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Procter & Gamble Company's 2015 Strategic Audit

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Procter & Gamble Company's 2015 Strategic Audit GM 105 – 12: PROCTER & GAMBLE COMPANY’S 2015 STRATEGIC AUDIT CSUS – COLLEGE OF BUSINESS ADMIN. | PROFESSOR HATTON FALL SEMESTER Group II: 2015, OCTOBER 30 Monica Cervantes Kayla Crimson Carina Figueroa Alexander Hess Emmanuel Martinez asdfsdfsdf 2015 Strategic Audit |Group II TABLE OF CONTENTS I. Current Situation ........................................................................................................ 2 A. Current Performance............................................................................................. 2 B. Strategic Posture ................................................................................................... 6 II. Corporate Governence ........................................................................................... 14 A. Board of Directors ............................................................................................... 14 B. Top Management ................................................................................................. 21 III. External Environment: Opportunities and Threats (SWOT) ............................... 29 A. Natural Pysical Envirnoment: Sustainability Issues ........................................ 29 B. Societal Environment .......................................................................................... 34 C. Task Environment ............................................................................................... 36 D. Summary of External Environment (EFAS) ....................................................... 39 IV. Internal Environment: Strengths and Weaknesses (SWOT) .............................. 41 A. Coporate Structure .............................................................................................. 41 B. Coporate Culture ................................................................................................. 42 C. Coporate Resources ........................................................................................... 43 D. Summary of Internal Environment (IFAS) ......................................................... 51 V. Analysis of Strategic Factors (SWOT) .................................................................. 52 A. Situational Analysis (SFAS) ............................................................................... 51 B. SFAS Matrix ......................................................................................................... 57 C. Review of Mission and Objectives ..................................................................... 57 VI. Strategic Alternatives and Recommended Strategy ........................................... 61 A. Strategic Alternatives.......................................................................................... 61 B. Recommended Strategy ..................................................................................... 66 VII. Implementation ..................................................................................................... 68 A. New Programs ..................................................................................................... 68 B. Financial Feasibility ............................................................................................ 69 C. Operating Procedures ......................................................................................... 69 VIII. Evaluation and Control ........................................................................................ 70 A. Information Systems ........................................................................................... 70 B. Control Measures ................................................................................................ 72 1 | P a g e Cervantes, M., Crimson, K., Figueroa, C., Hess, A., & Martinez, E. 2015 Strategic Audit |Group II I. Current Situation On October 31, 1837, William Procter, and James Gamble signed the partnership agreement that created the Procter & Gamble (P&G) Company. The two men turned their candle, and soft soap crafting firm into the most profitable consumer goods company within Cincinnati. Today, the conglomerate firm remains the second most profitable consumer goods company globally, second only to Nestle. Procter & Gamble has differentiated themselves from other top competitors as the fastest-moving consumer goods firm. They have generated $11.6 billion in adjusted cash flow, increased dividends for the 59th year in a row, and returned $11.9 billion in the 2014 fiscal year to shareowners. P&G is focused on providing branded consumer packaged goods with superior quality, and value to consumers internationally. Its products are sold in more than 180 countries, and territories through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons, distributors, e- commerce, high-frequency stores and pharmacies. They have on-the-ground operations in approximately 70 countries, and employ more than 110,000 people: constituting over 140 varying nationalities. P&G is now one of the most recognized conglomerates globally with two of the top ten most valued consumer packaged goods brands within the Firm’s portfolio (The World’s Most Valuable Brands, 2015). A. Current Performance Procter & Gamble’s current performance will be evaluated in terms of return on investment (ROI), market share, and profitability. Return on investment “measures the rate of return on the total assets utilized in the company,” and is often used as a measure of management’s efficiency (Wheelen, Hunger, Hoffman, & Bamford, 2015, p. 336). Market share is used to give a general idea of the size of a company relative to its market, and competitors (Investopedia, 2004). A company that maintains its current market share is growing revenue at the same rate as the total market, whereas a company that is growing market share will be growing its revenues faster than its competitors (Investopedia, 2004). P&G’s profitability will be measured in terms of net profit margin and earnings per share (EPS). Net profit margin “shows how much after- tax profits are generated by each dollar of sales” and EPS “shows the after-tax earnings 2 | P a g e Cervantes, M., Crimson, K., Figueroa, C., Hess, A., & Martinez, E. 2015 Strategic Audit |Group II generated for each share of common stock” (Wheelen, Hunger, Hoffman, & Bamford, 2015, p. 336). Return on Investment Procter and Gamble’s annual return on investment was 10.44% for 2013, 10.66% for 2014 and 7.17% for 2015. The 9.8% decrease in 2015’s annual year over year (Y/Y) investment growth was due to a 39.38% decline in year over year net income. Since ROI is often used as a measure of management’s efficiency, Procter & Gamble may need to devise new strategies to improve in this area. However, the Firm may not necessarily be alarmed by a sharp drop in ROI, due to its 2015 investments in a new manufacturing facility, and R&D. (FY 2015) (FY 2014) (FY 2013) PG Annual Return On Investment (June 30. 2015) (June 30. 2014) (June 30. 2013) Y / Y Investment Growth -9.8 % 1.2 % 1.76 % Y / Y Net Income Growth -39.38 % 3.36 % 4.57 % Annual Return On Investment 7.17 % 10.66 % 10.44 % Market Share Procter & Gamble’s Global Business Units (GBU’s) are organized into four industry- based sectors: Global Beauty, Global Health and Grooming, Global Fabric and Home Care, and Global Baby, Feminine and Family Care. Under U.S. GAAP the four sectors are aggregated into the following five reportable segments; 1) Beauty, Hair and Personal Care, 2) Grooming, 3) Healthcare, 4) Fabric Care and Home Care, and 5) Baby, Feminine and Family Care. 3 | P a g e Cervantes, M., Crimson, K., Figueroa, C., Hess, A., & Martinez, E. 2015 Strategic Audit |Group II 1. The Beauty, Hair and Personal Care segment consists of skin and personal care, cosmetics, hair care and color, prestige, and salon professional. P&G’s total market share in this segment is 50.39% (CSIMarket, 2015). According to the Firm’s 2014 annual report, P&G’s Olay brand, which is the top facial skin care brand in the world, held over 8% global market share. In the retail hair care, and color market, the Company exceeded 20% of the entire global market share; the Company’s international success was primarily due to its Pantene, and Head & Shoulders brand products. Throughout the 2015 fiscal year, Procter & Gamble’s total market share has remained unperturbed. 2. Procter & Gamble’s total market share within the Grooming segment, which consists of shave care, and electronic hair removal, was approximately 70%: primarily due to its Gillette franchise. They also reported to hold over 20% of the male shaver market, and 40% of the female epilator market. Then, In 2015, Procter & Gamble’s total global market share fell to 60%; however, the Firm’s market share for male shavers remained at 20%, while its market share for female epilators rose to almost 50%. According to Forbes magazine, P&G’s Gillette Razors retained its success because of a strong reputation, and number one ranking within consumer packaged goods brands. (The World’s Most Valuable Brands, 2015). 3. The healthcare segment consists of personal, and oral healthcare, of which P&G has a total market share of 11.51%. In 2014, P&G occupied the second market share position amongst oral care industry members, with 20% global share. The Firm was also amongst the top ten elite competitors within the personal healthcare industry. 2015’s global market share percentages for oral, and personal healthcare were the same as for 2014. 4. P&G’s total market share
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