Strategic analysis is a process of conducting research on operating environment of a company. The company has to prepare the strategies to achieve the objective and high market share in the market. The environmental analysis has been done to make the strategies (Rauch, et al., 2015). There are many methods to analyse the environment of the company and even though the company has to analyse the financial conditions. In this report, the case of Proctor and Gamble has been taken into consideration to analyse the strength and weakness and financial condition. There are many methods are used to analyse the strategic condition of the company.
In this report, the mission and vision statement of the company will be discussed. In order to achieve the mission the competitive profile matrix of the company will be analysed. External and internal analysis has been done to analyse the company position in the market. Matrix analysis of the company has been done to develop the strategies in the market.
Proctor and Gamble is an American Multinational consumer goods corporation which delivered the personal care and hygienic product care products. These products are also classified in the different segments such as beauty, health care, baby product and many more. In the previous records, the sale of the company is $83.1 billion (P&G, 2018).
The vision of the company is to provide the best consumer products and services deliver in the world.
In order to achieve this vision the company set the mission and the mission statement of the company is to provide the branded products and services to consumer. It also provides the value that enhances the life style of world’s consumers. By providing the quality services, the company will get the reward by the consumer in terms of the value creation, leadership sales, and profit (P&G, 2018).
Competitive profile matrix is an important strategic management tool which helps in comparing the firm with the other firm in the industry. In this matrix, the strength and weak point can easily evaluate. This matrix is measured on the basis of critical success factors and these factors evaluate in weight, rating and score (Capps III, & Glissmeyer, 2012). In this matrix, the rating of ranks are differs but the weight stay same of every firm. The greatest thing about CPM is that it helps the company in analysing the company position by comparing with the other competitors.
The competitive profile matrix of the company is showed in the below table:
|
P&G |
Revlon |
Estee Lauder |
|
|
Critical Success Factors Weight |
Rating Score |
Rating Score |
Rating Score |
|
Advertising 0.10 |
4 0.40 |
1 0.10 |
2 0.20 |
|
Research & Development 0.06 |
4 0.24 |
2 0.12 |
3 0.18 |
|
Income/Employee 0.05 |
4 0.20 |
3 0.15 |
1 0.05 |
|
Market penetration 0.10 |
4 0.40 |
1 0.10 |
3 0.30 |
|
Current Ratio 0.05 |
1 0.05 |
3 0.15 |
4 0.20 |
|
Top management 0.06 |
4 0.24 |
2 0.12 |
3 0.18 |
|
Market Share 0.10 |
4 0.40 |
2 0.20 |
3 0.30 |
|
Product Quality 0.10 |
2 0.20 |
3 0.30 |
4 0.40 |
|
Price Competitiveness 0.10 |
4 0.40 |
3 0.30 |
2 0.20 |
|
Customer Quality 0.08 |
4 0.32 |
2 0.16 |
3 0.24 |
|
Financial Profit 0.12 |
4 0.48 |
2 0.24 |
3 0.36 |
|
Inventory Turnover 0.08 |
4 0.32 |
2 0.16 |
1 0.08 |
|
Totals 1.00 |
3.65 |
2.69 |
2.10 |
EFE Matrix defines an analytical technique that helps to analyse the external position of the company or its strategic intents (Hill, Jones, & Schilling, 2014).
|
Opportunities |
Weight |
Rating |
Weighted Score |
|
Consumers are interested in natural products which is developed by the company |
0.03 |
2 |
0.05 |
|
Young generation are attracted towards the advertising of social media |
0.06 |
2 |
0.12 |
|
Traditional advertisement is less effective than the Social Media advertising |
0.06 |
2 |
0.12 |
|
The average monthly visits of online marketing is increases in U.S. of beauty related websites by topped 60 million and grew by 94 percent over the past 3 years (Ethiraj, Gambardella, & Helfat, 2018). |
0.06 |
3 |
0.18 |
|
Consumers are increasingly with their appearance, due to which the company open a new branch |
0.08 |
3 |
0.24 |
|
As per the research, higher priced products have higher demand such as expensive cosmetics and fragrances |
0.08 |
3 |
0.24 |
|
The products which are fame by celebrity have high demand in the market |
0.08 |
3 |
0.24 |
|
Threats |
Weight |
Rating |
Weighted Score |
|
FER (Foreign exchange rates) |
0.02 |
4 |
0.08 |
|
Anti-trust investigation in Europe |
0.03 |
3 |
0.09 |
|
The competitors expansion is increases globally from Unilever, Clorox and Colgate Palmolive |
0.08 |
4 |
0.32 |
|
Diamond Foods struggling as per the financially conditions |
0.08 |
2 |
0.16 |
|
Discount on the expensive products damage the image of those products |
0.04 |
3 |
0.12 |
|
Regulations are increasing due to harmful ingredients use in cosmetic products |
0.07 |
3 |
0.21 |
|
Competitors are the big threat for the company such as Estee Lauder company ranks number one in skin care products and two in beauty products |
0.07 |
3 |
0.21 |
|
It is considered that the Investment is necessary to bring new products in the market |
0.05 |
4 |
0.20 |
|
Premium cosmetics are the main target for counterfeiting. |
0.04 |
2 |
0.08 |
|
Totals |
0.93 |
2.84 |
Strengths
The company achieved high growth in the market with the high goodwill value. The company achieve the high market share and got the 14th rank out of 17th countries. There are many other achievements and uniqueness which are used by the company as strength and these are as below:
The company can use these strengths to achieve the objective and improve the weaknesses.
Weakness
There are many weakness point in the company due to which the company fails in achieving their objectives. The points are given below:
|
P&G |
J&J |
|||||||
|
2008 |
2009 |
2010 |
2008 |
2009 |
2010 |
|||
|
Liquidity Ratios |
||||||||
|
Current Ratio |
0.79 |
0.7 |
0.77 |
1.64 |
1.81 |
2.05 |
||
|
Profitability Ratios |
||||||||
|
Net profit margin |
15.23 |
17.51 |
16.13 |
20.31 |
19.81 |
21.65 |
||
|
Return on equity |
16.57 |
17.29 |
18.03 |
30.46 |
24.24 |
23.56 |
||
|
Returnn on Assets |
||||||||
|
Solvency/Gearing |
||||||||
|
Debt Equity |
0.52 |
0.58 |
0.48 |
0.27 |
0.28 |
0.29 |
||
|
Long Term Debt to Capital |
0.25 |
0.24 |
0.25 |
0.16 |
0.13 |
0.13 |
||
|
Efficiency |
||||||||
|
Inventory Turnover Ratios |
4.66 |
5.6 |
4.66 |
3.56 |
3.49 |
3.49 |
||
|
Receivables Turnover Ratios |
11.7 |
13.14 |
14.5 |
6.55 |
6.41 |
6.3 |
||
|
Market Valuation |
||||||||
|
Book Value per share |
22.91 |
21.72 |
21.6 |
15.35 |
18.36 |
20.66 |
As per the above table, it has been analysed that the liquidity ratio of P&G is constant in the three years but Johnson & Johnson liquidity ratio is increases with the increasing rate. Although, the profitability ratio of P&G is increases with the continuous rate but the ratio of Johnson & Johnson has high profitability ratio. As per the analysis, it can be said that the Johnson & Johnson Company has a strong competitive position in the market.
IFE matrix is a strategic management tool which is used to auditing and evaluating the major internal strength and weakness (Management Mania, 2016). This method is used for the company internal analysis which is described as the table below:
Strength
|
Strength |
Weight |
Rating |
Weighted Score |
|
Earnings per share |
0.05 |
4 |
0.20 |
|
The company has 14th rank in 17 countries |
0.07 |
3 |
0.28 |
|
The company invest $2 billion in Research and Development |
0.05 |
4 |
0.20 |
|
SBU Structure follow by the company |
0.05 |
4 |
0.20 |
|
23 P&G brands earn $ 1 billion per day |
0.10 |
4 |
0.40 |
|
Crest, bounty, Braun, Gillette, Charmin, Downy, and Pampers are the top brands that hold by the company |
0.10 |
4 |
0.21 |
|
Focus on lower price products to target the price sensitive consumers |
0.07 |
4 |
0.28 |
|
It is number one cosmetic dealer in the world |
0.04 |
4 |
0.16 |
|
Sale of Pringles line is increases |
0.12 |
4 |
0.48 |
|
It focus on precious products |
0.08 |
4 |
0.32 |
Weakness
|
Weakness |
Weight |
Rating |
Weighted Score |
|
No published vision statement |
0.02 |
1 |
0.02 |
|
In the balance sheet, the amount of goodwill is mentioned $57 billion |
0.04 |
1 |
0.04 |
|
Johnson & Johnson is not operating efficiently |
0.05 |
1 |
0.05 |
|
The company Spent $ 772 million in advertisement department |
0.07 |
1 |
0.07 |
|
Consumers are not aware of all brands of P&G with its name |
0.03 |
1 |
0.03 |
|
Weak profitability ratio |
0.03 |
2 |
0.06 |
|
The profit of the company is declined by the rate of 5% in 2011 and increased by 2.9% |
0.03 |
2 |
0.06 |
SO Strategies
To produce three lines of higher end fragrances the company spent $400 million in Research & Development (Uhl, & Gollenia, 2016). The higher amount of investment on R&D helps the company in analysing the competitor’s strategies and their strength. The company use this investment as strategies to achieve the objective.
The company invest $ 100 million in advertising of the skin care products (Bull, et al., 2016). It uses the celebrities as a spokesman which increases the demand of the company and that would be used by the company as strategies.
WO Strategies
The company spent more amounts on social media advertising to target the youth by the amount of $100M.
ST strategies
The company engage in talks with the Pepsi to purchase Pringles if the demand is satisfies by Diamond Foods.
The company focused on the low prices cosmetics and fragrances by targeting the price sensitive consumers. The company may suffer loss in the market but if it uses this method as a strategy it will achieve success.
WT strategies
The company can reduce advertising of well-established products in which the company spent large amount of $300 million and it can invest some other products. This strategy helps the company in reducing their weakness.
The SPACE Matrix is a management tool that is used by the company to evaluate the type of Strategy that the company should undertake to achieve the success (He, Song, & Wang, 2015). The Strategic Position & Action Evaluation Matrix focuses on the strategies which help to achieve the competitive position (Ehlers, White & Noack, 2017). The matrix divide into four quadrants and each different quadrants suggest different type of strategy such as aggressive, competitive, defensive, and conservative.
|
Internal Analysis Financial Position (FP) 2010 Liquidity Ratios Current Ratio 0.77 Profitability Ratios Net profit margin 16.13 Return on equity 18.03 Return on Assets Solvency/Gearing Debt Equity 0.48 Long Term Debt to Capital 0.25 Efficiency Inventory Turnover Ratios 4.66 Receivables Turnover Ratios 14.5 Market Valuation Book Value per share 21.6 (P&G, 2018). |
External Analysis Stability Position (SP) Rate of Inflation -2 Barriers to enter into market -3 Competitive Pressure -4 Price Elasticity of Demand -2 Technological changes -2 Result – Average -2.6 |
|
Internal Analysis Competitive Position (CP) Market Share -1 Customer Loyalty -3 Product Loyalty -2 Control over Suppliers and Distribution -2 Technological know-how -2 Result – Average -2.0 |
External Analysis Industry Position (IP) Growth Potential 7 Resource Utilisation 5 Profit potential 6 Ease of Entry into Market 3 Financial stability 7 Result – Average 5.6 |
Grand Strategy Matrix is a tool which used by the company to analyse the gain insight by using the strategies. It consist the four quadrants such as weak competitive position, strong competitive position, rapid market growth, and slow market growth.
The company stable at the quadrant II, where the company has strong competitive position and continuously grow in the market. It has been seen that the company is growing with the continuous rate. Revenue of the company is increases every year with the rate of 5%. The company has effective strategies which help it to gain the competitive advantage in the market. The company has 14th rank in the 17 the countries which states it has strong competitive position which can easily compete the other companies. The company growth and competitive position states that P& G is mentioned at the appropriate side.
|
Increasing R&D |
Increasing Advertising |
||||
|
Opportunities |
Weight |
AS |
TAS |
AS |
TAS |
|
Higher demand for higher products |
0.08 |
4 |
0.32 |
2 |
0.16 |
|
Social media advertising is more cost effective |
0.06 |
1 |
0.06 |
4 |
0.24 |
|
Consumer are interested in natural products (Lashgari, Antuchevi?ien?, Delavari, & Kheirkhah, 2014). |
0.03 |
4 |
0.12 |
2 |
0.06 |
|
As per the research, the women purchasing power is increases |
0.05 |
1 |
0.05 |
3 |
0.15 |
|
The beauty industry is expected to increases with the percent of 18.2 in 2016 |
0.06 |
3 |
0.18 |
4 |
0.24 |
|
Online purchasing is increases which is shown by the visiting of the consumers on online websites |
0.06 |
0 |
0.00 |
0 |
0.00 |
|
The sale of fragrances is increases due to celebrity advertisement |
0.04 |
1 |
0.04 |
4 |
0.16 |
|
Youth are more attracted by social media advertising (Gupta, 2015). |
0.06 |
1 |
0.06 |
4 |
0.24 |
|
Increasing R&D |
Increasing Advertising |
||||
|
Weakness |
Weight |
AS |
TAS |
AS |
TAS |
|
The company do not published vision statement |
0.02 |
0 |
0.00 |
0 |
0.00 |
|
Revenue is increases |
0.03 |
3 |
0.09 |
2 |
0.06 |
|
Goodwill value on balance sheet |
0.04 |
0 |
0.00 |
0 |
0.06 |
|
The company is not operating efficiently as Johnson &Johnson |
0.05 |
0 |
0.00 |
0 |
0.00 |
|
Spent $772 million in advertising |
0.07 |
2 |
0.14 |
3 |
0.21 |
|
Consumers may not recognised all the brands of P&G |
0.03 |
1 |
0.03 |
3 |
0.09 |
|
The company has weak profitability ratio |
0.03 |
0 |
0.00 |
0 |
0.00 |
|
Totals |
3.30 |
3.38 |
From the above analysis, it has been recommended that the company has to take some steps to improve the performance to achieve the objective. The points are given below:
The company can spend $400 million in research and development to produce the different level of higher fragrances (Wheelen, Hunger, Hoffman, & Bamford, 2017).
The company invested $ 772 million in advertisement department which is high amount; it has to reduce this amount and invest in the other departments (Zainudin, & Hashim, 2016). The investment in the other departments helps the company in grabbing the high market share in the market.
The company can expand the business by aware the more number of consumers. Increasing social media advertising helps to target the large number of young people in the world. The company has to improve the social media advertising.
The company has to maintain the raw material to fulfil the demand of consumers with the quality. The high quality of product attracts the large number of consumers so that the company can achieve the high market share.
Conclusion
From the limelight discussion, it has been concluded that the analysis should be done to develop the strategies to achieve the objective of the company. In this report, matrix has been prepared to analyse the competitive position of the company. As per the grand strategy matrix, the company is continuously growing with strong competitive position but it has to develop the new strategies. The company also has to focus on some important areas so that the company can achieve the high market share.
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