Category: Business

P&G conducted marketing research in Europe when it faced declining sales in Europe, more significantly in Germany. The research found that the threat to P&G was not from traditional rivals like Unilever, L’Oreal SA, etc., but from regional retailers, who were giving the company a tough fight. The research brought to light the fact that retail stores in Germany stocked unbranded diapers and detergents, that were sold at half the price of P&G’s products i.e. Pampers and Ariel respectively. The marketing research showed that one-fifth of all retail sales in Western Europe were attributed to private labels. In fact, the share of private label sales of total sales of the retailers was predicted to go up to 30 percent. One of the leading retail stores in Germany, Aldi, provided customers with unbranded or private label products, where they directly competed with the renowned products of P&G. For instance, Aldi stocked a private label product Putzmeister, a cleaner, to beat P&G’s Mr. Clean. Alarmed by the number of retail brands gaining a firm foothold in the retail market segment, Paul Polman, President for P&G Western Europe, decided to cut the prices of its commodities. As a part of this decision, the company reduced the price of the Pampers basic model to make the price range more affordable. The company followed yet another strategy by introducing even cheaper versions of its products. In this way, P&G avoided cutting down the prices of its existing products. For instance, the company launched Mr. Clean, a cheaper detergent version, instead of reducing the prices of Ariel. Meanwhile, the company also introduced and promoted improved versions of its premier and costlier models. P&G introduced a costlier version of Charmin, a toilet paper, to enhance sales in that product category. The company complemented the launch with an ad campaign that asked the consumers “Don’t you deserve a bit of luxury?” and tried to justify the high cost of the product. P&G also acquired Gillette Co, which made batteries and razors, to diversify and expand into more lucrative areas. The company took various steps to retain its brand image too. As a result of its efforts, the company’s net profit increased by 122 percent when compared to its sales during the previous three fiscal years. In India too, the company faced stiff competition from Hindustan Lever Limited (HLL), an FMCG company and a price war began. Until then, the Indian FMCG industry was in a sluggish state with the industry growth rate varying between 1 and 1.5 percent. However, the industry witnessed a revival, when the players in the sector resorted to price cuts. P&G resorted to price cuts to revive declining sales in its Indian operations. The company began its efforts by announcing price reductions on sachets of detergent products namely Ariel (from Rs 1.50 to Rs 1.00) and Tide (from Rs 3 to Rs 2). Soon afterward, the company announced a reduction of up to 50 percent on large packs (500 gm) of these products. While the price of Ariel went down from Rs 70 to Rs 50, the price of Tide was reduced from Rs 43 to Rs 23. HLL followed suit by reducing the price of its flagship detergent brand Surf Excel. P&G claimed that the sales of its detergent products doubled after the price cuts were implemented. P&G also had to deal with competition in the shampoo market, when HLL introduced ‘buy-one-get-one-free’ offer. Instead of resorting to price reductions, the company concentrated on heavily promoting its brand ‘Rejoice’ shampoo. Also, P&G introduced a line extension of its shampoo product ‘Pantene’. P&G’s share in the detergent market increased from 6 percent to 10 percent in one year. Analysts, however, were of the opinion that P&G had shifted its priority from being a value-based company to a volume-based company, in a bid to take on its rivals. Questions: 1. Is Procter & Gamble right in resorting to price cuts to revive its flagging sales? Discuss. 2. Comment on Procter & Gamble’s shift to a ‘volume-based’ company from a ‘value-based’ company.

The report should follow the following outline: 1. Describe Your Company Describe your imaginary company and its operations, its size, etc. It can be a service company or a company manufacturing a product. It can be an internet based company as long as the company’s overseas operations are such that it will experience all the challenges and opportunities faced by more traditional companies expanding overseas. In describing the operations of your imaginary company, ensure that you give a clear description of your business model and structure. For instance, if you operate a chain of coffee shops, where do you get your coffee from? If you manufacture a clothing line, do you have your own retail outlets or do you wholesale your product to existing retailers? If you repair an electronics product, e.g. smart phones, do you do this at the retail level or do you offer your services to existing large tech companies? 2. Describe Your Home and Host Countries The country where your company has been operating domestically will be U.S. In selecting a host country for international expansion, the country should be one of interest to the team, have potential for business expansion, and be a country where you can develop the type of information and insights you will need in developing your integrated project. Be sure that you explain your reasons for selection of your host country (see chapter 3 and criteria for selection of a host country, benefits, costs, and risks). 3. Decide on an Entry Strategy Describe your planned market entry strategy and give your reasons for this strategy. Also, how does your entry strategy relate to your core business strategy? See chapter 15. Note, to build a MNE, your entry strategy cannot be exporting or licensing. You have to set up some form of FDI in order to have operations in your host country. . 4. Describe the Environment in Which You Will Be Operating Your Company Describe the overseas environment you will be operating in and the critical operational, political, legal, and economic factors you must consider and how they will affect your company. Chapters 2 and 3 provide important background on the issues you should be describing, but you will have to do research on your particular host country, particularly whether it is developed or developing and its stage of development. 5. Describe the Cultural Profile of Your Host Country Provide a cultural profile of the local area in which you will be operating. What are the workers going to be like? What kind of reception do you anticipate from local government, suppliers, distributors, and so on? How will the culture affect your leadership and motivational approaches? Chapter 4 is important for this section of your report, but again, you will need to conduct research. 6. Describe Your Organization Chart Showing the Company and Its Overseas Operations Draw up an organization chart showing your company and its overseas operations. Describe why you have chosen this structure and how you will connect your overseas operation to headquarters. Also ensure that your structure and controls make sense in terms of your chosen business level strategy (cost reduction, localization, or both). Consult chapters 13 and particularly chapter 14. 7. Decide on a Staffing Policy for Top Level Managers in Your Overseas Operations How will you staff your management positions in your overseas operations? What is your rationale for this approach? Consult chapter 19. 8. Describe the Kinds of Leadership and Motivational Systems You Will Use Given the culture where your overseas entity will be operating, what kind of leadership and motivational systems and practices do you think will be most effective? Consult chapter 14 and read the case on Lincoln Electric (page 419) where what worked in the U.S. was a cultural and motivational disaster overseas. 9. Discuss the Kinds of Communications Issues Your Company May Face Discuss the kinds of communications problems your company may face in the host country working environment. How should they prepare for and deal with these problems? Consult chapter 4 on culture and understand difference between high and low context communications. 10. Discuss Any Special Control Issues Your Company May Face in Its Overseas Operations Explain any special control issues for your overseas operations that concern you. How do you plan to deal with them? There is a host of potential control issues, e.g. protecting intellectual property, protecting against graft, quality control, protecting your brand, etc. Chapters 2, 3, and 5 are relevant here, but you will have to think about your operations and do research on the particular circumstances to be faced in your host country. 11. Identify Concerns of the Host Country and the Local Community Identify the concerns of the host country and the local community regarding your operations there. What plans do you have to deal with their concerns and to ensure a long-term cooperative relationship? For instance, local concerns may relate to such matters as environmental pollution, creating jobs, following government regulations, employee training, and advancing new technologies, etc. Here you have to think politically and what you need to do to be accepted and ideally welcomed in your host country. This will require research on the particular concerns and issues of your host. List references used at the end or in endnotes. Include in-text citations when you used secondary resources, as you would in any paper.