Term Paper on "Procter and Gamble Organization 2005 and Beyond"

Term Paper 5 pages (1533 words) Sources: 1+

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P&G: Organization 2005 and Beyond Procter & Gamble SWOT Analysis

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The intent of paper is to complete a SWOT analysis of Procter & Gamble as the corporation was fundamentally re-organized under the Organization 2005 initiative. As P&G was faltering significantly through this time period in both sales and new product introduction processes, Organization 2005 focused on bringing an entirely new organizational structure, a redefinition of work processes to make them more efficient and lean, and a re-vamping of the culture to make it more focused on how to get employees motivated enough to go after more challenging objectives, including increasing the speed of innovation in the company. Clearly P&G had become too complacent in both product development and the aggressive penetration of new markets to sustain its revenue growth.

Organization 2005 was therefore defined and aggressively pursued to turn the company around. Organization 2005 was launched in September, 1998 in response to the continual financial, operational and marketing challenges the company had been facing. Ultimately the effort would revolutionize the brand and completely re-cast the value of the brand equity, forcing P&G to re-evaluate the equity in their brand (Market Research Executive Board, 2005).

Strengths

P&G was a member of the Global 50 list with Fortune Magazine with revenues of $40.2B, which translates into significant financial viability despite the many challenges the company experienced prior to the definition of the Organization 2005 initiative.

Global reach with a presence in 140 countries, netting out 5 billion customers globally and as a result is one of the most recognized brands in the world.

P&G was defined by a product divisional structure at the time of Product divisional focus at the time of Organization 2005. The five divisions that comprised the company at the time included Fabric and Home Care; Baby, Feminine and Family Care; Beauty Care; Healthcare; and Food and Beverage. Fabric and Home Care was the most important segment, accounting for nearly a third of P&G's total sales. While these divisions had ceased to generate significant revenue growth, they had established dominance of key brands in selected markets.

Creation of Global Business Units (GBU) to infuse higher levels of accountability and initiative throughout P&G on a global level. Dissolving four business units was seen as a critical move for getting the entire corporation more focused on their global customers, including the development of entirely new marketing, selling, and service objectives. This was accentuated by the development of the creation of Market Development Organizations (MDOs) that worked with the Global Business Units to create higher levels of product demand globally, by business unit.

Global Business Services (GBS) were centralized, including human resources, accounting, ERP and order management, and most importantly, information technology, were all consolidated from multiple geographic regions into a single, global organizational structure. This was specifically done to support the seven next line-of-business units' operations.

2002 began to show the results of heavy investment in Organization 2005, with the oral care, baby care and dish care businesses showing the greatest overall growth. In addition, the new CEO, George Lafley, was able to increase Crest to the number one oral care brand in the U.S., a position it had lost to Colgate in 1998.

The successful reorganization of the it function was completed as part of Organization 2005, with a high level of systems integration being completed in the context of several it initiatives. The core focus of these initiatives was specifically on collaborative technology to allow for greater levels of coordination and synchronization of marketing, B2C, B2B and trading exchange standards. In addition, P&Gs' supply chain was specifically re-organized and strengthened through the use of Web-based technologies to allow for greater supply chain visibility. In addition, analytics applications were integrated throughout the business units to allow for the creation of dashboards to measure collaborative performance between and within business units.

97% or 3,600 it employees were next assigned across the global business units, with just 3% being retained in a centralized it function. The role of Private Trading Exchanges (Columbus 2001) also aided significantly in ensuring a higher level of accuracy and speed throughout the supply chain. In addition, the many benefits of guided selling on the company's website using the techniques as defined by AMR Research (AMR Research 2001) also aided significantly in the growth of e-commerce strategies within the company.

In addition, the development of coordinated demand-driven networks and the centralizing of order management as defined by Manufacturing Manager (Manufacturing Engineer (2005) also paid significant dividends. The creation of a unified it architecture that was demand driven was a major competitive advantage that emerged from the work on the reorganization.

Weaknesses

Lack of organic growth in all markets and a lack of Earnings Per Share (EPS) in 1998, signaling a drastic need in expense management and revenue growth. P&G had been experiencing revenue growth of 1.4% to 5.5% between 1995 and 19999, well below the standard level that P&G had defined through previous years' performance in the 7% range.

The Organization 2005 restructuring was predicted to cost $1.9B in total costs, with $400M planned for 1999, and $1B over the next two fiscal years. The company predicted that the entire reorganization would require 10,000 positions to be eliminated through FY 2001. In addition, a further 5,000 positions would need to be eliminated in 2001. Workforce reductions would be heavily weighted towards the EMEA region, with 42% of total positions reduced there, 29% from North America, 16% from Latin America, and 13% from Asia.

Lack of new products in several years had shifted responsibility for the majority of revenue generation to the most stable, and most rapidly aging products in all five P&G Divisions.

Lack of ability to motivate employees to change at the rate that Mr. Jager showed how difficult change management strategies are to invoke in larger corporation (the Hard Side of Change Management 2005). Clearly what was needed was more of a focus on the best practices as defined by industry researchers (Aguirre, Calderone, Jones, 2004).

Opportunities

Organization 2005 could rejuvenate and revolutionize P&G, include increasing annual sales growth from between 6 to 8%, with a projected earnings growth of 13% to 15%.

Streamline the entire company by divesting unprofitable product lines and lines of business. This strategy is rarely discussed in the materials from this period of the company's history, yet Jager does seem to consider it from his actions.

Successful development of new product line extensions including Tampax and the resurgence of results from the P&G Pharmaceuticals business. This also included the development of entirely new brands that had packaging as part of their core messaging (Brody, 2006).

Development of an entirely new approach to researching and evaluating markets, focusing more on understanding what's the messaging below the numbers. This technique gave P&G executives entirely new insights into global markets, freeing them to focus on the global implications of product strategies based on the reorganization. Being more proactive about getting to know customers than before was a technique that allowed the company to gain significant insights into customers they had overlooked before (Johansson and Nonaka, 1987).

Threats

Loss of the primary architect of Organization 2005 Durk Jager in the middle of implementation.

Failure of two strategic acquisitions, Warner-Lambert and American Home Products.

Loss of distributors and dealers, in short significant parts of their entire distribution channel due to the languishing sales of products.

Lawsuits and legal action from countries where the majority of headcount reductions were completed. In many European nations employment is guaranteed through the government; to let people go in any of these European nations is very costly.

Lack of ability to execute on new innovations despite the completely re-vamped organizational structure created from organization 2005.

Acquisition of P&G, from a hostile takeover parent, during the most crippled… READ MORE

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