This report attempts to examine a specific marketing situation affecting Procter & Gamble. It aims to critically analyze a case study occurring in the late 1980’s, early 1990’s and propose an international marketing strategy for the future.
Procter & Gambler is a multinational company operating in all over the world with a very wide variety of mainly household products as well as its personal care products. The question at stakes lies on the multinational’s quest to go international, or “global” in its cosmetics business where the company is somewhat new as fas as experience concerned.
Specifically, the assignment, after analyzing the case study given will attempt to propose an international marketing strategy for Procter ; Gamble and suggest a strategic international plan for the future.
2. The current marketing situation facing P ; G.
P ; G under the aggressive chairman, Edwin L. Artzt is looking for a growth via acquisitions, diversification and a global coverage in order to achieve “International Power” implementing at the same time synergies in Sales, Advertising ; Promotion as well as in Distribution and to achieve global economies of scale. This was also the objective of the innovative chairman Edwin.
In search for growth of P ; G
P ; G is established in the household products. Artzt recognized that cosmetics carried high cross margins and resisted recessions in the global arena at the same time wanted to use P ; G existed resources as carrier for the new acquisitions and vise-versa to use the acquired brands, its resources and experiences (and all the marketing networks) as a carrier in order to sell P ; G existed products in the diversified markets. Companies cannot longer focus on their own mature markets (Kotler 1997) despite the unstable international political, economical, ecological sociological and technological environmental changes (STEEPLE), they do not have any other choice but to internationalize and globalize their operations. (Kotler, 1997) 1
Market Size of P ; G
See appendix 1 for Estimated industry sales for the 1998-year. (Page 16)
PLC of P ; G markets
See appendix 2 for P ; G markets PLC. (Page 17)
* Brand Names. (Potential brand loyalty by consumers)
* Established Leader in household products
* Heavy advertising and media pioneer
* Customer Knowledge ; experience in similar household products
* Aggressive Sales Force ; effective sales promotion.
* wide distribution network (via other household products Brands)
* Manufacturing efficiency in cost cutting ; financial ability to operate in Economies of Scale. (as other large companies)
* Product Innovation
* Limited knowledge in the cosmetics market
* When they go global they are going to face Multilingual and communication problems. (e.g. Japan)
* Accused for Animal Testing
* Possible changes in Demographics of each international country.
* New market sales via internet (e-commerce)
* Increased Sales in Cosmetics industries
* Research demographics
* Identify new market Segments (increase sales)
* Strong Competition Operating Years in the market (Revlon, L`Oreal, Clinique)
* The potential illegal copy/duplication of its products by other firms. (Black market)
* Risk of international Environment ( STEEP FACTORS )
Source : Electronic Journal, ABI /Inform : J. Michael , (September 1999) 2
The External (Macro) environment.
Social : International societies (Japan, EU) have accepted the cosmetics industry products as primary needs for the people. (Consumerism) So the sales in the cosmetic industry worldwide have increased and give potential to many cosmetic companies to enter the market.
Technological : Incremental changes in the technology such as Internet (e-commerce) have actually created new virtual business markets and changed the way people and informed and how they buy their cosmetic products.
Economics : P ; G as a multinational company it should have a very large amount of financial reserves and economic validity. These mean that the company has the ability to expand their competitive markets making new branches(or buying other competitive companies) even if there is recession, problems with exchange rates, trade barriers or other drawbacks operating in the market.
Ecological : Procter ; Gamble has been accused of testing their products on animals which these gives a very bad image to the company’s name while other companies operating in cosmetic sector such as BODYSHOP have created a brand loyalty with their customers only because they base their products in natural products without chemicals and non-animal testing (Green Environment Policy)
Political : The Political situation in some countries abroad (e.g. Turkey) is often very risky as we can see rapid changes in government, laws and regulations as well as tariff barriers. However, due to the existing experience in the household products market he P & G has the ability to penetrate in their household distribution.
Source : (Gerry Johnson & Kevan Scholes, 1999) 3
The Internal (Micro) Environment
2.3.1. Products – Brands – Acquisitions
In 1985 the company made its first diversification step to skin care products by acquiring the Oil of Ulay skin care line (NON related diversification)
In 1989 has decided to go along with the cosmetics business and bought NOXELL Corporation and its “Cover girl” and clarion brand cosmetic lines. From this decisions Artzt proved that the high growth of sales of P & G in 1990 came from the personal care products. That is from total $24.08 Billion the contribution mix of products to the company was as follows.
P & G Product Mix Contribution to Total Sales
Laundry Products and Cleaning
Food and drinks
Chemicals and Pulp
This three to five years charging in the mix of P & G products, brought high sales growth to P & G in general and at the same time strengthen Artzt’s decision to continue the company’s efforts into this market sector and to achieve two more objectives to sustain the company’s growth in USA (the domestic market) and via detailed selection plan of growth to expand and achieve international strength by starting from selective countries. Just to mention that 90 % of Cover Girl and Clarion Line Sales were done in the domestic market giving the opportunity for the brand to be considered in the global perspective via intergrating standardized marketing efforts in a number well selected international markets ( Kotler, Armstrong et. all, 1996) 4
In the same period Max Factor and Betrix Sales were 80% out of USA market with emphasis Japan and Europe. Artzt’s drives to acquire the brands in 1991 (RELATED DIVERSIFICATION) were to secure the $ 800 million sales of the existed Max Factor and Betrix Brands in the international market, so he actually bought “Market Share” and the Network in the global arena and has now set the “HORIZON FOR GROWTH”. He ct down the time required for P & G to go international with its existing resources which it could have cost the company million of dollars , efforts and mistakes, and at list three to four years sales Gaps.
What is remained for the Artzt was to set his implementation plan and re-engineer or review his strategy and tactics and examined in detailed ways and means he could strengthen his existed position in the local market with existed brands and at the same time to reverse the mix of Max Factor/ Betrix and Network to strengthen / introduce P & G’s activities in the countries used not to be strong or not be there at all e.g. Cover Girl Sales in Japan were “Zero” and after the acquisition of Max Factor Brand went up to $ 237 million and in Europe $ 340 million.
Artrz plan was to move to INTEGRATED DIVERSIFICATION in the Global arena
2.3.2. The Changing needs – habits of the consumer
Artrz’s initial intuition that cosmetics are not affected by any recession is reviewed as consumer purchasing power can be changed if attention is not given to the continuous changing habits, economic aspects of the society. More specifically :
In USA Market
* Consumers were deserting Department stores looking for distinctive brands offered by specialty clothing chains & Cosmetic boutiques as a result department stores sales were declining & mass merchandising shares were increasing.
* Consumers demographics & shopping habits are changing
* Mass-market sales are going through drug & discount stores.
* Baby boomers decided to invest in skin care products & less in cosmetics, nail polish & lipsticks.
* Young women often wanted to look older and use more cosmetics & nail polish than they needed, older they do not do.
* Due to zero growth birth rate there are fewer younger women.
IN JAPAN AND EUROPE
* Consumers were deserting DPT stores looking for distinctive brands offered by specialty clothing chains & cosmetic boutiques as a result Dpt stores slaes were declining & mass Merchandising share were increasing.
* Consumer demographics & shopping habits are changing.
* The Changing Japanese Lifestyles & tastes
* The Changing habits in packaging, styles & colour & images.
P & G is a multinational company selling a wide variety of products and operates in a very highly competitive environment. The Direct main competition comes from :
* Maybelline brand Lines
* Uniliver the Anglo-Ducth diversified in USA and bought Faberge & Elizabeth Arden
* ESTEE LAUDER
* Other Japanese Firms
The indirect competition comes also from the actual places the products are sold such as boutiques Avon type (Direct Marketing & Home Shopping Products).
The above companies/ Brands are holding various market positions in the global arena. Also there is strong competition among companies for self space as well as too many manufacturers chasing too few customers.
In Europe competition is strong particularly in France and Germany with L`Oreal. In General the move of P & G to acquire Max Factor brand help the company to acquire quick market share in the international market.
Where do the buyer buy the products?
2.5. Distributors & Networks
* Department Stores
* Mass – Market Sales (Outlets)
* Specialty Stores
* Direct Marketing (Avon)
* Home Shopping
* In Europe (Chain Stores & Pharmacies)
* Duty Free Shops
2.6. Advertising & Promotion
Most of the competitors including P & G follow the same concept of Advertising & promotion concepts. However there is not clear cut advertising plan of P & G to create product awareness in “International market” in order to stimulate trial and a plan for repeat purchase.
General Comment (See question 3-Action Plan)
A review plan of Action is required for the Global action of P & G taking into account the continuous environments & habits changes.
Propose an international marketing strategy for P & G.
Procter & Gamble is in the Cosmetics market Selling :
* Skin Care
P & G’s International Strategy Should focus on the following criteria.
* Achieve International – Global Power via Standardization, Adaptation its marketing mix to target markets wherever required and consolidation of all P ; G’s Resources built over the years or acquired for the purpose to expand and grow.
* Develop a Cross Cultural Strategy to understand better the various countries cultural aspects and adapt accordingly wherever required or imposed motivated changes.
There are certain guidelines suggested by Kotler (1997) 5 for a company like Procter & Gamble to follow in order to expand the total cosmetics market and at the same time to expand its market share given various risks involved (uncontrollable) such as exchange rates, government intervention, politics, tariffs, marketing mi and necessary adaptation in going international / Global. (Kotler, 1997)
The set guidelines create of framework for analysis, planning, implementation and control for a continuous “International Monitoring Managenent System” that would swift and mobilize resources according to the country’s growth and profit objectives.
Those guidelines or actions are :
* Decide on which markets segments to enter (targeting markets)
* Analyze international market opportunities
* Evaluate and control regularly
* Implement marketing Strategy for :
* Products/Brand Names/ features /Packaging/ enchancement /e.t.c.
* Sales Force
* Channels of distribution and logistics
* Communications/ promotions
* Pricing and Prices
* Organization Structure
* HRM- Personnel
* Marketing Information and Feedback
* Possible assistance and contribution per Society/ Culture
* Other organization policy’s
* Organize operational team
* Develop Strategic Marketing plan per country and consolidated
* Identify technical issues
* Allocate & re-allocate regularly necessary resources
* Establish models of market entry modes taking into account past experience
(Source Kotler, 1997, P.173) 6
Artzt’s view was that the Market Opportunity is there (in the international markets) his concern was how to enter and gain international market share and at the same time to generate additional growth to the mature domestic market without even making a proper global market research study.
The phrase of the case study mentioned by Artzt “HAVING TO LEARN IN THE COSMETICS INDUSTRY” was enough for him, with limited prior industry knowledge, he scan the competitive environment saw the industry’s gaps and acted as gaining all the above by acquiring other competitors existed networks, sales points/ outlets and gain international market share adding also considerable growth to the domestic market.
P & G’s engine of growth is its historic strength in innovation and branding. The technological improvements shall give the company a global method to expand further with the implementation of its e-commerce and Internet global facilities and activities and probably to upgrade its image to more luxury or personalized products.
Strategic International Marketing Plan for 2000-2005
4.1. Situation Analysis – The Market
Procter ; Gamble is a leader in the household care products and has been currently gain a good market share in the cosmetics business.
The company’s domestic market was USA and via acquisitions currently has expanded International to Europe, Japan and making plans for Australia and Asia.
(See Question 1)
4.2. The Need/ Products
Various products to stimulate: Hope, Maturity, Youthness and skin heath care aesthetics.
4.3. P & G Product Diversification
Cover Girl Line
Max Factor Cosmetics
Betrix product line including Hugo & Laura Biagiotti Brands
4.4. Potential Market
Values in Millions
Potential customers USA Europe JAPAN TOTAL
Potential Market 350 350 80 780
INTERNATIONAL MARKET CONCENTRATION
AND THEN AUSTRALIA AND ASIA
4.5. Industry Trends
* Produce high quality cosmetics with artistic or collective packaging.
* Offer package deals to potential customers to stimulate trialability
* Great piracy at lower level class market
* E-commerce sales demand is appearing into the market.
* Personalized sales demand is appearing into the market.
* Drives to the Green product concept.
4.6. Distribution Channels
Where do the buyers purchase the products in general?
* Dpt Store
* Mass-Market sales (outlets)
* Direct Marketing
* Home Shopping
* Chain stores & Pharmacies Emphasis in Europe
* Duty Free Shops.
4.7. Key Buying Influences
* The changing habits in packaging, styles, colours and images.
* We cannot generalize, however it seems that consumers were deserting DPT stores looking for distinctive brands offered by specialty clothing chains & cosmetics boutiques as a result DPT stores sales were declining & mass Merchandising share were increasing.
* The build up maturity of some cosmetics for the Young Women market between 18 to 25 years of age.
* The Build up of youthness of some cosmetics for the older target market of 35 and above.
The competition is very Strong in Europe and Japan, the main companies competing in the international arena are:
* Maybelline Brand Lines
* Uniliver the Anglo-Dutch diversified in USA and bought Faberge and Elizabeth Arden
* ESTEE LAUDER
* L’ OREAL
* JAPANESE FIRMS
* CRISTIAN DIOR
* BODY SHOP PRODUCT LINE
Additional competition is coming from Dpt store product lines specialty shops, direct marketing and home shopping networks.
No prices or pricing polished appear from the case study.
(See Question 2)
Advertising and promotion is following the competitive trends without any innovative initiation by P ; G. There is not any information whether the company is promoting awareness, product trialibility or push for repeat purchase.
4.10. Objectives over the next 5 years
* To increase sales with existed products in existed markets by 10 %
* To gain 30 % market share in Europe and Japan with both existed and new products
* Maintain USA market share
* Maintain its Global Market share to 34 %
* Invest in new technological markets such as Internet. Developing Web-pages for the new cosmetics line and e-commerce support.7
4.11. Strategies and Tactics
In addition to strategic issues explained in question 2- developing the strategy I should suggest the following tactics :
Product : – Standardize Colors, styles and packaging so that product could easily identified.
– Develop multi product packaging to accelerate awareness, trialibility and usage.
– Develop collective or event packaging of limited edition.
– Develop/ improve image of brands over the next 3 years
– Develop products to fit :
a. Baby Boomers
b. Youth to look more mature
c. Target women of 35 years of age and above in order to close the gap between baby boomers for USA Markets.
– Introduce cosmetics for the male market.
– Develop or acquire products in order to achieve greater market share.
* Review storage display in line with the decision to change colours, styles e.t.c.
* Standardize storage display
* Decision for the international storage and physical distribution channels and logistics.
* Sell via Dpt stores
Depending on the cultural habits.
4.13. Promotion – Training
Use a general and a target market promotion :
* Use models to enforce women motives once a month in the various pop stands.
* Use actresses up to the age of 35 years to generate youth.
* Use young actresses to generate maturity styles and colours
* Set up day events, special offers, coupons e.t.c.
* Introduce a frequent customer purchasing card with bonuses.
* Train the salesperson behind the counter on the “How To” Concept in order to :
i. Attract the customers
ii. Demo products
iii. Keep customer continuous sold.
* Offer free demos
* Build up alliances with the watch or jewelry factories
* Use a famous actor for the main pop material and TV advertising (as a spokewoman)
* Standardize pricing globally
* Increase value of the products by offering packages with additional P ; G products.
* Offer Discounts to frequent buyers (Use plastic Cards)
4.15. Positioning and information
* Review positioning per country every six months in order to make adaptations if required.
* Establish a global agent either inter-company or outside of the company to continuously control results.
* Review results per country and compare them with the Global model set.
* Contract a detailed analysis in order to identify consumer habits and trends as well as population/ demographics changes in the countries proposed to sell including USA.
* Run Brand / Image analysis per country
4.16. Budgets ; Action Plan
Allow 10 % spending on sales to support the growth in the International and Domestic market.
Activity Time Responsibility Cost
1. Run analysis as above
2. Run Brand analysis every year.
3. Standardize colors ; packaging
4. Develop Collective or event packaging
5. Develop products for baby boomers
6. Locate the right physical distribution center to avoid stock out.
7. Standardize storage display
8. Train Sales persons of “HOW TO”
9. Print Customer discount cards
10. Prepare global advertising campaign.
Business Cycle of P ; G Company for the year ended 1998
The company’s actual performance could be deduced by looking at its 1998 Annual Report. Its worldwide net earnings for the year 1998 were 3.8 billion dollar, which is 11% increase over the prior year and $37.2 billion net sales accounting for a 4% increase over the prior year. It has total assets of $30.9 billion and liabilities of $5.7 billion.
It’s obviously clear that the company is taking good care of its products because its expenses in advertising and the research and development of the goods are $2.6 and $1.56 billion respectively. This is an evidence of how much consumers demand our products and how this initiates the company to develop 300 brands to satisfy five billion consumers all over the world.
(Source Internet Site of P ; G) www.pg.com
Appendix 2 :
P ; G cosmetics Product Life Cycle
There are three PLC’s with P & G plus the consolidated PLC since the acquisition of Noxell in 1989.
1. The PLC that comes from the domestic activities
2. The PLC that comes from the international activities
3. The consolidated PLC as a total cosmetics business.
1) Kotler P. (1997) “Marketing Management, Analysis, Planning and Implementation” Ninth Edition, UK, Prentice Halls
2) Electronic Journal, ABI /Inform : Michael J, (September 1999) “Direct Marketing”, Subject “P & G consumer centric approach the Web”, Published by Garden City; Vol. 62, Iss 5, Page 47 – 52
3) Johnson G. & Scholes K., (1999) “Exploring Corporate Strategy” Fifth Edition, Prentice Halls, Europe, Page 105
4) Kotler P., Armstrong G., Sauders J. Wong V. (1996) “Principles of Marketing”, The European Edition, Prentice Halls, UK
5) Kotler Phillip (1997) “Principles of Marketing”, Ninth Edition, Prentice Halls, Page 173
6) Electronic Journal ABI/ Inform, Jack Neff (Nov 6 2000) “P & G gathers Web Strength” ,Vol. 85, Iss 18-20, Published in London
7) Lecture & Tutorial Notes
8) Official Internet site of Procter & Gamble : www.pg.com
1 Kotler P. (1997) “Marketing Management, Analysis, Planning and Implementation” Ninth Edition, UK, Prentice Halls
2 Source : Electronic Journal, ABI /Inform : Michael J, (September 1999) “Direct Marketing”, Subject “P & G consumer centric approach the the Web”, Published by Garden City; Vol. 62, Iss 5, page 47 – 52
3 Johnson G. & Scholes K., (1999) “Exploring Corporate Strategy” Fifth Edition, Prentice Halls, Europe, Page 105
4 Kotler P., Armstrong G., Sauders J. Wong V. (1996) “Principles of Marketing”, The European Edition, Prentice Halls, UK
5 Kotler Phillip (1997) “Principles of Marketing”, Ninth Edition, Prentice Halls, Page 173
6 Kotler Phillip (1997) “Principles of Marketing”, Ninth Edition, Prentice Halls, Page 173
7 Source : Electronic Journal ABI/ Inform, Jack Neff (Nov 6 2000) “P & G gathers Web Strength” ,Vol. 85, Iss 18-20, Published in London