Procter & Gamble’s Entry into South Africa

P&G ability to enter the South African market are of crucial importance for the company’s future success. They did not enter the market of Republic of South Africa before may be because of the political, economic and cultural issues that prevailed then. The following report will discuss about the strength and weakness of Procter and Gamble and then how entering the South African market and how to pay attention to their competitors. Later on a marketing plan will also be discussing on how to successfully position Tide in the South African market.

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The Procter and gamble is a Fortune 500 American multinational conglomerate that manufactures a wide range of consumer products which ranges from beauty and grooming, health and well being, household care etc. The pampers another brand of P&G that comes under its household category is the top selling diaper brand in the world .The Tide detergent comes under their house hold care category to For about 60 years, Tide has been caring for the clothes of families across the globe and helping to provide the everyday miracle of clean clothing .this product manufactured by Procter and gamble is a very popular laundry detergent and very successful on the markets in Canada ,the United States, Morocco ,India, Saudi Arabia etc .South Africa seems to be a promising market for the company this might be the factor the company entered the South African market with its Star homecare product Pampers .
Tide is among the most popular and patronized detergents in the world .Since its launching in 1946 the world’s first synthetic detergent was able to establish its market supremacy. The laundry detergent powder owned by Procter and Gamble currently holds about 40 percent of the laundry detergent market and it was able to penetrate into all the market which it’s operating now within a small period of time it continues its stable growth in the market and is committed towards helping families in their laundry needs. The Tide offers a wide array of products such as the Tide liquid, Tide Powder, Tide coldwater, Bleach, Tide HE and so on. Therefore we can say from its very Tide Bleach to Tide Total care to their very recent Tide stain release in wash booster it stress on the importance of clean, fresh clothes that helps you feel you’re the best and most confident no matter what you wearing that’s their motto .
Market Entry
Since there is always this issue of a giant US corporation spreading American style consumerism into all corners of the globe .However a Multinational Corporation cannot just waltz into any country and beat the completion there and just take the market share there are lot of big business houses that has failed in the past to local companies . In this case P&G should enter the market with their product Tide as a local company investing in the South African economy and hiring local workers from there and this is exactly how the company has been positioning itself for the past so many years .Yes it should be a Greenfield investment, even though it might be an expensive option however the benefit associated with its that it can build the subsidiary the way it wants and importantly could transfer the same kind organizational culture and practices with ease making it easy to establish operating routines and it also helps to expand and spread the core competencies within the enterprise through the way of Greenfield investment . Therefore Tide should enter the Republic of South African market by building manufacturing plants and hiring workers from thereby it can also create a good reputation there by providing employment for the locals .Like said before even though it might be little expensive later on it will start to bear fruit .
Environment Analysis
P&G as we know is the world’s leading laundry detergent company with a market share of 28.1 percent compared to its main arch rivals Unilever with a market share of 17.4 percent as per a survey conducted in 2006. Even though its competitor Surf another major laundry detergent and some other detergent brands from Unilever has already made entry into the South African market much before itself the penetration in this are hasn’t been that significant .P&G was late in entering the Indian detergent market to its rivals Unilever Surf because the Indian economy wasn’t that open and investment friendly until a couple of years ago by the time they entered even though Unilever held a strong position and enjoyed huge market share there P&G Tide was successful in bringing down the market share of Unilever Surf by engaging in a price war with them and now there no more huge market share is enjoyed by both the players as result. Similarly even if they are late in entering the Republic of South Africa with a population of about 49,991,300 people as per 2010 census, and is predicted among as the next best developing economies along with countries like Bangladesh, Egypt etc leaves a lot a scope and significant growth opportunities for Tide in South African market.
Political Environment
The Republic Of South Africa is Parliamentary democracy wherein the members are elected for a 5 year term .The Government have a favorable attitude towards foreign direct investments countries like United States and the members of European Union, Japan etc are their major trading partners .Therefore one can say there not much P&G has to worry about by introducing its Tide Detergent in this market as the Political factors are in favor and there is not much legal restrictions that the company has to comply with .The Government is investment friendly and has also formulated a new strategy to boost the country’s economic growth to 6 % by 2014.
Economic Environment
The economy of South Africa is pretty good. They have a growing economy with a GDP of 287 billion USD in 2009 and a real GDP growth rate of 3.7 % in 2009 from its previous 3% in 2008 .Their purchasing power is also expected grow over the period of time and its predicted as the next best 10 developing economies (In a report from France 24) after India and China. The key economic reforms have given rise to the macroeconomic stability of this country. Taxes have been reduced, tariffs lowered and exchange controls relaxed all these are positive signs.
Social and Cultural Factors
Their gross income and disposable income has increased rapidly over the recent years compared to before and is expected to grow even more and there are lot of potential for further growth for the country in different spheres. Statistical figures indicate that the Engel’s co-efficient is slightly decreasing in the last few years. Both the urban population and rural population have a level of welfare that they will be willing to spend on the basic requirements products. Culture:-
South Africa has a population of about 40 million people and about three quarters of its population is black and about 15 percent white. Apart from Afrikaans most of them do speak good English which is the global language. South Africa is considered to be an Industrial giant of Africa. Some of their business etiquettes with respect to communications they do not like to rush deals and are very casual in business dealings ,it’s better to use titles and surnames to address the people ,hand shake is the most common way of greeting however handshakes vary between the various ethnic groups . South Africans prefer a “win-win” negotiation and with respect to appearance and behavior they like to be well dressed and gift giving is not norm in the business and business meetings will be generally held over lunch or dinner in some good restaurant.
Technological environment
South Africa’s manufacturing output is technology intensive with high tech manufacturing sector such as machinery, scientific etc .South Africa’s technological research and quality standards is pretty good. They have also developed number of leading technologies in fields energy and fuels, steel production, telecommunications and Information technology etc
Thus after the PEST analysis it is pretty much clear that business environment is favorable to launch Tide in RSA.
SWOT Analysis
Strength – P&G Tide is a very strong brand it’s been really successful in numerous number of countries including the Unites States and various other countries in Asia such as India, Pakisthan, Srilanka and Bangladesh etc . It has a certain popular tagline in each of these countries and these have helped to retain the Brand name in everyone’s mind. It makes its product available in different quantities and prices based on that meeting the consumer needs. The company has about 127 000 employees working for them with people from various nationalities working for them on the top level group and P&G operates in numerous number of countries it also invests a large pile of money on their R&D . The detergent also helps in reducing waster consumption. They also do have high quality manpower
Weakness- Tide has a lot of competitors in the market such as the various Unilever home care brands such as Surf Excel, Omo, Comfort, Cif etc. Then since Tide is detergent product there are lots of substitute products available in the market like detergent cakes, liquid detergents etc .This might reduce the market demand for the detergent powders. The company might have to spend on for certain cultural and other activities in the public other than just spending for product development and research. The lack of reliability on data is another factor since the market is pretty huge and its spread over a lot of countries it is not possible to get a reliable data about the market demand and other data’s that will help in market development. This might reduce the predictability power of the company
Opportunities – The Company can utilize upon the changing lifestyle of the people for increasing the demand of the product by concentrating on customer needs and by giving the best product thereby the company can widen the scope and can increase the demand of Tide products. The company can try to acquire a high market share for the product by increasing the production and market share and thereby it is possible to achieve high demand and a reduction in price of the product thereby ensuring customer satisfaction. P&G could also apply certain new tactics in the market by introducing a new product. Tide can opt this strategy by introducing a new variety in the market it could get a sudden boost in the demand of the product at the time introduction in the market.
Threats – The Company might face some legislative pressures as the chemicals that are used in the production of detergents are harmful for the human body and natural environment. There might be environmental effects as the detergent contains chemicals that are harmful for human being and natural resources. Therefore the company must make sure that it makes environment friendly products. There could be chances for price war we know that the primary goal every manufacturer will be to increase the demand for their productions since sufficient demand is necessary for the company to survive in the competitive market. If any of the competitor company reduces their products price and this might result in a price war between the two.
Marketing Strategy
Procter and Gamble as one of the world’s consumer products companies in the world often undertake market research before launching its product and also uses this research to make decisions about the marketing mix as well as its marketing strategy and tactics. Market Research thus helped the company determine its marketing strategy by shaping the brand name and the product identification that the product would carry. Knowing the fact that women would be the primary target market for the product therefore the tactics should be developed keeping this in my mind and use in its promotional strategy.
The Marketing Mix
Price
This is the most powerful tool in marketing, as we know it is utilized in many a ways mainly to increase unit sales ,to make the market less attractive to potential competitors and to attract buyers so that they buy other items once the transaction has started .
The P&G pricing of Tide detergent soap proves to be an effective means not only to attract consumers but also to reduce the market appeal to its competitors .In India P&G had launched discounts for both its brands Tide and Ariel for about to 20% to 50% literally there was a price war with its archrivals Unilever Surf which was enjoying a major market share in the market before .However by its reduced pricing strategy buying Tide has become an economic -wise option for the larger masses. By slashing its price the volume of Tide sales have surged tremendously.
P&G will have to follow a similar pricing strategy here in South Africa like they did in India as their competitors Unilever brands are pretty strong there. 12 South African Rand for 1 Kg of tide would be a good idea.
Product
It’s considered that Tide’s usefulness expires as soon as laundry is finished, but this is not to suggest that P&G is not going to be liable after its use .The trend nowadays is providing feedback mechanism. It’s been realized by P&G which is why one can notice writings in the packets like if you have any suggestions or comment write to us. The company would be able to know how the customers feel about the products what they think of it in order to make this effective ,to bring awareness to their customers they have to re-in force the message to its customers via TV , radio or internet .
The company should therefore make sure what that’s discussed above is done in the South African market. Tide is an excellent brand name which carries its supremacy and toughness across the markets where it’s present.
Promotion
The very existence of internet has revolutionized the world of information technology this a very good sign for many new advertising opportunities .For e.g. the pop up ads and email ads .The television and radio advertising are also important ways to promote Tide in its new market .Like any other effective television and radio advertising it requires a very good punch line ,present the competitor product without mentioning its name tell about its weakness they should get testimony of experts or renowned authorities.
Drawing the attention of the internet users obviously would not readily move them into action. They have to therefore find some new ways or effective techniques to further engage them in company website. Therefore a strong consideration must be given to the content of the site. Thus by making the site more attractive this will help to engage more consumers and they will start to react positively to the ads.
Therefore company has to have an effective promotion and public relations in their new market in all the tools available to them. Advertising in various media maintains superior standing of the product in the wide detergent market place.
Place /Distribution
The choice of distribution is an extremely important decision to make. It should meet the needs of the South African market .When it comes to the elements of distribution channel which includes packaging, storage facilities, transportation and the members such as brokers, retailers and households must be suitable for the SA market needs. Tide must be made available both in the retail stores and wholesale stores of South Africa as the product try to satisfy the immediate need of people.
Packaging the product must take the following into consideration must facilitate storage and handling of the product must protect Tide from extreme temperatures, isolate appropriate purchase quantities. And also make sure that the packaging materials must be of bright colors to instantly capture attention of the consumers. At the same time storing Tide must be done by complying with the rules of the South African Government .P&G must also inform their stakeholders ,manufacturers about the various storage risks that might happen such as fires,theft,loss of market demand etc this will also ensure effective handling of storage costs . And it’s also important that they build a sound communication channel with their consumers, manufacturers, brokers and other stake holders in the new market for the smooth functioning.
Competitive Analysis
Tide is among the top 20 world’s detergent manufacturers. According to certain reports published during the period Tide held the highest share of 3 billion dollars during the late 2000 followed by its stalemate Ariel with about 2.8 billion US dollars. The major competitors that Tide is going to face in South Africa will be its major arch rivals and strong competitors such as Omo, Surf and Persil the other laundry detergents from Unilever.The competitors have already established their brands in the South African markets . However P&G needn’t be worried about that since before also there was this situation were Unilever tapped into the Indian markets even when it was not so business friendly even after making a late entry into the market arena they were able to capture significant share in the Indian market Tide will be able to repeat the same here also with its heavy advertising and other related campaigns so as to promote sales .However there are also lot of other small rivals in the field as a result of product innovation and behavior dynamics of the consumers therefore Tide will have to concentrate on its marketing strategy focusing in order for them to dominate the market eventually .
Conclusion
The international marketing of P&G Tide is really important before its entry into the new market. Basing it from the facts gathered in this research, it could be concluded that the international marketing of Tide is effective. Its constant dedication in achieving its goals defines its success and further utilization. It’s necessary that one company must know to stay in competition in order to endure in the market. It is also important for the company to understand what’s the major driver of the firms profitability in a competitive market this key marketing challenge and strategy. So as to conclude the report helps in identifying the various resources of P&G’s Tide. It’s important for the company that in spite of their success it should continually work on its strategy change and development is indispensable. All this will help in the company’s success.