Research Paper on "Resources and Capability of Procter and Gamble"

Research Paper 3 pages (1155 words) Sources: 3

[EXCERPT] . . . .

P&G Case

How should P&G's strengths be leveraged in strategy development and how can its weaknesses be mitigated?

P&G's main strength is that of its brand and distribution networks. These strengths are sustainable competitive advantages for the business and will subsequently endure almost any market condition. Many of P&G's brands are recession proof as they will continually sell more products even in the midst of economic turmoil. As such, P&G is leveraging its strengths within the consumer goods industry to capture more market share in the future. According to the company's annual letter to shareholders, the company achieved a 20% increase in consumer impressions. This metric is important to leveraging the company's strength because people must first be aware of the companies brand in order to use its products. The letter goes on to say, "Decades of experience have demonstrated that making people aware of our innovation and motivating them to try our new products is the key to long-term success (P&G Annual Report, 2010)."

Proctor and Gamble also has very significant financial strength relative to its competitors both domestically and abroad. Currently the company has $2.768 billion in cash (Procter & Gamble Co, 2012). This is a very significant advantage to the company, especially during periods of economic turmoil. By having a significant cash hoard, P&G has the ability to take advantage of competitor's misfortune. During periods of economic turmoil, competitors often attempt to sell assets in an attempt recapitalize themselves. By having cash readily available, P&G can purchase these viable assets at depressed prices. The consumer staples and products industry is characterized as an oligopoly. Only a few firms worldwide have a dominant presence similar in scope to that of Proctor and Gamble. As such, when one of the P&G's competitors has financial troubles, the company itself can capitalize and take market share with its financial strength.

The finally strength of P&G that can be leveraged in strategy development is its brand recognition. The strength of P&G's brands allows it to maintain industry leading margins. Margins are an indication of both the companies cost saving initiatives as well as its pricing power. Due to the extreme band recognition P&G has accumulated over the years, it has the benefit of pricing its products slightly above competitors without material affecting demand. This is due primarily to the consumer's familiarity with the brand and the quality that the brand delivers relative to its peers. Companies such as Coca Cola and Johnson have similar advantages in their respective fields. Why does Coca Cola capture more market share while selling high prices carbonated beverages year after year? It is because of the brand. RC cola is cheaper and some national taste tests indicate that people prefer its taste; however the Coca Cola brand endures. Such is the case, albeit on a lesser scale for P&G. The other portion of the Margin equation is costs. P&G has an advantage as it does not need heavily capital expenditures to produce many of its products. It has to expend heavily of research and development (yet another benefit of sound financial management which I mentioned above), but once the product is developed, it does not cost very much for each incremental piece of production. The development of Pringles cost billions of dollars in R&D, but the production and packaging of the finished product pales in comparison to this initial cost. This phenomenon is known as economies of scale which can be a very distinct… READ MORE

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