p&g project
TRANSCRIPT
SUPPLY CHAIN MANGEMENT NETWORK
USED BY PROCTER & GAMBLE
A report submitted to IIMT, Greater Noida as a part fulfillment of full time
Postgraduate Diploma in Management.
Submitted to: Submitted by:
Director(Academics) Kumar Vaibhov
IIMT, Greater Noida PGDM(IB)
IBR: 3011
BATCH-3rd
Ishan Institute of Management & Technology
1A, Knowledge Park -2, Greater Noida, Distt. G.B. Nagar (U.P.)
1
Website: www.ishanfamily.com, Email: [email protected]
PREFACE
All students learn theoretical subjects in their classroom, but as we are the management
students, apart from theoretical studies we need to get a deeper insight into the practical
aspects of those theories by working as a part of organization during our summer
training. Training is a period in which a student can apply his theoretical knowledge in
practical field. Basically, practical knowledge and theoretical knowledge have a very
broad difference. So this training has high importance as to know how both the aspects
are applied together.
The study of management acquires most crucial position in the business administration.
In order to be successful, it is necessary to give priority to the management in an
organization. But it can’t be denied that the study of management would be more
educational, materialistic and even more interesting, if it is to be paired with the work in
organization as an employee.
The training session helps to get details about the working process in the organization. It
has helped me to know about the organizational management and discipline, which has
its own importance. The training is going to be a life long experience.
Management in India is heading towards a better profession as compared to other
professions. The demand for professional managers is increasing day by day. To achieve
profession competence, manager ought to be fully occupied with theory and practical
exposure of management.
A comprehensive understanding of the principle will increases their decision-making
ability and sharpens their tools for this purpose. During the curriculum of management
programmers a student has to attain a practical exposure of an organization on live
project in addition to theory he/she studies.
This Project Report has been completed in Partial fulfillment of my management
Program, Post Graduate Diploma in International business (PGDIB) in the company
Procter & Gamble, Ranchi; which is a leading FMCG Organization. The objective of my
project was to meet with the retailers and to supply them the FMCG products of P&G.
P&G are a name which has its name in organized FMCG products in the world.
Kumar Vaibhov
2
IBR -3011;
14th Batch
Ishan Institute of Management & Technology.
3
CERTIFICATE
This is to certify that the project work done on “Supply Chain Management Network
used by Procter & Gamble in Ranchi” submitted to Ishan Institute of Management and
Technology, Greater Noida by Kumar Vaibhov in partial fulfillment of the requirement
for the award of degree of PG Diploma in International Business(IB), is a bonafide work
carried out by him under my supervision and guidance. This work has not been submitted
anywhere else for any other degree/diploma. The original work was carried during
05/05/09to 25/06/09in Supply Chain Department of P&G, RANCHI.
Mr.Nirmal Kumar Verma
(GUIDE)
4
ACKNOWLEDGEMENT
Presenting a Summer Training project of this type is an arduous task, demanding a lot of
time. I cannot in full measure appreciate and acknowledgement the kindness shown and
help extended by various persons in this endeavor. I will remember all of them with
gratitude.
I shall like to express my heartfelt gratitude to Mr. Nirmal Kumar Verma for his
inspiration, cooperation and memorable guidance extended to me at every stage of my
study. I shall always feel indebted to him who have been instrumental in the completion
of my studies and I am thankful to him from the core of my heart for always finding time
for me from his heavy schedule.
I am grateful to Mr. Mithilesh Kumar Jha for initiating my interest in the present topic
and for providing a helping handful of valuable suggestions during the course of studies.
My sincere thanks are also due to Dr.D.K.Garg (Chairman,Ishan Institute of
Management and Technology, Greater Noida), for his significant help extended for the
successful completion of the project. I highly the help I got from them in providing me
and lot of information regarding the functioning of the organization.
KUMAR VAIBHOV
Date Name of Guide:
Seal of the organization Mr. Nirmal Kumar Verma
5
DECLARATION
I, Kumar Vaibhov, student of PGDM (IB) (2008-10) of Ishan Institute of
management and Technology, Greater Noida hereby declare that the Summer training
Project work entitled “Supply Chain Management Network used by Procter &
Gamble.” is my original work.
Whatever information furnished in this project report is true to the best of my knowledge.
Kumar Vaibhov
Date:27-07-09 ENR.No.-IBR3011
Place: GREATER NOIDA PGDM (IB) – II SEM
6
TABLE OF CONTENTS
Topics Page No.
Preface 2.
Certificate 4.
Acknowledgement 5.
Declaration 6.
Table of contents 7.
Executive summary 9.
1. INTRODUCTION 10.
2. Company Profile 26.
i. Name of the Company 26.
ii. Historical Background 27.
iii. Corporate Directory. 31.
iv. Purpose, Values & Principle. 33.
3. Trade Profile 38.
i. Main Business 38.
ii. Ancillary Business 42.
4. Demand supply analysis 56.
5. Marketing Network of the company 71.
6. Marketing Policies 121.
7. Business Promotion Strategy 154.
7
8. Management hierarchy in market department 174.
9. Job Profiles/Assignment Profile 188.
10. Findings & Limitations 189
11. Suggestions/Recommendations 191
12. Achievements 194
13. Case Study 196.
14.Conclusion 200
15.Bibliography 205
Word of thanks 206
8
EXECUTIVE SUMMARY
During the period of summer training I tried to know the truth that leads the FMCG
sector. FMCG sector is the core of running society, as it is the consumer who regularly
needs these products for consumption. There are many factors that influence the
availability of the product. Marketing is especially important for a business in retail
industry because there is no other person on whom the retailer can rely in this industry for
penetration in the market or diversification.
Marketing is a very crucial activity in every business organization. Every product
produced within an industry has to be marketed otherwise it will remain as unsold stock,
which will be of no value. I have realized this fact after completion of my summer
training project. Despite of various difficulties and limitations faced during my summer
training project on the topic “Supply Chain Management Network used by Procter &
Gamble.” I have tried my level best to find out the most relevant information for the
organization to complete the assignment that was given to me. After completion of my
summer training project I have gained several experiences in the field of sales and
marketing. I have got the opportunity to meet various people, which fluctuate in different
situation and time. This summer training project has given me the opportunity to have
first experience in the corporate world.
Theoretical knowledge of a person remains dormant until it is used and tested in the
practical life. The training has given to me the chance to apply my theoretical knowledge
that I have acquired in my classroom to the real business world.. In spite of few
limitations and hindrance in the summer training project I found that the work was
challenging but fruitful. It gives enough knowledge about the operation in market and the
9
growth process adopted by an organization. This summer training project has enabled my
capability in order to manage business effectively and in my career in future.
CHAPTER-1: INTRODUCTION
About FMCG:
FMCG industry is alternatively called as CPG (Consumer packaged goods) industry. It
primarily deals with the production, distribution and marketing of consumer packaged
goods. The Fast Moving Consumer Goods (FMCG) are those consumables which are
normally consumed by the consumers at a regular interval. Some of the prime activities
of FMCG industry are selling, marketing, financing, purchasing, etc. The industry also
engaged in operations, supply chain, production and general management
Some common FMCG product categories include food and dairy products, glassware,
paper products, pharmaceuticals, consumer electronics, packaged food products, plastic
goods, printing and stationery, household products, photography, drinks etc. and some of
the examples of FMCG products are coffee, tea, dry cells, greeting cards, gifts,
detergents, tobacco and cigarettes, watches, soaps etc. Examples of FMCG also includes
a wide range of frequently purchased consumer products such as toiletries, soap,
cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-
durables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG
may also include pharmaceuticals, consumer electronics, packaged food products, soft
drinks, tissue paper, and chocolate bars.
FMCG industry provides a wide range of consumables and accordingly the amount of
money circulated against FMCG products is also very high. The competition among
FMCG manufacturers is also growing and as a result of this, investment in FMCG
industry is also increasing, specifically in India, where FMCG industry is regarded as the
10
fourth largest sector with total market size of US$13.1 billion. In 2005, the Rs. 48,000-
crore FMCG segment was one of the fast growing industries in India. FMCG Sector in
India is estimated to grow 60% by 2010. FMCG industry is regarded as the largest sector
in New Zealand which accounts for 5% of Gross Domestic Product (GDP). Some of the
merits of FMCG industry, which made this industry as a potential one, are low
operational cost, strong distribution networks, presence of renowned FMCG companies.
Population growth is another factor which is responsible behind the success of this
industry. FMCG industry creates a wide range of job opportunities. This industry is a
stable, diverse, challenging and high profile industry providing a wide range of job
categories like sales, supply chain, finance, marketing, operations, purchasing, human
resources, product development, general management.
Some of the well known FMCG companies are Procter & Gamble, Sara Lee, Nestlé,
Reckitt Benckiser, Unilever, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi and
Mars etc.
FMCG sector generates 5% of total factory employment in the country and is creating
employment for three million people, especially in small towns and rural India.
Well-established distribution networks, as well as intense competition between the
organized and unorganized segments are the characteristics of this sector. FMCG in India
has a strong and competitive MNC presence across the entire value chain. It has been
predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion
11.6 in 2003. The middle class and the rural segments of the Indian population are the
most promising market for FMCG, and give brand makers the opportunity to convert
them to branded products. Most of the product categories like jams, toothpaste, skin care,
shampoos, etc, in India, have low per capita consumption as well as low penetration
level, but the potential for growth is huge. The Indian Economy is surging ahead by leaps
and bounds, keeping pace with rapid urbanization, increased literacy levels, and rising
per capita income.
The big firms are growing bigger and small-time companies are catching up as well.
According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by
11
MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands,
and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by
Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola
(8) and Parle (9). These are figures the soft drink and cigarette companies have always
shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest
categories in FMCG. Between them, they account for 35 of the top 100 brands.
THE TOP 10 COMPANIES IN FMCG SECTOR
S. NO. Companies
1. Hindustan Unilever Ltd.
2. ITC (Indian Tobacco Company)
3. Nestlé India
4. GCMMF (PROCTER &
GAMBLE)
5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries
9. Procter & Gamble Hygiene and
Health Care
10. Marico Industries
The companies mentioned in the table, are the leaders in their respective sectors. The
personal care category has the largest number of brands, i.e., 21, inclusive of Lux,
Lifebuoy, Fair and Lovely, Vicks, and Ponds. There are 11 HLL brands in the 21,
aggregating Rs. 3,799 crore or 54% of the personal care category. Cigarettes account for
17% of the top 100 FMCG sales, and just below the personal care category. ITC alone
accounts for 60% volume market share and 70% by value of all filter cigarettes in India.
12
The foods category in FMCG is gaining popularity with a swing of launches by HLL,
ITC, Godrej, and others. This category has 18 major brands, aggregating Rs. 4,637 crore.
Nestle and Procter & Gamble slug it out in the powders segment. The food category has
also seen innovations like softies in ice creams, chapattis by HLL, ready to eat rice by
HLL and pizzas by both GCMMF and Godrej Pillsbury. This category seems to have
faster development than the stagnating personal care category. Procter & Gamble, India's
largest foods company, has a good presence in the food category with its ice-creams,
curd, milk, butter, cheese, and so on. Britannia also ranks in the top 100 FMCG brands,
dominates the biscuits category and has launched a series of products at various prices.
In the household care category (like mosquito repellents), Godrej and Reckitt are two
players. Goodknight from Godrej, is worth above Rs 217 crore, followed by Reckitt's
Mortein at Rs 149 crore. In the shampoo category, HLL's Clinic and Sunsilk make it to
the top 100, although P&G's Head and Shoulders and Pantene are also trying hard to be
positioned on top. Clinic is nearly double the size of Sunsilk.
Dabur is among the top five FMCG companies in India and is a herbal specialist. With a
turnover of Rs. 19 billion (approx. US$ 420 million) in 2005-2006, Dabur has brands like
Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. Asian Paints is enjoying a
formidable presence in the Indian sub-continent, Southeast Asia, Far East, Middle East,
South Pacific, Caribbean, Africa and Europe. Asian Paints is India's largest paint
company, with a turnover of Rs.22.6 billion (around USD 513 million). Forbes Global
magazine, USA, ranked Asian Paints among the 200 Best Small Companies in the World
Cadbury India is the market leader in the chocolate confectionery market with a 70%
market share and is ranked number two in the total food drinks market. Its popular brands
include Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems. The Rs.15.6 billion (USD 380
Million) Marico is a leading Indian group in consumer products and services in the
Global Beauty and Wellness space
Growth Prospects of FMCG
13
With the presence of 12.2% of the world population in the villages of India, the Indian
rural FMCG market is something no one can overlook. The increased focus on farm
sector will boost rural incomes, hence providing better growth prospects to the FMCG
companies. Better infrastructure facilities will improve their supply chain. FMCG sector
is also likely to benefit from growing demand in the market. Because of the low per
capita consumption for almost all the products in the country, FMCG companies have
immense possibilities for growth. And if the companies are able to change the mindset of
the consumers, i.e. if they are able to take the consumers to branded products and offer
new generation products, they would be able to generate higher growth in the near future.
It is expected that the rural income will rise in 2007, boosting purchasing power in the
countryside. However, the demand in urban areas would be the key growth driver over
the long term. Also, increase in the urban population, along with increase in income
levels and the availability of new categories, would help the urban areas maintain their
position in terms of consumption. At present, urban India accounts for 66% of total
FMCG consumption, with rural India accounting for the remaining 34%. However, rural
India accounts for more than 40% consumption in major FMCG categories such as
personal care, fabric care, and hot beverages. In urban areas, home and personal care
category, including skin care, household care and feminine hygiene, will keep growing at
relatively attractive rates. Within the foods segment, it is estimated that processed foods,
bakery, and dairy are long-term growth categories in both rural and urban areas.
Faster growth ahead for FMCG companies
The abolition of fringe-benefit tax and higher allocation under NREGS would be positive
trigger for consumer sector at large, increase in MAT rate from 10% to 15% would
adversely impact the earnings of Dabur and Godrej Consumer Products.
No change in excise duty structure for cigarettes does provide a much needed booster for
ITC in the near term.
14
On the other hand, higher allocation towards various agri and irrigation-linked schemes
would propel the micro irrigation business growth, the measures fall short of our
expectations (expecting micro irrigation to be included under mission mode). Sectors like
media, education and aviation were more or less untouched.
With government continuing to focus on 'higher disposable income' in the hands of rural
India and 'inclusive growth', it has increased the budget allocation towards National Rural
Employment Guarantee Scheme by 144% at Rs 39,100 crore. This would propel
consumption spends in the economy and thereby help volume growth for FMCG
companies at large. We could see faster growth in the coming quarters. Government has
also abolished fringe benefit tax (FBT), thereby aiding a 1-1.5% improvement in earnings
per share for most of the FMCG players barring Godrej Consumer. While all the FMCG
companies would tend to gain from this, GCPL and Dabur are adversely impacted by 5%
increase in MAT rates (from 10% to 15%). This would result in 2.5-3% drop in EPS of
Dabur and GCPL, net of the gains from savings on FBT.
Ciggarretes:With fiscal deficit being the biggest concern for the government and post the
increase in sales tax on cigarettes in Delhi and Maharashtra (up from 12.5% to 20%), we
were expecting tax increase on cigarettes, either in the form of excise duty increase or
VAT increase. Increase in taxation at over 5% would have impacted our volume growth
estimates for ITC. However, cigarettes excise rates have been left untouched. This would
have a positive impact on the cigarettes business, as after a span on 2 years the sector gets
relief from price increases (VAT implementation in FY08 and higher taxation on non-
filters in FY09) and thereby will see no disruption in volumes (saw 1.5% volume decline
in FY08 and 3% in FY09). We are expecting 3% volume growth for ITC's cigarettes
portfolio for the next couple of years.
Media: The government has made no changes to the foreign ownership rules pertaining to
media, news media in particular. While the sector remains largely neglected, government
has extended the stimulus for print media by 6 months, besides imposing 5% customs
duty on set-top boxes. We believe neither of the two measures would have any material
impact on media sector.
15
Education: While lot was expected from the budget for the education sector --- in terms
of higher budgetary allocation, opening up of the sector for more private participation and
more public private partnership projects, the Union Budget has eluded from making any
moves in the direction. Most of the education sector stocks have witnessed a sharp run up
in anticipation of budget, which we feel will see material price correction.
Aviation: Indian aviation sector, highly indebted and making losses of $1 billion
annually, was expecting government to open up the sector to FDI. This would have
helped the players in the ailing sector to deleverage the balance sheet as also fund the
capex. However, government has made no such announcement, extending the pain period
for the aviation sector.
Exchanges: The government has announced abolition of commodity transaction tax,
which was proposed in the interim budget. While it does not have any bearing on the
financials (as it was not yet implemented), abolition clears the overhang. We remain
positive on the exchange sector and Financial Technologies.
Removal of Quantitative Restrictions and Reservation Policy:
The Indian government has abolished licensing for almost all food and agro-processing
industries except for some items like alcohol, cane sugar, hydrogenated animal fats and
oils etc., and items reserved for the exclusive manufacture in the small scale industry
(SSI) sector. Quantitative restrictions were removed in 2001 and Union Budget 2004-05
further identified 85 items that would be taken out of the reserved list. This has resulted
in a boom in the FMCG market through market expansion and greater product
opportunities.
Central and state initiatives
Various states governments like Himachal Pradesh, Uttaranchal and Jammu & Kashmir
have encouraged companies to set up manufacturing facilities in their regions through a
package of fiscal incentives. Jammu and Kashmir offers incentives such as allotment of
land at concessional rates, 100 per cent subsidy on project reports and 30 per cent capital
investment subsidy on fixed capital investment upto US$ 63,000. The Himachal Pradesh
16
government offers sales tax and power concessions, capital subsidies and other
incentives for setting up a plant in its tax free zones. Five-year tax holiday for new food
processing units in fruits and vegetable processing have also been extended in the Union
Budget 2004-05. Wide-ranging fiscal policy changes have been introduced progressively.
Excise and import duty rates have been reduced substantially. Many processed food items
are totally exempt from excise duty. Customs duties have been substantially reduced on
plant and equipment, as well as on raw materials and intermediates, especially for export
production. Capital goods are also freely importable, including second hand ones in the
food-processing sector.
Food laws
Consumer protection against adulterated food has been brought to the fore by "The
Prevention of Food Adulteration Act (PFA), 1954", which applies to domestic and
imported food commodities, encompassing food colour and preservatives, pesticide
residues, packaging, labelling and regulation of sales.
Critical operating rules in Indian FMCG sector
• Heavy launch costs on new products on launch advertisements, free samples and product promotions.
• Majority of the product classes require very low investment in fixed assets
• Existence of contract manufacturing
• Marketing assumes a significant place in the brand building process
• Extensive distribution networks and logistics are key to achieving a high level of penetration in both the urban and rural markets
• Factors like low entry barriers in terms of low capital investment, fiscal incentives from government and low brand awareness in rural areas have led to the mushrooming of the unorganized sector
• Providing good price points is the key to success
17
Indian Competitiveness and Comparison with the World Markets
The FMCG sector is among the largest employers in India and livelihood of 13 million
people associated with it across 8 million Kiranas are directly depended on it. while
talking about potential of the sector. Indirectly, 25 million more people employed at
wholesalers, distributors, stockists, etc are also affected with well-being of sector. The
FMCG sector is also one of the major contributor to the exchequer as it contributes Rs
31,000 crore ($6.5 billion) though direct and indirect taxes.
The following factors make India a competitive player in FMCG sector:
1. Availability of raw materials
Because of the diverse agro-climatic conditions in India, there is a large raw material
base suitable for food processing industries. India is the largest producer of livestock,
milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice,
wheat and fruits &vegetables. India also produces caustic soda and soda ash, which are
required for the production of soaps and detergents. The availability of these raw
materials gives India the location advantage.India is the largest producer of livestock,
milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice,
wheat and fruits & vegetables. India also has an ample supply of caustic soda and soda
ash, the raw materials in the production of soaps and detergents – India produced 1.6
million tonnes of caustic soda in 2003-04. Tata Chemicals, one of the largest producers
of synthetic soda ash in the world is located in India. The availability of these raw
materials gives India the location advantage.
2. Labor cost comparison
Low cost labor gives India a competitive advantage. India's labor cost is amongst the
lowest in the world, after China & Indonesia. Low labor costs give the advantage of low
cost of production. Many MNC's have established their plants in India to outsource for
domestic and export markets.
18
3. Presence across value chain
Indian companies have their presence across the value chain of FMCG sector, right from
the supply of raw materials to packaged goods in the food-processing sector. This brings
India a more cost competitive advantage. For example, Procter & Gamble supplies milk
as well as dairy products like cheese, butter, etc.
4. Large domestic market
India is one of the largest emerging markets, with a population of over one billion. India
is one of the largest economies in the world in terms of purchasing power and has a
strong middle class base of 300 million. Around 70 per cent of the total households in
India (188 million) resides in the rural areas. The total number of rural households is
expected to rise from 135 million in 2001-02 to 153 million in 2009-10. This presents
the largest potential market in the world. The annual size of the rural FMCG market was
estimated at around US$ 10.5 billion in 2001-02. With growing incomes at both the rural
and the urban level, the market potential is expected to expand further.
5. INDIA-a large consumer goods spender:
An average Indian spends around 40 per cent of his income on grocery and 8 per cent on
personal care products. The large share of fast moving consumer goods (FMCG) in total
individual spending along with the large population base is another factor that makes
India one of the largest FMCG markets. Even on an international scale, total consumer
expenditure on food in India at US$ 120 billion is amongst the largest in the emerging
markets, next only to China.
6. Presence across value chain:
Indian firms also have a presence across the entire value chain of the FMCG industry
from supply of raw material to final processed and packaged goods, both in the personal
care products and in the food processing sector. For instance, Indian firm Amul's
product portfolio includes supply of milk as well as the supply of processed dairy
products like cheese and butter. This makes the firms located in India more cost
competitive.
19
Analysis of FMCG Sector in India:
Strengths:
1. Low operational costs
2. Presence of established distribution networks in both urban and rural areas
3. Presence of well-known brands in FMCG sector
Weaknesses:
1. Lower scope of investing in technology and achieving economies of scale, especially
in small sectors
2. Low exports levels
3. "Me-too" products, which illegally mimic the labels of the established brands. These
products narrow the scope of FMCG products in rural and semi-urban market.
Opportunities:
1. Untapped rural market
2. Rising income levels, i.e. increase in purchasing power of consumers
3. Large domestic market- a population of over one billion.
4. Export potential
5. High consumer goods spending
Threats:
1. Removal of import restrictions resulting in replacing of domestic brands
2. Slowdown in rural demand
3. Tax and regulatory structure
LEADING FMCG COMPANY PROCTER & GAMBLE
20
William Procter, a candle maker, and James Gamble, a soap maker, formed this global
and Fortune 500 Corporation in 1837. Procter and Gamble (P&G) is headquartered in
Cincinnati, Ohio. These two entrepreneurs and inventors were immigrants from England
and Ireland respectively; who have chosen for some reason to settle in the Cincinnati
area. The company manufactures a wide variety of consumer goods including beauty,
household, health and wellness products. In the early parts of 2007, P&G was the 25th
largest U.S Company by revenue, 18th largest by profit, and 10th in Fortune’s Most
Admired Companies list. “Touching Lives, Improving Life” is the corporate motto
which is exemplified in the 138,000 employees and loyal customers worldwide. The
worldwide demand for P&G’ s products and services has forced management to focus on
global marketing and innovation. This worldwide marketing and innovation success was
achieved by making sure that what P&G produce is of highest quality and most
importantly is what customers need. P&G is very adaptable to changing customer
demands by carefully and clearly defining its innovative strategies;
The management of P&G had planned to create a more nimble organization and to
increase the speed and quality of innovation. P&G also focused on improving the speed
of commercialization of new products. In addition, P&G wanted to move the company’s
focus to higher growth, higher margin businesses such as health care and personal care.
Another innovative play-to-win strategy is that P&G management had adopted was the
acquisition of its domestic and foreign competitors. P&G acquired a number of other
companies that helped diversified its product line and increased profits significantly. In
order to foster this aggressive strategy, management had integrated and reorganized all
the manufacturing processes of the companies they acquired. Manufacturing processes of
companies like Folgers Coffee, Norwich Eaton Pharmaceuticals, Richardson-Vicks,
Noxell, Shulton’s Old Spice, and many others.
P&G has demonstrated that its success depends on its customers, people, and innovation.
Each and every employee is brought together by the company’s common culture, values,
and goals. The company recognizes its diversity as a unique characteristic and strength
and it’s been able to maximize the talents and creativity from these people. P&G has also
21
demonstrated that it is not just in business to maximize shareholders wealth but it’s also a
social responsible company. This is illustrated in its summer camp program that is open
to community youth. “We developed our Summer Camp program as a way to seek
out the best and brightest. But, it's also a way for us to give these candidates a head start,
not only on their schooling, but also their careers.” Understanding customer needs and
building lasting relationships are important in helping an organization innovate.
Businesses innovate through unmet customer needs. Customers express their needs that
have not been met and organizations innovate to meet those needs. This is why P&G is
still leading the domestic product industry because, it listens to customers unmet needs
and innovates aggressively to meet those needs. For instance, when babies were wearing
cloth diapers, they were very leaky and labor intensive to wash; at that time, mothers
needed an innovative product on the market to help fix the labor intensive part of
washing the cloth diapers as well as the leakage. P&G answered this innovative call by
introducing a revolutionary product called “Pampers” into the market.
Pampers helped simplified the diapering process by resolving the leakage and the labor
intensive washing. Innovation means change and to change you must know why you are
changing, that is to say you must understand the pros and cons of the change process. In
addition, you must understand the characteristics of innovation or change and its
implication organization wide.
P&G has been successful in implementing communication strategy corporate wide. The
company ensures that the length and breadth of all its units understand the impact of any
change mostly at the professional level. Management ensures that everyone involved is
interested in the change process. The more employees are interested in the change
process the greater the success of the change or innovation. The most important element
here is motivation. Management must let employees see a win-win situation in the
change process.
Most companies are described as first movers into some specific industries and once they
get in, they make it very difficult for others to get in due to a specified or unspecified
characteristic of innovation. This could be innovation in technology, innovation in
financial management (capital acquisition), innovation in customer service and what have
22
you. One main innovation characteristic of P&G is to move innovation to
commercialization faster than any other competitor in the industry. “Defining the
innovation strategy and the resulting portfolio characteristics (play-to-win or play-not-to-
loose and the associated mix of incremental, semi-radical, and radical innovations) are
the first major responsibility of a company’s leadership”.
Secondly, anything that creates a situation that people had to deal with is a characteristic
of innovation. When innovation is implemented, it changes people’s attitude toward the
new process. It makes people think and act different from the way they used to. It creates
different vision and mission that people have to focus on; and this gives rise to altering
behaviors and attitudes. All this is because of innovation. Whenever P&G introduces a
new product line, it alters situations and behaviors. Anything that creates a problem or
resolves a problem is a characteristic of innovation. When Lesterine mouth wash was
introduced into the market, it solved the problem of bad breath but than people had to
deal with the burning sensation.
Since the beginning of this decade, The Procter & Gamble Company (P&G) has followed
three primary growth strategies:
1) focus on P&G's biggest brands, countries, and retail customers;
2) develop faster-growing, higher-margin businesses such as beauty, health, and home;
3) serve more of the world's consumers by accelerating growth in developing markets.
Each of these strategies has contributed to P&G's ability to deliver top-line growth at or
above the company's targets for the past five consecutive years. And each of these
strategies has implications for P&G's supply chain operations.
But it's the third strategy—growing P&G's business in developing markets—that puts our
supply chain operating strategy to one of its biggest tests. We call this strategy the
“Consumer-Driven Supply Network.” It's based directly on P&G's purpose: to improve
the lives of the world's consumers. And it's tied directly to a deeply held belief at P&G
that “the consumer is boss.”
23
With the Consumer-Driven Supply Network, we are building and operating P&G's
supply chains “from the shelf back.” Today's consumers have more choices than ever,
and those choices offer a broader range of value. The consumer-goods companies that
win with consumers will be those who perform the best at two critical “moments of
truth.” The first moment of truth is when a consumer stands at the shelf and chooses a
brand to purchase. The second moment of truth is at home, when the consumer uses our
brand and decides whether it lives up to her expectations.
The implications for the supply chain are clear. Historically, our supply chains have been
internally focused on meeting cost and productivity targets. Our external focus was
limited almost entirely to the second moment of truth—we measured how the finished
product design and quality performed with consumers when they used it.
The challenge for today's supply chain leaders is to continue to deliver at the second
moment of truth, while designing supply chains to better meet consumers' and customers'
needs at the first moment of truth. The most important measure of how the supply chain
works is whether our products are always there, always affordable, and always preferred
by the consumer when he or she stands at the shelf and decides what to buy.
Measuring up to this challenge has gotten harder as P&G has gotten larger. In 2005, we
announced the biggest merger in consumer products history. With Gillette, P&G is nearly
a $70 billion company. We have 22 brands each with annual sales over $1 billion. In the
United States, 99 percent of households use a P&G product. Globally, we serve roughly
3.5 billion of the world's consumers with more than 300 brands that touch consumers'
lives nearly 3 billion times a day.
The Consumer-Driven Supply Network
As P&G has grown, so have our supply chains, with more supply chains in more places
around the world delivering an increasing number of products. Today, we're facing
several competing priorities:
Rising supplier costs vs. the need to meet the consumer value equation.
Reaping the benefits of global scale vs. the need for local differentiation.
24
Meeting the unique challenges of developed and developing markets.
Serving large, global retailers vs. small, local high-frequency stores.
We're addressing these challenges by building a set of capabilities that create value for
retail customers and consumers and drive growth for P&G's businesses. These
capabilities fall into three areas: reliable service; agile, demand-driven supply; and
affordable differentiation.
In terms of reliable service, we want to measure our performance through the eyes of the
consumer as she experiences our products at the first moment of truth. This means getting
the right product at the right place—on the shelf—at the right time. It also means
understanding the quality of the product on the shelf (not just the quality when it left our
manufacturing facility or distribution center) and ensuring products are priced to
represent a good value to the consumer. Consistent, reliable service every day is an
essential building block for any supply network.
With agile, demand-driven supply, we're focusing on reducing end-to-end supply
network time by building a flexible and responsive supply network that is capable of
producing what's actually selling, not what is forecast to sell. We believe we can
dramatically reduce supply network time, which has significant cash benefits for P&G
and retail customers. Furthermore, it translates to speed to shelf for promotional events
and new product initiatives.
25
CHAPTER-2: COMPANY’s PROFILE
Name of the Company : Procter & Gamble.
Registered Office or Plant : One Procter & Gamble Plaza,
Cincinnati, Ohio, USA-45202.
www.pg.com.
Year of Incorporation : 1837
Key people : A.G. Lafley,
Chairman, President, and Chief Executive.
Sector : Private
Industry : Fast moving consumer goods.
Revenue : US$83.503billion(2008)
Board of Directors : Alan Lafley, Clayton Daley Jr., Charles Lee, Ralph
Snyderman M.D., Margaret Whitman, W. J.
McNerney Jr., Lynn Martin, Johnathan, Rajat Gupta ,
Patricia Woertz, and Kenneth Chenault Rodgers,
Ernesto Zedillo, Scott Cook,
26
Net incomeUS$12.075BILLION (2008)
P&G
(HISTORY BACKGROUND)
1837 : On October 31, 1837, Procter & Gamble was born.
1859 : Sales reached one million.
1887 : William Arnett Procter, began a profit-sharing program for the company's
workforce to avoid strikes like problems.
1911 : Began to diversify its products & build factories in other locations in the
United States.
1930 : The company moved into other countries, both in terms of manufacturing
and product sales and acquisized of the Newcastle upon Tyne-based
Thomas Hedley Co.
1946: Company introduced “TIDE” detergent powder
1950: Company introduced “PRELL” shampoo.
1955: Began selling the first toothpaste “CREST”.
27
1961: Company launched its most revolutionary products “PAMPERS”
1985: P&G acquired Indian based company Richardson Hindustan limited
1993: Procter & Gamble Home Products is incorporated as a 100% subsidiary of The
Procter & Gamble Company, USA. Procter & Gamble Home Products launches
Ariel,Super-Soaker.
1995: Procter & Gamble Home Products enters the Hair care Category with the launch of
Pantene-V.
1997: Procter & Gamble Home Products launches Head & Shoulders shampoo.
2000: Procter & Gamble Home Products introduced Tide Detergent Powder - the largest
selling detergent in the world and PANTENE Pro-Vitamin. P&G Home Products
Limited presented India in the first International Styling and Beauty Expert Contest- Hair
Asia Pacific 2000 in collaboration with SriLankan association of hairdressers and
beauticians.
2002: P&G also hosted Pantene World Teen Queen contest in Goa. Contestants
from UK,USA, South Africa, Kenya, Tanzania, Mauritius, Middle East and
Hong Kong participated to win the coveted World Teen Queen crown.
2005: P&G acquized GILLETTE.
2008: P&G was named one of "Canada's Top 100 Employers" by Mediacorp
Canada Inc., and was featured in MacLean’s newsmagazine. Later that
month, P&G was also named one of Greater Toronto's Top Employers,
which was announced by the Toronto Star newspaper.
28
HISTORY OF PROCTER & GAMBLE IN INDIA:
In India Proctor & Gamble has two subsidiaries: P&G Hygiene and Health Care Ltd. and
P&G Home Products Ltd. P&G Hygiene and Health Care Limited is one of India's fastest
growing Fast Moving Consumer Goods Companies with a turnover of more than Rs. 500
crores. It has in its portfolio famous brands like Vicks & Whisper. P&G Home Products
Limited deals in Fabric Care segment and Hair Care segment. It has in its kitty global
brands such as Ariel and Tide in the Fabric Care segment, and Head & Shoulders,
Pantene, and Rejoice in the Hair Care segment.
1951: Procter & Gamble's relationship with India started when Vicks Product Inc.
India, a branch of Vicks Product Inc. USA entered Indian market.
1964: A public limited company, Richardson Hindustan Limited (RHL) was
formed which obtained an Industrial License to undertake manufacture of
Menthol and de mentholised peppermint oil and VICKS range of products
such as Vicks VapoRub, Vicks Cough Drops and Vicks Inhaler.
1967: In May,1967 RHL introduced Clearsil, then America's number one pimple
cream in Indian market.
1979: RHL launches Vicks Action 500.
1984 : RHL set up an Ayurvedic Research Laboratory to address the common
29
Ailments of the people such as cough and cold.
1985: In October,1985 RHL became an affiliate of The Procter & Gamble
Company, USA and its name was changed to Procter & Gamble India.
1989: Procter & Gamble India launched Whisper - the breakthrough technology
sanitary napkin.
1991: P&G India launched Ariel detergent.
1992: The Procter & Gamble Company, US increased its stake in Procter &
Gamble India to 51% and then to 65%.
1993: Procter & Gamble India divested the Detergents business to Procter &
Gamble Home Products and started marketing Old Spice Brand of
products.
1994 : P&G Home Products Limited was incorporated as 100% subsidiary of the
Procter & Gamble Company, USA and it launched Ariel Super Soaker.
In the same year Procter & Gamble India divested the Detergents
business to Procter & Gamble Home Products
1995: Procter & Gamble Home Products entered the Haircare Category with the
launch of Pantene Pro-V shampoo.
1997: Procter & Gamble Home Products launches Head & Shoulders shampoo.
1999: Procter & Gamble India Limited changed the name of the Company to
30
Procter & Gamble Hygiene and Health Care Limited.
2000: Procter & Gamble Home Products introduced Tide Detergent Powder - the
largest selling detergent in the world.
2003: Procter & Gamble Home Products Limited launched Pampers - world's
number one selling diaper brand.
CORPORATE DIRECTORY
HEAD OFFICE:
Procter & Gamble Plaza,
Cincinnati, Ohio, USA-45202
CORP. OFFICE :
P&G Plaza,
Cardinal Gracias Road,
Chakala,Andheri( E ),
MUMBAI-400099.
Maharashtra , India.
Tel. no. – (+22) 2826 6000
FAX - (+22) 5693 9696.
BRANCH OFFICE:
D-102, Harmu Housing Colony,
Sehjanand Chowk,
Ranchi, Jharkhand.
31
P&G Plant location:
Manufacturing operations are based in the following regions:
United States
Canada
Latin America
Europe
China (thirty-one wholly-owned factories) and other parts of Asia
Africa
India
-Mandideep plant
Plot -182, Sector- A,
Industrial Area,
Mandideep 462 010, Dist: Raisen, MADHYA PRADESH
CONTACT P&G:
e-mail id Phone no.
Consumer Feedback [email protected] (+22)2494 2113
Career Questions [email protected] No
News Media Inquiries [email protected] (+22)2826 7463
32
(+22)2826 7476
(+22) 2826 7243
Shareholder Services [email protected] (+22) 2826 6000
PURPOSE, VALUES & PRINCIPLE
PURPOSE:
P&G provides branded products and services of superior quality and value that improve
the lives of the world’s consumers. As a result, consumers reward P&G with leadership
sales, profit and value creation, which allows the people, share-holders and the
communities in which its employees lives and work to prosper.
VALUES:
P&G attracts and recruits the finest people in the world. This builds the organization from
within, promoting and rewarding people without regard to any difference unrelated to
performance. P&G acts on the conviction that the men and women of Procter & Gamble
will always be its most important asset.
LEADERSHIP:
33
P&G has following leadership qualities:
P&G is leader in area of responsibility, with a deep commitment to deliver the
leadership result.
P&G employees have a clear vision where the company is going on. The
employees are totally devoted towards their work. The employees are well
known how to grasp maximum market share and to win the heart of
millions of consumers.
P&G mainly focuses on the resources to achieve the leadership objectives and
strategies.
P&G develops the characteristics to develop strategies and organizational
barriers.
OWNERSHIP:
P&G accepts personal accountability to meet the business needs, improves
system, and help others to improve effectiveness.
P&G acts like owners, treating the Company's assets as its own and behaving
with the company's long-term success in mind.
INTEGRITY:
P&G always try to do the right thing.
The employees of P&G are very honest and straightforward with each other.
P&G operates within the letter and spirit of the law.
The values and principles of P&G is present in every actions and
decisions.
P&G is data-based and intellectually honest in advocating proposals,
including recognizing risks.
34
PASSION FOR WINNING:
P&G is determined to be the doing what matters most.
P&G have a healthy dissatisfaction with the status quo.
P&G have a compelling desire to improve and to win in the marketplace.
TRUST:
An employee of P&G respects its colleagues, customers and consumers and treats
them as the employees wants to be treated.
P&G employees have confidence in each other's capabilities and intentions.
We believe that people work best when there is a foundation of trust.
PRINCIPLES:
P&G shows respect for all individuals
P&G believe that all individuals can and want to contribute to their fullest
potential.
P&G has value differences.
P&G inspires and enable people to achieve high expectations, standards, and
challenging goals.
P&G is very honest with people about their performance.
The Interests of the Company and the Individual Are Inseparable:
P&G believes that doing what is right for the business with integrity will lead to
mutual success for both the company and the individual. P&G quest for mutual
success ties employees together.
P&G encourage the stock ownership and ownership behavior.
Strategically Focused in Our Work:
P&G Operate against clearly articulated and aligned objectives and strategies.
35
P&G only do work and only ask for the work that adds value to the business.
P&G Simplify, standardize, and streamline current work whenever possible.
Value Personal Mastery:
P&G believes that it is the responsibility of all individuals to continually develop
themselves and others.
P&G Encourage and expect outstanding technical mastery and executional
excellence.
Seek to Be the Best:
P&G strive to be the best in all areas of strategic importance to the Company.
P&G benchmark the performance rigorously versus the very best internally and
externally.
P&G learn from both its successes and failures.
P&G is externally Focused :
P&G develops superior understanding of consumers and their needs.
P&G Create and deliver products, packaging, and concepts that build winning
brand equities.
P&G Develop close, mutually productive relationships with our customers and
our suppliers.
The employees of P&G are good corporate citizens.
Innovation Is the Cornerstone of Our Success:
P&G places great value on big, new consumer innovations.
36
P&G accepts the challenge convention and reinvent the way we do business to
better win in the market place.
GOALS OF P&G:
P&G established its five sustainability strategies in 2007 with specific, measurable goals
in key areas. In November 2008, P&G released its tenth annual sustainability report
which highlighted the company’s approach and progress toward meeting these goals.
The revised 2012 goals are:
Develop and market at least $50 billion in cumulative sales of “sustainable
innovation products”(SIP), which are products with a significantly reduced
(>10%) environmental footprint versus previous or alternative products. When
compared against P&G’s original target of $20 billion in cumulative SIP sales, the
new goal reflects a strengthened pipeline of initiatives.
Deliver a 20 percent reduction (per unit of production) in carbon dioxide
emissions, energy consumption, water usage and disposed waste from P&G
plants, leading to a total reduction over the decade of at least 50 percent. P&G
originally targeted a 10 percent reduction in each of its operational categories and
now sees new opportunities in all aspects of our operations.
Enable 300 million children to Live, Learn and Thrive (LLT) and deliver three
billion liters of clean water through P&G’s Children’s Safe Drinking Water
(CSDW) program. P&G had set an original target of reaching 250 million
children through Live, Learn and Thrive (LLT) and delivering two billion liters of
clean water through its Children’s Safe Drinking Water (CSDW) program. We
now see new opportunities to expand our programs to serve more children in
need.
37
CHAPTER-3: TRADE PROFILE
Procter & Gamble brands:
Procter & Gamble is the leading FMCG company in the world and second largest FMCG
in India. The sales of Procter & Gamble products are $500mllion to $1billion. Effective
July 1, 2007, the company's operations are categorized into three "Global Business Units"
with each Global Business Unit divided into "Business Segments" according to the
company's March 2009 earnings release. The P&G divided it products into three major
segments, which are as follows:
Beauty Care
o Beauty segment
38
o Grooming segment
Household Care
o Baby Care and Family Care segment
o Fabric Care and Home Care segment
Health and Well-Being
o Health Care
o Snacks and Pet Care
The major segments alongwith its name are as follows:
Air Fresheners
Febreze Air Fresheners
Antiperspirants & Deodorants
Old Spice
Secret
Baby & Child Care
Charmin
Children's Pepto
Clearblue Easy
Dreft
Luvs
Pampers
Pampers Kandoo
Pampers UnderJams
Puffs
Batteries
Duracell
Body Wash & Soap
Camay
39
Ivory
Old Spice
Safeguard
Zest
Olay
Hair Care
Aussie
Head &Shoulders
Herbal Essences
Infusium23
Pantene
Hair Color
Clairol
HealthCare
Align
Braun
Clearblue Easy
Fibersure
Metamucil
Pepto-Bismol
Prilosec OTC
Vicks
Household Cleaners
Bounty
Febreze Air Fresheners
Mr. Clean
Mr. Clean Auto Dry Carwash
Swiffer
40
Prescription Drugs
Actonel
Asacol
Didronel
Enablex
Macrobid
Macrodantin
Prestige Fragrances
Baldessarini
Boss
Boss skin
Bruno banani
Escada
Ghost
Giorgio Beverly Hills
Hugoste
NAOMI CAMPBELL
PUMA
Shaving
Braun
Gillette Fusion
Gillette M3Power
Gillette Satin Care
Gillette Venus
Feminine Care
Always
Tampax
41
Cosmetics
Cover Girl
Max Factor
Skin Care
Braun
Gillette Complete Skincare
Olay
Laundry & Fabric Care
Bounce
Cheer
Downy
Dreft
Era
Febreze Air Fresheners
Gain
Ivory
Tide
ANCILLARY BRANDS:
The main ancillary brands of Procter & Gamble brands are as follows:
Billion dollar brands are:
ALWAYS:
Brand of feminine hygiene products including maxi pads, pantyliners (sometimes
called Alldays), and feminine wipes.
ARIEL
42
brand of washing powder/liquid available in numerous forms and scents.
ACTONEL
Is brand of the osteoporosis drug risedronate co-marketed by Sanofi-Aventis
BOUNTY
is a brand of paper towel sold in United States, Canada and the United
Kingdom (rebranded to "Plenty" in the UK )
BRAUN
is a small-appliances manufacturer specializing in electric razors,
coffeemakers, toasters, and blenders.
CREST
brand of toothpaste.
DAWN
is a brand of dishwashing detergent.
DOWNY/ LENOR
is a brand of fabric softener.
DURACELL
is a brand of batteries and flashlights.
FUSION
43
is a brand of men's wet shave razors and is the quickest P&G brand to have
reached $1 billion in annual sales.
GAIN
is a brand of laundry detergent and fabric softeners.
GILLETTE
is a safety razor manufacturer.
HEAD & SHOULDERS
is a brand of shampoo.
Old Spice
is a brand of deodorant.
IVORY
is a soap.
NICE n’ EASY
is a hair coloring product.
OLAY
Is a brand of women's skin care products.
ORAL-B
is a brand of toothbrush.
44
PAMPERS
is a brand of disposable diaper/nappy.
PANTENE
is a brand of hair care products (conditioners/styling aids).
PRILOSEC OTC
is a brand of heartburn medicine co-marketed by AstraZeneca.
PRINGLES
is a brand of potato chips.
PUFFS
is a brand of facial tissue.
SECRET
is a brand of antiperspirant and deodorant.
TAG
is a deodorant and body spray.
TIDE
is a brand of laundry detergent.
VICKS
45
is a brand name of over-the-counter medicines (Formula 44, Sinex,
NyQuil/DayQuil)
WELLA
Is a brand name of hair care products (shampoo, conditioner, styling, and hair
color).
WHISPER
is a brand of pantyliners sold primarily in Asian markets.
Global Products A to Z
Most of these brands, including Bounty, Crest, Pringles, Puffs, and Tide, are
global products available in several continents. Procter & Gamble products are
available in North America, Latin America, Europe, the Middle East, Africa, and
Asia. The name of the products of P&G and its availability in the world is as
follows:
Brand Area Available
A Touch of
Sun®
North America, Asia
Ace® North America, Latin America, Europe, Middle
East, Africa
Actonel® North America, Europe, Middle East, Africa
Alldays® Latin America, Europe, Middle East, Africa
46
Alomatik Europe, Middle East, Africa, Asia
Always® North America, Latin America, Europe, Middle
East, Africa, Asia
Ammens® Latin America
Ariel North America, Latin America, Europe, Middle
East, Africa, Asia
Asacol® North America, Europe, Middle East, Africa
Attento Asia
Ausonia Europe, Middle East, Africa
Aussie® North America, Europe, Middle East, Africa, Asia
Ayudin Latin America
Az Europe, Middle East, Africa
Balsam® North America, Asia
Bess® Europe, Middle East, Africa
Blend a Dent Europe, Middle East, Africa
Blend a Med® Europe, Middle East, Africa
Blendax® Europe, Middle East, Africa
Bold® North America, Latin America, Europe, Middle
47
East, Africa, Asia
Bonux Europe, Middle East, Africa
Boss®-Hugo
Boss
North America, Latin America, Europe, Middle
East, Africa, Asia
Bounce® North America, Latin America, Europe, Middle
East, Africa, Asia
Bounty® North America, Latin America, Middle East, Africa,
Asia
Buffette® Latin America
Camay® North America, Latin America, Europe, Middle
East, Africa, Asia
Cascade® North America, Latin America, Asia
Charmin® North America, Latin America, Middle East, Africa,
Asia
Cheer® North America, Latin America, Europe, Middle
East, Africa, Asia
Cheff® Latin America
Cierto® Latin America
CoverGirl® North America, Latin America, Asia
Crest® North America, Latin America, Europe, Middle
East, Africa, Asia
48
Crest Glide® North America, Latin America, Europe, Middle
East, Africa, Asia
Cristal® Latin America
Cutie Asia
Daily Defense® North America
Dash Europe, Middle East, Africa
Dawn® North America, Latin America
Daz Europe, Middle East, Africa
Dodot Europe, Middle East, Africa
Downy® North America, Latin America, Europe, Middle
East, Africa, Asia
Dreft® North America, Latin America, Europe, Middle
East, Africa, Asia
Ela® Latin America
Era® North America, Latin America
Escudo® North America, Latin America
Eukanuba® North America, Europe, Asia
Evax Europe, Middle East, Africa
Fairy® Europe, Middle East, Africa, Asia
49
Febreze® North America, Latin America, Europe, Middle
East, Africa, Asia
Fixodent® North America, Latin America, Europe, Middle
East, Africa, Asia
Frost & Tip® North America
Gain® North America, Latin America, Asia
Gillette® North America, Latin America, Europe, Middle
East, Africa, Asia
Giorgio® North America, Europe, Middle East, Africa, Asia
Gleem® North America
Hairpainting® North America, Asia
Head &
Shoulders®
North America, Latin America, Europe, Middle
East, Africa, Asia
Herbal
Essences®
North America, Europe, Middle East, Africa, Latin
America, Asia
Hipoglos Latin America
Hydrience® North America, Europe, Middle East, Africa, Latin
America, Asia
Iams® North America, Europe, Middle East, Africa,
Infasil® Europe, Middle East, Africa
Inf usium® North America, Latin America, Europe, Middle
50
East, Africa, Asia
Inner Science North America, Asia
Ipana Europe, Middle East, Africa
Ivory® North America, Latin America, Europe, Middle
East, Africa, Asia
Jar Europe, Middle East, Africa
Joy ® North America, Latin America, Asia
Kolestone North America, Latin America, Europe, Middle
East, Africa, Asia
Kukident Europe, Middle East, Africa
Lacoste North America, Latin America, Europe, Middle
East, Africa, Asia
Ladysan Latin America
Laura Biogiotti® Latin America, Europe, Middle East, Africa
Lavasan Latin America
Lenor Europe, Middle East, Africa, Asia
Lines Europe, Middle East, Africa
Linidor Europe, Middle East, Africa
Loreto Latin America, Asia
51
Loving Care® North America, Europe, Middle East, Africa, Latin
America, Asia
Lunch® Latin America
Luvs® North America, Latin America, Asia
Macrobid® North America
Macrodantin® North America
Maestro® Latin America
Magia Blanca Latin America
Magistral® Latin America
Max Factor® North America, Europe, Middle East, Africa, Asia
Men's Choice® North America, Latin America, Europe, Middle
East, Africa
Metamucil® North America, Latin America, Europe, Middle
East, Africa, Asia
Miss Clairol® North America, Europe, Middle East, Africa, Latin
America
Motif Latin America
Mr. Clean® North America, Latin America, Asia
Mr. Proper Europe, Middle East, Africa
Mum Latin America, Europe, Middle East, Africa, Asia
52
Muse Asia
Myth Europe, Middle East, Africa
Natural
Instincts®
North America, Latin America
Naturella Latin America, Europe, Middle East, Africa
Nice 'n Easy® North America, Europe, Middle East, Africa, Asia
Noxzema® North America, Latin America, Asia
Olay® North America, Latin America, Europe, Middle
East, Africa, Asia
Old Spice® North America, Latin America, Europe, Middle
East, Africa, Asia
Pampers® North America, Latin America, Europe, Middle
East, Africa, Asia
Pampers
UnderJams®
North America, Latin America, Europe, Middle
East, Africa, Asia
Pantene® North America, Latin America, Europe, Middle
East, Africa, Asia
Pepto-Bismol® North America, Latin America, Europe, Middle
East, Africa, Asia
Perla Asia
53
Pert Plus® North America, Latin America, Europe, Middle
East, Africa, Asia
Pop Latin America
Prilosec OTC North America
Pringles® North America, Latin America, Europe, Middle
East, Africa, Asia
Puffs® North America, Latin America, Asia
PUR® North America, Europe, Middle East, Africa
Rejoice Europe, Middle East, Africa, Asia
Rejoy Asia
Rindex North America, Latin America
Safeguard® North America, Latin America, Europe, Middle E
ast, Africa, Asia
Salvo North America, Latin America
Scope® North America, Latin America, Europe, Middle
East, Africa, Asia
Secret® North America, Latin America, Europe, Middle
East, Africa, Asia
Senior Latin America
Shockwaves Europe, Middle East, Africa
54
SK-II North America, Europe, Middle East, Africa, Asia
Supremo Latin America
Sure® North America, Latin America, Asia
Swiffer® North America, Latin America, Europe, Middle E
ast, Africa, Asia
Tampax® North America, Latin America, Europe, Middle
East, Africa, Asia
Tempo® Middle East, Africa, Asia
Tess Latin America
Tide® North America, Latin America, Europe, Middle
East, Africa, Asia
Tras® Latin America
Ultress® North America, Asia
Unijab Latin America
Vencedor® Latin America
Viakal Europe, Middle East, Africa
Vicks® North America, Latin America, Europe, Middle E
ast, Africa, Asia
Vitapyrena Latin America
55
Vizir Europe, Middle East, Africa
Wella North America, Latin America, Europe, Middle
East, Africa, Asia
Whisper® Asia
XtremeFX® North America
Yes® Europe, Middle East, Africa
Zest® North America, Latin America, Europe, Middle E
ast, Africa, Asia
CHAPTER-4: DEMAND SUPPLY ANALYSIS
Fast moving consumer goods are those goods which are of use in the consumer’s daily
life. Example- toothpaste, soaps, detergents, shaving creams, shampoo etc.
A person when get up in the morning he search for the brush, toothpaste, soaps, detergent
etc. Thus, the demand of the fast consumer goods never comes to an end until the
consumer lives.
“Touching Lives, Improving Life” is the corporate motto which is exemplified in the
138,000 employees and loyal customers of P&G worldwide. The worldwide demand for
P&G’s products and services has forced management to focus on global marketing and
innovation. This worldwide marketing and innovation success was achieved by making
56
sure that what they produce is of highest quality and most importantly is what customers
need. P&G is very adaptable to changing customer demands by carefully and clearly
defining its innovative strategies; however, it almost lost its market dominance to
competition in the mid 80’s had it not been its aggressive play-to-win strategy.
Another innovative play-to-win strategy that P&G management had adopted was the
acquisition of its domestic and foreign competitors. P&G acquired a number of other
companies that helped diversified its product line and increased profits significantly. In
order to foster this aggressive strategy, management had integrated and reorganized all
the manufacturing processes of the companies they acquired. Manufacturing processes of
companies like Folgers Coffee, Norwich Eaton Pharmaceuticals, Richardson-Vicks,
Noxell, Shelton’s Old Spice, and many others. “Innovation must be encouraged, carefully
implemented within an organization at all times”.
P&G has demonstrated that its success depends on its customers, people, and innovation.
Each and every employee is brought together by the company’s common culture, values,
and goals. The company recognizes its diversity as a unique characteristic and strength
and it’s been able to maximize the talents and creativity from these people. P&G has also
demonstrated that it is not just in business to maximize shareholders wealth but it’s also a
social responsible company.
Characteristics of Innovative Organization in demand-supply:
“By describing the landscape of unmet customer needs and analyzing where new offering
have worked before, you can chart a path that will produce successful innovations time
after time”. Understanding customer needs and building lasting relationships are
important in helping an organization innovate. Businesses innovate through unmet
customer needs. Customers express their needs that have not been met and organizations
innovate to meet those needs. This is why P&G is still leading the domestic product
industry because, it listens to customers unmet needs and innovates aggressively to meet
those needs. For instance, when babies were wearing cloth diapers, they were very leaky
and labor intensive to wash; at that time, mothers needed an innovative product on the
57
market to help fix the labor intensive part of washing the cloth diapers as well as the
leakage. P&G answered this innovative call by introducing a revolutionary product
called“Pampers” into the market.
Pampers helped simplified the diapering process by resolving the leakage and the labor
intensive washing. Innovation means change and to change you must know why you are
changing, that is to say you must understand the pros and cons of the change process. In
addition, you must understand the characteristics of innovation or change and its
implication organization wide.
Globalization, International competition, the spread of information technology.
All of these factors have escalated competition and the need to change in order to
maintain competitive advantage. Organizations have to be faster, more responsive, and
produce higher quality. All told, there is more pressure than ever, on everyone, to be able
to change.
The aforementioned are the primary features of change and P&G management has
recognized that. Sometimes, what employees do not understand is the impact of change
on their professional and family lives; and it is the responsibility of management to
communicate this impact to employees both positive and negative; but mostly,
management overemphasizes on the positives and pays little attention on the negative
impact.
Managerial changes viewed as good and necessary can be seen by employees as
intimidating and even terrifying. But when companies don't take this into account, and
force changes that employees aren't prepared to handle, those companies risk alienating
their workers, losing money and, in the end, seeing those great strategic changes fall flat.
This is a communication strategy that P&G has been successful in implementing
corporate wide to fulfill the demand of products. The company ensures that the length
and breath of all its units understand the impact of any change mostly at the professional
level. Management ensures that everyone involved is interested in the supply of products
of and suppressing the demand. The more employees are interested in the change process
58
the greater the demand of the products, greater will be the supply and hence the more will
be the innovation. The most important element here is motivation. Management must let
employees see a win-win situation in the change process. Another case in point here was
the mismanagement of the change process in the United States Department of
Agriculture, Forest Service. Forest Service management didn’t recognize the importance
of communicating their re-organization plan to employees ahead of time; and this had
resulted in a loss of great talents and good teams; because, some of them felt intimidated,
terrified, and alienated. Change must be carefully managed to ensure success. It is
impossible to address all the characteristics of innovation in this paper however; the
salient features will thoroughly be discussed. Organizational culture must be nurtured to
accept change at all levels. The nurturing of the organizational culture relies on the
fundamental responsibility of management to plan, direct, motivate, and control the day
to day operations of the organization. Innovative cultures must be built and supported by
management.
To begin with, anything that gives a corporation a competitive advantage over the other is
a characteristic of innovation. Most companies are described as first movers into some
specific industries and once they get in, they make it very difficult for others to get in due
to a specified or unspecified characteristic of innovation. This could be innovation in
technology, innovation in financial management (capital acquisition), innovation in
customer service and what have you. One main innovation characteristic of P&G is to
move innovation to commercialization faster than any other competitor in the industry.
“Defining the innovation strategy and the resulting portfolio characteristics (play-to-win
or play-not-to-loose and the associated mix of incremental, semi-radical, and radical
innovations) are the first major responsibility of a company’s leadership”.
Secondly, anything that creates a situation that people had to deal with is a characteristic
of innovation. When innovation is implemented, it changes people’s attitude toward the
new process. It makes people think and act different from the way they used to. It
creates different vision and mission that people have to focus on; and this gives rise to
altering behaviors and attitudes. All this is because of innovation. Whenever P&G
introduces a new product line, it alters situations and behaviors. Anything that creates a
59
problem or resolves a problem is a characteristic of innovation. When Listerine mouth
wash was introduced into the market, it solved the problem of bad breath but than people
had to deal with the burning sensation. Thus, hereby we can see that the organization is
also creating the need of the products too. Thus, the demand of the products increases and
hence the supply also increases and thereby the market share.
The changing need of the consumers always needs innovations. Innovations can have
both positive and negative implications. Innovation introduces new technologies. A few
years ago, people were discussing the “revenge of technology”. Now there are a few
people that are warning us about the “pursuit of technology”. Whatever the pundits say,
the future is probably going to happen anyway. So here is my initial list of characteristics
of innovations that might change the world: Anything that provides a service or solves a
problem in a significantly better way, anything that changes how society works or plays,
anything that eliminates a major problem (or cost) for people and or organizations.
The reason why leadership hype is critical for innovation, creativity and change in an
organization is that; at P&G innovation or change occurs from top down. This sends a
clear message to everyone that if the entire leadership has changed to accommodate
innovation, it’s about time for them to change also (employees). Management makes
employees creative and innovative by hyping innovation and
making it a priority. To encourage creativity and innovation within an organization,
leadership must hype it; institute a reward system to compensate creative employees and
link innovation and creativity to the broader mission and vision of the organization.
P&G Core Competencies Lead to World-Class Technologies according to the
demand of its products:
P&G has more than 200 proprietary technologies in the market today to satisfy the needs.
These technologies are organized into a dozen areas of world-class competencies — areas
of unique technology strengths the Company have applied to develop superior products.
Examples of these core competencies include: Metal Ion Control — the technology to
60
control metal ions (e.g., calcium and sodium) originated from the Company's need to
control the hardness in water to improve laundry cleaning performance. This
understanding has been reapplied to other product areas ranging from tartar removal on
tooth enamel, to delivering increased bone mass in pharmaceuticals and providing
calcium in fruit beverages.
Fats and Oils — A century of technology developments in fats and oils is the
basis for product innovation in many product categories including food, personal
cleansing, and fabric and home care products. The Company is recognized for its
ability to tailor fats into a wide variety of materials. Olean®, the non-caloric fat
substitute, is an example of how this competency translates into product
innovations.
Surface and Phase Chemistry — Building from its deep knowledge in fats and
oils, P&G has also developed a global leadership position in surface and phase
chemistry. Proprietary surfactants and emulsifiers are the basis for superior
cleaning products, fabric conditioners, two-in-one shampoo and conditioners,
cosmetics, and foods.
Absorbent Structures and Materials — P&G's baby care, feminine hygiene and
tissue/towel businesses are all based upon world-class capability in absorbent
structures and materials. Breakthrough improvements in paper making have
created materials that are softer, more absorbent and use significantly less wood
fiber.
Perfumes and Odor Management — Applied in products ranging from Tide,
Pantene, Downy® and Giorgio of Beverly Hills, P&G is the largest producer and
user of perfumes. Scientists have applied this knowledge and technology to
proprietary products based upon molecules that actually capture unpleasant
human, pet, cooking and smoking odors in products like Febreze and the home
dry-cleaning kit, Dryel, that refreshes fabrics without washing.
Retailers on average lose the sale 31 percent of the time due to out-of-stocks, says Keith
Harrison, Procter & Gamble's (P&G) global product supply chain manager.
61
Subsequently, P&G research also notes that customers will only tolerate an out-of-stock
two or three times before they substitute another brand or switch stores.
Taking these statistics into account, Procter & Gamble has increased its focus on the
retail shelf. P&G uses the concept of a Demand Driven Supply Network, which reacts to
consumer demand to drive the rest of the supply chain rather than maintain an internally
focused supply chain.
Simultaneous Development of Suppliers and Customers:
From the very early stages of the formation of PROCTER & GAMBLE, the cooperative
realized that sustained growth for the long-term was contingent on matching supply and
demand. Further, given the primitive state of the market and their development in a
synchronous manner was critical for the continued growth of the industry. The
organization also recognized that in view of the poor infrastructure in India, such
development could not be left to market forces and proactive interventions were required.
Accordingly, PROCTER & GAMBLE adopted a number of strategies to assure such
growth. For example, at the time PROCTER & GAMBLE was formed, the vast majority
of consumers had limited purchasing power and was value conscious with very low
levels of consumption of the FMCG products. Thus, PROCTER & GAMBLE adopted a
low price strategy to make their products affordable and guarantee value to the consumer.
The success of this strategy is well recognized and remains the main plank of PROCTER
& GAMBLE's strategy even today.
The choice of product mix and the sequence in which PROCTER & GAMBLE
introduced its products is consistent with this philosophy. Beginning with beauty
segment, the product mix was enhanced slowly by progressive addition of higher value
products while maintaining desired growth in existing products. Even today, while
competing in the market for high demand of fmcg products, P&G ensures that adequate
supplies of low value products are maintained.
62
For the long-term, the PROCTER &GAMBLE followed a multi-pronged strategy of
education and support. For example, only part of the surplus generated by the Unions is
paid to the members in the form of dividends. A substantial part of this surplus is used for
activities that promote growth FMCG products.
The dual strategy of simultaneous development of the market has resulted in parallel
growth of demand and supply of FMCG at a steady pace and in turn assured the growth
of the industry over an extended period of time.
Cost Leadership:
PROCTER & GAMBLE’s objective of providing a value proposition to a large customer
base led naturally to a choice of cost leadership position. Given the low purchasing power
of the Indian consumer and the marginal discretionary spending power, the only viable
option for PROCTER & GAMBLE was to price its products as low as possible. This in
turn led to a focus on costs and had significant implications for managing its operations
and supply chain practices
Focus on Core Activities:
In view of its small beginnings and limited resources, it became clear fairly early that
PROCTER & GAMBLE would not be in a position to be an integrated player from
production to delivery to the consumer. Accordingly, it chose a strategy to focus on core
fast moving consumer goods and rely on third parties for other complementary needs.
This philosophy is reflected in almost all phases of PROCTER & GAMBLE network
spanning R&D, production, collection, processing, marketing, distribution, retailing etc.
On the other hand, logistics of the products to customers was managed through third
parties.
However, it played a proactive role in making support services available to its members
wherever it found that markets for such services were not developed. For example, in the
initial stages, its small and marginal member retailers did not have access to finance,
customer retaining, knowledge of basics etc. Thus to assure continued growth in fmcg
63
production and supply, PROCTER & GAMBLE actively sought and worked with
partners to provide these required services. In cases where such partnerships could not be
established, PROCTER & GAMBLE developed the necessary capabilities and provided
the services.
Managing Third Party Service Providers:
Well before the ideas of core competence and the role of third parties in managing the
supply chain were recognized and became fashionable, these concepts were practiced by
PROCTER & GAMBLE. Accordingly, the P&G focused efforts on these activities and
related technology development. Marketing efforts (including brand development) were
assumed by P&G. All other activities were entrusted to third party service providers.
These include logistics of different segments products of P&G, distribution of products,
sale of products through dealers and retail stores etc. It is worth noting that a number of
these third parties are not in the organized sector, and many are not professionally
managed. Hence, while third parties perform the activities, PROCTER&GAMBLE
developed a number of mechanisms to retain control and assure quality and timely
deliveries.
Market / Customers:
In comparison with developed economies, the market for fmcg products in India is still in
at growth stage with tremendous potential for high value products for its different
segments etc. The distribution network, on the other hand, is quite less in the rural areas
of the country in comparison to the urban areas of the country. Traditional methods are
still practiced in the countries which is not adequate to realize the market potential and
alternative approaches are necessary to tap this market.
Third Party Logistics Services:
64
In addition to the weaknesses in the basic infrastructure, logistics and transportation
services are typically not professionally managed, with little regard for quality and
service. Even from the cursory description of the environment provided above, it should
be clear that the traditional management practices of the west are not sufficient for
success in emerging markets. Many MNCs that ventured into India following the first
phase of liberalization in 1990s found this at a great cost. The success of PROCTER &
GAMBLE is in glaring contrast to the experience of this MNCs and thus provides an
alternative business model that may be useful for others considering entry into emerging
markets like India. A schematic description of the business model showing the demand-
supply linkages is presented For example, procurement prices set by Unions are a major
determinant of fmcg products. Similarly, Procter & Gamble’s pricing strategy for fmcg
products has a strong influence on consumer demand. In addition to outbound logistic
Procter & Gamble takes responsibility for coordinating with the distributors to assure
adequate and timely supply of products. It also works with the Unions in determining
product mix, product allocations and in developing production plans. The Unions, on the
other hand, coordinate collection logistics and support services to the member-retailers as
well as distributors.
GOLDEN EYE-VISION FOR DEMAND & SUPPLY:
We deliver RPS of availability & visibility sustained in all covered store.
We deliver competitive advantages through conceptual selling.
We will be the preferred supplier for trade.
What is RPS?
65
RPS =RETAIL PERFORMANCE STANDARDS.
RETAIL PERFORMANCE STANDARDS
What is RPS?
A standard way of measuring sales performance across the country.
What are the elements of RPS?
Distribution & visibility
66
MAS :
Major account stores
Stores that contribute to 70% of retail value business.
OT :
Open trade
Stores that contribute to balance 30% of retail rupee value business.
W/s
Wholesale stores
Stores where retailers buy contribute 50% of total business.
DSE ROLE IN THE VISION:
While RPS is a goal, we have chosen a path to get there: we will deliver RPS by
ensuring delivery of
CPCDMPVCI
C- Callage
P- Productivity
How do we define RPS?
On town class basis
Metro & Non metro
On an Outlet basis
Chemist & Non-chemist.
MAS,OT,W/s
67
C- Customer service level
D- Distribution extension%
M- Merchandising.
P- Pricing & Credit.
V- Volume.
C- Competitive advantages.
I- Initiative
DSE DAILY ROUTINE
GOLDEN RULE:
“Selling is a noble profession because it satisfies the needs of the buyer”.
Just like doctor cure the patients the ailments sell with the pride.
68
1. Preparation for the day:
Collect route docs and clip into organizer:
1. Check daily objective from DMS score card.
2. Collect distribution gap analyzer.
3. Collect last DSR for route.
2. TRADE COVERAGE
3. CLOSING
FOR THE DAY
1. PREPARATIO
N FOR THE DAY
Fig: DSE daily routine
69
Collect palm from IDSS.
Plan initiatives for next day by store.
Plan volume objective by store.
Plan distribution & merchandising objective by store.
2. TRADE COVERAGE:
Objective:
1. Win the store :
Superior trade relation ( preferred supplier status)
2. Win in the store :
Superior distribution & visibility –delivers RPS.
Strategy:
1. 10 Basic cell procedure
2. Conceptual selling.
The 10 basic call procedures consist of following steps:
Review plans.
Enter call.
Store check & plan order.
Presentation.
Close & confirm order.
Collections.
Merchandising review.
Records & reports.
Leave call.
Call analysis.
70
3. CLOSING FOR THE DAY:
Reconcile cash
1. Count cash.
2. Check total v/s day’s pending bills collected.
3. Complete CR & submit along with the cash, cheques & pending bills to
the cashier.
Handover the contract forms of initiative to STL.
71
CHAPTER-6 : MARKETING NETWORK OF P&G
P&G uses the marketing network as a system for selling goods or services through a wide
network of distributors, each of whom is responsible and compensated for recruiting new
members to the multi level marketing system.
Marketing network of P&G offers an attractive business proposition to many people.
P&G offers the opportunity to become involved in a system for distributing products to
consumers. As the Multi level marketing system (MLM) participant, P&G makes money
by selling the MLM products to other MLM participants. If they're not already a member
of its MLM Company, it can sign them up. Besides earning money off its own sales, it
also earns a percentage of the income generated by the distributors that P&G brought into
its MLM plan. Often there are bonuses for selling particular amounts of MLM product or
signing up a certain number of new members.
P&G is represented by the independent, unsalaried salespeople of multi-level marketing,
referred to as distributors (or associates, independent business owners, dealers, franchise
owners, sales consultants, consultants, independent agents, etc.), and are awarded a
commission based upon the volume of product sold through each of their independent
businesses.
The independent distributors develop the organizations by either building an active
customer base, who buy direct from our company, or by recruiting a downline of
independent distributors who also build a customer base, thereby expanding the overall
organization. Additionally, distributors can also earn a profit by retailing products they
purchased from the company at wholesale price.
P&G provides its distributors to earn a commission based on the sales efforts of their
organization, which includes their independent sale efforts as well as the leveraged sales
efforts of their downline. This arrangement is similar to franchise arrangements where
royalties are paid from the sales of individual franchise operations to the franchisor as
72
well as to an area or region manager. Commissions are paid to multi-level marketing
distributors according to the company’s compensation plan. There can be multiple levels
of people receiving royalties from one person's sales
The marketing network of P&G business operates in all the 50 states of United States and
in more than 100 other countries. The new businesses may use terms like "affiliate
marketing" or "home-based business franchising".
The pyramiding (getting commissions from recruiting new members including "sign-up
fees") is illegal in most states to remain legitimate in the U.S. The company that utilizes
multi-level marketing has to make sure commissions are earned only on sales of the
company's products or services if they cross state boundaries. If participants are paid
primarily from money received from new recruits, or if they are required to buy more
product than they are likely to sell, then the company may be a pyramid scheme,, which
is illegal in most countries. New salespeople may be asked to pay for their own training
and marketing materials, or to buy a significant amount of inventory. A commonly
adopted test of legality is that marketing network follow the so-called 70% rule which
prevents members "inventory loading" in order to qualify for additional bonuses. The
70% rule requires participants to sell 70% of previously purchased inventory before
placing new orders with the company. There are however variations in interpretations of
this rule. Some attorneys insist that 70% of purchased inventory should be sold to people
who are not participants in the business, while many marketing network companies allow
for self-consumption to be a significant part of the sales of a participant.
The distribution channel of P&G:
The management of P&G consists may be of a chain of intermediaries, each passing the
product down the chain to the next organization, before it finally reaches the consumer or
end-user. This process is known as the 'distribution chain' or the 'channel.' Each of the
elements in these chains will have their own specific needs, which the producer must take
into account, along with those of the all-important end-user. This includes a cross-
function approach to manage the movement of raw materials into an organization, certain
73
aspects of the internal processing of materials into finished goods, and then the
movement of finished goods out of the organization toward the end-consumer. As
organizations strive to focus on core competencies and becoming more flexible, they
have reduced their ownership of raw materials sources and distribution channels. These
functions are increasingly being outsourced to other entities that can perform the
activities better or more cost effectively. The effect is to increase the number of
organizations involved in satisfying customer demand, while reducing management
control of daily logistics operations. Less control and more supply chain partners led to
the creation of supply chain management concepts. The purpose of supply chain
management is to improve trust and collaboration among supply chain partners, thus
improving inventory visibility and improving inventory velocity.
Several models have been proposed for understanding the activities required to manage
material movements across organizational and functional boundaries. SCOR is a supply
chain management model promoted by the Supply Chain Council. Another model is the
SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain
activities can be grouped into strategic, tactical, and operational levels of activities.
Successful marketing network requires a back up support by SCM T he SCM requires a
change from managing individual functions to integrating activities into key supply chain
processes. An example scenario: the purchasing department places orders as requirements
become appropriate. Marketing, responding to customer demand, communicates with
several distributors and retailers as it attempts to satisfy this demand. Shared information
between supply chain partners can only be fully leveraged through process integration.
Supply chain business process integration involves collaborative work between buyers
and suppliers, joint product development, common systems and shared information.
According to Board of Directors of Procter &Gamble, operating an integrated supply
chain requires continuous information flow. However, in many companies, management
has reached the conclusion that optimizing the product flows cannot be accomplished
without implementing a process approach to the business. The key supply chain
processes stated by Procter &Gamble are:
74
Customer relationship management
Customer service management
Demand management
Order fulfillment
Manufacturing flow management
Supplier relationship management
Product development and commercialization
Returns management
Much has been written about Procter & Gamble demand management. The Procter &
Gamble have following characteristics, which includes:
a) Internal and external collaboration
b) Lead time reduction initiatives
c) Tighter feedback from customer and market demand
d) Customer level forecasting
One could suggest other key critical supply business processes combining these processes
stated by P&G such as:
a. Customer service management
b. Procurement
c. Product development and commercialization
d. Manufacturing flow management/support
e. Physical distribution
f. Outsourcing/partnerships
g. Performance measurement
a) Customer service management process
P&G states that Customer Relationship Management is very important regarding the
relationship between the organization and its customers. Customer service provides the
source of customer information. It also provides the customer with real-time information
on promising dates and product availability through interfaces with the company's
75
production and distribution operations. P&G uses the following steps to build customer
relationships:
determine mutually satisfying goals between organization and customers
establish and maintain customer rapport
produce positive feelings in the organization and the customers
b) Procurement process
Strategic plans are developed with suppliers to support the manufacturing flow
management process and development of new products. In firms where operations extend
globally, sourcing should be managed on a global basis. The desired outcome is a win-
win relationship, where both parties benefit, and reduction times in the design cycle and
product development are achieved. Also, the purchasing function develops rapid
communication systems, such as electronic data interchange (EDI) and Internet linkages
to transfer possible requirements more rapidly. Activities related to obtaining products
and materials from outside suppliers requires performing resource planning, supply
sourcing, negotiation, order placement, inbound transportation, storage, handling and
quality assurance, many of which include the responsibility to coordinate with suppliers
in scheduling, supply continuity, hedging, and research into new sources or programs.
c) Product development and commercialization
Here, customers and suppliers must be united into the product development process, thus
to reduce time to market. As product life cycles shorten, the appropriate products must be
developed and successfully launched in ever shorter time-schedules to remain
competitive. According to P&G, the managers of the product development and
commercialization process must:
1. coordinate with customer relationship management to identify customer-
articulated needs;
2. select materials and suppliers in conjunction with procurement, and
76
3. develop production technology in manufacturing flow to manufacture and
integrate into the best supply chain flow for the product/market combination.
d) Manufacturing flow management process
The manufacturing process is produced and supplies products to the distribution channels
based on past forecasts. Manufacturing processes must be flexible to respond to market
changes, and must accommodate mass customization. Orders are processes operating on
a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow
process lead to shorter cycle times, meaning improved responsiveness and efficiency of
demand to customers. Activities related to planning, scheduling and supporting
manufacturing operations, such as work-in-process storage, handling, transportation, and
time phasing of components, inventory at manufacturing sites and maximum flexibility in
the coordination of geographic and final assemblies postponement of physical
distribution operations.
e) Physical distribution
This concerns movement of a finished product/service to customers. In physical
distribution, the customer is the final destination of a marketing channel, and the
availability of the product/service is a vital part of each channel participant's marketing
effort. It is also through the physical distribution process that the time and space of
customer service become an integral part of marketing, thus it links a marketing channel
with its customers (e.g. links manufacturers, wholesalers, retailers).
f) Outsourcing/partnerships
This is not just outsourcing the procurement of materials and components, but also
outsourcing of services that traditionally have been provided in-house. The logic of this
trend is that the company will increasingly focus on those activities in the value chain
where it has a distinctive advantage and everything else it will outsource. This movement
has been particularly evident in logistics where the provision of transport, warehousing
and inventory control is increasingly subcontracted to specialists or logistics partners.
77
Also, to manage and control this network of partners and suppliers requires a blend of
both central and local involvement. Hence, strategic decisions need to be taken centrally
with the monitoring and control of supplier performance and day-to-day liaison with
logistics partners being best managed at a local level.
g) Performance measurement
Experts found a strong relationship from the largest arcs of supplier and customer
integration to market share and profitability. By taking advantage of supplier capabilities
and emphasizing a long-term supply chain perspective in customer relationships can be
both correlated with firm performance. As logistics competency becomes a more critical
factor in creating and maintaining competitive advantage, logistics measurement becomes
increasingly important because the difference between profitable and unprofitable
operations becomes more narrow. The organization noted that firms engaging in
comprehensive performance measurement realized improvements in overall productivity.
According to experts internal measures are generally collected and analyzed by the firm
including
1. Cost
2. Customer Service
3. Productivity measures
4. Asset measurement, and
5. Quality.
External performance measurement is examined through customer perception measures
and "best practice" benchmarking, and includes :
1) customer perception measurement, and
2) best practice benchmarking.
Components of Supply Chain Management are:
1. Standardization 2. Postponement 3. Customization
78
Channels
A number of alternate 'channels' of distribution of P&G may be available:
Selling direct, such as with an outbound sales force or via mail order, Internet and
telephone sales
Agent, who typically sells direct on behalf of the producer
Distributor (also called wholesaler), who sells to retailers
Retailer (also called dealer or reseller), who sells to end customers
Advertisement typically used for consumption goods
Distribution channels may not be restricted to physical products alone. They may be just
as important for moving a service from producer to consumer in certain sectors, since
both direct and indirect channels may be used. Hotels, for example, may sell their
services (typically rooms) directly or through travel agents, tour operators, airlines,
tourist boards, centralized reservation systems, etc.
There have also been some innovations in the distribution of services. For example, there
has been an increase in franchising and in rental services - the latter offering anything
from televisions through tools. There has also been some evidence of service integration,
with services linking together, particularly in the travel and tourism sectors. For example,
links now exist between airlines, hotels and car rental services. In addition, there has been
a significant increase in retail outlets for the service sector. Outlets such as estate
agencies and building society offices are crowding out traditional grocers from major
shopping areas.
Channel members
Distribution channels can thus have a number of levels. The channel members of P&G is
the simplest level, that of a direct contact with no intermediaries involved, as the 'zero-
level' channel. The next level, the 'one-level' channel, features just one intermediary; in
79
consumer goods a retailer, for industrial goods a distributor. In small markets (such as
small countries) it is practical to reach the whole market using just one- and zero-level
channels.
In large markets (such as larger countries) a second level; a wholesaler for example, is
now mainly used to extend distribution to the large number of small, neighborhood
retailers or dealers.
In Japan the chain of distribution of P&G is often complex and further levels are used,
even for the simplest of consumer goods.
In Bangladesh P&G is using different Chains of Distribution, especially 'second level'.
The internal market
Many of the marketing principles and techniques which are applied to the external
customers of an organization can be just as effectively applied to each subsidiary's, or
each department's, 'internal' customers.
In some parts of certain organizations this may in fact be formalized, as goods are
transferred between separate parts of the organization at a `transfer price'. To all intents
and purposes, with the possible exception of the pricing mechanism itself, this process
can and should be viewed as a normal buyer-seller relationship. The fact that this is a
captive market, resulting in a `monopoly price', should not discourage the participants
from employing marketing techniques. Less obvious, but just as practical, is the use of
`marketing' by service and administrative departments; to optimize their contribution to
their `customers' (the rest of the organization in general, and those parts of it which deal
directly with them in particular). In all of this, the lessons of the non-profit organizations,
in dealing with their clients, offer a very useful parallel. But in spite of this many,
organizations prefer not to operate at a 'transfer' price because costs gradually increase as
they undergo the distribution process.
80
Channel decisions
Channel strategy
Product (or service)<>Cost<>Consumer location
Managerial concerns
The channel decision is very important. In theory at least, there is a form of trade-off: the
cost of using intermediaries to achieve wider distribution is supposedly lower. Indeed,
most consumer goods manufacturers could never justify the cost of selling direct to their
consumers, except by mail order. Many suppliers seem to assume that once their product
has been sold into the channel, into the beginning of the distribution chain, their job is
finished. Yet that distribution chain is merely assuming a part of the supplier's
responsibility; and, if they have any aspirations to be market-oriented, their job should
really be extended to managing all the processes involved in that chain, until the product
or service arrives with the end-user. This may involve a number of decisions on the part
of the supplier:
Channel membership
Channel motivation
Monitoring and managing channels
Channel membership
1. Intensive distribution - Where the majority of resellers stock the 'product' (with
convenience products, for example, and particularly the brand leaders in
consumer goods markets) price competition may be evident.
2. Selective distribution - This is the normal pattern (in both consumer and industrial
markets) where 'suitable' resellers stock the product.
3. Exclusive distribution - Only specially selected resellers or authorized dealers
(typically only one per geographical area) are allowed to sell the 'product'.
81
Channel motivation
It is difficult enough to motivate direct employees to provide the necessary sales and
service support. Motivating the owners and employees of the independent organizations
in a distribution chain requires even greater effort. There are many devices for achieving
such motivation. Perhaps the most usual is `incentive': the supplier offers a better margin,
to tempt the owners in the channel to push the product rather than its competitors; or a
competition is offered to the distributors' sales personnel, so that they are tempted to push
the product.The channel motivation is the incentive as a Channel Value Proposition or
business case, with which the supplier sells the channel member on the commercial
merits of doing business together. He describes this as selling business models not
products.
Monitoring and managing channels
In much the same way that the organization's own sales and distribution activities need to
be monitored and managed, so will those of the distribution chain.
In practice, many organizations use a mix of different channels; in particular, they may
complement a direct sales force, calling on the larger accounts, with agents, covering the
smaller customers and prospects.
Marketing network Compensation plans utilized by P&G:
P&G has devised a variety of marketing network compensation plans over the last
decades:
Stairstep Breakaway plans:
This type of plan is characterized by P&G as having representatives who are
responsible for both personal and group sales volumes. Volume is created by
recruiting and by retailing product. Various discounts or rebates may be paid to group
leaders and a group leader can be any representative with one or more downline
82
recruits. Once predefined personal and/or group volumes are achieved, a
representative moves up a commission level. This continues until the representative's
sales volume reaches the top commission level and "breaks away" from their upline.
From that point on, the new group is no longer considered part of his upline's group
and the multi-level compensation aspect ceases. The original upline usually continues
to be compensated through override commissions and other incentives.
Unilevel plans :
This type of plan is considered as the simplest of compensation plans by P&G. Uni-
Level plans pay commissions primarily based on the number of levels a recipient is
from the original representative who is purchasing the product. Commissions are not
based on title or rank achieved. By qualifying with a minimum sales requirement,
representatives earn unlimited commissions on a limited number of levels of
downline recruited representatives.
Matrix plans:
This type of plan is similar to a Uni-Level plan, except there are also a limited
number of representatives who can be placed on the first level. Recruits beyond the
maximum number of first level positions allowed are automatically placed in other
downline (lower level) positions. Matrix plans often have a maximum width and
depth. When all positions in a representative's downline matrix are filled (maximum
width and depth is reached for all participants in a matrix), a new matrix may be
started. Like Uni-Level plans, representatives in a matrix earn unlimited commissions
on limited levels of volume with minimal sales quotas.
Binary plans:
A binary plan is a multilevel marketing compensation plan which allows distributors
to have only two front-line distributors. If a distributor sponsors more than two
distributors, the excess are placed at levels below the sponsoring distributor's front-
line. This "spillover" is one of the most attractive features to new distributors since
83
they need only sponsor two distributors to participate in the compensation plan. The
primary limitation is that distributors must "balance" their two downline legs to
receive commissions. Balancing legs typically requires that the number of sales from
one downline leg constitute no more than a specified percentage of the distributor's
total sales.
Hybrid plans
Hybrid plans are compensation plans that are constructed using elements of more
than one type of compensation plan.
Criticism of marketing network
The Federal Trade Commission (FTC) issued a decision, In re Amway Corp., in 1979 in
which it indicated that multi-level marketing was not illegal per se in the United States.
However, Amway was found guilty of price fixing (by requiring "independent"
distributors to sell at the low price) and making exaggerated income claims.
The FTC advises that multi-level marketing organizations with greater incentives for
recruitment than product sales are to be viewed skeptically. The FTC also warns that the
practice of getting commissions from recruiting new members is outlawed in most states
as "pyramiding". In April 2006, it proposed a Business Opportunity Rule intended to
require all sellers of business opportunities—including MLMs—to provide enough
information to enable prospective buyers to make an informed decision about their
probability of earning money.
In March 2008, the FTC removed Network Marketing (MLM) companies from the
proposed Business Opportunity Rule:
The revised proposal, however, would not reach multi-level marketing companies or
certain companies that may have been swept inadvertently into scope of the April 2006
proposalSounds good, doesn't it? And being part of a well-run MLM business can be a lot
like being a member of a large extended family.
84
Unfortunately, not every MLM opportunity is a legitimate business opportunity. Many
pyramid schemes, frauds designed to part the unwary from their money, are disguised as
MLM opportunities.
Like MLM, pyramid schemes depend on recruiting people to become distributors of a
product or service. Like MLM, the pyramid scheme offers the opportunity to make
money by signing up more recruits and by accomplishing certain levels of achievement.
The big difference between MLM and a pyramid scheme is in the business' operations.
The entire purpose of a pyramid scheme is to get your money and then use you to recruit
other suckers (ahem - distributors). The entire purpose of MLM is to move product. The
theory behind MLM is that the larger the network of distributors, the more product the
business will be able to sell.
P&G had the written copies of the company's sales literature, business plan and/or
marketing plan. P&G talks to other people who have experience with the marketing
networking companies and the products, to determine whether the products are actually
being sold and if they are of high quality. P&G checks with the Better Business Bureau to
see if there have been any complaints about the company. P&G always organizes the
meetings of its network marketing. And listen carefully at that multi level marketing
recruitment meeting.
The inflated claims for the amazing amounts of money that P&G is going to make should
set its alarm bells ringing. Being part of a successful marketing network company can be
both profitable and fun, but unfortunately, some purported marketing networking
opportunities are actually pyramid schemes designed to flatten both its wallet and the
dream of running a business.
85
Distribution channel
Manufacturer
Carried & Forward
Wholesaler
Retailer
Consumer
This is the first pipe of distribution channel by which the company reaches itscustomers.
In this channel of distribution, manufacturing units, supply the product to the next
channel member, that is, C&F. The Company reaches its customers by this method
. This method is such that different depots, which work according to own will without
any interference from the company. They have their own agents who look and take care
of the orders of the next channel in the distribution pipeline. The next member in the
distribution pipeline is C&F who are based in districts. They also possess license. They
86
have to work in the fixed territory. Dealer take the product from the processing channels
members in still a big store as big as whole seller and carries on the channel distribution.
They sell the product to the customer a play a vital role in the sales. They are the people
who are directly responsible for the sales figure of the company’s product. If we want to
increase the sale of the product then we have to judiciously cut down the expenditure on
advertising and give this portion to the retailers. It is because it the retailer who are
responsible for manipulating the brand perception.
There was a time when India known as the land of snake charmers. The land of mystery.
In this country, poverty and wealth meet in the middle. How can such a contradiction
n survive together?
The answer is strongly religious social fabric, bound by tradition. Still a
profoundly religious country in Hindu faith deems it a virtue to come to terms with one’s
own being. Spiritual growth surpasses wealth and power, as the former brings the later
too. The spiritual would is one where all come together. India is a country where all the
flavors are strong. Ok, may be not. But do you know where it comes from? Biscuits have
a interesting and perhaps surprising history. The Irish monks brought Irish learned it from
Spanish. The Spanish learned it from Arab. And Arab in turn learned it from India.
Imagine that, alcohol in India, as elsewhere, has been around for a while. In today’s
markets, understanding the customer’s situation and responding effectively to differing
needs through the coordination of marketing and SCM can be a source of superior value
creation. This paper has introduced DCM as a model which combines the strengths of
marketing and SCM by shifting the focus to the customer and designing customer-centred
supply chains. Marketing is traditionally externally focused and creates customer value,
while SCM is inwardly focused and concentrates on the efficient use of resources in
implementing marketing decisions. Marketing and SCM integration is between those that
define demand with those who fulfill it. Until today, the concept of DCM has been
addressed from SCM and operations perspectives; however, despite its clear relevance,
no marketing contribution can be cited. By outlining the roles of marketing in demand
chains, the paper closes this gap and proposes several important new areas for future
research in marketing.
87
Widely cited examples of successful companies following the principles of DCM, such as
Dell in the computer industry or Zara in the fashion industry (Walker et al. 2000 and
Margretta 1998), lead us to believe that more companies will adopt DCM in their quest to
gain competitive advantage. These companies increase profitability through product
availability, delivery accuracy, responsiveness and flexibility by tightly linking customer
and supply initiatives. Within DCM, marketing and supply functions work together to
develop suitable relationships for different customers, develop joint customer
prioritisation strategies, process accurate customer information and match value
requirements with operational capabilities.
Our conceptual framework suggests new roles for marketing within DCM which imply
new areas for research. Collecting data for a cross-functional study is difficult, but cross-
functional and interorganisational data collection seems almost impossible. Thus, while
most of the literature agrees that the biggest value creation potential lies in the integration
across all organisations within the supply chain, we have restricted our focus to DCM
from a company perspective. This does not necessarily exclude suppliers or distribution
partners; however, the viewpoint from the company controlling the demand chain is
taken. Our perspective is consistent with the “firms in network” level proposed by Möller
and Halinen (1999). Those studies reporting current best practice examples also suggest
that demand and supply integration starts internally and that the full potential of
leveraging it across all supply chain organisations has not yet been tapped (SAP 2003;
Deloitte 2002). Supply and demand integration issues can only be captured if
representatives from both sides within the same company are involved. Our initial
intention was to conduct paired interviews in selected companies. After the completion of
a trial set of interviews, we noticed the limitations related to the methodology. Rather
than gaining knowledge on the elements of DCM, the interviewees elaborated on the
barriers and problems, often making the other function responsible for integration failure.
Therefore, we decided to involve both parties simultaneously, and to facilitate
constructive discussions through a co-development workshop.
88
The co-development workshop involved eight companies with representatives from
supply and demand functions within each company (marketing, sales, logistics and
SCM). We could have involved more companies with only one representative from either
marketing or supply functions, but at this stage, we opted for the quality rather than the
quantity of the sample. The companies were chosen on the basis of proven expertise and
interest in DCM. They represented a range of different industries, from oil and cosmetics
to a manufacturer of personal care products and a photoprinting technology provider. The
workshop lasted one day and was run by Synectics, a consulting company which
specialises in running suchworkshops. Synectics applied a creative problem solving
process which captured the different mindsets of both functional representatives but then
sought convergence. The process utilises brainstorming techniques, with an objective of
leveraging both present knowledge and future potential. Its structure, with rigorous
projective exercises, tools and techniques, enables the participants’ thinking to be shaped
and developed. As researchers, we acted as so-called “problem owners”, which enabled
us to choose the prominent topics, while leaving the process responsibility to the
professionals. The rich data from the workshop was captured through notes and an
extensive number of flip charts. Overall, we recognize the limitations of the data
collection through the workshop; however, given firstly, the nature of the problem,
secondly, the early state of development and thirdly, our purpose of building a grounded
conceptual framework rather than testing hypotheses, we believe that the workshop was a
rewarding and suitable method. It allowed us to tap the “mental maps” and experiences of
demand and supply representatives within the same companies, and was a suitable,
discovery-orientated and practitioner-based approach. We conclude that an area for
further research is to analyse the cross-functional relationship between marketing and
supply functions. While this research can build on the findings from existing studies on
interfunctional relationships, we agree with Kahn and Mentzer (1998), as well as Ellinger
(2000), who suggest that more research is needed which identifies theantecedents of
marketing and supply cooperation. Our literature review and tentative empirical findings
suggest that a mutually satisfying relationship between both functions has two levels: a
first, basic level of information exchange and communication, which is a necessary yet
not a sufficient condition for the second level of collaboration. Collaboration between
89
marketing and supply functions implies a mutual understanding and collective goals. On
the first level, information exchange, more research is needed to identify which
information needs to be shared. Our findings from the workshop (which are summarised
in figure 5) emphasise that it is not the raw sales data but rather the functional knowledge
which should be communicated. For the second level of collaboration, the KPI appears to
be a major inhibitor or facilitator for collective goals. Our findings propose that
manufacturing and supply chain managers who are rewarded on the basis of costs view
customisation of products, product variety and delivery options as threats to their
performance. Instead, collaborative KPIs focus on a broader set of collective company
objectives rather than evaluating functions on discrete or conflicting performance
measures. Finally, achieving a mutual understanding of the information is possibly the
most challenging aspect of marketing and supply collaboration. One delegate reported an
occasion in his company where exactly the same information was provided to marketing
and supply functions, but as they interpreted it in different ways, the operational
implications drawn by both functions were totally different. In the literature, the
dissimilar workstyles and functional cultures are often cited as barriers to collaboration.
Our own findings suggest that these rational reasons are frequently part of a vicious circle
with mutual emotional resentment.
A CONCEPTUAL FRAMEWORK FOR DEMAND CHAIN MANAGEMENT
Based on the data from the workshop as well as the literature review, a conceptual
framework with four fundamental elements of DCM emerges: (1) integrating the demand and
supply processes; (2) managing the digital integration; (3) configuring the value system and (4) managing the cross-functional working relationships between the marketing and supply functions. Each of the elements will now be outlined and the propositions for further research in
marketing are derived.
90
Logistics and Supply Chain Management as an important aspect of Biscuit Industry
In recent years, the basis for global competition has changed. No longer are organizations
competing against other organizations, but rather supply chains are competing against
supply chains. The success of an organization is now invariably measured neither by the
sophistication of its products nor by the size of the market share. It is usually seen in the
light of the ability, sometimes forcefully and deliberately harnesses its supply chain and
to opt for innovative approaches of supply chain flows such as single-piece-flow, to
deliver responsively to the customers as and when they demand it.
This paper tries to identify and analyze the importance and adoption of various SCM
practices in Indian FMCG industry. The paper is based on empirical study conducted by
the author in Indian FMCG industry and various SCM practices are clubbed in different
factors through Factor analysis.
It is rightly said that manufacturers now compete less on product and quality – which are
often comparable – and more on inventory turns and speed to market (John Kasarda,
1999). This statement shows the beliefs that supply chain management will increasingly
be the principal determinant of the ability to compete. Every link in it can add up to a
competitive advantage. There was time when companies looked at their supply chains –
the upstream part of their value chain from the company’s perspective as a means of
focusing on their own core competencies, and of leveraging those of vendors and
91
lowering their cost to increase their responsiveness towards consumers . Those goals can
not be swept away by supply chain but they will be superseded by a single super
objective as to compete on the basis of how well organization manage its supply chain –
thus the competitive advantage is shifting from the shop floor. The question arises why it
is so important to optimize the supply chain. It is so because inefficiencies in the supply
chain leads to higher inventories at all points of the chain. This adds costs related to
wastages, blocked funds and risk of holding obsolete products with chances of quality
depletion.
SCM in Indian Business Scenario
Indian organizations are still juggling among the Material Resource Planning (MRP-II),
Enterprises Resource Planning (ERP), Logistics and Supply Chain Management (SCM).
However, it is quite evident that Indian corporate sector is fast recognizing the need of
SCM, which can integrate all other practices and processes. SCM in India offers one of
the fastest growth areas in revenues as well as employment. According to ETIG, there is
no reliable estimate of the market opportunities for supply chain and its components exist
in India today. Even though, ETIG estimates the Indian market value for supply chain /
logistics at 13 percent of GDP is more than US $50 billion, a lion’s share of which is
accounted for by transportation and warehousing.
India started a little late for restructuring and reformulating the strategies related with
92
supply chain. However, there is no doubt that Indian industries are fast catching and
gearing up for meeting the new business environment. A study of available literature
related with Indian business practices after 1991’s liberalization policies shows that
organizations are concerned about their value chain and identifying that competition is
shifting towards the efficiency and effectiveness of entire supply chain activities. The
traces of SCM adoption by Indian organizations are given as:
• Until 1990, logistics was treated as the management of transportation, inventories
and warehousing and organizations had to perform these activities individually in
an efficient manner.
• Before opening of Indian market, Indian business giants were enjoying the solo
play with continuous expansion of capacities. Later on when they heard the music
of competition, they found themselves with excess capacities with huge cost
burdens. This forced organizations to control the cost factor for the survival at
marketplace.
• At the same time of 1990’s, Indian organizations got fascinated by Business
Process Re-engineering (BPR). Organizations treated BPR as remedy of their
illness across the organizations’ processes and functions by eliminating the non-
value adding activities and streamlining the operations with a promise of higher
returns.
• Later on, the emergence of Enterprises Resource Planning (ERP) gave boost to
93
BPR. For the first time, organizations could have an integrated view of the
various ‘silos’ that existed in their businesses, giving an opportunity to
rationalize, remove duplication and speed up the processes.
• Rapid growth and improvement of telecommunication networks and wide spread
of information technology tools and techniques after mid 1990s posed the biggest
challenge in handling well-informed customers. Nevertheless, these changes also
provided the biggest boost to Indian industries because organizations found
themselves able to reach out vendors or suppliers on one end, and customers to
the other. Due to this revolution only, ERP-II integrated the internal departments
into a seamless organization, whereas, SCM attempts to integrate the external
factors and processes into the internal processes.
Changes can be implemented easily when tough times reign. Companies in India have
been looking at ways of cutting costs and improving process efficiencies, in their quest to
become globally competitive through taking initiatives for supply chain management
practices because SCM recognizes that distinct functions like purchases, inventory
management, distribution and production planning work best when integrated. At the
same time, supply chain management in India seems to be following the path of more
advanced industrial countries, involving not only the customers, manufacturers, and
vendors but also the third party service providers, consultants, software providers etc.
94
Indian Fast Moving Consumer Goods (FMCG) Industry
Indian Fast Moving Consumer Goods (FMCG) industry has a long history. However, the
Indian FMCG industry began to take shape only the last fifty years. Even today, the
Indian FMCG industry continues to suffer from a definitional dilemma as well as the
exact estimation of market size. Nevertheless, more than Rs. 43,000 crores ( in organized
sector) fast moving consumer goods (FMCG) industry is a critical component of the
Indian economy. The actual size of industry is phenomenal, if one adds the turnover of
unorganized sector. That is why, this sector has potential to drive growth, enhance quality
of life and create jobs. The Indian FMCG sector is primarily a low margin business,
where success depends on the volume. Presently, the FMCG sector is one of the largest in
the country, which accounts for more than 14.5 per cent of GDP with whooping sum of
domestic consumption capacity of nearly 20 billion U.S. Dollar. With the average growth
of Indian economy in the range of 6-8% per year will witness a consistence rise in
demand and purchasing power of Indian market. Following the trend, the FMCG sector
will grow by 5-6% per year in mature categories and 8-10% per year in upcoming
categories. However, factors such as low rural penetration, dependence on monsoon, the
price sensitivity of the consumers and increased level of competition could result in
decreasing profit margins in the industry.
The following section examines the different philosophies related to development
of SCM. Subsequent sections describe the research construct, which provides details of
95
sample design, design of questionnaire, survey methodology, followed by an analysis of
the results and the managerial implications of the study along with the future research
directions.
Synthesis of Supply Chain Management Literature
The concept of supply chain management first appeared in the literature in the mid-1980
by Keith and Webber. However, the fundamental assumptions on which SCM rests are
significantly older. The management of inter-organizational operations can be traced
back to channel research in the 1960’s by Bucklin and systems integration research in the
1960’s by Forrestter. According to Cooper et.al. (1997), the term supply chain
management has risen to prominence over the past ten years. La Londe (1997) identified
positions at forty-three different companies that carry ‘supply chain’ in their titles. By
now, SCM has become such a hot topic that it is difficult to pick up any periodicals on
manufacturing, marketing, distribution, customer management, or transportation without
seeing an article about SCM or its related topics.
Despite the popularity of the term supply chain management, managers and
researchers have considerable confusion over the actual meaning of the term. Some
authors such as Tyndall et.al. (1998) defined SCM in operational terms involving the
flow of materials and products. Ellram and Cooper (1990) viewed SCM as management
philosophy and still others as La Londe (1997) viewed it in terms of management
process. In fact, some have questioned the existence and benefits of the SCM
96
phenomenon, for example, Bechtel and Jayaram (1997) asked ‘Is the concept of SCM
important in today’s business environment or is it simply a fad destined to die with other
short-lived buzzwords?
Research in SCM evolved along three separate paths that eventually merged into a
common body of literature, with a primary focus on integration, customer satisfaction and
business results i.e. creation or enhancement of value of the products or services. Jones
and Riley (1985) stated that supply chain management deals with the total flow of
materials from suppliers through end users. Three differences between supply chain
management and classical materials and manufacturing control are identified by Houlihan
(1988) as:
• The supply chain is viewed as a single process. Responsibilities for the
various segments in the chain are not fragmented and relegated to
functional areas such as manufacturing, purchasing, distribution and sales.
• Supply chain management calls for and in the end depends on strategic
decision making.
• Supply chain management calls for different perspective on inventories
which are used as balancing mechanism of last, not first, resort. A new
approach to systems is required – integration rather than interfacing.
97
SCM as a Management Philosophy
The philosophy of SCM emphasized to extend the concept of partnerships into a
multiform effort to mange the total flow of goods from the supplier to the ultimate
customer. Ellram and Cooper (1990) emphasized that SCM as a management philosophy
takes a systems approach to viewing the channel as a single entity, rather than a set of
fragmented parts, each performing its own function. Langley and Holcomb (1992)
suggested that the objective of SCM should be the synchronization of all channel
activities to create customer value. Mentzer et.al.(2001) proposed that SCM as
management philosophy has the following characteristics:
• A systems approach to viewing the channel as a whole and to managing
the total flow of goods inventory from the supplier to the ultimate
customer.
• A strategic orientation toward cooperative efforts to synchronize and
converge intra-firm and inter-firm operational and strategic capabilities
into a unified whole and
• A customer focused orientation to create unique and individualized
sources of customer value, leading to customer satisfaction.
98
SCM as a Set of Activities
For adopting the supply chain management philosophy, organization has to establish
management practices that permit them to act or behave consistently. Bowersox and
Closs (1996) argued that to be fully effective in today’s competitive environment, firms
must expand their integrated behavior to incorporate customers and suppliers. The
philosophy of SCM turns into implementation of supply chain management as a set of
activities. According to Greene (1991), the set of activities as a coordinated effort is
called supply chain management between the supply chain partners, such as suppliers,
carriers and manufacturers to respond dynamically to the needs of the end customer. So
supply chain management activities such as mutually sharing information, risks and
rewards with chain members (Ellram and Cooper, 1990), integrated behavior and
processes and an effort to build and maintain long term relationship are vital for
realization of the management philosophy behind SCM. Gentry and Vellenga (1996)
argued that it is not usual that all the primary activities in a value chain – inbound and
outbound logistics, operations, marketing, sales and service – are performed by any one
of firm to maximize customer value. Thus, forming strategic alliances with channel
partners such as suppliers, customers, or intermediaries e.g. logistics service providers,
provides competitive advantage through creating customer value (Langley and Holcomb,
99
1992).
SCM as a Set of Management Process
Davenport (1993) defined a process as a structured and measured activities designed to
produce a specific output for a particular customer or market. LaLonde (1997) proposed
that SCM is the process of managing relationships, information and materials flow across
enterprise borders to deliver enhanced customer service and economic value through
synchronized management of the flow of physical goods and associated information from
sourcing to consumption. Ross (1998) defined supply chain processes as the actual
physical business functions, institutions and operations that characterize the way a
particular channel system moves goods and services to market through the supply
pipelines. The same idea was reflected by Cooper, Lambert, et al. (1997), a process is a
specific ordering of work activities across time and place, with a beginning, an end,
clearly identified inputs and outputs and a structure of action. Lamb ert et al. (1998)
suggested that the key processes would typically include customer relationship
management, customer service management, demand management, order fulfillment,
manufacturing flow management, procurement and product development and
commercialization.
100
SCM Practices in Indian FMCG Industry
In a low margin and high volume business like FMCG, it requires a very close attention
on the planning and operational part of the entire value chain activities because these
minutest details can change the fortune of any organization. While branding differentiates
the image of the product, the distribution system will determine the faith of the
organization up to a very large extent in FMCG industry. The diversity of India and
existence of vast untapped markets of rural areas provide the bundle of opportunities to
companies. The best price or quality product offerings combined with heavy promotional
and advertising budgets will not help the product succeed if one of the major ingredients
of the marketing mix as distribution is not properly focused. The table1 shows the types
of FMCG outlets are available across the India. Every organization needed to serve a
large percentage of these outlets to reap the economies of the scale.
Logistics deals with the planning and control of material ows and related information in
organizations, both in the public and private sectors. Broadly speaking, its mission is to
get the right materials to the right place at the right time, while optimizing a given
performance measure (e.g. minimizing total operating costs) and satisfying a given set of
constraints (e.g. a budget constraint). In the military context, logistics is concerned with
the supply of troops with food, armaments, ammunitions and spare parts, as well as the
transport of troops themselves. In civil organizations, logistics issues are encountered in
firms producing and distributing physical goods. The key issue is to decide how and
when raw materials, semi-finished and finished goods should be acquired, moved and
stored. Logistics problems also arise in firms and public organizations producing
services. This is the case of garbage collection, mail delivery, public utilities and after-
101
sales service.
Significance of logistics. Logistics is one of the most important activities in modern
societies. A few figures can be used to illustrate this assertion. It has been estimated t
hat the total logistics cost incurred by USA organizations in 1997 was 862 billion dollars,
corresponding to approximately 11% of the USA Gross Domestic Product (GDP). This
cost is higher than the combined annual USA government expenditure in social security,
health services and defence. These figures are similar to those observed for the other
North America Free Trade Agreement (NAFTA) countries and for the European Union
(EU) countries. Furthermore, logistics costs represent a significant part of a company’s
sales, as shown in Table 1.1 for EU firms in 1993.
Logistics systems
A logistics system is made up of a set of facilities linked by transportation services.
Facilities are sites where materials are processed, e.g. manufactured, stored, sorted, s
old or consumed. They include manufacturing and assembly centres, warehouses,
distribution centres (DCs), transshipment points, transportation terminals, retail outlets,
mail sorting centres, garbage incinerators, dump sites, etc.
Supply chains
A supply chain is a complex logistics system in which raw materialsare converted into
finished products and then distributed to the final users (consumersor companies). It
includes suppliers, manufacturing centres, warehouses, DCs and retail outlets. shows a
typical supply chain in which the production and distribution systems are made up of
two stages each. In the production system, com- ponents and semi-finished parts are
produced in two manufacturing centres while finished goods are assembled at a different
102
plant. The distribution system consists of two central distribution centres (CDCs)
supplied directly by the assembly centre, which in turn replenish two regional distribution
centres (RDCs) each. Of course, depending on product and demand characteristics it may
be more appropriate to design a supply chain without separate manufacturing and
assembly centres (or even without an assembly phase), without RDCs or with different
kinds of facilities (e.g. cross-docks, see Section 1.2.2). Each of the transportation links in
Figure 1.1 could be a simple transportation line (e.g. a truck line) or of a more complex
transportation process involving additional facilities (e.g. port terminals) and companies
(e.g. truck carriers). Similarly, each facility in Figure 1.1 comprises several devices and
subsystems. For example, manufacturing plants contain machines, buffers, belt conveyors
or other material handling equipment, while DCs include shelves, forklifts or automatic
storage and retrieval systems. Logistics is not normally associated with the detailed
planning of material ows inside manufacturing and assembly plants. Strictly speaking,
topics like aggregate production planning and machine scheduling are beyond the scope
of logistics and are not examined in this textbook. The core logistics issues described in
this book are the design and operations of DCs and transportation terminals.
Failing to manage your company's talent needs, says Wharton management professor
Peter Cappelli, "is the equivalent of failing to manage your supply chain." And yet the
majority of employers have abysmal track records when it comes to the age-old problem
of finding and retaining talent.
Supply chain managers "ask questions like, 'Do we have the right parts in stock?' 'Do we
know where to get these parts when we need them?' and 'Does it cost a lot of money to
carry inventory?' These questions are just as relevant to companies that are trying to
manage their talent needs," he says. In other words, the principles of supply chain
management, with its emphasis on just-in-time manufacturing, can be applied to talent
management.
"This is a fundamentally different paradigm in terms of thinking about talent," according
103
to Cappelli, the author of a book coming out in April titled, Talent on Demand: Managing
Talent in an Age of Uncertainty. His theory, he suggests, addresses a major complaint
about the field of human resources -- that it is "touchy-feely, squishy stuff with little
applicability to business problems. HR practices have typically been about meeting
individuals' needs, figuring out what psychological profile they fit and what should b
e done to help them grow and advance. But if you're an employer who is worried about
issues like the finances of the company, you would like HR to think about personnel from
the perspective of money and costs, and what happens if you don't have the right people
in place to do the necessary jobs."
Those who study supply chain management tackle these kinds of questions all the time,
notes Cappelli. "Managing supply chains is about managing uncertainty and variability.
This same uncertainty exists inside companies with regard to talent development.
Companies rarely know what they will be building five years out and what skills they
will need to make that happen; they also don't know if the people they have in their
pipelines are going to be around."
Part of the problem is that many companies are locked into an older paradigm based on
the assumption that they can accurately meet their talent needs through static forecasting
and planning models, even though the global marketplace is an increasingly
unpredictable, unforgiving environment. "The idea that we can achieve certain
nty through planning is no longer true," Cappelli states. "Instead, we have to deal with
uncertainty by being more responsive and adaptable."
Sitting on the Shelf
The term "talent management" simply means "trying to forecast what we are going to
need, and then planning to meet that need," Cappelli notes. The definition of supply
chain management is essentially the same: "We think that demand for our products next
year is going to be 'X'. How do we organize internally to meet that demand?"
Underlying supply chain questions is the issue of inventory, which in talent management
terms often comes up when employers talk about having a "deep bench" of talent. "You
104
hear that phrase a lot -- 'we have a deep bench,' or 'we have a big talent pipeline' -- and it
is said with pride," Cappelli says. "Yet if you think about it in supply chain terms, a deep
bench is the equivalent of lots of inventory, which sounds terrible when we think of
products. In fact, it is worse when we talk about talent. That's because an inventory of
talent is much more costly than an inventory of widgets. Talent doesn't sit on the shelf
like widgets do. You have to keep paying talent. And the best way to have a piece of
talent walk away is to tell it to sit on the shelf and wait for opportunity. Anyone who is
ambitious will leave, and then you will lose the big upfront investment you made in that
person."
Avoiding inventory buildup directly relates to companies' efforts to manage the uncertainty around their talent needs. "Suppose a company forecasts that it will need 100 new engineers this year," says Cappelli. "No one ever asks the question: 'How accurate is that forecast?' As it turns out, that forecast is almost always wrong because business needs are so hard to predict. So the way to proceed is to ask the next question: 'What happens if we are wrong?' You can be wrong in one of two ways: You can end up needing more engineers than you thought and have to either carry them or lay them off, or fewer engineers than you thought and have to scramble to find extras. Next question: 'What does that cost us in each case? Does it cost us more if we have too many, or if we have too few?' It's almost always the case that it is much worse in one context than in the other."
If companies start thinking about what the odds are of being wrong, and what the
associated costs are, "then they know which way to bet and they greatly reduce the
ir likelihood of losing a lot of money," Cappelli says.
From there, the challenge is to reduce the odds of being wrong. That points to another
technique from operations research -- the portfolio approach, whose goal is to minimize
the variability that occurs when different markets are headed in different directions. In the
financial world, investors create a portfolio of diverse investments where some are likely
to be up when others are down in order to reduce their overall risk exposure. Applied to
talent management, the concept means balancing out the kinds of errors that might occur,
for example, when different divisions in a large, highly decentralized organization try to
105
predict the number of sales people (or general managers, engineers, etc.) each division
thinks it will need. "Some divisions will end up with too many sales people, and some
with too few, but if you pool these different divisions with respect to hiring, it's likely the
variations will cancel out rather than multiply," Cappelli says. "The problem has been
that companies have decentralized so much that they stopped even thinking about how to
coordinate talent questions across divisions."
As he writes in his book: "In the language of operations research and supply chain
management, the problems of undersupply and oversupply are collectively known a
s 'mismatch costs.'" The portfolio solution addresses the mismatch problem by
encouraging companies to coordinate the different talent development efforts into one
common program. When some divisions overshoot demand and others undershoot it, "the
company can offset the mismatch by moving candidates around."
Reducing bottlenecks is another supply chain concept relevant to talent-on-demand. The
CIA had this problem when it faced a two-year waiting list to get people through security
clearances, according to Cappelli. "New hires were stacked up with nothing to do, exactly
the way goods can get stacked up in an assembly line. It's important to remember that the
assembly line can move only as fast as the slowest part."
In the CIA's case, because it wasn't able to increase the flow of people through security,
the question becomes: Why is it hiring so many people, knowing they can't get through
the bottleneck? "The organization shouldn't make that many hires at once," Cappelli says
. "You see this in many companies, including those that hire people only once a year, like
college grads. Say they hire 50 graduates in June into training slots. At the end of the
year, they have 50 people expecting to move from the training program into more
permanent positions. Why doesn't the employer stagger the process and hire people twice
a year instead of once? Not all college grads prefer to start work in June; some want to
travel and start later in the year." The advantage of staggering the hires is that the
company then needs only half the number of training positions and, more important, can
adjust the amount of hiring in the latter period to changes in demand.
106
Other operations research practices that Cappelli relates to talent development include
shortening the forecasting cycle, reorganizing the delivery of development programs to
improve responsiveness, and working out "queueing problems." Queueing problems
occur in situations where, for example, employees are waiting for rotational assignme
nts but can't get them because the incumbents have no vacancies to move into -- the result
of a business downturn, change in assignment length or a product redesign, for example.
"The analogy in manufacturing is an 'unbalanced [assembly] line,' in which inventory
builds up behind the slower-moving station, or in this case, the assignment that takes
longer to complete."
Bust Instead of Boom
Many of the so-called new ideas in talent management now -- like 360-degree feedback,
assessment centers, job rotation and especially long-term succession planning -- were
common in the heyday of big corporations and stable growth that followed World War II,
says Cappelli, who is head of Wharton's Center for Human Resources. "The current
business environment bears little resemblance to the post-World War II period -- which
explains why the planning-based approach no longer makes sense."
The 1970s were a case in point. Companies carefully crafted long-term plans for
developing talent that turned out to be totally wrong, Cappelli says. "Everyone exp
ected the economy to boom, and in fact it was flat. Employers turned out lots of talent
they couldn't use, which led to the general abandonment of internal talent development."
The early recession and re-engineering wave of the 1980s reversed that. "Companies got
rid of huge numbers of employees, which meant there was no institutional memory left in
the ranks. That's when people started to reinvent practices that were common in the
1950s."
In the 1990s, Cappelli says, companies turned to outside hiring, inspired in part by the
large number of laid-off employees that were a hangover from the 1980s and in part by
the ability to hire workers "just in time." But employers also began to hire people away
from their competitors -- a game that created retention problems and usually ended in an
107
expensive draw once more companies started to play it. In addition, organizations found
that outside hiring did nothing to improve morale for those inside the company who saw
new people being brought in over them.
Companies are left facing a dilemma: On the one hand, it's hard to get a payback from investing in talent development when priorities suddenly shift and employees change j
obs every few years instead of once or twice a career. But doing no internal development
and relying only on outside hiring is also problematic since it leaves the employer
vulnerable to the whims of the labor market. "What we need is a way to deal with the
uncertainty of business needs and the uncertainty of internal talent pipelines," says
Cappelli, noting that the choice is not between developing talent internally or hiring from
the outside. The better option is to do some of both: Use more adaptable models of
internal development that include getting employees to share the costs, and then use
outside hires to fill in the shortfalls when forecasts inevitably prove wrong.
The traditional basic structure of FMCG supply chain has not changed over the years.
The basic supply chain related with distribution side of FMCG industry is the
competitive scenario has changed the importance of each element of the chain operation
i.e. a detailed planning and analysis of every activity of the chain so that to make the
same efficient and effective.
Despite the importance and theoretical development of SCM, there is little empirical
research on how practitioners define and incorporate SCM practices into overall
corporate strategy and functioning. Similarly, little is known about the specific pr
actices or concerns of successful SCM implementation in Indian FMCG organizations.
This research paper investigates these issues by means of empirical data.
Companies that are moving in this new direction include startups, which have a clean slate as far as talent management practices go, and professional services firms, where getting the right talent mix is especially critical. "Consulting firms, auditing firms, law
firms and so forth started to make the effort to calculate the costs of poor talent
management back in 1999 when the labor market was so tight," Chappell says. "
Because of the need to constantly hire new people, they know that their ability to
compete can be severely compromised by high turnover." Indian firms, he adds, may be
the leaders in new ways to think about managing talent because the talent crunch in that
country is so severe.
108
Cisco's 'Voluntary Sabbatical'
In his book, Cappelli cites the talent management processes at a number of companies,
including Unilever, IBM, General Electric, EDS, Dow, Capital One, Citibank, Corning,
Johnson & Johnson and Bear Stearns, to name a few. He describes the sophisticated
forecasting model at Dow, which incorporates traditional statistical-based forecasting
with such factors as the political and business climate in each of Dow's countries of
operation, changes in labor and employment legislation, and business plans for the
operating units. "Standardized systems make it possible to aggregate the individual
estimates up to an overall projection for the company," Cappelli says.
At Capital One, where the challenge was to help the company plan its workforce -- which
had gone from 20,000 employees in 2001 to 14,000 in 2005 to 30,000 in 2007 after a
series of acquisitions -- the company assembled a team with experts in marketing and
operations research, but none from the traditional HR function. The group used data
mining techniques, manufacturing models and information from its PeopleSoft system
to generate talent planning models for each business unit. "Rather than just predict the
number of people required in each role, they also modeled outcomes such as attrition
rates, employee morale, rates of promotion and outside hires." The big innovation at both
companies is that these models have moved past traditional forecasting and toward
simulations in order to deal with uncertainty in business. "Rather than generating a static
estimate of how many workers will be needed two years out," says Cappelli, "they say to
operating managers: 'Tell us the assumptions you have about your business, and we'll
give you a talent estimate. Better yet, give us a range of different assumptions, and we'll
give you a range of talent estimates within which the reality will most likely lie.'"
Cappelli recounts efforts by some companies to give employees more control over the
career development process and thus make them more likely to stay with the company.
Duke Power, for example, allows employees, under certain conditions, to post and swap
jobs with other employees at their same job and salary level. Coca-cola run job fairs for
its junior auditors; Gap operates an internal headhunting office where employees with at
least two years' experience can look for other positions within the company.
Chubb "opened up its internal labor market by eliminating both job tenure and supervisor
109
approval as requirements for changing jobs within the company." McKinsey posts all the
projects that use associates (the level of employee below partner) on a worldwide system
along with information on the relevant industry, the client, the in-house team and the type
of project work. It then encourages associates to rank their preferences.
During the IT downturn in 2001 and after, Cisco offered a "voluntary sabbatical" to its
employees in which the company agreed to pay one-third of their salaries while they
spent time working at nonprofit organizations." Deloitte tries to keep former employee
s of Deloitte & Touche plugged in to the company for as long as five years after they
leave (often for family reasons), provided they don't take a new job. Its Personal Pursuits
program covers certification and skills programs fees to help them stay current, and offers
access to company career and work-life programs, among other things. The idea in both
cases is to keep employees "on the hook" with the company so that they can be brought
back to work quickly should demand pick up.
Cappelli acknowledges that uncertainty about whether skills will be needed in the future
and whether employees will stick around makes it difficult for employers to recoup
investments in those employees. One of the best ways to deal with that problem is to
get employees to share the costs of development. "Rather than trying to guess who is
ready for advancement,' Cappelli notes, "many companies have moved toward self-
nomination, where individuals volunteer or apply for development experiences. The
employers usually require that the candidates keep doing their regular jobs and maintain
good performance in them. So the developmental experiences, which are typically work-
based, are essentially free to the company."
Selling Old Ideas as New Concepts
For the most part, however, companies are not yet going in new directions when it comes
to adopting more efficient talent management techniques. This is especially so at the
110
bigger, older employers like General Electric, Procter & Gamble, IBM, PepsiCo and
members of the oil industry. Many of these are known as "academy companies," referring
to their reputations as places where employees go to learn management skills and then are hired away by other firms.
GE "is doing the same things it did in the 1950s," says Cappelli. "It laid out a model and
that model is not being questioned. Some parts of this model work well and are quite
consistent with what I describe -- especially the ability to make matches between peop
le and opportunities -- but other components aren't as efficient, such as the goal of having
deep benches of talent. IBM no longer guarantees people lifetime employment and they
do some amount of outside hiring, but they still direct the careers of their managers from
headquarters.
So many HR people were laid off during the 1980s that HR personnel don't know that the
planning models many are embracing are decades old, says Cappelli. "HR people are all
drinking the same Kool-Aid. They are selling these practices like they were new ideas. At
the same time, internal accounting is so bad that they don't even know the costs of their
inefficient talent management efforts. Companies don't realize that they need a change."A
new approach to talent management is needed for two key reasons, according to Cappelli:
On the public policy side, companies are not developing the talent the U.S. needs to stay
competitive. On the employer side, most of the companies aren't doing talent planning, or
their planning is wrong, even as their ability to hire on a just-in-time basis is eroding.
Employers can't easily find people out there to poach; it's an expensive and time-
consuming process to even look.
When planning practices were first initiated, Cappelli says, markets were stable enough to make long-term planning possible. "IBM, for one, had 15-year business plans that
were pretty accurate. Companies in the defense industry had 10-year plans. You didn'
t have to make year-end adjustments back then. But these days, demand can change
within a year. Authority and accountability are pushed onto individuals and not systems,
and career mobility across companies is high. Employers must adapt to that reality."
Operating a chaos-tolerant supply chain in a world of increasing uncertainty is an
impossible mission unless you have business-specific SCM software that helps you
manage complexity and increase your profitability, competitiveness, and growth. Infor
SCM (Supply Chain Management) meets the challenge with specialized functionality that
takes into account the different supply chain perspectives and unique business challenges
111
of manufacturers, retailers, and transportation and logistics service providers. By
partnering with Infor, you're assured of having comprehensive SCM solutions delivered
by a single vendor, with best practices and low total cost of ownership built in, that match
all of your business priorities from network design/order inception to delivery-from
concept to customer.
Infosys's supply chain logistics and inventory management software solutions help
companies like yours:
Reduce supply chain operational costs for increased profitability
Improve customer service to enhance competitiveness
Manage growth and expansion to improve revenues and market share
Become supply chain leaders
Infor Supply Chain Management is a global solution with implementations at over 1,600
customer sites in 40 countries. Backed by domain experts who know supply chain
management and the challenges you face, our supply chain planning and execution
solutions comprise the following key components:
Strategic Network Design —modeling and optimization tools for determining the most
effective number, location, size, and capacity of facilities to meet customer service goals
; time-phased tactical planning for determining where and when to make, buy, store, and
move product through the network.
Demand Planning —forecasting tools, web-based collaboration interface, and sales and
operations reporting and metrics that help companies predict and shape customer demand
with greater accuracy.
Distribution Planning —inventory analysis and time-variable stock target calculations for
ensuring the optimal balance between service levels and inventory investment;
synchronized replenishment plans for all network points right back to manufactu
ring and supplier sources for better visibility.
112
Manufacturing Planning —constraint-based advanced planning system for engineering,
assembly, and repetitive manufacturing environments; similar tools for process
manufacturers.
Production Scheduling —finite capacity scheduling for engineering, assembly, and
repetitive environments, as well as batch-process production facilities.
Transportation and Logistics Planning —transportation planning, transportation
procurement, route planning, transportation management, small parcel shipping, a
nd international trade logistics for global, multi-modal operations.
Warehouse Management System —end-to-end fulfillment and distribution including
inventory, labor, and work and task management, as well as cross-docking, value-added
services, yard management, multiple inventory ownership and billing/invoicing, and
voice-directed distribution.
RFID —comprehensive RFID-enablement framework delivering business value through
process optimization for manufacturers and other companies, as well as compliance
solutions for retail, pharmaceuticals, the US Department of Defense, and others.
Event Management —proactive, real-time exception management technology for
detecting conditional change anywhere in the supply chain and communicating it
instantly for resolution.
Push versus pull supply chains
Supply chains are often classified as push or pull systems. In a pull (or make-to-order
(MTO)) system, finished products are manufactured only when customers require them
. Hence, in principle, no inventories are needed at the manufacturer. In a push (or make-
113
to-stock (MTS)) system, production and distribution decisions are based on forecasts. As
a result, production anticipates effective demand, and inventories are held in warehouses
and at the retailers. Whether a push system is more appropriate than a pull system
depends on product features, manufacturing process characteristics, as well as demand
volume and variability.
MTO systems are more suitable whenever lead times are short, products are costly, and
demand is low and highly variable. In some cases, a mixed approach can be used.
For example, in make-to-assembly (MTA) systems components and semi-finished
products are manufactured in a push-based manner while the final assembly stage is pull-
based. Hence, the work-in-process inventory at the end of the first stage is used to
assemble the finished product as demand arises. These parts are then assembled as soon
as customer orders are received.
Product and information owes in a supply chain. Products own through the supply chain
from raw material sources to customers, except for obsolete, damaged and
nonfunctioning products which have to be returned to their sources for repair or disposal.
Information follows a reverse path. It traverses the supply chain backward from
customers to raw material suppliers. In an MTO system, end-user orders are collected by
salesmen and then transmitted to manufacturers who in turn order the required
components and semi-finished products from their suppliers. Similarly, in an M
TS system, past sales are used to forecast future product demand and associated material
requirements. Product and information ows cannot move instantaneously through the
supply channel. First, freight transportation between raw material sources, production
plants and consumption sites is usually time consuming. Second, manufacturing can take
a long time, not only because of processing itself, but also because of the limited plant
capacity (not all products in demand can be manufactured at once). Finally, information
can ow slowly because order collection, transmission and processing take time, or
because retailers place their orders periodically (e.g. once a week), and distributors make
their replenishment decisions on a periodic basis (e.g. twice a week).
Degree of vertical integration and third-party logistics
According to a classical economic concept, a supply chain is said to be vertically
114
integrated if its components (raw material sources, plants, transportation system, e
tc.) belong to a single firm.
Fully vertically integrated systems are quite rare. More frequently the supply chain is
operated by several independent companies. This is the case of manufacturers buying r
aw materials from outside suppliers, or using contractors to perform particular services,
such as container transportation and warehousing. The relationships between the
companies of a supply chain may be transaction based and function specific (as those
illustrated in the previous example), or they can be strategic alliances. Strategic alliances
include third-party logistics (3PL) and vendor-managed resupply. 3PL is a long-term
commitment to usean outside company to perform all or part of a company’s product
distribution. It allows the company to focus on its core business while leaving distribution
to a logistics outsourcer. 3PL is suitable whenever the company is not willing to invest
much in transportation and warehousing infrastructures, or whenever the company is
unable to take advantage ofeconomies of scale because of low demand.
On the other hand, 3PL causes the company to lose control of distribution and may
possibly generate higher logistics costs.
Retailer-managed versus vendor-managed resupply
Traditionally, customers (both retailers or final consumers) have been in charge of
monitoring their inventory levels and place purchase orders to vendors (retailer-man
aged systems). In recent years, there has been a growth in vendor-managed systems, in
which vendors monitor customer sales (or consumption) and inventories through
electronic data interchange (EDI), and decide when and how to replenish their customers.
Vendors are thus able to achieve cost savings through a better coordination of customer
deliveries while customers do not need to allocate costly resources to inventory
management. Vendor- managed resupply is popular in the gas and soft drink industries,
although it is gaining in popularity in other sectors. In some vendor-managed systems,
the retailer owns the goods sitting on the shelves, while in others the inventory belongs to
the vendor. In the first case, the retailer is billed only at the time where it makes a sale to
a customer.
115
How Logistics Systems Work
Logistics systems are made up of three main activities: order processing, inventory
management and freight transportation.
Order processing
Order processing is strictly related to information owes in the logistics system and
includes a number of operations. Customers may have to request the products by fill
ing out an order form. These orders are transmitted and checked. The availability of the
requested items and customer’s credit status are then verified. Later on, items are
retrieved from the stock (or produced), packed and delivered along with their shipping
documentation. Finally, customers have to be kept informed about the status of their
orders.
Traditionally, order processing has been a very time-consuming activity (up to 70% of
the total order-cycle time). However, in recent years it has benefited greatly from
advances in electronics and information technology. Bar code scanning allows retailers to
rapidly identify the required products and update inventory level records.
Laptop computers and modems allow salespeople to check in real time whether a product
is available in stock and to enter orders instantaneously. EDI allows companies to enter
orders for industrial goods directly in the seller’s computer without any paperwork.
Inventory management
Inventory management is a key issue in logistics system planning and operations.
Inventories are stockpiles of goods waiting to be manufactured, transported or sold.
Typical examples are
• components and semi-finished products (work-in-process) waiting to be manufactured or assembled in a plant;
• merchandise (raw material, components, finished products)transported through the supply chain (in-transit inventory);
• finished products stocked in a DC prior to being sold;
116
• finished products stored by end-users (consumers or industrial users) to satisfy future needs.
There are several reasons why a logistician may wish to hold inventories in some
facilities of the supply chain. Improving service level. Having a stock of finished
goods in warehouses close to customers yields shorter lead times.
Reducing overall logistics cost. Freight transportation is characterized by economies of
scale because of high fixed costs. As a result, rather than frequently delivering small
orders over long distances, a company may find it more convenient to satisfy custome
r demand from local warehouses (replenished at low frequency). Coping with
randomness in customer demand and lead times. Inventories of finished goods (safety
stocks) help satisfy customer demand even if unexpected peaks of demand or delivery
delays occur (due, for example, to unfavorable weather or traffic conditions). Making
seasonal items available throughout the year. Seasonal products can be stored in
warehouses at production time and sold in subsequent months. Speculating on price
patterns. Merchandise whose price varies greatly during the year can be purchased when
prices are low, then stored and finally sold when prices go up. Overcoming inefficiencies
in managing the logistics system. Inventories may be used to overcome inefficiencies in
managing the logistics system (e.g. a distribution company may hold a stock because it is
unable to coordinate supply and demand).
Holding an inventory can, however, be very expensive for a number of reasons. First, a
company that keeps stocks incurs an opportunity (or capital) cost represented by the
return on investment the firm would have realized if money had been better invested.
Second, warehousing costs must be incurred, whether the warehouse is privately owne
d, leased or public (see Chapter 4 for a more detailed analysis of inventory costs).
The aim of inventory management is to determine stock levels in order to minimize total
operating cost while satisfying customer service requirements. In practice, a good
inventory management policy should take into account five issues:
(1) the relative importance of customers;
(2) the economic significance of the different products;
117
(3) transportation policies;
(4) production process edibility;
(5) competitors’ policies.
Inventory and transportation strategies
Inventory and transportation policies are intertwined. When distributing a product, three
main strategies can be used: direct shipment, warehousing, cross docking.
If a direct shipment strategy is used, goods are shipped directly from the manufacturer to
the end-user (the retailers in the case of retail goods). Direct shipments eliminate the
expenses of operating a DC and reduce lead times. On the other hand, if a typical
customer shipment size is small and customers are dispersed over a wide geographi
c area, a large eet of small trucks may be required. As a result, direct shipment is
common when fully loaded trucks are required by customers or when perishable goods
have to be delivered timely. Warehousing is a traditional approach in which goods are
received by warehouses and stored in tanks, pallet racks or on shelves . When an order
arrives, items are retrieved, packed and shipped to the customer. Warehousing consists of
four major functions: reception of the incoming goods, storage, order picking and
shipping. Out of these four functions, storage and order picking are the most expensive
because of inventory holding costs and labor costs, respectively. Cross docking (also
referred to as just-in-time distribution) is a relatively new logistics technique that has
been successfully applied by several retail chains. A cross dock is a transshipment facility
in which incoming shipments (possibly originating from several manufacturers) are
sorted, consolidated with other products and transferred directly to outgoing trailers
without intermediate storage or order picking. As a result, shipments spend just a few
hours at the facility. In pre-distribution cross docking, goods are assigned to a retail outlet
before the shipment leaves the vendor. In post-distribution cross docking, the cross dock
itself allocates goods to the retail outlets. In order to work properly, cross docking
requires high volume and low variability of demand (otherwise it is difficult to match
supply and demand) as well as easy-to-handle products. Moreover, a suitable information
system is needed to coordinate inbound and outbound owes.
118
Centralized versus decentralized warehousing
If a warehousing strategy is used, one has to decide whether to select a centralized or a
decentralized system. In centralized warehousing, a single warehouse serves the whole
market, while in decentralized warehousing the market is divided into different zones,
each of which is served by a different (smaller) warehouse. Decentralized warehousing
leads to reduced lead times since warehouses are much closer to customers. On the other
hand, centralized warehousing is characterized by lower facility costs because of larger
economies of scale. In addition, if customers’ demands are uncorrelated, the aggregate
safety stock required by a centralized system is significantly smaller than the sum of the
safety
stocks in a decentralized system. This phenomenon (known as risk pooling) can be
explained qualitatively as follows: under the above hypotheses, if the demand from a
customer zone is higher than the average, then there will probably be a customer zone
whose demand is below average. Hence, demand originally allocated to a zone can be
reallocated to the other and, as a result, lower safety stocks are required. Finally, inbound
transportation costs (the costs of shipping the goods from manufacturing plants to
warehouses) are lower in a centralized system while outbound transportation costs (the
costs of delivering the goods from the warehouses to the customers) are lower in a
decentralized system.
Freight transportation
Freight transportation plays a key role in today’s economies as it allows production and
consumption to take place at locations that are several hundreds or thousands of
kilometers away from each other. As a result, markets are wider, thus stimulating
direct competition among manufacturers from different countries and encouraging
companies to exploit economies ofscale. Moreover, companies in developed countries
119
can take advantage of lower manufacturing wages in developing countries. Finally,
perishable goods can be made available in the worldwide market.
Freight transportation often accounts for even two-thirds of the total logistics cost and has
a major impact on the level of customer service. It is therefore not surprising that
transportation planning plays a key role in logistics system management. A manufa
cturer or a distributor can choose among three alternatives to transport its materials. First,
the company may operate a private eet of owned or rented vehicles (private
transportation). Second, a carrier may be in charge of transporting materials through
direct shipments regulated by a contract (contract transportation). Third, the company can
resort to a carrier that uses common resources (vehicles, crews, terminals) to fulfill
several client transportation needs (common transportation). In the remainder of this
section, we will illustrate the main features of freight transportation from a logistician’s
perspective.
Distribution channels
Bringing products to end-users or into retail stores may be a complex process. While a
few manufacturing firms sell their own products to end-users directly, in most cases
intermediaries participate in product distribution. These can be sales agents or brokers
, who act for the manufacturer, or wholesalers, who purchase products from
manufacturers and resell them to retailers, who in turn sell them to end-users.
Intermediaries add a markup to the cost of a product but on the whole they benefit
consumers because they provide lower transportation unit costs than manufacturers
would be able to achieve. A distribution channel is a path followed by a product from the
manufacturer to the end-user. A relevant marketing decision is to select an appropriate
combination of distribution channels for each product.
Channels 1–4 correspond to consumer goods while channels 5–7 correspond to industrial
goods. In channel 1, there are no intermediaries. This approach is suitable for a restricted
number of products (cosmetics and encyclopedias sold door-to-door, handicraft sold at
local ea markets,
etc.). In channel 2, producers distribute their products through retailers (e.g. in the tire
industry). Channel 3 is popular whenever manufacturers distribute their products only i
120
n large quantities and retailers cannot afford to purchase large quantities of goods (e.g. in
the food industry). Channel 4 is similar to channel 3 except that manufacturers are
represented by sales agents or brokers (e.g. in the clothing industry). Channel 5 is used
for most industrial goods (raw material, equipment, etc.). Goods are sold in large
quantities so that wholesalers are useless. Channel 6 is the same as channel 5, except that
manufacturers are represented by sales agents or brokers. Finally, channel 7 is used for
small accessories (paper clips, etc.).
Freight consolidation
A common way to achieve considerable logistics cost savings is to take advantage of
economies of scale in transportation by consolidating small shipments into larger ones.
Consolidation can be achieved in three ways. First, small shipments that have to be
transported over long distances may be consolidated so as to transport large shipments
over long distances and small shipments over short distances (facility consolidation).
Second, less-than-truckload pick-up and deliveries associated with different locations
may be served by the same vehicle on a multi-stop route (multi-stop consolidation).
Third, shipment schedules may be adjusted forward or backward so as to make a single
large shipment rather than several small ones (temporal consolidation).
121
CHAPTER-6: MARKETING POLICIES
THE MARKETING DEPARTMENT OF P&G:
The marketing function plays a critical role in linking sales, development, customers and
prospects, and the company’s executive management. Marketing has traditionally been
thought of as a combination of market research, strategic planning, and product planning
and sales support. Marketing is the company’s window on the world outside the
company. Other customer facing roles, such as sales and service, provide major inputs,
but marketing must provide the interpretation that explains and predicts buyer behavior.
By accurately observing customers business initiatives and, even more importantly,
anticipating future initiatives in target markets, marketing can identify priorities and
equip the sales force accordingly.
All marketers need to be aware of the effect of globalization, technology, and
deregulation. Rather than try to satisfy everyone, marketers start with market
segmentation and develop a market offering that is positioned in the minds of the target
market. To satisfy the target market’s needs, wants, and demands, marketers create a
product, one of the 10 types of entities (goods, services, experiences, events, persons,
places, properties, organizations, information, and ideas). Marketers must search hard for
the core need they are trying to satisfy, remembering that their products will be
successful only if they deliver value (the ratio of benefits and costs) to customers.
Every marketing exchange requires at least two parties—both with something valued by
the other party, both capable of communication and delivery, both free to accept or reject
the offer, and both finding it appropriate or desirable to deal with the other. One
agreement to exchange constitutes a transaction, part of the larger idea of relationship
marketing. Through relationship marketing, organizations aim to build enduring,
mutually satisfying bonds with customers and other key parties to earn and retain their
long-term business. Reaching out to a target market entails communication channels,
distribution channels, and selling channels. The supply chain, which stretches from raw
materials to the final products for final buyers, represents a value delivery system.
122
Marketers can capture more of the supply chain value by acquiring competitors or
expanding upstream or downstream. In the marketing environment, marketers face brand,
industry, form, and generic competition. The marketing environment can be divided into
the task environment (the immediate actors in producing, distributing, and promoting the
product offering) and the broad environment(forces in the demographic, economic,
natural, technological, political-legal, and social-cultural environment). To succeed,
marketers must pay close attention to the trends and developments in these environments
and make timely adjustments to their marketing strategies. Within these environments,
marketers apply the marketing mix—the set of marketing tools used to pursue marketing
objectives in the target market. The marketing mix consists of the four Ps: product, price,
place, and promotion. Companies can adopt one of five orientations toward the
marketplace. The production concept assumes that consumers want widely available,
affordable products; the product concept assumes that consumers want products with the
most quality, performance, or innovative features; the selling concept assumes that
customers will not buy enough products without an aggressive selling and promotion
effort; the marketing concept assumes the firm must be better than competitors in
creating, delivering, and communicating customer value to its chosen target markets; and
the societal marketing concept assumes that the firm must satisfy customers more
effectively and efficiently than competitors while still preserving the consumer’s and the
society’s wellbeing. Keeping this concept in mind, smart companies will add “higher
order” image attributes to supplement both rational and emotional benefits. The
combination of technology, globalization, and deregulation is influencing customers,
brand manufacturers, and store-based retailers in a variety of ways. Responding to the
changes and new demands brought on by these forces has caused many companies to
make adjustments. In turn, savvy marketers must also alter their marketing activities,
tools, and approaches to keep pace with the changes they will face today and tomorrow.
FUNCTIONS OF THE MARKETING DEPARTMENT
To establish P&G as a leading brand of fast moving consumer goods and daily
solutions in the mind of Indian Consumer and influencers.
123
To track and capture opportunities and build brand image and presence
through corporate communication both internal and external.
To create market presence and brand positioning through advertising and both
direct and indirect and various promotions.
To launch products as per committed time for the customers.
To be a link between the field (i.e. sales) and the development team so as to
bring feedback from the market / customers and use it for further improvising on
our products and bring innovative products to our customers.
To provide support to the sales team at the branches.
The sales function in the context of a P&G, is a group of people who are directly tasked
to generate profitable revenue from existing clients and finding new clients. Typically,
they are having set performance objectives that are linked directly or indirectly with
revenue and/or profit targets for a set period of time.
With a rigorous focus on a market-oriented approach and profit creation as the basic
policy, the aim is to establish a structure that stably generates high profits by the use of
key initiatives such as the implementation of fully FIV* (Future Inspiration Value) based
management, the creation of a business portfolio with higher profitability, moving
forward with group management, and innovation in collaboration with partners and group
companies.
In order to achieve this, P&G will focus on the business areas in which it can show its
maximum strength, and strengthen its social innovation business, which consists of its
social infrastructure, industrial infrastructure, life infrastructure and information
infrastructure businesses, and will endeavor to maximize the synergies with the
infrastructure technology/products business that underpins social innovation business
operations.
Corporate governance is being systematically strengthened, efficient group company
management implemented and equity relationships reviewed, in order to raise earnings
throughout the corporate group. With the emphasis on acquitization and collaborations
124
with partners and group companies, P&G diverse its business to strengthen collaborative
innovation and also has business undertakings in various areas of operations.
Basic policies adopted by the Procter & Gamble Company Board of Directors
in respect to the Corporate Governance Guidelines
A. Board Purpose and Responsibilities.
The Board represents and acts on behalf of all shareholders of the Company. The Board
is responsible for establishing, and helping the Company achieve, business and
organizational objectives through oversight, review and counsel. The Board also:
approves and monitors critical business and financial strategies of the Company;
assesses major risks facing the Company, and options for their mitigation;
approves and monitors major corporate actions;
oversees processes designed to ensure the Company's, and Company employees',
compliance with applicable laws and regulations and the Company's Worldwide
Business Conduct Manual;
oversees processes designed to ensure the accuracy and completeness of the
Company's financial statements;
monitors the effectiveness of the Company's internal controls;
selects, evaluates and sets appropriate compensation for the Company's Chief
Executive;
oversees succession planning for the Chief Executive position;
reviews the recommendations of Company management for, and elects, the
Company's principal officers; and
125
oversees the compensation of the Company's principal officers elected by the
Board.
B. Board Size, Composition and Qualifications.
a)Size:
As required by the Company's Regulations, the Board will be comprised of between ten
(10) and fifteen (15) members.
b)Composition:
The Board will be comprised of a majority of independent members (members who are
free of any material relationship with the Company or Company management). For
purposes of these Guidelines, "independence" will be determined in accordance with a
separate guideline established by the Board. The separate guideline will always be at least
sufficient to meet the independence standards of the New York Stock Exchange and
applicable legislation.
c)Qualifications for Non-Employee Board Members:
The Company seeks Board members who will represent the balanced best interests of the
Company's shareholders as a whole, rather than special constituencies; who have
demonstrated character and integrity; who have an inquiring mind; who have experience
at a strategy/policy-setting level or who have high-level managerial experience in a
relatively complex organization, or who are accustomed to dealing with complex
problems; who have an ability to work effectively with others; who have sufficient time
to devote to the affairs of the Company; and who are free of conflicts of interest. In
seeking such Board members, the Company also seeks to achieve a mix of Board
members that represents a diversity of background and experience, including with respect
to age, gender, international background, race and specialized experience.
d) Qualifications for Employee Board Members:
126
To be considered for Board membership, employees of the Company must have senior
management responsibility for broad areas of the Company's operating or functional
groups.
e) Specific Qualification Rules of All Board Members:
To assist in meeting the objectives listed above on the qualifications of Board members,
the Board has adopted certain specific policies:
1. Disqualifying Factors:
No person will be considered for Board membership who is:
an employee or director of a company in significant competition with the
Company;
an employee or director of a major or potentially major customer, supplier,
contractor, counselor or consultant of the Company;
a recent employee of the Company; or
an executive officer of a company where a P&G employee Director serves on the
board.
Should any current Board member become subject to one of the above disqualifying
factors, he/she will immediately offer his/her resignation to the Board. Absent special
circumstances agreed to by a majority of the Board (excluding the affected member(s),
the Board will accept the offer of resignation.
2. Director Resignation Based on Election Results:
In any non-contested election of directors, any incumbent director nominee who receives
a greater number of votes cast "against" such nominee than votes "for" such nominee
according to certified election results shall immediately tender his or her resignation as a
Director to the Board of Directors. Within ninety days following the certification of the
127
election results, the Board of Directors will decide, after taking into account the
recommendation of the Governance and Public Responsibility Committee (in each case
excluding the nominee in question) whether to accept the resignation. Absent a
compelling reason for the director to remain on the Board, the Board of Directors shall
accept the resignation. The Board's explanation of its decision shall be promptly
disclosed on a Form 8-K submitted to the Securities and Exchange Commission.
3. Retirement Age:
Absent exceptional circumstances agreed to by a majority of the Board (excluding the
affected member(s)), each Board member, upon reaching the age of seventy (70) years,
will resign effective upon the next Board meeting.
4. Term Limits:
Absent special circumstances agreed to by a majority of the Board (excluding the
affected member(s)), no Board member may serve for more than a total of eighteen (18)
years.
5. Job Change.
Except for the Company's Chief Executive, if a Board member's principal
occupation or business association changes substantially (including retirement)
following his/her initial election, s/he must immediately offer his/her resignation
to the Board. The Board will determine by majority vote of members present at a
duly-constituted meeting whether to accept the offer of resignation.
The Company's Chief Executive will resign from the Board when s/he retires
from the Company, provided, however, upon the agreement of at least a majority
of the Board, such Chief Executive may continue to serve on the Board for a
transition period of up to one year following such retirement.
6. Conflicts of Interest:
128
In addition to abiding by the Company's Worldwide Business Conduct Standards, each
Board member must recuse himself/herself from any discussion or decision affecting
his/her personal, business or professional interests.
7. Renomination:
Renomination to the Board will be based on the needs of the Board at the time of
determination. Board members do not have an expectation they will be automatically
renominated when their term expires.
C. Board Meetings.
a) Regular Meeting Calendar.
Dates and Times:
The Board will meet seven (7) times per year, unless it determines that more or
fewer meetings are required. Meetings will typically occur during the following
months: January, February, April, June, August, October and December.
Topics:
The Board agenda will include regular in-depth reviews of the key issues
affecting the Company overall, and various Company businesses and functions.
Business unit and functional presentations will address key issues facing the
business unit/function, and decisions and strategies relating to those issues.
Appropriate time will be allotted for Board-member questions and input. At least
once per year, the Board will meet to review the performance and succession plan
for the Company's Chief Executive, and executive continuity plans for other
principal officers (the meetings may be separate). Succession planning should
include policies and principles for Chief Executive selection and performance
review, as well as policies regarding succession in the event of an emergency or
the retirement of the Chief Executive. The Board's evaluation of the Chief
Executive's performance will be shared with the Chief Executive.
129
Distribution of Materials:
Information and materials will be distributed in advance of the Board meetings
where important to the Board's understanding or to facilitate discussion.
b) Offsite Meetings:
The Board will meet outside of Cincinnati from time to time in conjunction with major
strategic issues or an in-depth review of a major segment of the Company's operations.
c) Special Meetings:
The Chair will call additional meetings as necessary to address important or urgent
Company issues. Any member may request that the Chair call a special meeting. Special
meetings may be held in person, or by telephone or other form of interactive electronic
communication.
d) Attendance:
Attendance is expected at all Board and Committee meetings, for the full length of such
meetings. Any extraordinary circumstance that would cause a member to attend fewer
than seventy-five percent (75%) of all Board meetings should be discussed with the
Board Chair and the Chair of the Governance & Public Responsibility Committee as far
in advance as possible.
e) Voting:
At any time, the independent members of the Board present at a duly-constituted
meeting may determine, by majority vote, that members who are not independent should
not participate in the discussion or voting with respect to any issue. This determination
may be made for legal, conflict of interest or any other reason deemed appropriate by the
independent members. Likewise, if it appears that an issue will impact the personal,
business or professional interests of one or more members, and those members fail to
recuse themselves in accordance with Section II.E.6 above, a majority of the other
130
members present at a duly-constituted meeting may determine that the affected members
should not participate in the discussion or voting with respect to that issue.
D. Board Leadership:
a) Chair:
The Board will be chaired by one (1) member. The Chair will be appointed by vote of a
majority of non-employee members of the Board present at a duly-constituted meeting,
and may be removed at any time by the same vote.
b) Presiding Director:
If the Board Chair is the Chief Executive of the Company, then one of the independent
members of the Board will be named as Presiding Director. The Presiding Director will
act as a key liaison with the Chief Executive, will assist the Board Chair in setting the
Board agenda, will chair the executive sessions described in Section IV.C below, and will
communicate Board member feedback to the Chief Executive. The Presiding Director
will be chosen annually by a majority of the non-employee members of the Board present
at a duly-constituted meeting after consultation with the Governance & Public
Responsibility Committee. The name of, and a means of directly contacting, the
Presiding Director will be made public.
c) Executive Sessions:
Regardless of who holds the position of Board Chair, the non-employee members of the
Board will meet regularly outside the presence of any Company employee. For purposes
of these executive sessions, a former Chief Executive of the Company will be considered
to be an employee member, and thus will not attend the executive sessions. Executive
sessions will be led by the Chair, if the Chair is an independent member of the Board, or
otherwise by the Presiding Director. Additional semi-executive sessions (meetings of the
131
non-employee members of the Board plus specific Company employees or other
individuals) may be held at any time at the request of the Board, the Chair or the
Presiding Director.
d) Board Agendas:
The Board Chair, in consultation with the Presiding Director, if any, will determine the
agenda for each meeting. All Board members should propose to the Chair or the
Presiding Director the inclusion of additional agenda items that they deem necessary or
appropriate in carrying out their duties.
E. Board Committees.:
a) Purpose:
The purpose of Board Committees is to help the Board effectively and efficiently fulfill
its responsibilities, although the Committees do not displace the oversight responsibilities
of the Board as a whole. Committees will report the results of their significant activities
to the full Board or make recommendations to the full Board as appropriate.
b)Standing Committees:
The Board has established four standing Committees of the Board. The Governance &
Public Responsibility Committee will regularly review the Board's committee structure
and make recommendations to the full Board as needed. The Board may add, eliminate
and change the Charter or composition of any Committee at any time, except to the extent
that such a change would violate the Company's Articles, Regulations. By Laws or the
listing standards of the New York Stock Exchange. The four standing Committees are as
follows:
132
Audit Committee(established in 1940): The Audit Committee has the
responsibilities set forth in its Charter with respect to the quality and integrity of
the Company's financial statements; the Company's compliance with legal and
regulatory requirements; the Company's overall risk-management profile; the
independent auditor's qualifications and independence; the performance of the
Company's internal audit function and independent auditors; and preparing the
annual Audit Committee Report to be included in the Company's proxy statement.
Compensation & Leadership Development Committee(predecessor Committee
established in 1960): The Compensation & Leadership Development Committee
has the responsibilities set forth in its Charter with respect to overseeing overall
Company compensation policies and their specific application to principal
officers elected by the Board and to members of the Board and assisting the full
Board with respect to leadership development.
Governance & Public Responsibility Committee (predecessor Committee
established in 1972): The Governance & Public Responsibility Committee has the
responsibilities set forth in its Charter with respect to identifying individuals
qualified to become members of the Board; recommending to the Board when
new members should be added to the Board; recommending to the Board
individuals to fill vacant Board positions; recommending to the Board the director
nominees for the next annual meeting of shareholders; in the event of a director
resignation after such incumbent director-nominee receives more votes "against"
such nominee than votes "for" such nominee in any non-contested election,
recommending to Board whether to accept the resignation; periodically
developing and recommending to the Board updates to the Company's Corporate
Governance Guidelines; assisting the Board and the Company in interpreting and
applying the Company's Corporate Governance Guidelines, Board governance;
evaluation of the Board and its members; reviewing plans and making
recommendations to the Board on the Company's corporate sustainability efforts,
including environmental quality, economic development and corporate social
responsibility and overseeing organization diversity, community and government
133
relations, product quality and quality assurance systems and corporate reputation,
and other matters of importance to the Company and its stakeholders(including
employees, consumers, customers, suppliers, shareholders, governments, local
communities and the general public).
Innovation & Technology Committee (established in 2001). The Innovation &
Technology Committee has the responsibilities set forth in its Charter with respect
to overseeing and providing counsel on matters of innovation and technology.
(Topics considered by this Committee include the Company's approach to
technical and commercial innovation, the innovation and technology acquisition
process, and tracking systems important to successful innovation.)
c) Committee Membership:
The Audit, Compensation & Leadership Development and Governance & Public
Responsibility Committees each will have not fewer than three (3) members consisting
entirely of outside, independent members of the Board. The Innovation & Technology
Committee will include not fewer than three (3) outside, independent members of the
Board in addition to any other members of such Committees.
d) Assignment and Rotation of Committee Members:
The Governance & Public Responsibility Committee will, after consultation with the
Board Chair, make membership recommendations for all Committees to the full Board
for action at the first Board meeting following the annual meeting of shareholders. In
making these recommendations, the Governance & Public Responsibility Committee will
consider the Board's preference for rotating Committee chairs and members at no longer
than five (5) year intervals measured from January 2005. However, the Board also
acknowledges that at times it may not be in the best interest of the Company to rotate
certain Directors due to exceptional circumstances.
134
e) Committee Agendas:
The Chair of each Committee will, after consultation with appropriate members of
Company management, determine the agenda for each meeting. The Board Chair,
Presiding Director and other Committee members may also suggest the inclusion of items
on the agenda.
F. Board Compensation.
a) Compensation Committee Responsibility:
The Compensation & Leadership Development Committee of the Board will annually
review the compensation of Board members, and will make recommendations to the full
Board.
b)Compensation Philosophy:
In making its recommendations to the full Board concerning the compensation of Board
members, the Compensation & Leadership Development Committee should consider the
following goals:
Board members should be fairly compensated for the work involved in overseeing
the management of a company the size and scope of Procter & Gamble.
Board-member compensation should be competitive with director compensation
at other U.S. companies the size and scope of Procter & Gamble.
Board-member compensation should align Board members' interests with the
long-term interests of the Company's shareholders.
G. Board Access to Management and Independent Advisors.
a) Management:
135
Non-employee members of the Board are encouraged to contact and/or meet with
Company employees without principal officers being present for purposes of gathering
information. The Company will, on a regular basis, provide specific opportunities for this
type of interaction. However, no individual director should give direction to Company
employees during these meetings; such direction should be provided by the full Board to
the Company's Chief Executive.
b) Independent Advisors:
The Board will hire such independent advisors, including attorneys, accountants,
investment bankers and other consultants, as it deems necessary or appropriate to carry
out its duties.
H. Board Orientation and Continuing Education.
a) Orientation:
The Secretary of the Company will arrange for new members of the Board to meet with
senior operating and functional managers of the Company, in order that the new member
can become familiar with the Company's strategic plans, financial statements, and key
policies and practices. This orientation should begin as soon as practicable after the new
Board member is elected, and should be complete within one(1) year after s/he joins the
Board.
b)Continuing Education:
From time to time, the Company will provide Board members with presentations from
Company and/or third-party experts on topics that will assist Board members in carrying
out their responsibilities. In addition, once per year the Company will pay the reasonable
expenses for any Board member who wishes to attend accredited third-party training for
directors.
136
I. Service on Other Boards.
a) Board Chair:
The Board Chair may not serve on more than two (2) outside public boards without the
approval of a majority of the non-employee members of the Board. Service on charitable
or educational boards does not count towards this limit, unless a majority of the non-
employee members of the Board determines that such service constitutes an unreasonable
demand on the Chair's time.
b) Non-Employee Directors:
A non-employee director may not serve on the boards of more than five (5) other public
companies or, if the member is an active chief executive officer of another public
company, on the boards of more than three (3) other public companies
c)Employee Directors.
Chief Executive. The Company's Chief Executive may not serve on more than
two (2) outside public boards without the approval of a majority of the non-
employee members of the Board, and must consult with the Board before accepting
an appointment to an outside Board. Service on charitable or educational boards does
not count towards this limit, unless a majority of the non-employee members of the
Board determines that such service constitutes an unreasonable demand on the Chief
Executive's time.
Other Employee Board Members:
Members of the Board who are Company employees (other than the Chief Executive)
may not serve on more than one (1) outside public Board without the approval of a
majority of the non-employee members of the Board, and must consult with the Chief
137
Executive before accepting any appointment to an outside Board. The Chief
Executive will consult as appropriate with the Board Chair (if the chief executive is
not the Chair) or the Presiding Director with respect to such appointments. Service on
charitable or educational boards does not count towards this limit, unless a majority
of the non-employee members of the Board determines that such service constitutes
an unreasonable demand on the employee Board member's time.
d) Principal Officers of the Company Elected by the Board:
No principal officer of the Company elected by the Board may serve on the board of a
significant competitor or customer, or significant potential competitor or customers.
Principal Officers should normally avoid serving on the Board of a major or potential
major supplier, contractor or consultant. All principal officers must consult with the
Company's Chief Executive before accepting an appointment to an outside Board. The
Chief Executive will consult with the Board prior to any officer accepting a position on
the Board of any major or potential major supplier, contractor, or consultant and will
inform the Board of any outside board memberships accepted by a principal officer of the
Company.
J. Stock Ownership Guidelines.
Each non-employee member of the Board is required to own common stock of the
Company in accordance with the Company's share ownership guidelines for non-
employee directors. Employee members of the Board are required to own stock of the
Company in accordance with the Company's share ownership guidelines for Company
executives.
K. Board Self-Evaluation.
Annually, the Board will conduct a self-evaluation under the leadership of the
Governance & Public Responsibility Committee. On a periodic basis, this Committee
will engage an independent governance expert to facilitate the evaluation process. The
Board will discuss the report of the Governance & Public Responsibility Committee
138
concerning the performance of the Board and its members and take appropriate actions in
response
L. Amendment of these Guidelines:
Recognizing that best practices for corporate boards of directors, and practical
considerations, will change over time, the Board will monitor developments in these
areas, and will amend these Guidelines as it deems appropriate.
POLICIES REGARDING PURCHASE OF ANY ORDER OR
SERVICES:
These BASIC TERMS & CONDITIONS apply to any purchase order
(“AGREEMENT”) relating to goods/services(individually “GOODS” “SERVICES” and
collectively “GOODS/SERVICES”) between seller (“SELLER”) and buyer(“BUYER”)
(individually “PARTY; collectively “PARTIES”). All terms and conditions set forth
herein shall be deemed to apply to the subject matter of such AGREEMENT as if fully
set forth therein.
1.SPECIFICATIONS.
Seller shall perform and BUYER shall purchase SERVICES and/or Seller shall sell and
BUYER shall purchase GOODS in strict compliance with the specifications as agreed
upon BUYER and SELLER as incorporated herein by reference and forming a part
hereof (“SPECIFICATIONS”).
2. DISPOSAL.
In the event that any material, product or equipment, that is associated or identified with
BUYER’s marketed or previously marketed products or which incorporates BUYER’s IP
139
RIGHTS requires disposal while under SELLER’s ownership or control, then SELLER is
responsible for ensuring that the disposal is carried out under SELLER’s direct control
and full supervision in order to ensure that the DISPOSAL ITEM is made entirely
unsalvageable.
3. RETURN, SCRAPPING & REWORK.
Any GOODS DELIVERED by SELLER to BUYER that are not in fullcompliance with
the terms and conditions of this AGREEMENT may at BUYER’s option be :
(i) returned to SELLER at SELLER’s expense for credit to BUYER at the full price plus
all costs and expenses associated with such return;
(ii)scrapped by BUYER, at SELLER’s expense, in which case BUYER shall be relieved
of any payment obligations with respect to such GOODS, or
(iii) reworked by BUYER or SELLER, at SELLER’s expense. The rights and remedies
setforth in this Section are not exclusive and nothing herein limits the PARTIES’ rights
and remedies under this AGREEMENT or at LAW.
4.SERVICES NOT IN COMPLIANCE.
If any SERVICES provided by SELLER to BUYER are not in full compliance with
the terms and conditions set forth in this AGREEMENT, then BUYER is entitled to
credit for the full price; or towithhold payment in whole or in part as long as the
SERVICES are not in full compliance with this AGREEMENT. Therights and
remedies set forth in this Section are not exclusive and nothing herein limits the rights
and remedies either PARTY may have under this AGREEMENT or at LAW.
5.REDUCTION OR DISCONTINUANCE.
BUYER may deem it necessary, from time to time, to reduce or discontinue purchases of
the GOODS covered by this AGREEMENT because of reasons such as product or
packaging reformulation or others.
140
6. PRICE.
The price for the GOODS/SERVICES shall be as agreed upon by the PARTIES
(“PRICE”) and include anygoods and services necessary to fulfill this AGREEMENT.
7. PERIOD.
The period of this AGREEMENT (“PERIOD”) begins at the time of execution of the
AGREEMENT(“EFFECTIVE DATE”) and ends at the date as agreed upon by the
PARTIES, unless terminated earlier as set forth herein.
8. TERMINATION FOR CONVENIENCE.
BUYER may, for any reason and at any time, terminate this AGREEMENT upon at least
five (5) calendar days written notice to SELLER, without penalty, liability or further
obligation.
9. INVOICING AND PAYMENT.
BUYER shall pay SELLER as agreed upon by the PARTIES. For all payments,whether
subject to discount for prompt payment or not, the discount period and the due date for
payment shall be calculated from the date the accurate invoice is received at the location
as designated by BUYER, the date of DELIVERY of the corresponding GOODS or the
date of performance of the corresponding SERVICES, whichever is later. BUYER may
withhold payment if SELLER’s invoice is incorrect or does not conform to BUYER’s
invoicing instructions.
SHIPMENT TERMS FOR GOODS.
“DELIVERY” and its derivatives mean delivery as agreed upon by thePARTIES.
SELLER shall retain title and risk of loss for GOODS in accordance with these terms.
10. GENERAL REPRESENTATIONS & WARRANTIES.
141
SELLER represents and warrants that as of DELIVERY of the GOODS to BUYER, and
covenants that, continuously thereafter, the GOODS and any parts thereof shall be in
strict compliance with all SPECIFICATIONS; be safe and otherwise appropriate and fit
for BUYER’s intended use; be of merchantable quality and free from defects, whether
latent or patent; be in full compliance with all applicable LAW. SELLER represents and
warrants that at the time of performance of the SERVICES, the SERVICES and any parts
thereof shall be in strict compliance with all SPECIFICATIONS; be done in a competent,
workmanlike manner and free from defects in materials and workmanship, whether latent
or patent; be in conformity with the standards of care employed by leading vendors in the
services industry for projects of this kind and scope; and be in full compliance with all
applicable LAW.
11. TITLE. SELLER
It represents and warrants that upon DELIVERY of the GOODS, SELLER shall pass to
BUYER, and BUYER shall receive, good and marketable title to such GOODS, free and
clear of all liens, claims, security interests, pledges, charges, mortgages, deeds of trusts,
options, or other encumbrances of any kind (“LIENS”).
12. LIENS.
SELLER shall at all times keep any of BUYER's property in the possession of SELLER
or any of its subcontractors or under SELLER’s or any of its subcontractors’ control free
and clear of any LIENS, and hereby grants BUYER the right to file such protective
financing or similar statements to confirm and record BUYER’s ownership thereof.
13. THIRD PARTY IP RIGHTS.
SELLER represents and warrants that the GOODS/SERVICES and any parts thereof and
BUYER’s use, sale, offer to sell and/or importing of such GOODS/SERVICES and any
parts thereof, do not infringe any copyrights, design patents, utility patents, trademarks,
142
trade secrets or similar intellectual property rights (collectively “IP RIGHTS”) of any
third party; and at the EFFECTIVE DATE there are no claims currently being asserted
and no actions pending or threatened against SELLER by any third party that the
GOODS/SERVICES and any parts thereof allegedly infringe, violate or misappropriate
third party IP RIGHTS. SELLER shall provide BUYER with immediate notice of such
claims or actions as they arise.
14. CHILD LABOR & FORCED LABOR.
SELLER shall not employ children, prison labor, indentured labor, bonded labor or use
corporal punishment or other forms of mental and physical coercion as a form of
discipline. In the absence of any national or local law, BUYER and SELLER define
“child” as less than 15 years of age. If local LAW sets the minimum age below 15 years
of age, but is in accordance with exceptions under International Labor Organization
Convention 138, the lower age will apply.
15. COMPLIANCE WITH LAW.
SELLER shall at all times be in full compliance with all applicable governmental, legal,
regulatory and professional requirements (collectively “LAW”).
16. PRIVACY.
SELLER shall all at times comply with BUYER privacy policy and security requirements
as set forth on, which is incorporated herein and shall form part hereof.
17. SUPPLIER DIVERSITY PROGRAM.
If SELLER has operations (production, sales, administrative) physically located in the
United States of America which are involved in SELLER’s performance under this
AGREEMENT, then SELLER is expected to develop procurement and contracting
strategies aimed at meeting the goals of BUYER's minority business development
program.
143
18. APPLICABILITY & SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
SELLER’s representations,warranties and covenants set forth in the ” GENERAL
REPRESENTATIONS AND WARRANTIES” section shall terminate and expire with
respect to each delivery of the GOODS 1 year after the date of receipt of the GOODS at
BUYER’s final destination and with respect to each performance of a SERVICE 1 year
after the date of such performance; provided, however, that in the case of a latent defect
in the GOODS/SERVICES, such SELLER’s representations, warranties and covenants
shall terminate and expire 1 year after the date on which BUYER discovered or is
notified of such defects, whichever is earlier. Any other of SELLER’s representations,
warranties, covenants and other obligations set forth in this AGREEMENT shall be
subject to all applicable statutes of limitation, similar statutes and other similar defenses
provided by law or equity.
19. INDEMNIFICATION.
SELLER shall, in addition to SELLER’s obligation to indemnify BUYER, its parent, its
affiliates and subsidiaries and their respective agents, officers, directors and employees
(“BUYER INDEMNITEE”) by law, in equity or otherwise, at its own expense at
BUYER’s option defend, indemnify and hold harmless BUYER INDEMNITEE from and
against all claims, including third-party claims, allegations, demands, liabilities, fines,
losses, damages, costs and expenses, including reasonable fees and expenses of attorneys
and any amounts paid in settlement (collectively “CLAIMS”), arising out of or related to
any of the following:
(i) SELLER’s breach of any representation, warranty,covenant or other obligation set
forth in this AGREEMENT;
(ii) the negligence, gross negligence, bad faith, intentional orwillful misconduct of
SELLER or subcontractors (whether or not approved by BUYER) or their respective
employees orother representatives;
144
(iii) SELLER’s use of any subcontractors (whether or not approved by BUYER) arising
out of or relating to SELLER’s performance under this AGREEMENT; or
(iv) bodily injury, death or damage to personal propertyarising out of or relating to
SELLER’s or subcontractors’ (whether or not approved by BUYER) and their respective
employees’ or other representatives’ performance under this AGREEMENT.
20. IP INFRINGEMENT INDEMNIFICATION.
If any GOODS/SERVICES or parts thereof become, or are likely to become, the subject
of an action resulting from SELLER’s alleged breach of the “Third Party IP RIGHTS”
section, then SELLER shall at SELLER’s expense
(i) defend, indemnify and hold harmless BUYER INDEMNITEE from and against all
CLAIMS, arising out of or related thereto; and
(ii) promptly secure any rights necessary to make the
GOODS/SERVICES non-infringing, or at BUYER’s option
(a) replace/modify such GOODS/SERVICES to make them non-infringing or
(b) remove such GOODS/SERVICES or any parts thereof and refund BUYER all related
fees and charges.
Additionally, in the event either PARTY is served with a warning letter and/or a lawsuit
is filed against either PARTY, alleging that the GOODS/SERVICES or any parts thereof
or BUYER’s use, sale, offer to sale and/or importing of the GOODS/SERVICES,
respectively infringe, violate or misappropriate third party IP RIGHTS, then BUYER, at
its sole discretion, shall be entitled to immediately terminate this AGREEMENT without
any penalty, liability or further obligation, in addition to its rights hereunder.
Notwithstanding the foregoing, BUYER shall hold SELLER harmless with respect to
145
liability for infringement of a design patent by reason of SELLER making or furnishing
to BUYER hereunder, any article or articles the ornamental appearance of which was
specified by BUYER and not offered by SELLER as an option.
21. IP RIGHTS OWNERSHIP.
BUYER shall own all creative ideas, developments and inventions, including designs
drawings and calculations which SELLER, prior to or after the EFFECTIVE DATE,
develops, invents or creates or causes to be developed, invented or created specifically
relating to the GOODS/SERVICES or parts thereof, its intended use or relating to
SELLER's performance in accordance with this AGREEMENT ("BUYER's IP
RIGHTS"). Nothing herein shall limit SELLER's rights to IP RIGHTS owned by
SELLER to the extent not developed, invented or created specifically relating to the
GOODS/SERVICES or parts thereof, its intended use or relating to SELLER's
performance in accordance with this AGREEMENT ("SELLER's IP RIGHTS").
Additionally, any work of SELLER's authorship relating to the GOODS/SERVICES or
parts thereof hereunder is considered a "work made for hire." In the event that the work is
not considered "work made for hire," SELLER hereby irrevocably grants to BUYER a
perpetual, non-exclusive, worldwide, royalty free and freely assignable license with the
right to sublicense all copyrights, to the extent permissible by LAW including the right to
reproduce, disseminate, publicize, translate and to use. Concurrentlywith the DELIVERY
of the GOODS/SERVICES or parts thereof, SELLER shall
(i) transfer BUYER's IP RIGHTS to BUYER and execute any documents that BUYER
determines are necessary to document BUYER's ownership and their physical
incorporation in any form and fashion and
(ii) grant to BUYER a perpetual, non-exclusive, worldwide, royalty free and freely
assignable license with the right to sublicense to SELLER's IP RIGHTS to make, have
made, use, sell, offer for sale, and import in conjunction with the GOODS/SERVICES or
parts thereof, particularly including maintenance, spare parts and improvements of the
GOODS/SERVICES or parts thereof and provide their physical incorporation in any
146
form and fashion to BUYER. To the extent legally permissible, SELLER shall cause its
employees to agree to assign to SELLER such BUYER's IP RIGHTS as may be made by
such employees in connection with their employment by SELLER.
22. INSURANCE.
SELLER shall maintain and cause its subcontractors to maintain at their expense
sufficient and customary insurance coverage with generally acceptable underwriters.
Such insurance shall include BUYER INDEMNITEE as additional insured in connection
with SELLER’s performance under this AGREEMENT to be stated explicitly on the
Certificate(s) of Insurance. SELLER hereby irrevocably and unconditionally waives and
shall cause its insurers to irrevocably and unconditionally waive any rights of subrogation
for claims against BUYER INDEMNITEE, to be documented to BUYER’s satisfaction.
23. CONFIDENTIALITY.
During the PERIOD, SELLER, its subcontractors and/or their employees
(collectively“RECEIVER”) may become privy to certain proprietary information, in
writing, orally or in any other form, whether or notmarked as confidential or other similar
designation, of BUYER, its parents, its affiliates and/or its subsidiaries (collectively
“DISCLOSER”) and proprietary information furnished to DISCLOSER by a third party
on a confidential basis ("collectively, INFORMATION"). All INFORMATION is the
valuable property of DISCLOSER, and RECEIVER shall not have or obtain any rights
therein. RECEIVER shall hold the INFORMATION in confidence, not use nor disclose
INFORMATION to any third party, other than for SELLER’s performance under this
AGREEMENT. The commitments set forth in this Section shall not extend to any portion
of INFORMATION which, as established by relevant documentary evidence satisfactory
to BUYER,
(a) is already in SELLER’s lawful possession at the time of disclosure by the
DISCLOSER;
147
(b) is through no act on the part of the SELLER, generally available to the public;
(c) corresponds to that furnished by the DISCLOSER to any third party on a non-
confidential basis;
(d) corresponds in substance to that
furnished to SELLER by a third party having no obligation of confidentiality to the
DISCLOSER; or
(e) is required to be disclosed by law or government regulation, provided that SELLER
provides reasonable prior notice of such required disclosure to the BUYER. SELLER
shall, at BUYER’s option, return or destroy all INFORMATION promptly upon the
earlier of termination or expiration of this AGREEMENT. BUYER shall be entitled to
specific performance and injunctive relief as remedies for any breach or threatened
breach of any provision of this Section, without the necessity of posting bond or proving
actual damages, which remedies shall not be deemed to be exclusive remedies for such
breach or threatened breach by SELLER, but shall be in addition to all other available
remedies. The rights and obligations as set forth in this provision shall survive the
termination or expiration of this AGREEMENT.
24. ASSIGNMENT.
SELLER shall neither transfer nor assign this AGREEMENT nor any of its rights or
obligations hereunder, whether in whole or in part, by delegation, subcontracting,
operation of law, or otherwise, without the prior written consent of BUYER. Any such
transfer or assignment without BUYER’s prior written consent shall be null and void.
Buyer may, without restriction, transfer or assign this AGREEMENT in whole or in part
or any of its rights or obligations hereunder, by delegation, operation of law, or otherwise
without the prior written consent of Seller.
148
25. CONTRACTOR STATUS.
The PARTIES are and shall remain independent contractors with respect to each other,
and nothing in this AGREEMENT shall be construed to place the PARTIES in the
relationship of partners, joint ventures, fiduciaries or agents. In no case shall SELLER,
the employees, workers, laborers, agents or subcontractors of SELLER be deemed
employees of BUYER.
26. PUBLIC DISCLOSURES.
Except as required by law or with BUYER’s prior written consent, SELLER shall
neither
(i)disclose the existence, or the terms and conditions, or the subject matter of this
AGREEMENT to any party (collectively,“AGREEMENT INFO”),
(ii) issue press releases or any other publication regarding AGREEMENT INFO,
(iii) issue statements as to the existence of a relationship between the PARTIES, nor (iv)
use BUYER’s, its parents’, its affiliates’ or subsidiaries’ corporate names or trademarks.
27. MODIFICATION & WAIVER.
No modification or amendment of any provision of this AGREEMENT shall be valid or
binding unless it is executed and delivered by both PARTIES hereto in writing
subsequent to the date hereof and specifically states that it is intended to take precedence
over this AGREEMENT. Any other modification, amendment or waiver shall be null and
void.
28. SELLER SUSTAINABILITY.
SELLER shall comply with and cause its employees to comply with BUYER’s supplier
sustainability policy
149
29. GOVERNING LAW, CONSTRUCTION & LANGUAGE.
This AGREEMENT shall be governed by and interpreted for any and all purposes in
accordance with the internal laws of the Country, state, or province where the BUYER is
located (“LOCAL”) applicable to contracts made and to be performed wholly within the
LOCAL without reference to principles of conflicts of laws and the United Nations
Convention on International Sale of Goods shall have no force or effect on transactions
under or relating to this AGREEMENT. The courts sitting in, or having principal
jurisdiction over the LOCAL shall have exclusive jurisdiction of all disputes hereunder.
Whenever the word “including” is used in thisAGREEMENT, it is deemed to be
followed by the words “without limitation.” SELLER represents and warrants that
(i)the AGREEMENT shall prevail over any general terms and conditions of trade,
including but not limited to seller’s general terms and conditions and has been reviewed
and accepted by SELLER and
(ii) performance against this AGREEMENT constitutes SELLER’s unconditional
acceptance of the AGREEMENT
PLAYERS OF FMCG
Britannia India Ltd (BIL)
Britannia India Ltd was incorporated in 1918 as Britannia Biscuit Co Ltd and currently
the Groupe Danone (GD) of France (a global major in the food processing business) and
the Nusli Wadia Group hold a 45.3 per cent equity stake in BIL through AIBH Ltd (a
50:50 joint venture). BIL is a dominant player in the Indian biscuit industry, with major
brands such as Tiger glucose, Mariegold, Fifty-Fifty, Good Day, Pure Magic, Bourbon
etc. The company holds a 40 per cent market share in the overall organised biscuit market
and has a capacity of 300,000 tonne per annum. Currently, the bakery product business
accounts for 99.1 per cent of BIL's turnover. The company reported net sales of US$ 280
million in 2002-03. Britannia Industries Ltd (BIL) plans to increase its manufacturing
capacity through outsourced contract manufacturing and a greenfield plant in Uttaranchal
to expand its share in the domestic biscuit and confectionery market.
150
Dabur India Ltd
Established in 1884, Dabur India Ltd is the largest Indian FMCG and ayurvedic products
company. The group comprises Dabur Finance, Dabur Nepal Pvt Ltd, Dabur Egypt Ltd,
Dabur Overseas Ltd and Dabur International Ltd. The product portfolio of the company
includes health care, food products, natural gums & allied chemicals, pharma, and
veterinary products. Some of its leading brands are Dabur Amla, Dabur Chyawanprash,
Vatika, Hajmola, Lal Dant Manjan, Pudin Hara and the Real range of fruit juices. The
company reported net sales of US$ 218 million in 2003-04. Dabur has firmed up plans to
restructure its sales and distribution structure and focus on its core businesses of fast-
moving consumer good products and over-the-counter drugs. Under the restructured set-
up, the company plans to increase direct coverage to gap outlets and gap towns where
Dabur is not present. A roadmap is also being prepared to rationalise the stockists'
network in different regions between various products and divisions.
Indian Tobacco Corporation Ltd (ITCL)
Indian Tobacco Corporation Ltd is an associate of British American Tobacco with a 37
per cent stake. In 1910 the company's operations were restricted to trading in imported
cigarettes.The company changed its name to ITC Limited in the mid seventies when it
diversified into other businesses. ITC is one of India's foremost private sector companies
with a turnover of US$ 2.6 billion. While ITC is an outstanding market leader in its
traditional businesses of cigarettes, hotels, paperboards, packaging and agri- exports, it is
rapidly gaining market share even in its nascent businesses of branded apparel, greeting
cards and packaged foods and confectionary. After the merger of ITC Hotels with ITC
Ltd, the company will ramp up its growth plans by strengthening its alliancewith
Sheraton and through focus on international projects in Dubai and the Far East. ITC's
subsidiary, International Travel House (ITH) also aims to launch new products and
services by way of boutiques that will provide complete travel services
Marico
Marico is a leading Indian Group incorporated in 1990 and operating in consumer
products, aesthetics services and global ayurvedic businesses. The company also markets
151
food products and distributes third party products. Marico owns well-known brands such
as Parachute, Saffola, Sweekar, Shanti Amla, Hair & Care, Revive, Mediker, Oil of
Malabar and the Sil range of processed foods. It has six factories, and sub-contract
facilities for production. In 2003-04,the company reported a turnover of US$ 200 million.
The overseas sales franchise of Marico's branded FMCG products is one of the largest
amongst Indian companies. It is also the largest Indian FMCG company in Bangladesh.
The company plans to capture growth through constant realignment of portfolio along
higher margin lines and focus on volume growth, consolidation of market shares,
strengthening flagship brands and new product offerings (2-3 new product launches are
expected in (2004-05). It also plans to expand its international business to Pakistan.
Nirma Limited
Nirma Ltd, promoted by Karsanbhai Patel, is a homegrown FMCG major with a presence
in the detergent and soap markets. It was incorporated in 1980 as a private company and
was listed in fiscal 1994. Associate companies' Nirma Detergents, Shiva Soaps and
Detergents, Nirma Soaps and Detergents and Nilnita Chemicals were merged with
Nirma in 1996-1997. The company has also set up a wholly owned subsidiary Nirma
Consumer Care Ltd, which is the sole marketing licensee of the Nirma brand in India.
Nirma also makes alfa olefin, fatty acid and glycerine. Nirma is one of the most
successful brands in the rural markets with extremely low priced offerings. Nirma has
plants located in Gujarat, Madhya Pradesh and Uttar Pradesh. Its new LAB plant is
located in Baroda and the soda ash complex is located in Gujarat. Nirma has strong
distributor strength of 400 and a retail reach of over 1 million outlets. The company
reported gross sales of US$ 561 million in 2003-04. It plans to continue to target the mid
and mass segments for future growth.
Foreign players
Cadbury India Ltd (CIL)
Cadbury Indian Ltd is a 93.5 per cent subsidiary of Cadbury Schweppes Plc, UK, a global
major in the chocolate and sugar confectionery industry. CIL was set up as a trading
concern in 1947 and subsequently began its operations with the small scale processing of
imported chocolates and food drinks. CIL is currently the largest player in the chocolate
152
industry in India with a 70 per cent market share. The company is also a key player in the
malted foods, cocoa powder, drinking chocolate, malt extract food and
sugar confectionery segment. The company had also entered the soft drinks market with
brands like 'Canada Dry' and 'Crush', which were subsequently sold to Coca Cola in
1999. Established brands include Dairy Milk, Perk, Crackle, 5 Star, Éclairs, Gems,
Fructus, Bournvita etc. The company reported net sales of US$ 160 million in 2003. The
company plans to increase the number of retail outlets for future growth and market
expansion.
Cargill
Cargill Inc is one of the world's leading agri-business companies with a strong presence
in processing and merchandising, industrial production and financial services. Its
products and geographic diversity (over 40 product lines with a direct presence in over 65
countries and business activities in about 130 countries) as well as its vast
communication and transportation network help optimize commodity movements and
provide competitive advantage. Cargill India was incorporated in April 1996 as a 100 per
cent subsidiary of Cargill Inc of the US. It is engaged in trading in soyabean meals,
wheat, edible oils, fertilisers and other agricultural commodities besides marketing
branded packaged foods. It has also set up its own anchorage facilities at Rosy near
Jamnagar in Gujarat for efficient handling of its import and export consignments.
Colgate-Palmolive India
Colgate Palmolive India is a 51 per cent subsidiary of Colgate Palmolive Company,
USA. It is the market leader in the Indian oral care market, with a 51 per cent market
share in the toothpaste segment, 48 per cent market share in the toothpowder market and
a 30 per cent share in the toothbrush market. The company also has a presence in the
premium toilet soap segment and in shaving products, which are sold under the Palmolive
brand. Other well-known consumer brands include Charmis skin cream and Axion dish
wash. The company reported sales of US$ 226 million in 2003-04. The company's
strategy is to focus on growing volumes by improving penetration through aggressive
campaigning and consumer promotions. The company plans to launch new products in
oral and personal care segments and is prepared to continue spending on advertising and
153
marketing to gain market share. Margin gains are being targeted through efficient supply
chain management and bringing down cost of operations.
Hindustan Lever Ltd (HLL)
Hindustan Lever Ltd is a 51 per cent owned subsidiary of the Anglo-Dutch giant
Unilever, which has been expanding the scope of its operations in India since 1888. It is
the country's biggest consumer goods company with net sales of US$ 2.4 billion in 2003.
HLL is amongst the top five exporters of the country and also the biggest exporter of tea
and castor oil. The product portfolio of the company includes household and personal
care products like soaps, detergents, shampoos, skin care products, colour cosmetics,
deodorants and fragrances. It is also the market leader in tea, processed coffee, branded
wheat flour, tomato products, ice cream, jams and squashes. HLL enjoys a formidable
distribution networkcovering over 3,400 distributors and 16 million outlets. In the future,
the company plans to concentrate on its herbal health care portfolio (Ayush) and
confectionary business (Max). Its strategy to grow includes focussing on the power
brands' growth through consumer relevant information, cross category extensions,
leveraging channel opportunities and increased focus on rural growth.
Nestle India Ltd (NIL)
Nestle India Ltd a 59.8 per cent subsidiary of Nestle SA, Switzerland, is a leading
manufacturer of food products in India. Its products include soluble coffee, coffee blends
and teas, condensed milk, noodles (81 per cent market share), infant milk powders (75
per cent market share) and cereals (80 per cent market share). Nestle has also establish
ed its presence in chocolates, confectioneries and other processed foods. Soluble
beverages and milk products are the major contributors to Nestle's total sales.
Some of Nestle's popular brands are Nescafe, Milkmaid, Maggi and Cerelac. The
company has entered the chilled dairy segment with the launch of Nestle Dahi and Nestle
Butter. Nestle has also made a foray in non-carbonated cold beverages segment through
placement of Nestea iced tea and Nescafe Frappe vending machines. Exports
contribute to 23 per cent of its turnover and the company reported net sales of US$ 440
million in 2003.
154
PepsiCo
PepsiCo is a world leader in convenient foods and beverages, with revenues of about US$
27 billion. PepsiCo brands are available in nearly 200 markets across the world. The
company has an extremely positive outlook for India. "Outside North America two of our
largest and fastest growing businesses are in India and China, which include more than a
third of the world's population" (Pepsico's annual report). PepsiCo entered India in 1989
and is concentrating on three focus areas - soft drink concentrate, snack foods and
vegetable and food processing. PepsiCo's success is the result of superior products, high
standards of performance and distinctive competitive strategies.
CHAP-7 BUSINESS PROMOTION STRATEGY OF P&G
In the 20th century and particularly after World War II, Germany became one of the most
attractive European locations for American direct investment. And also in 2005 the
Federal Republic with an investment volume of 120 billion Euro and 850,000 jobs is the
place in Europe where American investment finds its highest concentration. This is also
underlined by a study of the Boston Consulting Group (BCG), which had been published
by the American Chamber of Commerce in Frankfurt/Main in 2004. According to a
survey among 100 American companies Germany was first in Europe as a location for
holding companies and for manufacturing companies the country was third following
Europe’s Eastern part and Great Britain. Germany’s reputation as business location seems
to be much better the US than at home, as BCG stated: “If Germany would be dealt in
shares, American analysts actually would say: BUY.” The reason for this can not only be
connected with Germany’s geographic position in Europe but also with the fact, as B CG
says, that “Corporate Germany has recently strongly been americanized – not only in case
of the vocabulary being used in the head departments.” Also management strategies,
organization and accounting are said to follow American patterns.“ Additionally, ‚hard
economic facts’ such as market entry, research potential, labour force and the reform
efforts of the German government developed as investment incentives for investors from
155
the US.3These things also held for the American consumer goods company Procter &
Gamble, which nowadays considers Germany as one of its most important European
markets according to sales. The company, which belongs to the outstanding companies in
American industry, was founded in 1837 by the candle maker William Procter and by the
soap maker James Gamble in Cincinnati, Ohio, is considered as the pioneer of brand
management in the business of detergents, household cleaners, personal care and food
products. With more than 100,000 employees worldwide and 300 brands P&G does not
only rank among „America’s most admired companies“ which are annually nominated by
„Fortune. According to James Collins und Jerry Porras it also belongs to those
companies which were „built to last”. P&G stands for an innovative brand management,
which is seen as groundbreaking for consumer goods business. In contrast to many
American firms such as Singer, Harvester or Ford, which had been engaged in Germany
long before World War II, P&G entered the German market only in the late 1950s where
it became a transmitter of modern marketing know how. Using the example of P&G the
paper examines the American strategies of market entry in Germany in order to analyze
some of the main features of American investment in the German consumer goods
industry. What were the motives that made P&G enter the German market? Which
strategies were used?
What marketing know how was transferred with P&G’s market entry? Which innovative
strategies in case of product, sales and marketing took hold? What did P&G learn from
its exposure to the German competition regulations in case of price and sales promotion
for the globalization of its business? These and some more questions shall be answered in
the following. After a short overview on the history of American FDI in Germany and on
the corporate history of P&G, I will proceed according four features:
Strategies, i.e. product and market policy, structures, that is the implementation of a
German business, Reception, that is the adoption to the German market conditions and
Performance. Besides unpublished records of German corporate archives of P&G’s main
competitor Henkel literature on P&G’s success story was used for this paper. The first
one, written by Alfred Lief, was followed by Oscar Schisgalls ‘official’ corporate
history„Eyes on tommorrow“ (1985) and recently by the study of Dyer (etalii, 2004),
156
which is also a ‘commissioned history’. Besides this there is a number of publications on
P&G’s marketing and sales strategies, which are connected with the company’s
outstanding market success. Additionally, there are also some critical books from former
employees and investigative journalists.
1. On the history of American FDI in Germany
In the 20th century Germany developed into one of the most important target countries
for American FDI. American companies with new technical procedures or products
began to expand their activities to Europe and to the German market in the late 19th
century as Mira Wilkins has shown. This applies before all for innovative branches such
as electrical industry, petroleum production, food or machine building and firms such as
GE, Standard Oil of New Jersey , Mergenthaler Linotype, National Cash Register,
Singer, Otis or International Harvester. World War I changed the American position in
the world economy and brought an even stronger direct economic engagement in the
European markets. One reason for this was the growing productivity of the US economy
and the prevailing protectionism in international trade policy. Almost inseparable tariff
walls contributed to reduced export profits in the aftermath of World War I. As a
consequence manufacturing was transferred abroad to evade these barriers. Bu t World
War I also induced a significant financial shift which made the US the worldwide most
important creditor nation. Particularly from the German perspective the American
expansion to Europe did not only result from the technical or industrial leadership but
also from monetary strength. The “change from debtor to creditor”, which now became
evident, was seen as “a consequence of America’s changed position on the capital
market”. Thus the 1920s saw the first boom of US foreign direct investment in Europe.
Particularly after the German currency reform of 1923/4 and as a consequence of the
‘Dawes Plan’ there was a strong inflow of American investment capital which can be
seen not only as an instrument of the US German policy but also as an element of the
internally reparations system. After the currency stabilization the conditions for the
establishment of American subsidiaries in Germany had been improved greatly. Thus up
157
to the outbreak of the ‘Great Depression’ “a veritable wave of American companies”
came to Germany. According to the information of the US commercial attach in Berlin
there were about 1,500 American companies engaged in almost any
German branch in spring of 1930 as manufacturing plants, sales and service companies
and agencies. With this US FDI in Germany had increased from 445 million US dollar
(USD) in 1900 to more than 1,7 billion USD in 1912 and to 7,5 billion USD in 1929.
Compared to the total amount of the American FDI in Europe, Germany with 216,5
million USD was second after the UK with 485 million USD after France with 145
million USD and Italy with 113 million USD „Germans aim to be . But the first boom of
American investment in Europe was soon stopped in the 1930s by the disintegration of
the world market in the course of the Great Depression and of the ongoing nationalism
and protectionism before the outbreak of the Second World War.
With the European Recovery Program, the founding of EEC and world monetary system
a step by step liberalization of world trade set in and provided new challenges for
economic growth. Seeking new markets, American firms were very much attracted by
the process of political and economic integration taking place in post- war Europe, where
traditional suppliers were exposed to previously unknown competitive pressure. The
European Community in the 1960s mobilized more American investments than any other
region worldwide. Not least due to the high custom tariffs local manufacturing plants
were more profitable than export business. Thus private capital transfer by direct
investment became one of the central features of international economic integration,
which turned Europe in an „economic gravitational field“. Up to the 1950s US FDI in the
Federal Republic up had been limited due to Allied occupation and lack of exchange.
Liberalization did not set in before 1958 when the full convertibility of the German Mark
was achieved. Since then the share of American FDI in West Germany rose from 32 percent
in 1950 to 35 percent in early 1959 and reach ed 42 percent in early 1969. The increase
was to the loss of the UK and France, the latter had “consciously slowed down”
investments from the US at that time. US FDI in German in total rose from 204 million
USD in 1950 to more than 1 billion in 1960 and 4,5 billion in 1970.
158
Again American investors concentrated on traditional fields such as petroleum production
or automobiles, but also on synthetic materials or electrical equipment. Besides ‚classic’
reasons for investment such as marketing and cost considerations or advantages by local
manufacturing, the positive prospects of the German market, which in the 1950s and
1960s showed the highest growth rates in Europe and second highest in the world , were
of prime concern for American firms. In this context the emerging political stability and
west orientation but also the liberal investment climate, the undervaluation of the German
Mark compared to the US dollar, qualified workforce and comparatively low wages
proved to be most attractive. And from 1954 onwards there was also a double taxation
agreement, which provided American Investors in the Federal Republic with tax
advantages.
2. Procter & Gamble on the West German market for consumer chemicals
strategies:
In contrast to its main competitors Lever and Colgate which had been engaged on the
German market with subsidiaries already before World War I or from the 1920s onwards,
Procter & Gamble was late entering Germany at the end of the 1950s. At that time the
company h ad already been engaged in the highly oligopolistic US market for soaps,
detergents and shortenings for more than a century. “Hard- pressed and unable to
achieve anything like breakout success against its main competitors” Colgate or Lever
Brothers, Dyer describes P&G’s business as “profitable, but by no means comfortable
through 1945”. This mirrors the competitive situation on the American market for soap
and detergents where domestic growth was no longer possible because of the “Big
Soapers” Lever, P&G and Colgate-Palmolive, which together held 75 percent of the soap
market and 90 percent of the market for household cleaners. Foreign growth should have
been a solution in this stand-off. But besides business in raw materials in Cuba, on the
Philippines and in Indonesia, P&G only maintained subsidiaries in Canada and the UK.
159
The first foreign plant had been founded in 1915 in Canada and in 1930 P&G acquired
the English soap manufacturing plant Thomas Hedley & Co. Ltd. in Newcastle/Tyne.
The small company could have served as a ‘bridgehead’ just to get P&G “a general idea
of the European soap business“, but the headquarters in Cincinnati up to World War II
did not undertake any other acquisitions in Europe. As one reason for P&G’s reluctance
toward expansion on th e European markets might be seen the high tariff walls.
Additionally there was the „potential instability in Europe“ at that time which also
contributed to the fact „that P&G would have no fixed investments there“. Another point
might have been the prevailing competitive conditions. P&G was probably „reluctant to
tackle head-on the strong, entrenched competitors such as Lever and Henkel & Cie
Thu s P&G’s European expansion did not begin before the end of World War II with the
start of the detergent Tide, which increased P&G’s share of the American market for
detergents from 30 percent in 1925 to 69 percent in 1953 . As the first synthetic
detergent worldwide Tide was suited for all household cleaning from laundry to dish
washing but it profited most from th e spread of automatic washing machines which
doubled the consumption of detergents. Being the “first mover” on this field Tide gave
P&G ”its edge over Colgate and Lever“
With an increase of sales by 110 percent between 1955 and 1965 P&G belongs “to the
corporate miracles in American economy“. At least for this period P&G seemed top
pursue the „unofficial goal of doubling its business every ten years or so“. P&G’s
comfortable equity base offered an adquate starting point for expansion although the
American Antitrust policy (1950 Celer-Kefauver Act) made vertical integration suspect
under law and contributed to the fact, that P&G on its domestic market had only limited
chances to make important acquisitions. Alternatively foreign expansion in Latin
America and in Europe increased. Europe became the most important target for P&G’s
corporate growth. According to P&G-Chairman Neil McElroy, the US secretary of
defense from 1957 to 1959, business expansion was „absolutely necessary“, because „ of
the Common European Market“. Thus from then on P&G expanded „aggressively into
new products and geographies”, because “the phenomenal success of Tide gave the
company both the confidence and the financial strength to explore new products and
160
businesses become less important for the company, it prepared its market entry into
Europe in the second half of the 1940s.
Nevertheless, with P&G’s entry in the European market the „cold war“ between „the big
soapers“ began, as th e press put it44. And the commencement of a European business, of
course, caused some strains in P&G’s relationship to Henkel, which did not only
considered Germany but also Europe as its own „ traditional market“. This conflict
mirrors the different perceptions of competition in German and American companies,
because P&G reacted to Henkel’s critical attitude with a lack of understanding. The
Americans, as a Henkel executive put it, could „not believe, that we put an end to our
know how exchange because of them entering the European markets”. Henkel assumed
that „P&G’s younger managers“ did not want to „hold on to the friendly relationship any
longer that we had in former times“. Indeed, according to P&G’s president Neil McElroy,
there was „basically no reason, which could bar Procter & Gamble from starting business
in any country and therefore also in Germany”
3. P&G’s structure in Germany
P&G’s strategy now became evident at last. The American company obviously was in
search of an adequate foothold in the German market to start the business with soaps,
detergents and household cleaners. In summer 1960, the German branch office in
Frankfurt/Main was founded with a capital stock of 2 million . The next step aimed at the
establishment of an adequate manufacturing plant and sales organization. Thus P&G
made offers to some German middle-sized soap and detergents manufacturers such as
UHU, Dalli-Werke Mäurer & Wirtz or Rei-Werke which did not only maintain
manufacturing capacities but also sales divisions. In October 1962 Rei-Werke AG in
Boppard took over the distribution of the soap Camay and of Fairy, a hou sehold cleaner,
which were produced at the Dalli-Werke in Stolberg near Aachen. One year later the
company started further products such as the detergent Dash and the softener Lenor in
Germany. As from an internal point of view only the establishment of an own
161
manufacturing plant was seen as „sure sign of P&G’s commitment to the West German
market“, in 1963 a newly constructed detergent plant (“Dash-Werk”) in Worms was put
up. Together with REI-Werke, which were acquired in 1965, this plant manufactured
detergents predominantly for the German market. On a European level P&G’s
development to a „global marketer“ was supported by structural reorganizations. In the
mid-1960s four “international divisions” were installed and one of these was responsible
for the European market. A centralized European Technical centre was founded in
Brussels to support the local subsidiaries with r&d, chemical engineering, purchase,
technology, and production. The European sister companies were thought of as „clones“
of P&G’s American soap and detergent business and worked together as a network.
Firms being acquired were not treated as portfolio investments but procterized, which
meant „being upgraded and transformed to comply with P&G standards” and to become “
miniature versions of P&G”
4. The reception of P&G in Germany
P&G’s product strategy can be characterized as one of a high innovative potential and
readiness to take a risk. The company obviously benefitted from its “first mover’s
advantages“, even on the German market. Being first in the market with a pure vegetable
shortening, a synthetic detergent, a toothpaste against tooth decay and a “really efficient
antidandruff-shampoo” P&G had no problem to manage different lines of business under
one roof. German prejudices that a manufacturer of detergents could not possibly produce
food at the same time, because the consumer would not accept this, were not considered
at all. The same was true in the case of the consistency of detergents. Although liquid
products in the US since the first half of the 1950s were very successful und increasingly
displaced washing powders and abrasives, German producers still were in doubt, “if the
German housewives are to use a dish liquid at all” P&G’s marketing ideas such as
market leadership by branding, turnover before profitability and adherence to consumer
research were successfully transferred to the German consumer markets. Brand
marketing as a business technique “was one signal innovation in American marketing
during the twentieth century”. It epitomized the persistent theme of balancing centralized
oversight with decentralized decision making bases on who in the company who had the
162
best information about the decision at hand”. Because of the emergence of packaged
consumer goods such as soups, condensed milk, beer or corn flakes, the US economy
became a starting point of a ‘brand revolution’, which was fostered by P&G as one of its
protagonists. Additionally the enlargement of distribution facilities such as warehouses
and supermarkets contributed to changing marketing techniques which did without
personal consultation and instruction but focussed on the packaging of good s,
advertisement and sales strategies. In this context P&G Distinguished itself by well-
defined brand names, easily to remember, by emotional, colourful package design as “the
brand’s look” , and the use of dominant images in advertisement to stress the product’s
utility.
Brand building therefore is seen as P&G’s „corporate pattern“ and its outstanding
contribution „in business history“. The company thus considered “the introduction of new
brands” as “guaranty for the permanent growth of profits to-be” and developed several
elements of brand management. One significant item was in-house competition, which
was understood as “ pure competition“ although it also accepted “brand cannibalism”.
“Never before an American firm had encouraged a kind of such competition between
brands of its own” , but was only engaged in different price ranges. To keep market
shares within the firm, each brand was managed as a profit centre and as a separate
business from the conception of the product up to the control of its success. According to
the principle „one brand, one manager“ the responsibility for one brand remained in the
hands of one single product manager, who headed the product group, developed the
annual marketing plan, planned and arranged advertising and sales promotion strategies,
coordinated package design and forecasted and analyzed sales results. One consequence
of this was, that in the aftermath of World War II a single agency was being engaged for
each brand and P&G became one of the world’s largest advertisers.
Market research was another important pillar of sales marketing which was introduced by
P&G already in the 1920s. The market research division, which was introduced in 1925,
was mainly to observe the price movements in the raw material markets, but became an
important marketing instrument under Paul Smelser, who aimed at foreseeing shifts of
the market and consumer wants, and with view to this, the improvement of products and
163
marketing concepts. The point was to know the consumer much better than the
competitor could do. This was to be achieved with innovative research techniques such as
to give samples to private households, running tests of new products or to intensify field
research by door-to-door interviews about consumers habits in case of washing and
cleaning, cooking etc. After the war there were also telephone surveys and „check-u p
people“ who had to evaluate sales promotion at the retailers.
In 1939 the first TV commercial for P&G’s Ivory soap was produced and in the aftermath
of World War II, the soap opera format was transferred to TV combining commercial
spots with sponsorships of regular TV shows. In 1948 P&G started its first TV episode
for Ivory Snow and Crest in the context of the TV show “Fashions on Parade” which
was broadcasted live on the air. One year later the production company Procter &
Gamble Productions Inc. was founded to buy and produce shows, programs and other
features for radio, TV and film such as the Jane Wyman Show or the Warner Brothers
production of The Waltons.
With strategies such as these but also with it’s pricing policy P&G again and again
moved beyond the usual pales of competitive conceptions in Germany, even though the
company had promised before “to stick to the rules of the game” und to adapt “to the
German price as well as to the sales and advertising methods”. Although P&G wanted “
to penetrate the German market slowly so as to not unsettle the German industry”89,
American firms were alleged as “not having any respect for European business practices
old traditions” such as agreements on prices, output and product specifications which
were to regulate the market. Indeed the German price system which was traditionally
quite inflexible because of regulative agreements was threatened to be demolished by
these promotion campaigns, because price cuttings, give away and discounts in fact
contributed to the increase of market shares. In view of the German firm Henkel this
price slashing had taken on indescribable forms, particularly because the price spiral led
to a domino effect which no firm could avoid. Henkel hoped to exert some influence on
other market participants as the company worried that the “whole price system will be
disturbed if one breaks ranks” and the prices would tumble. Apprehensions such as these
led to hard conflicts on the markets for detergents, because the old established
164
competitors decided to do everything, to make P&G’s start as difficult as possible“. So it
was thought to issue a publication on the German competitive law by Henkel or by the
German brand association in order to stress the differences to other European countries,
for example concerning the give away of original packages or presents. Henkel thought
“this could possibly retard or even avoid Procter’s market entry in Germany“, the more as
“a withdrawal from a market would be much more difficult because of prestige reasons
than deciding to enter into the market”.
Meanwhile Procter’s market entry indeed was slowed down by the restrictive German
competitive law. As Procter’s German partner Willy Maurer, head of the REI-Werke,
said, P&G found “the establishment of its German branch much more difficult than one
had imagined before”. Particularly after the GWB competition regulative law came into
force, P&G was bothered by German competitors which fought with non- stop claims
against “sales measures which had proved very successful in the US”. Matter of dispute
were for example special offers such as price reductions and give away which came along
with the launch of new products and which were common practice in the US. In
Germany these were seen as unfair business practices, which had to be prosecuted “in
order to deter other firms from similar sales methods”.
These legal actions were focusing on the intention, that a “certain pattern of competition
had to be maintained to prevent the German market from being destroyed or to stop new
sales methods which would not be successful”. But when the launch of Dash and Lenor
had been carried out successfully, Procter from 1967 onwards resorted “very much to
price conflicts”, for examples as far as the conditions for the wholesalers were concerned.
At least, some years later, after P&G had taken the German consumer ‘by storm’ this led
to the situation, “that formerly existing market habits regarding the length and size of
rebates did not exist any longer”.
Conclusion
Particularly from 1945 onwards the German market for consumer goods proved to be an
outstanding growth market, because it was relatively underdeveloped compared to other
165
Western countries. This offered manifold chances to expanding American companies
such as P&G to capture these markets with innovative product and sales strategies.
Although P&G in contrast to the German firm Henkel could not count on “the pulling
force of the company’s name”, because most of the Germans did not even know where
the firm came from. But being much more “consequent, active and full of ideas”, P&G
succeeded in working it’s way up the German detergent market next to Henkel.
Compared to its competitors Lever, Colgate and also Henkel, P&G stands out for its
“smooth and consequent management of all factors of marketing mix” which focused on
market leadership and became obvious in product and price policy and by sales and
marketing measures as well.
On this basis the German market for P&G became one of the main pillars of the
European business, where the company encountered new market cultures, far reaching
regulation acts and different national consumer wants. „Constant change and adaptation“
was P&G’s response to these manifold challenges. So at least these experiences gained
from the European business made the former soap maker a “true”Multinational
FMCG STRATEGIES IN INDIA:
We intend to pursue the following strategies in order to consolidate our position as one of
the leading operators in the ‘FMCG’ segment in India. Our growth strategy is based on:
Increasing our penetration in the country by leveraging our supply chain, distribution and
logistics network:
We intend to increase our penetration in the country by setting up new stores in cities
where we already have presence, as also entering into new areas in the country. We
believe that our existing infrastructure have been designed for a higher scale of
operations than our current size, and can help us grow with out the need to significantly
increase costs. Moreover, our continuous effort to improve systems and processes leads
us to believe that we can deal with higher scale of operations without any hindrance.
Higher business volumes will also improve our negotiating powers and help us get
further economies of scale in our buying.
166
Emphasis on Backward Integration:
We believe that through backward integration we will continue to substantially control
the cost of production, resulting in such cost benefits being passed on to our customers.
We intend to increase the in-house manufacture, design and development of our products
and realize economies of scale. We intend to manufacture at least 25% of our
requirement for apparels and may require expansion of our existing manufacturing
facilities. This will also enable us to reduce our reliance on external agencies for supply
of our products and will result in lower turn-around time. In addition, our focus would be
to undertake in-house such functions of the manufacturing processes, which, in our view,
would add maximum value and would enable us to reduce our procurement costs.
Expansion of FMCG
Historically, we have derived significant portion of our revenue from sale of apparels. In
pursuance of our business plan to diversify our portfolio of offerings, FMCG products
play a key role. FMCG products are usually meant to fulfill the daily needs of consumers
and therefore, we believe retailing of FMCG products will bring customers to our stores
on a frequent basis and this may in-turn lead to consumption of our apparels. We believe
retailing of FMCG products would help us to eliminate the impact of seasonality of the
apparels market in India, which depends on factors such as change in weather conditions
and festival celebrations. In furtherance of our endeavors to reduce costs, we intend to
procure FMCG products directly from the manufacturers. For this purpose, we have
entered into and will continue to explore the possibilities of entering into certain
arrangements with domestic FMCG majors on such terms and conditions, which are
suitable to our business model.
Procurement from low-cost production centers outside India:
In addition to our strategy to continue procurement of goods from small and medium size
vendors and manufacturers which leads to cost efficiencies, we intend to procure FMCG
and apparels from low-cost production centers located outside India. Towards this
objective, we propose to increase our procurement of finished and semi-finished goods
167
from China and thereby realize economies of scale and pass on the benefits so accrued to
our customers.
Increasing customer satisfaction and our base of loyal customers:
We believe that understanding the needs of our customers is of prime importance for the
continuous growth of our business. In order to continuously provide customer
satisfaction, our customer management team assimilates customer feedback and we
endeavor to take necessary steps to address the requirements of our customers. We
propose to continuously undertake such initiatives to increase the satisfaction of our
customers.
Continue to upgrade information technology systems and processes:
We believe that any retail business requires efficient information technology systems for
control over the functioning of various stores including stock management, pricing and
promotion, replenishment, sales, quality control and financial accounting. We are
currently in the process of upgrading our information technology set up and have entered
into arrangements with leading vendors of information technology services for
implementation of more advanced ERP applications such as SAP. We intend to
periodically upgrade our information technology systems and processes.
Continue to train employees and seek entrepreneurship from employees:
We believe a key to our success will be our ability to continue to maintain and grow a
pool of strong and experienced professionals. We have been successful in building a team
of talented professionals and intend to continue placing special emphasis on managing
attrition and attracting and retaining our employees. We intend to continue to encourage
our employees to be enterprising and expect them to ‘learn on the job’ and contribute
constructively to our business, either through ideas, personal networks or effective
knowledge management. We also intend to continuously re-engineer our management
and organizational structure to allow us to respond effectively to changes in the business
environment and enhance our overall profitability.
FUTURE STRATEGIES:
168
Following are the future strategies of union for increasing the sale of their home
furnishing products.
1. Increasing the Sales.
2. Providing better quality products
3. Full concentration on customers satisfaction
To face competition by providing goods at competitive prices, PACKAGING AND
PROMOTION, strategies are also made regarding this. These are as follows:
PACKAGING:
Earlier, packaging was treated as just a part of the product. However, over the year,
packaging has assumed so much important in promoting the product that themarketing
man today treats it as a separate element altogether. Packing of export
products has now assumed great important particularly in the light of labeling laws and
laws on disposal of packing material enacted in various countries. For example, in
Germany, a country with very strict environmental laws, the packaging should be liable
to recycling. Now biodegradable packing materials like plastics are considered to be
harmful to the environment are hence, are banned. Besides, different countries have rules
regarding the labeling on packaging for different product like food stuff, beverages,
fragile good, medicines etc.
Another important aspect of export packing is that the outer cartons should carry special
marks suggested by the buyers, called ‘shipping marks’. These marks help the consignee
to identify the good quickly at his port and to take change of them in the quickest
possible time.
The main function of packaging is:
a) Protect the product against damages in transit and during storage.
b) Provide information about the product and its features.
c) To serve as a means of promotion.
d) To prevent pilferage and adulteration.
e) To provide better convenience to customers.
f) To carry information complying to norms.
169
Factors in packaging are:
a) Language of the customer.
b) Accepted color in the importing country.
c) Size should render easy handling.
d) The package should meet the regulation of importing country.
e) It should withstand the transits & handling.
f) Storage condition.
g) Climate of the importing country.
h) Length of distribution channel.
i) Longer the channel the more is the time taken for product to reach the
customer.
1)Nature of goods. Different type of goods needs different types and style of
packaging.
2)Branding.
PROMOTION
Promotion mix consists of the following:
1. Advertising - Any form of non personal presentation and promotion conducted
through paid media under clear sponsorship.
2. Sale Promotion - Short term incentives to encourage purchase or sale of a product
or service.
3. Publicity - Involves securing editorial space in media, read, viewed or heard by a
company’s customer or prospective customers, with a view to meet sales goals.
4. Personal Selling - Oral presentation to one or more prospective customers for the
purpose of making sales.
170
STRATEGIES REGARDING HANDLING OF RETAILSERS
COMPLAINTS
Following procedure is used for retailer’s complaints:
1. Retailers Complaints are first recorded
2. The complaints are acknowledged within a week of receipt.
3. Immediate analysis is done
4. Sampling analysis is done
5. Corrective actions are taken as follow up.
If necessary, they personally reach to the buyers and solve their problems, in order to
grasp the maximum market share and satisfy the consumer’s need. According to
estimates by the Rural Marketing Agencies Association of India, the total budget for rural
marketing is only about Rs 500 crore (Rs 5 billion), compared to the over Rs 13,000 crore
(Rs 130 billion) allotted to mass media.
This is grossly inadequate to cover the huge potential for different products in rural
markets. Of course, clients' reluctance to spend big money for bigger results in rural
markets is because there are no standard performance yardsticks for judging the efficacy
of the rural marketing efforts. But only consider the huge successes of some regional
brands, especially in the FMCG sector, which are giving the multinationals a run for their
money. P&G step up its payback from rural marketing efforts by taking following steps:
People power:
Total commitment from top leadership, keeping in mind that rural marketing is a long-
term relationship, is imperative - the successes of P&G is proof of this statement. But
even more important is the need for a dedicated task force.Rural marketing efforts of
P&G needs special mindsets, which many of the urban-oriented management graduates
who are at the helm of affairs at most organizations do not possess.
A separate marketing and sales vertical headed by people with passion and commitment
to rural marketing and supported by a field team that can face the rough and tough of the
vast country-side with courage and conviction is a must.
171
The best bet is to recruit students from specialized institutes such as the Indian Institute
of Rural Management, or at least, management graduates who have studied the subject as
an elective.
Many of these are students from small towns, people with fire in their bellies who want to
prove themselves in big companies and have no issues about working in smaller markets.
Pay them well - remember, you pay peanuts, you get only monkeys - and discuss the path
their careers are likely to take in the organization. And send them out in the field only
after thorough training.
Ensure the consistency of the team involved in any project, until the completion of a
specific task. Recently, we were involved with two big clients. In both cases, the teams
that briefed us in the initial stages and participated enthusiastically in the campaign, were
shifted out midway, in keeping with their companies' policy of shifting and promoting
people.
The teams that succeeded felt no ownership of the campaigns they had not initiated. What
started as a great rural marketing initiative has been relegated to the dustbin... the fate of
many rural marketing initiatives in the country.
Goals are good:
Early on in the campaign, P&G defines its objective: is it a tactical effort to achieve
increased sales in specific areas during a specific time, or wants to build a strong equity
for your brand in rural India?
Most of the FMCG companies are more interested in the first choice. Most of them have
previously appointed vendors who implement the company's ideas blindly, be they van
campaigns or below-the-line activities.
There is very little effort to tailor whatever communication is made in such efforts, to suit
the local audience or fit it with the overall campaign efforts in the mass media.
172
This invariably leads to less than satisfactory results in terms of awareness of the brands
and long-term impact of the efforts in the targeted markets. If you are interested in the
second alternative, a comprehensive brand building strategy in rural India, with both
short term and long term goals, is a must.
Know your customers:
A good place to begin is studying the mindset of your customers, so you can create a
customized plan of action. All too often, clients insist their knowledge of their customers
(based on studies of urban India) is enough on which to base an action plan. The
experience shows that the attitudes, aspirations and fears of rural customers, with regard
to products and brands, is very different from their urban counterparts.
More and more companies turn to the local haats to sell their products. While haats offer
opportunities to target consumers from several villages at one place, and to that extent
make your effort cost-effective, ensure that the people who patronize these haats are the
kind who will buy your brand.
For instance, we recently conducted a survey among some haats in Tamil Nadu, with
some interesting results. The haats were popular with the poorest agricultural laborers
who consciously buy the duplicate, spurious products that are sold in these bazaars, since
they can't afford the real thing. It is estimated that FMCG companies lost more than Rs
10,000 crores (Rs 100 billion) to spurious products, mostly sold through such local haats
and bazaars.
Ensure availability:
Most anecdotes about rural marketing centre on the distribution aspect - the humongous
task of physically reaching your product to over 600,000 villages, most of them without
motorable roads. But it's not really as nightmarish as it is made out to be, at least keeping
in mind the present goals of marketing companies in rural India.
173
All have heard about the shampoo sachets that are available in even the smallest villages.
How does that happen? It's a direct result of rising aspirations, fuelled by television
commercials. The consumer demands the product from the local shopkeeper, who then
buys the products from the nearest feeder markets.
Which means if you can ensure distribution to the feeder markets in towns or villages
with populations of 10-15,000, you’ve already taken the first step towards reaching your
target customer?
174
MANAGEMENT HIERARCHY IN MARKAETING DEPARTMENT
175
BOARD OF DIRECTORS
PRESIDENTCHAIRMAN CEO, CFO,
CIO,CTO.
General Manager
Plant manager
Divisional Manager
Regional Manager
OFFICE MANAGER
SHIFTSUPERVISOR
DEPART-MENT
MANAGER
Store manager
Crew leader
Foreperson
176
KEY PERSONS OF P&G :
KENNETH I.CHENAULT- (age 58)
Mr. Chenault is the Chairman and Chief Executive Officer of American Express
Company ( a financial service company). He was appointed to the director of board on
21ST April, 2008. He is also the director of International business machines. He is also the
member of Audit and Compensation & Leadership development Committees.
Scott D. Cook – (age 56)
He was appointed to the board of director since 2000. He is also the director of
eBay Inc. He is also the chairman of Executive Committee of Board of Intuit Inc.
( a software and a web services firm). He is also the member of Compensation &
Leadership development and Innovation & Technology Committees.
Rajat K.Gupta – (age 59)
He was appointed to the board of director since 2007. He is also the director of Goldman
Sachs Group Inc, Genpact, Ltd. And American Airlines. He is the member of Audit and
Innovation & Technology committees.
A.G. LAFLEY - ( age 61)
Mr. Lafley is the chairman of the Board and Chief Executive Officer of the company. He
was appointed to the board of director since 2000. He is also a director of General
Electric Company and DELL Inc.
Charles R. Lee – (age68)
177
Mr. Lee is the retired chairman of the Board and Co- Chief executive officer of Verizon
Communication Inc. He was appointed to the board of director since 1994. He is also the
director of DIRECTV Group Inc, Marathon Oil Corporation, United Technology
Corporation and US Steel Corporation.
Lynn M. Martin - (age68)
Ms. Martin is a former professor at the J.L College of Management, Northwestern
University and former Chair of the council for Women and Advisor to the firm of
Deloitte and Touche LLP for Deloitte’s internal human resources and minority
advancement matters. She was appointed to the director of board since 1994.
W.James McNerney, Jr. - (age59)
Mr. McNerney is the chairman of the Board, President and Chief Executive Officer of the
Boeing Company ( aerospace and military defense system). He was appointed to the
board of director since 2003. He is also the presiding director, Chairman Compensation
& Leadership development Committee and member of the Governance & Public
Resposibility Committee .
Johnathan A. Rodgers – (age 62)
He was appointed to the board of directors since 2001. He is the president of and And
Chief Executive officer of TVone LLC( media and communications).He is also the
director of Nike Inc. He is also the member of Innovation & Technology Committee.
Ralph Synderman (age 68):
He was appointed to the board of director since 1995. Dr. Synderman is Chancellor
Emeritus, James Duke Professor of Medicine at Duke University. He is also the director
178
of Targacept Inc. and a venture partner of NEA. He is also the chair of Innovation &
Technology Committee and member of the Audit Committee.
Patricia A. Woertz (age 55)
Ms. Woertz was appointed to the board on 8 th January,2008. She is chairman, Chief
Executive Officer and President of Archer Daniels Midland Company. She is also the
member of Audit and Governance & Public Responsibility Committees.
Ernesto Zedillo (age 56)
Dr. Zedillo is the former President of Mexico, director of the Centre for study
Globalization and professor in the field of International Economics and politics at Yale
University. He is also the director of Alcoa Inc. and Electronics Data System. He was
appointed to the board of director since 2001.
MANAGEMENT HIERRARCHY:
Managers are organizational members who are responsible for the work performance of
other organizational members. Managers have formal authority to use organizational
resources and to make decisions. In organizations, there are typically three levels of
management: top-level, middle-level, and first-level.
These three main levels of managers form a hierarchy, in which they are ranked in order
of importance. In most organizations, the number of managers at each level is such that
the hierarchy resembles a pyramid, with many more first-level managers, fewer middle
managers, and the fewest managers at the top level. Each of these management levels is
described below in terms of their possible job titles and their primary responsibilities and
the paths taken to hold these positions. Additionally, there are differences across the
management levels as to what types of management tasks each does and the roles that
they take in their jobs. Finally, there are a number of changes that are occurring in many
organizations that are changing the management hierarchies in them, such as the
increasing use of teams, the prevalence of outsourcing, and the flattening of
organizational structures.
179
TOP-LEVEL MANAGERS OF P&G:
Top-level managers, or top managers, are also called senior management or executives.
These individuals are at the top one or two levels in an organization, and hold titles such
as: Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operational
Officer (COO), Chief Information Officer (CIO), Chairperson of the Board, President,
Vice president, Corporate head.
Often, a set of these managers will constitute the top management team, which is
composed of the CEO, the COO, and other department heads. Top-level managers make
decisions affecting the entirety of the firm. Top managers do not direct the day-to-day
activities of the firm; rather, they set goals for the organization and direct the company to
achieve them. Top managers are ultimately responsible for the performance of the
organization, and often, these managers have very visible jobs.
Top managers in most organizations have a great deal of managerial experience and have
moved up through the ranks of management within the company or in another firm. An
exception to this is a top manager who is also an entrepreneur; such an individual may
start a small company and manage it until it grows enough to support several levels of
management. Many top managers possess an advanced degree, such as a Masters in
Business Administration, but such a degree is not required. Some CEOs are hired in from
other top management positions in other companies. Conversely, they may be promoted
from within and groomed for top management with management development activities,
coaching, and mentoring. They may be tagged for promotion through succession
planning, which identifies high potential managers.
MIDDLE-LEVEL MANAGERS OF P&G
Middle-level managers, or middle managers, are those in the levels below top managers.
Middle managers' job titles include: General manager , Plant manager, Regional manager,
and Divisional manager. Middle-level managers are responsible for carrying out the goals
set by top management. They do so by setting goals for their departments and other
business units. Middle managers can motivate and assist first-line managers to achieve
business objectives. Middle managers may also communicate upward, by offering
suggestions and feedback to top managers. Because middle managers are more involved
180
in the day-to-day workings of a company, they may provide valuable information to top
managers to help improve the organization's bottom line. Jobs in middle management
vary widely in terms of responsibility and salary. Depending on the size of the company
and the number of middle-level managers in the firm, middle managers may supervise
only a small group of employees, or they may manage very large groups, such as an
entire business location. Middle managers may be employees who were promoted from
first-level manager positions within the organization, or they may have been hired from
outside the firm. Some middle managers may have aspirations to hold positions in top
management in the future.
FIRST-LEVEL MANAGERS OF P&G:
First-level managers are also called first-line managers or supervisors. These managers
have job titles such as: Office manager, Shift supervisor, Department manager,
Foreperson, Crew leader, Store manager.
First-line managers are responsible for the daily management of line workers—the
employees who actually produce the product or offer the service. There are first-line
managers in every work unit in the organization. Although first-level managers typically
do not set goals for the organization, they have a very strong influence on the company.
These are the managers that most employees interact with on a daily basis, and if the
managers perform poorly, employees may also perform poorly, may lack motivation, or
may leave the company.
In the past, most first-line managers were employees who were promoted from line
positions (such as production or clerical jobs). Rarely did these employees have formal
education beyond the high school level. However, many first-line managers are now
181
graduates of a trade school, or have a two-year associates or a four-year bachelor's degree
from college.
P&G MANAGEMENT LEVELS AND THE FOUR MANAGERIAL
FUNCTIONS :
Managers at different levels of P&G engages in different amounts of time on the four
managerial functions of planning, organizing, leading, and controlling.
Planning is choosing appropriate organizational goals of P&G and the correct directions
to achieve those goals. Organizing involves determining the tasks and the relationships
that allow employees to work together to achieve the planned goals. With leading,
managers motivate and coordinate employees to work together to achieve organizational
goals. When controlling, managers monitor and measure the degree to which the
organization has reached its goals.
The degree to which top, middle, and supervisory managers perform each of these
functions is presented in the hierarchy chart. The top managers do considerably more
planning, organizing, and controlling than do managers at any other level. However, they
do much less leading. Most of the leading is done by first-line managers. The amount of
planning, organizing, and controlling decreases down the hierarchy of management;
leading increases as you move down the hierarchy of management.
MANAGEMENT ROLES
In addition to the broad categories of management functions, managers in different levels
of the hierarchy fill different managerial roles. These roles are categorized, and they can
be grouped into three major types: decisional, interpersonal, and informational.
DECISIONAL ROLES.
Decisional roles require managers to plan strategy and utilize resources. There are four
specific roles that are decisional. The entrepreneur role requires the manager to assign
182
resources to develop innovative goods and services, or to expand a business. Most of
these roles will be held by top-level managers, although middle managers may be given
some ability to make such decisions. The disturbance handler corrects unanticipated
problems facing the organization from the internal or external environment. Managers at
all levels may take this role. For example, first-line managers may correct a problem
halting the assembly line or a middle level manager may attempt to address the aftermath
of a store robbery. Top managers are more likely to deal with major crises, such as
requiring a recall of defective products. The third decisional role, that of resource
allocator, involves determining which work units will get which resources. Top managers
are likely to make large, overall budget decisions, while middle mangers may make more
specific allocations. In some organizations, supervisory managers are responsible for
determine allocation of salary raises to employees.
Finally, the negotiator works with others, such as suppliers, distributors, or labor unions,
to reach agreements regarding products and services. First-level managers may negotiate
with employees on issues of salary increases or overtime hours, or they may work with
other supervisory managers when needed resources must be shared. Middle managers
also negotiate with other managers and are likely to work to secure preferred prices from
suppliers and distributors. Top managers negotiate on larger issues, such as labor
contracts, or even on mergers and acquisitions of other companies.
INTERPERSONAL ROLES.
Interpersonal roles require managers to direct and supervise employees and the
organization. The figurehead is typically a top of middle manager. This manager
may communicate future organizational goals or ethical guidelines to employees at
company meetings. A leader acts as an example for other employees to follow,
gives commands and directions to subordinates, makes decisions, and mobilizes
employee support. Managers must be leaders at all levels of the organization; often
lower-level managers look to top management for this leadership example. In the
role of liaison, a manger must coordinate the work of others in different work
183
units, establish alliances between others, and work to share resources. This role is
particularly critical for middle managers, who must often compete with other
managers for important resources, yet must maintain successful working
relationships with them for long time periods.
INFORMATIONAL ROLES.
Informational roles are those in which managers obtain and transmit information. These
roles have changed dramatically as technology has improved. The monitor evaluates the
performance of others and takes corrective action to improve that performance. Monitors
also watch for changes in the environment and within the company that may affect
individual and organizational performance. Monitoring occurs at all levels of
management, although managers at higher levels of the organization are more likely to
monitor external threats to the environment than are middle or first-line managers. The
role of disseminator requires that managers inform employees of changes that affect them
and the organization. They also communicate the company's vision and purpose.
Managers at each level disseminate information to those below them, and much
information of this nature trickles from the top down. Finally, a spokesperson
communicates with the external environment, from advertising the company's goods and
services, to informing the community about the direction of the organization. The
spokesperson for major announcements, such as a change in strategic direction, is likely
to be a top manager. But, other, more routine information may be provided by a manager
at any level of a company. For example, a middle manager may give a press release to a
local newspaper, or a supervisor manager may give a presentation at a community
meeting.
MANAGEMENT SKILLS
Regardless of organizational level, all managers must have five critical skills: technical
skill, interpersonal skill, conceptual skill, diagnostic skill, and political skill.
184
TECHNICAL SKILL.
Technical skill involves understanding and demonstrating proficiency in a particular
workplace activity. Technical skills are things such as using a computer word processing
program, creating a budget, operating a piece of machinery, or preparing a presentation.
The technical skills used will differ in each level of management. First-level managers
may engage in the actual operations of the organization; they need to have an
understanding of how production and service occur in the organization in order to direct
and evaluate line employees. Additionally, first-line managers need skill in scheduling
workers and preparing budgets. Middle managers use more technical skills related to
planning and organizing, and top managers need to have skill to understand the complex
financial workings of the organization.
INTERPERSONAL SKILL.
Interpersonal skill involves human relations, or the manager's ability to interact
effectively with organizational members. Communication is a critical part of
interpersonal skill, and an inability to communicate effectively can prevent career
progression for managers. Managers who have excellent technical skill, but poor
interpersonal skill are unlikely to succeed in their jobs. This skill is critical at all levels of
management.
CONCEPTUAL SKILL.
Conceptual skill is a manager's ability to see the organization as a whole, as a complete
entity. It involves understanding how organizational units work together and how the
organization fits into its competitive environment. Conceptual skill is crucial for top
managers, whose ability to see "the big picture" can have major repercussions on the
success of the business. However, conceptual skill is still necessary for middle and
supervisory managers, who must use this skill to envision, for example, how work units
and teams are best organized.
185
DIAGNOSTIC SKILL.
Diagnostic skill is used to investigate problems, decide on a remedy, and implement a
solution. Diagnostic skill involves other skills—technical, interpersonal, conceptual, and
politic. For instance, to determine the root of a problem, a manager may need to speak
with many organizational members or understand a variety of informational documents.
The difference in the use of diagnostic skill across the three levels of management is
primarily due to the types of problems that must be addressed at each level. For example,
first-level managers may deal primarily with issues of motivation and discipline, such as
determining why a particular employee's performance is flagging and how to improve it.
Middle managers are likely to deal with issues related to larger work units, such as a
plant or sales office. For instance, a middle-level manager may have to diagnose why
sales in a retail location have dipped. Top managers diagnose organization-wide
problems, and may address issues such as strategic
POLITICAL SKILL.
Political skill involves obtaining power and preventing other employees from taking
away one's power. Managers use power to achieve organizational objectives, and this
skill can often reach goals with less effort than others who lack political skill. Much like
the other skills described, political skill cannot stand alone as a manager's skill; in
particular, though, using political skill without appropriate levels of other skills can lead
to promoting a manager's own career rather than reaching organizational goals. Managers
at all levels require political skill; managers must avoid others taking control that they
should have in their work positions. Top managers may find that they need higher levels
of political skill in order to successfully operate in their environments. Interacting with
competitors, suppliers, customers, shareholders, government, and the public may require
political skill.
186
CHANGES IN MANAGEMENT HIERARCHIES
There are a number of changes to organizational structures that influence how many
managers are at each level of the organizational hierarchy, and what tasks they perform
each day.
FLATTER ORGANIZATIONAL STRUCTURES USED BY P&G:
Organizational structures can be described by the number of levels of hierarchy; those
with many levels are called "tall" organizations. They have numerous levels of middle
management, and each manager supervises a small number of employees or other
managers. That is, they have a small span of control. Conversely, "flat" organizations
have fewer levels of middle management, and each manager has a much wider span of
control.
Many organizational structures are now more flat than they were in previous decades.
This is due to a number of factors. Many organizations want to be more flexible and
increasingly responsive to complex environments. By becoming flatter, many
organizations also become less centralized. Centralized organizational structures have
most of the decisions and responsibility at the top of the organization, while decentralized
organizations allow decision-making and authority at lower levels of the organization.
Flat organizations that make use of decentralization are often more able to efficiently
respond to customer needs and the changing competitive environment.
As organizations move to flatter structures, the ranks of middle-level managers are
diminishing. This means that there a fewer opportunities for promotion for first-level
managers, but this also means that employees at all levels are likely to have more
autonomy in their jobs, as flatter organizations promote decentralization. When
organizations move from taller to flatter hierarchies, this may mean that middle managers
lose their jobs, and are either laid off from the organization, or are demoted to lower-level
management positions. This creates a surplus of labor of middle level managers, who
may find themselves with fewer job opportunities at the same level.
187
INCREASED USE OF TEAMS.
A team is a group of individuals with complementary skills who work together to achieve
a common goal. That is, each team member has different capabilities, yet they collaborate
to perform tasks. Many organizations are now using teams more frequently to accomplish
work because they may be capable of performing at a level higher than that of individual
employees. Additionally, teams tend to be more successful when tasks require speed,
innovation, integration of functions, and a complex and rapidly changing environment.
Another type of managerial position in an organization that uses teams is the team leader,
who is sometimes called a project manager, a program manager, or task force leader. This
person manages the team by acting as a facilitator and catalyst. He or she may also
engage in work to help accomplish the team's goals. Some teams do not have leaders, but
instead are self-managed. Members of self-managed teams hold each other accountable
for the team's goals and manage one another without the presence of a specific leader.
OUTSOURCING.
Outsourcing occurs when an organization contracts with another company to perform
work that it previously performed itself. Outsourcing is intended to reduce costs and
promote efficiency. Costs can be reduced through outsourcing, often because the work
can be done in other countries, where labor and resources are less expensive than in the
United States. Additionally, by having an out-sourcing company aid in production or
service, the contracting company can devote more attention and resources to the
company's core competencies. Through outsourcing, many jobs that were previously
performed by American workers are now performed overseas. Thus, this has reduced the
need for many first-level and middle-level managers, who may not be able to find other
similar jobs in another company.
There are three major levels of management: top-level, middle-level, and first-level.
Managers at each of these levels have different responsibilities and different functions.
Additionally, managers perform different roles within those managerial functions.
Finally, many organizational hierarchies are changing, due to changes to organizational
188
structures due to the increasing use of teams, the flattening of organizations, and
outsourcing
189
My Work
I was given the job of business development of Procter & Gamble brands in Ranchi. I
was assigned Ranchi to execute the job. My job was to visit retail stores as much as
possible and knowing the business of that particular retail store. I tried to know following
things about retail shop:
1. Name and address of owner of the retail shop with contact number.
2. Category of retail shop according to P&G’s category.
3. Problems of the retail shop.
4. Average daily footfall in the retail shop.
5. Average per day sales of P&G products in the retail shop.
This needed a comprehensive analysis of economy and demographic condition of that
area. I had three major objectives:
1. To visit retail shops as more as possible in allocated area.
2. To find the exact the problem of the retailers.
3. To supply the products of P&G.
In order to fulfill my objective, I visited owners of retail shops in Ranchi (Jharkhand). I
tried to solve their problems by taking their problems to higher level management. I was
also handling the supply chain management of the company there. Therefore, to know the
demand of the products at the retail store was also my work.
190
FINDINGS
The experiencing of working with P&G was really challenging but full of knowledge.
This was the first time when I faced exposure to the market of reality. During the period
of summer training I could find following truths:
1. Consumers– final destination of products: Generally in any business there are
some steps in making a product available to the ultimate customers. Manufacturer
sells goods to wholesalers, wholesaler sells to retailers through distribution agents
and finally the retailer sells goods to ultimate customers. But now the concept of
organized retail is on boom. Companies manufacture products and take on all jobs
to make that product reach to ultimate customers by backward integration as well
as forward integration.
2. Supply Chain Management: Success of a retail business is dependent on how
the retailer meets the demand of customers. In today’s fast moving world people
cannot wait for a product because the substitutes are available. So meeting the
need of customers as and when demanded is required to succeed in retail business.
This can be achieved only when the supply chain management is efficient.
3. Retail Business – A business of selling service: It was quit amazing to see a
retailer sells his goods worth rupees five thousand per day having only 100 square
feet shop while his neighbour having 500 square feet shop cannot sell goods
worth five hundred per day. After talking to both the shopkeepers I found it was
service that they were providing to their customers that caused the difference.
How the shopkeepers make a relationship with their customers is most important
191
in today’s retail business. Here a point is important that this personal relationship
with customers is a great weapon in the hands of unorganized retailers and still
this has not been adopted by organized retail. It is, technically, difficult for
organized retail to maintain personal relationship with customers.
4. Dissatisfaction among unorganized retailers: A tough time is running for
unorganized retailers as they themselves accepted that their sales have gone down
during last two years. Some retailers blamed the slowdown is due to recession.
The reality is that they are not changing their business pattern with the in socio-
cultural change in Indian society, as the use of Fast moving consumer goods never
comes to an end. Many retailers are of the view that margin should more on the
products and more & more display should be provided to them. There is nothing to
worry about, but to perceive the direction of wind and take benefit of that.
5. Regular visits: In accordance to grasp the maximum share and to retain the
customers it is very important to the employees to have a regular visit to the
retailers and also to gather the customer’s opinion. This makes a regular flow of
passing information from consumers to manufacturer. This helps a lot to the
consumers in getting the choice products and companies in wasting their time and
money. Thus, the regular visits are very much necessary for an organization.
192
LIMITATIONS
1. All of the retailers were not so co-operative. As they were very busy with direct
selling process, so they hardly get any free time for such discussion.
2. In my project I was supposed to visit every retailer in Ranchi market but due to some
unavoidable circumstances like weekly holiday, occasional holiday, i could not visit all
the retail outlets.
3. Lack of technical information and experience also became hurdles for me. Some
particular sectors of Ranchi were so crowdie and disarranged that it became quite
impossible for us to visit those retail stores present there.
4. Off course, money also played a vital factor in the whole project duration.
5. Most of the retailers were illiterate so tackling them was difficult task.
193
SUGGESTIONS
TRAINING DURATION:
It should be increased
Sometimes extended it two-three days
TRAINING PERSONNEL/FACULTY:
Need more expertise
Should be skilled and knowledgeable
Must be experienced.
TRAINING EVALUATION:
It is regularly done but methodology need changes
Should be more realistic
TRAINING FACILITIES:
Facilities provided are good but venue should be sometimes changed to some external
place.
EFFECTIVENESS OF TRAINING:
Should be monitored on regular basis.
Measures should be taken to improve effectiveness.
Compensation should be provided in suitable amount by the company,
so that that the trainee will give full interest during the training.
TRAINING METHODS:
New techniques must be adopted
More of practical demonstrations should be included in training programmes
194
The guide should give maximum time to the trainee so that the result obtain will
be more satisfactory.
RECOMMENDATION
After the thorough study of company‘s policies and systems I would like to give
following recommendations:
Human resource and development department must try to make all the
employees aware of their training policies.
It should be taken proper care of, that the policies are followed full and fairly.
Duration of training programmes may sometimes create problems as different
individuals have different thoughts about it so it should be discussed with the
trainer and the trainees.
Providing various facilities during training is good but hey should not be too
much that the main purpose of training is spoiled.
General awareness programmes should also be conducted at regular intervals as
they make the executives alert of advancement and will be able enhance the
personal and organizational effectiveness.
Here must be more of practical demonstrations I provide the workers real
experiences.
Trainees should be provided with proper assistance when he encounters learning
obstacles.
After completing the project, there are few recommendations, which should be
implemented if possible. It will also help in increasing the market share of Procter
&Gamble. The marketing strategies should be changed according to the time & proper
policies should be implemented for the proper growth of the company. Apart from these
other things like general awareness programmes should be promoted.
According to the 4 p’s of marketing strategies are:
1) Product strategy. 2) Price strategy
3) Place strategy. 4) Promotional strategy.
195
PRODUCT STRATEGY:
1.P&G should provide modified products so that increase sale of their products & all the
segment of people purchase those products.
2. Most of the retailer complaining about the problem regarding the amount of stock
given to their store. So, the company should always look into the matter for
their providing the stock at right time.
PRICE STRATEGY:
1. P&G provides less schemes to the retailer but other company provides a large
no. of schemes.
2. Profit margins of P&G to the retailer is less than the other companies. So, it
should provide equivalent profit margins as other company provide.
PLACE STRATEGY:
1. In Ranchi, P&G is second fmcg company after HUL, there is large competition
in this region. Hence, the company had to grasp a lot of the market share.
2. There are retailers & customers in RANCHI where people are not aware of
P&G products. So the company should take special focus on their area to increase
the market share of P&G should provide special campaign in these areas to know
about their products.
3. Many kinds of persons come to purchase the products of P&G from the near
by area. Those people are mostly from the villages so the prices should be low so
that the people can easily buy the products.
PROMOTIONAL STRATEGY:
196
1. The company should promote their products through the different media like
print media, mass media, electronic media and internet.
2. There should be more schemes for retailers after completing their
sales target at a given period.
3. In Ranchi, the company can improve its market share by regular performance of
promotional activities, they should adopt it by canopy, attracting hoardings,
banners.
4. P&G should sponsor for the socio-cultural activities organized in Ranchi.
5. P&G should change their packing of their products at regular interval of year;
they should not stick to only one packing.
197
MY ACHIEVEMENT
These six week with Procter & Gamble are unforgettable for me. The experience, which I
got during these days, was tremendous. That was a most challenging and enjoyable time,
as my guide made me engaged in work for whole working shift which helped me a lot to
make good relation with so many people of different department where I did my project
& other division. My senior guide engaged me fully at work and this provided me an
opportunity to create an excellent relationship with several staff of the company. The
staffs of the company were cooperative and I could learn a lot of things from their way of
handling people and the business. Incidentally, there were M.B.A trainees with P&G
which gave an opportunity to make good M.B.A friends.
198
CASE – STUDY
P&G
In March 2003, Fortune magazine ranked Procter & Gamble (P&G), the world's leading
fast-moving consumer goods (FMCG) company, as #7 in the list of the 'World's Most
Admired Companies.' P&G was one of the very few companies to have figured in this list
for 17 consecutive years (1985-2002). P&G was ranked high on the parameter of 'ability
to develop superior quality and highly innovative products on a consistent basis.'
Analysts attributed this 'ability' to the company's understanding of consumers' needs and
preferences that had evolved out of its continuous focus on market research (MR). With
the setting up of its MR department in 1924, P&G became one of the first companies in
the world to conduct formal research on consumers' needs and preferences. Over the next
eight decades, the company developed several innovative MR techniques. Its researchers
were trained to get the information they required from consumers. P&G employed
advanced technology to analyze the feedback it obtained and arrive at the right
conclusions. P&G used qualitative research tools, such as focus groups, in-house visits,
in-context visits, and in-store interviews, and quantitative research tools like blind tests,
concept tests, and so on. The company also hired external agencies to conduct MR. In
199
recent years, P&G used the Internet as a medium for research and, in the process,
achieved significant savings on cost and time. Commenting on the benefits of the
Internet, Barbara B. Lindsey. director of P&G's consumer research services and new
technologies group, said, "It can save you a whole lot of time and a whole lot of money."
It also helped P&G reduce its reliance on external research agencies. P&G conducted
online concept tests to get
feedback from consumers. This feedback helped it in introducing new products and
launching improved versions of existing products. In 1999, 15 percent of its market
surveys in the US were conducted online. The figure increased to 40 percent in 2000 and
to 50 percent in 2001 .The online concept tests provided P&G
with valuable insights into the consumers' opinion of product attributes such as pricing,
packaging, and so on. They also helped in generating product awareness before its
launch. For instance, in August 2000, when P&G was contemplating the launch of Crest
White Strips, it wanted to check if consumers would accept the product at a retail price of
$44, which was considered to be on the higher side for this product category. The
company decided to use the Internet for this purpose. An eight-month long promotional
campaign was launched in the print and electronic media, in which consumers were
encouraged to visit the newly-created website, www.whitestrips.com. where the product
was offered. The company also sent e-mails to consumers who might be interested in
obtaining latest information on the product. In eight months, an estimated 1,44,000 Crest
White Strips were sold. It was found that 20% of the consumers who had sought
information on the product also purchased it. The sales generated online helped P&G
convince retailers to stock the product, even though it was considered to be highly priced.
Further, the data enabled P&G to analyze purchasing trends, which helped in devising the
promotion campaign for the product. In this case, it was noticed that women accounted
for 80 percent of the purchases and 50 percent of the women who purchased the product
were aged between 35 and 54. Based on these findings, P&G devised advertising
campaigns for the product. Another observation was that a significant number of people
who purchased the product applied the upper and lower strips simultaneously, although
the company's published instructions were to first use the upper strips, and then the lower
ones. Accordingly, the company changed the instructions so that consumers could apply
200
the strips in any order. The Crest White Strips was officially launched in May 2001 and
turned out to be a successful product. By 2001, P&G was conducting 50 percent of its
concept tests on the Internet. The company employed online MR tools to assist it in
conducting research. These tools enabled P&G to develop and maintain consumer panels
that comprised of people who registered on the website for surveys. In order to encourage
consumers to participate in the online surveys, the company offered gift coupons, free
samples of P&G products, and. so on. To obtain feedback from the survey participants,
P&G posted the try/buy offers on its website. For example, during the launch of Physique
hair care products, P&G invited consumers to register on its Physique, com website and
sample the new products absolutely free.
Within 12 weeks, more than five million consumers visited and registered themselves on
the site, tested the product, and gave their feedback. This exercise gave the product a
good start when it was launched P&G also made an effort to involve customers in the
product design. In 2001, it launched the 'feedback adviser program' on the Internet, to
collaborate with customers in developing new products. The program allowed customers
to try out new products and provide feedback, so that P&G could make further
improvements, in developing the product and drawing up marketing plans. Consumers
were also asked to rank P&G's product brands, and give their opinion/suggestions on the
brands. The feedback received from consumers was studied and the relevant information
was shared with the top management. Commenting on the usefulness of this program
over traditional methods, Kristin Sharp, Brand Manager, P&G said, "P&G's product -
feedback adviser program is higher on the evolutionary scale than a focus group. People
can rank and submit opinions and suggestions which are automatically sorted, with the
most useful information bubbling to the top." P&G's online MR surveys saved
considerable time and costs for the company. Using traditional methods, a consumer
survey cost the company around $50,000 and took at least three to four weeks. An online
consumer survey could be carried out in ten days for $10,000. Similarly, a traditional
product/concept test required around $25,000 and two months for completion. A similar
test on the Internet could be completed in a week for $2,500. Commenting on the benefits
of the Internet for P&G's market research initiatives, Alan George Lafley, Chairman and
201
Chief Executive Officer of P&G, said, "A year or two ago, we would do thousands of
concept tests and consumer panels worldwide, which would take six to eight
weeks. Today we do the majority of bur concept tests in 48 to 72 hours online at a
fraction of the cost and with equal or higher reliability. That's the kind of power the
Internet can bring.
"However, notwithstanding the benefits reaped by P&G through shifting its MR activities
online, analysts felt that relying on the Internet, in some cases, could lead to the
collection of misleading data. They also said that online MR could be conducted only on
those consumers who had access to the Internet, placing restrictions on the sample size
and characteristics. They felt that this problem would be more prominent in developing
countries where Internet penetration was significantly lower than in developed countries
CONCLUSION
P&G Strength, Weaknesses, Opportunities, and Threats (SWOT)
Analysis
During the summer training, I came to know about various aspects of P&G.One strategic
management tool that P&G uses to stay ahead of its competition is the effective and
efficient utilization of SWOT analysis. This involves specifying the goals and objectives
of the business as well as identifying the internal and external factors that are favorable
and unfavorable in achieving the goals and objectives. These analyses are based on the
company’s case study as well as the industry trend. Because of the segmentation and size
of the company, P&G faces a lot of domestic and foreign regulatory threats and
distribution systems where foreign competition tries to imitate P&G’s brand names for
the seek of misleading consumers for self profit. This threat of foreign brand imitation is
due to weak foreign business laws and regulations.
202
P&G’s strength includes: strong financial position both in the domestic and foreign
markets. The company was the 25th largest U. S company by revenue in the early part of
2007, and the 18th largest by profit. This is why the company is one of the most admired
companies in the United States. Also, the company has the ability and capability to push
innovation to commercialization faster than any other competitor in the industry; even
though it faces competition from Johnson & Johnson, Kimberly Clark, and Unilever,
it’s been able to move products and services from the innovation phrase to
commercialization faster; P&G has effective and efficient manufacturing processes which
include total quality management as well as just in time inventory systems; this has
enabled the company to save on inventory costs; and this cost saving is generously passed
on to consumers in a form of high quality and lower prices of goods and services.
Another unique strength of P&G is its pool of skilled labor. In a Congressional briefing
luncheon hosted by the Athena Alliance and the Congressional Economic Leadership
Institute held at the Rayburn House Office Building in Washington DC in June 2006;
P&G’s Corporate Director of Innovation Capability mentioned, “P&G has 9,000 R&D
associates including 1,100 PhDs.” This clearly explains the tremendous success of the
company. The company’s pool of highly skilled employees in the industry has given it
the edge to lead in the innovation of over 40 product categories for which it holds more
than 27,000 patents. The Director of Corporate Innovation Capability added “Our
research and development organization is fluent in a broad range of competencies
including chemistry, engineering, materials science, biological sciences, medicine, and
mathematics.”
Also, P&G has a track record of producing high quality products which is very difficult
to match or beat. Consumers want high quality products at reasonable and affordable
prices, and this is the main reason why P&G is the driver of the consumer product
industry worldwide. P&G’s innovative products and services have helped consumers
save a lot of money on dental hygiene and on other health care products.
Just about everyone wants a bright healthy smile, but not everyone can spend $600 for
the dental visits needed to achieve whiter teeth. And unlike the stereotypical eureka
203
moment, a lone P&G scientist didn’t accidentally stumble onto the Crest White Strips
formula late one night at the lab. What we did do was work backward from the consumer
need for a convenient, affordable solution to whiter teeth. We brought together a diverse
team of experts across our technology centers who were at the leading edge of their fields
from our flexible films group, adhesive group, dental experts from our oral care
organization and bleaching experts from our laundry business. And through solution
focused R&D, we delivered Crest White strips with a level of tooth whitening that
surpasses anything else available in the retail market, and consumers pay only $35. (P&G
Corporate Director of Innovation Capability).
Some weaknesses of P&G include: Lack of effective distribution system in some
segment as well as poor location in some foreign countries and high cost of inputs.
Another area of weakness is the employment of foreign based local management who
doesn’t have any international business experience. This makes collaboration with
headquarters a little difficult because of their inexperience in the global business arena.
P&G’s opportunities include: Well defined market niche, just in time
manufacturing technology, wide range of demography, and the removal of trade barriers
in some foreign countries. The removal of trade barriers in some foreign countries has
enabled the company to operate competitively without much government intervention.
Trade barriers historically has been known to be one of the biggest threats for most
multinational businesses because of hostile takeovers by some foreign governments,
difficulty of entry, corruption among government officials and bribery, and unhealthy
business environment.
Threats include: New entry into the household product industry, use of substitute
products, increased trade barriers in some developing nations, unfavorable business laws
and political instability. Investors do not like uncertainty. They want to ensure that there
is democracy and stable government in whatever country they invest and most
importantly, they should be able to repatriate their profits without many restrictions. This
has been a threat to most businesses as well as P&G.
204
A series of innovation systems that are now common practices in corporations
across America including extensive market research, the brand-management system, and
employee profit-sharing programs, were first developed at P&G; however, two key
innovation systems will be discussed. These include the “AskMe Enterprise” and the
“Corporate Standards System.”
It is important to analyze and contrast these two key innovation systems within P&G. I
have decided to choose the AskMe Enterprise innovation system because innovation
begins with ideas or brainstorming sessions among the subject matter experts, and
AskMe Enterprise innovation system provides that capability.
MY LEARNING
While doing my summer training in one of the recognized organized retail my basic
learning was how FMCG organizations do work and how that make decision for there
future expansion plans. As I was part of a well growing expansion plan that is franchisee
and business development. So in these two month I had a very tough learning as well as
challenging but that challenge thought a lot and my experience is as follows.
(i) Learning about FMCG industry:- As in that two month I had been a
part of FMCG Company and I came to know about FMCG industry.
There is a cut throat competition in the present scenario among the
FMCG companies. It is very difficult to retain the customers in the
present scenario. The companies are really doing their level best in
satisfying the changing need and demand of customers.
(ii) Supply chain management:- Supply chain management is like blood
circulation in body. Without that blood circulation retail can not
survive and how that supply chain makes retail effective. Because
demand is equal to supply is the first rule of any market so that first
and basic rule is to be competed by supply chain because a market can
205
not wait for the products to come in to market so an effective supply
chain can make retailing effective.
(iii) Public relation:- As my job was to meet with the existing retailers and
to have a interaction with them so that is job of public relation and in
these two months I learnt that how to have a formal interaction with
the client and how to have an interaction to make one convince. I
learnt that to make some body convince one has to come in to level of
communication to some one convince.
(iv) Dissatisfaction of retailers: - As my task was to meet with the retailers
so during my project I meet with several retailers and find a
dissatisfaction level among them. Most of the retailers were not happy
with there type of work and they were agree with that they need more
margin rate on the products and time to time they also demand for the
schemes on the products. The retailers wanted to have a regular meet
with the top level management of P&G once at a regular interval of six
months to solve out their problems.
206
BIBLIOGRAPHY
Marketing Management By Philip Kotlor
(Hesselbein, Goldsmith, & Somerville, 2002, p. 82).
MAGAZINES
India today
Business today
News papers (Economic Times, Business standards, Business week)
WEB SITES:
www.pg.com
www.google.com
207
OTHER
Material Given by Company Employees
WORD OF THANKS
I take the opportunity to pay heartily regards to Dr. D. K. GARG (Chairman) and Mr.
M.K. VERMA (Dean) for lending me their kind support for completion of my project.
I thank all those who directly or indirectly supported me morally, financially and through
providing knowledge by which I could complete my Research.
Last but not the least I am thankful to the management of P&G & especially to my guide
Mr. NIRMAL KUMAR VERMA whose co-operation and guidance was a milestone in
completion of my project
208
209