PG Swot Analysis free essay sample

About the Consumer Products Industry Nondurable consumer products or consumables companies develop and manufacture a variety of household items that have a limited life span, usually three years or less. The industry can be segmented into household products and personal care products. Household products include: soaps and other detergents, such as laundry detergents and bleaches; polishes and sanitation goods; and other cleansing agents. Personal care products consist of : personal cleaning products such as toothpastes, shampoos, bar soaps and body washes; health and beauty aids, including cosmetics, fragrances and over the counter medications; and diapers and feminine hygiene products. Other items range from cat litter to automotive additives. The top worldwide producers include Procter and Gamble, Kimberly Clark, Unilever, Colgate-Palmolive, Church and Dwight, Clorox, and Ecolab. Industry Trends and How It Operates Given the low growth rates of population and household formations in the developed nations, it has become more difficult for consumer product manufacturers to achieve significant sales gains. In the graph above, the percentage of nondurable goods to personal income fluctuates around 25% but there is no significant change between months. In addition, consumer product companies are faced with intense competition and higher commodities costs. For example, rising oil and natural gas prices are key concerns since they serve companies directly as an energy source or indirectly such as resin (a substance used to create plastics). In response, household and personal care product companies are making efforts to stimulate sales in varying ways, such as entering new markets, creating new products categories, strengthening a strong brand image, acquiring businesses, targeting baby boomers, and spending on advertising. Because of these efforts, the industry should continue to consolidate, and consumers will likely see more product choices at more points of purchase. Entering New Markets With established US and western European markets reaching saturation, manufacturers are actively pursuing growth overseas. Companies in this sector are investing heavily in developing and emerging markets in China, Central and Eastern Europe and India, where recent trends in economic and population growth bode well for home and personal care products consumption. In many of these countries, increases in gross domestic income and population are outpacing those of the United States and Western Europe. The economic outlook for these regions is positive. The World Bank forecasts that over the next several years emerging European markets, China, and India will see GDP growth rates of 5. 0%, 7. % and 6. 2% respectively. Manufacturers have shifted their attention away from Latin American countries – at least for now – as a result of weak economic growth in those countries. Creating New Product Categories Given the maturity of the household nondurables industry, new product development is a key driver of a company’s future sales growth. New products evolve largely through the efforts of a co mpany’s Research and Development, in conjunction with its marketing division. To remain competitive, companies need to develop a continuous stream of new, value-added products. In any given year thousands of new products in all categories inundate the market. However, only 15% of new products in any given year reach their business objectives; the rest are withdrawn from the market. Another benefit, from the manufacturer’s point of view, is that successful new products typically carry higher profit margins than established items. Their special qualities, which manufacturers tout, are designed to appeal to a target market, and consumers are willing to spend more to obtain the real or perceived value added. The costs of new product development vary greatly, depending partly on how revolutionary the product is or how ambitious the launch program may be. Unique formulas, revised ingredients, packaging innovations, changes at the consumer level, or a combination of these factors can drive new products. There are four main categories of new product development: All new products â€Å"New and improved† products Product line extensions Changes at the consumer level Strengthening a Strong Brand Image For a manufacturer, product mix- the type and quantity of merchandise it sells- is a critical factoring the company’s success, even its survival. Because products sometimes appear to be indistinguishable from one another, a company’s main objective is to develop brands that are well recognized by consumers. The ultimate goal is to attain a leading market share in a category that has an expanding customer base. Brand Power: For both household and personal care product manufacturers, having a brand with a leading market share is a key competitive advantage. A strong brand fosters consumer loyalty, which in turn creates the opportunity for additional market share growth and above-average pricing flexibility. One good example is PG’s Tide laundry detergent. Despite a selling price above that of many other brands and the entry of Wal-Mart stores Inc. ’s private-label product, Tide continues to strengthen its No. 1 position in US laundry detergent sales. Market Share Advantage: Having a product with a leading market share is important for several reasons. First, the higher a company’s market share, the more power it will have with retailers. This helps ensure that it products are given prime shelf space. Second, if a product is in high demand, the company will be able to produce it in large volumes, resulting in manufacturing and distribution efficiencies. Third, a substantial market share translates into more sales dollars, which the company can use for additional advertising and promotional spending to further support the brand. Product Mix: The nature and quality of a company’s product line affects the bottom line. For instance, personal products tend to carry higher profit margins than household goods. Consumers tend to be less willing to experiment with lower quality toothpaste or cosmetics than with cut-rate floor cleaner or bleach. However, a low-price product may still be quite profitable it sells in large volumes. Breadth of brands: Within each category that a consumer product company offers, a number of brand names are generally available at different price points to appeal to customers of every income level. For example, PG offers several different laundry detergents, including Tide, Bold and Cheer. Acquiring Businesses Acquisitions of firms tend to be less frequent than other industries due to companies tending to be very independent of one another. More recently, the nondurable consumer products industry have seen the value of acquiring related companies that can add to their bottom line and remain competitive. One example is Clorox which purchased First Brands, the maker of kitty litter, Glad plastics, and STP motor oil, and become the leader in all three categories. 1 Targeting Baby Boomers A driving force behind manufacturers’ creation of new products has been the aging US population. Many new products clearly target baby boomers. According to marketers, these individuals are keenly sensitive about their looks. Thus, skin care and hair coloring are two categories that have shown strong sales increases over the past several years. Advertising The success of a consumer product often depends on advertising and marketing budget allotted to it. Getting the consumers to accept a completely new product is particularly difficult; it takes tremendous amount of advertising to gain a potential customer’s awareness. PG is a dominant global marketer, spending approximately $5. 9 Billion on worldwide television, print, radio and internet advertising in 2005. About Procter Gamble The Procter Gamble Company was founded by William Procter and James Gamble in 1837, and is headquartered in Cincinnati, Ohio. It manufactures and markets various consumer products worldwide.