on their own improvement. In that sense, Proctor and Gamble will explore this opportunity and operate sustainably in such countries. The best part is that Proctor and Gamble has already taken an initiative to uphold sustainability among several developing countries such as in India, Malaysia and sub-Saharan Africa (Monks, Minow 32). The company has successfully managed to deliver clean drinking water to needy children all over the world in an effort to improve their lives (Proctor Gamble Company 5). As such, it has made a strong impact that will last impact the society. In the future, unfortunately, some governments would impose strict rules that would negatively impact the operations and profitability of Proctor and Gamble in their countries (Sullivan 43). These rules may include heavy ban on certain raw materials such as wood i n order to prevent deforestation and the slow process of desertification. Since the company heavily uses pulp in the manufacture of products and packaging material, it may have to find alternatives at the expense of its profitability. Therefore, such imposed bans would result in high operation costs and subsequent reduction in the company’s profit margins. Other regions such the European Union have strict environmental laws that determine the quality of products and the acceptable chemical compositions (Sullivan 43). In cosmetics products, for instance, harmful chemical products may be controlled by such laws and enormous fines would be imposed if such chemicals are reported to exist at harmful concentration levels. Proctor and Gamble will also incur further expenses in efforts to respond to strict laws. Conclusions and Recommendations. Several decades ago, many organizations operated without much regulation that would impact the operation of such organizations in a great man ner. Companies were established, operated, and several sustainability factors were never given the utmost attention. As a result, there was inadequate consumer protection laws, environmental laws, as well as, risk assessment procedures. With increasing awareness on the impacts of such establishments, the society started planning ways of protecting the environment, people and animals through setting up the governing rules. These rules and regulations change as time goes to accommodate the factors handled at one moment in time. Therefore, organization has grown and adapted to match the requirements of the society and deliver the best on its part. Proctor and Gamble, for example, has existed for more than a century and has undergone a series of changes through several generations. At the moment, Proctor and Gamble is a multinational company with products in excess of 300 and operates globally in more than 80 countries. As highlighted in the document, the company is a market leader and takes a strong lead in innovations. For instance, relevant sources have indicated that, on a yearly basis, the company introduces one to two leading brands into the market. In approximately 10 years from now, the company is devising strategies of reaching emerging markets. In connection to that, the company will be exposed to several opportunities within the political, social, economical and environmental perspectives. However, the success of the company depends on its ability to innovate and set up strategies that will carry it forward through the markets (Monks, Minow 32). On the other hand, the company will still face risks that may result from operating within the markets. As mentioned in the paper, the risks are numerous, and the company will have to create ways of negotiating past the risks (Sewell 2). As a market leader, the company must have the tactics of operating in exceptional markets and still emerge victorious in the end. Proctor and Gamble is a market leader and a pa ce setter; hence, it is inevitable to mention that it leans more on the success side than the failure side. Finally, I would like to conclude that constant improvement in organizational skills, innovation skills and marketing skills is the key to a successful organization. Works Cited Federal Institute of Risk Assessment. â€Å"5th World Congress on Alternatives and Animal Use in the Life Sciences.† Bfr.bund.de. Bfr.bund.de, 2005. Web. Funding Universe. â€Å"The Proctor Gamble Company.† Fundinguniverse.com.  Fundinguniverse.com, 2011. Web. Isidore, Chris. â€Å"Europe Recession Risk grows, with or without Debt Default.†Ã‚  Financeyahoo.com. Financeyahoo.com, 2011. Web. McGowan, Evan. â€Å"Corporate Profile: Procter and Gamble.† Academy of Management  Journal, 12 (8). Pp. 20-28, 2006 Print. 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Stockhouse. â€Å"Proctor Gamble Makes Commitment at Clinton Global Initiative to Provide 2million People with Clean Drinking Water in East Africa.† Stockhouse.com. Stockhouse.com, 2011. Web. Sullivan, Joe. Exploring international business environments. Boston, MA: Pearson Custom Publishing, 1999. Wohi, Jessica. â€Å"Proctor Gamble Profit Tops Expectations.† Reuters.com.  Reuters.com, 2009. Web. This report on Proctor Gamble Company was written and submitted by user The198 to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.