Procter Gambles Innovation And Information Technology Practices Marketing Essay

Procter Gambles Innovation And Information Technology Practices Marketing Essay The PESTEL analysis found out that government taxes/ corporate tax and global economic downturn become the issues of the PG changes its business to merging market. And the SWOT analysis evaluate that PG have the strong financial position and strong branding makes it success in this new markets trend. The efficiency and effective of supply chain also is the strong point for PG innovation. The report also evaluates and concludes  that would be an ideal to meet the challenge which presented by the market and could satisfy the consumer demand since it uses open innovation- Connect and Develop program outsourcing the raw- materials and technologies and through acquisition of domestic and foreign competitors. But it also has the barriers on this program and acquisition. Since carriage out the Obamas foreign tax proposals, foreign rivals pay less in taxes in their home countries, foreign-based competitors would be able to reinvest more, expand faster and sell their products at lower prices than U.S. companies and this affect PG. The tax changes put PG at a cost disadvantage, PG gain a 15% to 20% cost disadvantage compared with other rivals. This will make PG unable to effectively compete against foreign corporations in the future (www.msnbc.msn.com). The heavily of IRS (Internal Revenue Service) fees is a burden of PG. This will reduce the profit of PG. For the example, PG valued artwork donated Cincinnati Art Museum in 2003 at $8.5 million but the IRS allowed PG subtract $6.4 million of the income taxes because the company states that in the lawsuit that PG is uses third-party appraisers to value its donations, so the company not allow PG subtract the full amount of the donation. And, PG had paid more than $6 billion of federal income taxes over the six years that were audited (www.usatoday.com). The national income and GDP growing will increase buying power. It will course PG raised its consumers especially in developing markets such as China and India. According to the report, GDP growing helps the Procter Gamble gain the premarket; it was gained from 2.2 percent to $58.51 after it reported results (www.reuters.com). Today, according to The New York Times (2009) reported that the sales from developing countries are doubling every four years. The sales from developing markets represent 32 percent of P Gs $78 billion in annual revenue, up from 23 percent four years ago. Global economic downturn- merging markets In the worlds four most populous nations, three are state in emerging markets; there are China, India and Indonesia. According to the Capital Groups estimation, it found that 70% of the worlds economic growth under the next 10 years will move towards from emerging market countries (Delfeld Carl T, 2009). Delfeld Carl T (2009) defines that Emerging markets now account for half of global economic growth, 33% of world GDP, and nearly 20% of world stock market value. After global economic downturn, PG trend to focus its growth strategy on emerging markets, it has opening about 20 new manufacturing facilities outside its established markets (www.wikinvest.com). It makes PG raising its capita sales in India and China more than 1 billion residents each and added $40 billion a year in Mexico (social.forecastfocus.com). And Delfeld Carl T (2009) also defines that PG now gains 32% of total sales from these merging markets and this is doubling every four years. PG have a large scale of operations and strong financial position in the domestic and foreign markets. PG serve 4 billion customers around the world and it has operations in over 80 countries (Procter Gamble, 2010). In the year 2008, PG was the 8th largest corporation in the world by market capitalisation and 14th largest US Company by profit. Now, it is 6th in Worlds Most Admired Companies in year 2009 (Americas Most Admired Companies 2009). In the Fortune 500, the company was the 20th in annual ranking of Americas largest corporations in the year of 2009 (CNN Fortune ranking). This strength helps PG gain opportunities in merging markets with the successful result. PG brings many new innovations to the market around the world. This is one of the strengths that PG success its business in the world. PG products innovation are very popular around the world, it gain a lot of awards, example, SymphonyIRI Group recognizes PG in its annual Pacesetters list and with the Outstanding Achievement in Innovation award (Procter Gamble, 2010). According to Business week, it reported PG is ranked 12 among the Worlds Most Innovative Companies (Procter Gamble, 2010). This is the marketing strategic that PG used to present around the world. PG provides well- known, trusted brands touch the lives of consumers in over 180 countries allows PG to efficiently and effectively to serve more consumers at more price points and gain the switch off markets advantages, for example Tide is the clear leader in the U.S. laundry detergent market with approximately 38% value share. Ariel is the leading detergent in Western Europe with about 16% value shares (2009 Annual Report). According to the IRI New Product Pacesetter Report, it ranks that PG products are the best-selling new products in the U.S. every year. Over the past 14 years, PG has had 114 top 25 Pacesetters. In the last year alone, PG had five of the top 10 new product launches in the U.S. and 10 of the top 25. (www.marketingweek.co.uk) Gillette acquisition, Ambi Pur acquisition After Gillette acquisition, PG believe that will create a group with annual sales of GBP 32bn, pushing its rival Unilever turn into second position in the UK toiletries market (Business Services Industry 05, 2010 CBS Interactive Inc). The PGs Gilette brand expend its market enters a new era in male personal care. That is a great opportunities to PG to expend it markets to male markets and gain more market share. There have many advantages to PG acquire Ambi Pur. Ambi Pur brand was rich history in innovation, if PG acquire with Ambi Pur success, it can enjoy millions of consumers which come from air care market. Beside that, Ambi Pur brings new technologies and high-performance products to PG current Air Care portfolio (Procter Gamble, 2010). This will increase the markets share of PG and brings PG go future. 2. Innovation and IT means to PG Innovation and IT become most and most importance in markets to every company. According to the Bob McDonalds speech which presented at the Innovation Institutes of India Global Conference (2008, p.4), claim that the innovation means at PG is the conversion of a new idea into consumer delight and, ultimately, into revenues and profits. In PG, the innovation very roughly, they innovate at every point of brands and innovate in every part of business. Its cover in terms of product or packaging innovation, and to innovate include design, media, communications, business models, cost structures and organizational structures (Bob McDonald, 2008). Open Innovation has significantly increased PGs innovation speed. Bob McDonald define that open innovation not as a form of out-sourcing but, rather, as a way to in source the creativity of the world. Nowadays, over half of the ideas and technologies innovations that PG bring to market are come from foreign countries (CASE III-5 by DeHayes, 2009). For examples, PGs Swiffer brand works together with Unicharm, Royal/Dirt Devil, and IDEO for the innovation of product, commercial and design. PGs Febreze partnerships with KJK, Givaudan, and GK Design for the package design, technology and perfume development. A Pringles potato chip is a successful example of the PGs open innovation effort (www.business-strategy-innovation.com). In this case, PG taking the innovation in, at the same time its also taking innovation out, for example: PG licensing PGs food technologies and packaging capabilities to ConAgra Foods (www.pg.com), in order to gain the licensing fee (CASE I-4 by Lyn Denend and Burg elman). Procter Gamble try to maintain its competitive advantages by focusing on product innovation, its always look for innovation ideas by its total portfolio of businesses and technologies. Its use its internal capability with an external network of innovation partners through Connect and Develop program. Theres a global network provide potential innovation partners for PG with about researchers, scientists and entrepreneurs doing work in areas relevant to PG businesses (www.pg.com). Through its Connect + Develop initiative, PG bring in new product ideas from outside, allows others developers to obtain their concepts and designs into PGs product pipeline. For example, they helped PG launch Olay Regenerist Eye Derma-Pods, and become its top-selling skin-care item in the year 2008 (www.fastcompany.com, 2008). According to the wiki analysis, it found that PG will launch a flurry of new products globally, using innovation to boost sales in fiscal 2010 coming out of the global recession (www. wikinvest.com, 2010). Acquisition of domestic and foreign competitors PG management had adopted another innovative play-to-win strategy by acquisition of domestic and foreign competitors. PG acquired other companies that helped in innovation its products, diversified its product line and increased its profits (knol.google.com knol.google.com). For example, the cases of Gillette acquisition, and Ambi Pur acquisition. After Gillette acquisition, PG gain the innovation in male personal care products, for example the Gillette Fusion ProGlideà ¢Ã¢â‚¬Å¾Ã‚ ¢ razors and ProSeriesà ¢Ã¢â‚¬Å¾Ã‚ ¢ male skin care products, there are innovation products which combine Gillette technologies (Procter Gamble, 2010). After acquisition of Gillette, PG increase its position in faster growing, higher margin, and more asset efficient businesses. The PG gain 22 brands with sales of $1 billion or more and 14 brands with sales between $500 million or $1 billion (Rick Ciccone, 2006). Besides, Ambi Pur brings new technologies and high-performance products to PG current Air Car e portfolio, (Procter Gamble, 2010). This will increase the product innovation, expands PGs market and gain more market share. (CASE II-17 by Burgelman and Meza). JIT inventory control Just-in-Time inventory control, can save costs, save time, reduce waste and move products and services to customers on time. In this case, PG is using this method and partnership with Wal- Mart. Wal-Mart linked with PGs inventory management system, provides information sharing and opened its consumer information to PG. After received the sales data directly from the checkout of Wal- Mart, PG used JIT inventory control on time deliveries to Wal-Mart and deliver the stock to the stores to meet the contracted customer service level. The just-in-time process works well for Wal-Mart and helps PG reduce the waste and more efficiency; PGs sales have increased significantly to Wal-Mart and directly to the consumer (Handfield and Nichols, 1999; Simchi-Levi, et al, 2000). TQM the process Total Quality Management (TQM)s principle provides many guidelines for PG to support its management approaches. Each principle will create their procedure to help PG in continually improving with training, practice and education (hubpages.com). The Five components of PGs TQM programs that primary to the improvements are: 1) Plant and division waste assessments to track discharges by site and set goals for improvement 2) Process assessments 3) Lifecycle assessments 4) Research on product impacts 5) Benchmarking. For example, the case at the Lima Ohio facility had success reduced 77% of air, water, and solid energy over four years using the TQM method. The other success example that is paper plant in Mehoopany, PG has created an innovation reduced 75% of the solid waste going to the landfill (www.future500.org). 3. The ways to improve and change The several ways that innovation and IT aspects of the organization/ supply chain of PG might be improved; there are supply chain reinventions, eStore website, products innovation and logistics. 3.1 Setting Up the Web Store Early in this year, PG ran e- commerce in USA, e Store provide a wide range of potential consumer to PG. EStore allow PG to monitor sales volume. World Wide Web allows PG to sell products directly to the consumer and it also allows PG get the relationships with customer. PG can get the comment and suggestion or advices directly to the consumer and take the action to change and improve faster. In addition, PG can overcome geographic barriers to reach a global markets and customer- base. In this case, PG can continue use e- commerce to expand its Web Store to another country, such as Western Europe, Asian countries, because online shopping is not new news to the world, people can accept this marketing method. The PG also can set up its eStore in the lower cost places or overseas, for overseas PG can set up the web store office at merging market such as India or Taiwan because, India is IT developed country can provide good IT with low prices. And in Taiwan, the online shopping market is mature and popular, there have a mature market to PG expands its market to South Asian and China. Beside that, consumer on the Internet do not care where are the web store built. If PG built in the low- cost places, it can gain more profit and reduce the cost. This method that have used by CASE II-4 by DeHayes (2009), they move their offices from high- cost New Jersey to lower- cost Indiana. Supply chain reinvention- supply network In the PGs existing supply chains, it was limit its ability to reduce material use in PGs packages. The existing supply chain in PG is: Supplier manufacturer retailer consumers. After reinventing to the supply networks the PGs supply chain method will be change to Supplier manufacturer consumers. The supply chain has shorter the journal and also giving many benefits. The supply network is more focus on external market and consumer, using supply chain will help PG in expand its market to merging markets. So using the supply networks, PG can more focus on the consumer- driven especially external consumer, it also help PG run its business more fast and flexible. The table 3.1 below has shown that the effective when PG after using the supply networks in PG (Rick Ciccone, 2006). From To Chain Network Long and slow Fast and flexible Forecast-based Demand-based Manufacturer-driven Consumer-driven Internal focus External focus Designed from product forward Designed from shelf back Cost-reduction Value and growth creation Table 3.1, source by : Ciccone, R. (2006) AMR Supply Chain Conference, Reinventing the Supply Chain and Manufacturings Role Improve product innovation- health medicines combine with Chinese herbal According to the research of University of Maryland Medical Center (UMMC), (2009) reported that Recently, the World Health Organization estimated that 80% of people worldwide rely on herbal medicines for some part of their primary health care. In Germany, about 600 700 plant-based medicines are available and are prescribed by some 70% of German physicians. In the last 20 years in the United States, public dissatisfaction with the cost of prescription medications, combined with an interest in returning to natural or organic remedies, has led to an increase in herbal medicine use. Nowadays, Traditional Chinese Herbal Medicines (TCHMs) have been modified into solutions, soluble granules and tablets by extracting the plants natural ingredients. Due to the fact that TCHMs are natural and with very little side effects, its usage has been increasing significantly throughout the world. Research has shown that, similar medicinal plants are being used for the same purposes around the world (Chen, 2009). In this case, PG can change the health- care products ingredients to Traditional Chinese Herbal such as facial products, shampoo products. This is a good idea for the products innovation that can bring PG into another business level and markets. 3.3 Partnership with foreign countries company Today, the merging markets are developing so fast, many businesses tries to invest in this market to gain the competitive advantages. In order to survival in the market, PG can choose partnership entry mode to entry foreign countries to avoid distribution system and high cost of inputs problems. This can help PG invest to overseas save more cost, share risk with others and easy to entry the market. Partnership Company will provide the supply chain information to PG, help PG run the business smoothly. For example, PG partnership with Darlie which is a toothpaste brand of the Taiwan of Hawley Hazel company. This product is very popular in Asian countries, including Malaysia, Thailand, Singapore and the China (www.darlie.com). If PG partnership with this company, it will increase the market share significant. At the same time, PG also can gain the innovation and IT technology. But the Hawley Hazel company may less international business experience. This makes collaboration has a littl e difficult to manage because of their inexperience in the global business arena (CASE III-3, Christensen and Anthony). 4. Overcome the barriers It might be very difficult to overcome the barrier indicated above, unless the organization appropriate financial resources and human resources in: Building global network in different language Although the online marketing has given PG a lot of advantages but the cost and logistics of delivering goods to consumers have been the biggest barriers to PG, this barrier is around this supply chain and cost-effective thing. The cost of logistics and packaging fees are costly, it will affect the profit of PG. Another problem is the delivery problem; some of the rural places there have no convenient transportation for transport. So PG have to create the solutions to reduce the cost of packaging fees and logistics fees. The language and cultural differences also are the barriers of supply network in PG. PG want to expand its business in the merging markets, its has to change the its website page language to multi- languages specially Chinese language because Chinese language popular in Asian including China, Singapore, Taiwan and Malaysia. Those are big developing markets to PG, PG have to improve this services in order to gain the competitive advantages (CASE III-8 by DeHayes, 2009) The program for building a global network of professionals requires a lot of time and resources. PG had taken many years to identify and build its network of technology entrepreneurs, suppliers and scientists (www.business-strategy-innovation.com). Another barrier in building global network that may face is online advertising. Using search engine advertising also is a costly media innovation, because the GoTo search engine charge for the list position. In order to solve these problems, there have two ways that let PG Web store may appear on search engine results, which are sponsored links and relevancy ranked listings (CASEII- 4 by DeHayes, 2009, p 329). Beside that, in order to remove the barriers in Chinese markets, PG has to spend the money and human resources to create a Chinese language website or software (CASE III- 8 by DeHayes, 2009). Using 3PL to remove logistics barriers For the case which improve product innovation to low- income market, normally the facility such as transportation in low- income countries not that develop and convenient especially in the rural places. The problem of delivery to the rural places problem might be very difficult to overcome, besides the organization appropriate financial resources to solve the problems, the another way is using 3PL to remove the logistics barriers, because 3PL helps company to save costs, reduce waste, reduce financial risks. Relationships with Asian retailer In Europe, PG partnerships with Wal- Mart retailer to serve the consumer needs and market. The PG also can use the same method to entry Asian market, it can relationship with Watson, Tesco, The Store, Guardian, Giant etc. Those are famous retailer in South Asian, partnership with them PG can gain more competitive advantages and market share. It also help PG invest to Asian easier. The Asian retailer can give the feedback from the Asian consumer comment and suggestion; this will help PG to improve and benchmark with others company and continue improve itself, same with CASE III-3 by Christen and Anthony (2009) relationship with outside, take the knowledge from others. Stay focused on its customers need, Kanban continue improvement strategy In order to overcome the barriers from competitor, PG should stay focused on its customers needs, continue improve in technologies and also product, using the Kanban continue improvement strategy to maintain its business strategy and competitive advantages. At the same have to benchmark itself and competitor. Benchmarking helps PG opens organizations to new methods, gives ideas and tools to improve their effectiveness. PF can get more innovation from this management method, and this management has been used by many companies, such as Toyota, Nissan etc. Continue the Open innovation activities Innovation is PG business strategy, it cannot survival without innovation, PG come out many ideas to remove the barrier. And the open innovation is the way that PG use to remove the lack of innovation period in its business and this activities run (CASE III-3 by Christensen and Anthony, 2009). The open innovation activities need a lot of money and human resources such as scientist, chemistry, engineering, materials science, biological sciences, designer to develop the technology or innovation products and also packaging design. To overcome the barrier indicated above, PG has appropriate financial resources in place and the appropriate human resources to operate the equipment. For example, the Summer Camp program, that is a way to search for the best or brightest innovation group (Procter and Gamble, 2010). Company has to appropriate financial resources to organize this program to keep the open innovation run. That is hard to find a talented and creative scientist, chemistry and engin eering, and also costly to hire (CASE IV- 2 by Matthew C. Verlinden). Mass advertise According to the research of University of Maryland Medical Center (2009) there are still some Europe countries which do not widely accept the usage of Chinese Herbs medicines, they classified the Chinese Herbs as drug that are not fully regulated. In order to overcome the problem, the company should mass advertise Chinese Herbal products to the public, by introducing its health benefits and the little side effect it has on people. To do that a company has to invest a large sum of money in promoting and advertising these products to gain consumers trust which then leads to an increase in its market share. Training system Human resource is one of the main resources that need most. Training system uses to provide company human resources such as expert skills and knowledge. PG training system provide a set of session to train all its leadership team and subject matter experts including cultural, language, and religious differences with the organization. People can use the knowledge which they learn in the training system to manage the implementation of innovation and change (www.business-strategy-innovation.com). In order to run this system successful, the financial resources have been providing by PG (CASE II- 1 by DeHayes, 2009). 5. Conclusions The findings indicate that PG is now looking for more innovation and IT that can move the supply chain more efficient and effectiveness. Recently PG has used the outsourcing method, there is open innovation and through the acquisitions other company to increase the innovation and IT. JIT and TQM to confirm the supply chain run smoothly, and meet the consumer demands on time. Open online web store helps PG expand its business without geography barriers, increase its market share. Change to supply network is to reinventing its Supply Chain and Manufacturings Role. However, there have a lot of barriers, such as lack of innovation problems, Websites language problems, logistics problem and the quality control barriers of the innovation and IT in the supply chain become the burden of PG to improve and reduce its benefit. In order to overcome the barriers, it can be concluded that the organization must appropriate financial resources and human resources in open innovation program, training system to overcome the lack of innovation barriers. Focus on merging market to gain the competitive advantages and overcome the competition barriers and using the 3PL to remove logistics barriers in low- income market.