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BUSINESS GLOBALIZATION

PROCTER & GAMBLE COMPANY

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ContentsINTRODUCTION:..........................................................................................................................................3

Introduction of the P & G:.......................................................................................................................3

Employee Reactions:...........................................................................................................................5

Benefits of P & G business globalization..............................................................................................6

Advantage of globalization:.................................................................................................................7

Change in balance trade of P&G in 20th century:.................................................................................7

Effect of Globalization on Poverty:......................................................................................................7

Benefits of Trade Bloc:.........................................................................................................................8

Economies of scale:.............................................................................................................................8

Globalization and Growth....................................................................................................................9

The Consequences of Globalization...................................................................................................10

SWOT ANALYSIS.........................................................................................................................................12

CONCLUSION:............................................................................................................................................14

RECOMMENDATION:.................................................................................................................................15

REFERENCES:.............................................................................................................................................16

BIBILOGRAPHY:..........................................................................................................................................17

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INTRODUCTION:Definition of business Globalization:

Globalization means the integration and democratization of the world's culture, economy, and infrastructure through transnational investment, rapid proliferation of communication and information technologies, and the impacts of free-market on local, regional and national economies. According to late Pakistan's most prominent economist late Dr. Mahbub-ul-Haq “Globalization is no longer an option, it is a fact. Developing countries have either to learn to manage it far more skillfully, or simply drown in the global cross currents."

Introduction of the P & G:Today, Procter & Gamble (P&G) is one of the world’s most prominent multinationals. It carries a reputation of holding an absolute advantage in marketing knowledge and capabilities, a reputation which is well founded: several P&G brands, such as Ariel, have not only been on the worldwide markets for more than a quarter of a century, but have always remained the market leader or at least fierce competitors for the throne.

However, P&G has had to undergo several organizational and brand changes before it could achieve the success it enjoys today. Particularly, by the end of the Seventies, the firm was experiencing difficulties in transplanting one of its brands from the United States to Europe. This brand was Vizir, a laundry detergent which offered superior performance in a new product form, liquid instead of powder, a form that P&G competitors had tried to market in the past but failed.

But before P&G could even bring the brand to market and convince the European consumer to adapt it, it had to convince their own subsidiaries to accept the product. P&G was thus facing a dilemma: its existing structure, which has been carbon-copied from the United States, was maybe starting to show its limitations. There could be a way to severely reduce new brands’ time-to-market, better organize costs, and obtain a higher synergy between European subsidiaries to share organizational knowledge.

We will analyze the company at this specific point in time, in an attempt to identify its main issues, and review several strategic alternatives to address these issues. The issue is not only based on the desirability of the product form in the target market, it has to deal in what structure configuration should P&G have in order to perform better and reduce unnecessary intra-company confrontations. A global strategy may be in order, or at least an organization of the European operations in a way that resembles a global strategy, since the US operations will remain independent and keep their current structure.

Global structure & Governess:

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Our unique organizational structure offers the global scale benefits of an international company and the local focus to be relevant for consumers in roughly 180 countries where our brands are sold. Our corporate structure provides the framework that allows us to tap the benefits of a global organization with speed and efficiency. Our global operations keep us in touch with our local communities. And our strong governance practices ensure that we conduct our operations with consistently high standards and integrity.

Organization of P&G:

1. P&G were organized into 5 Global Business Units. Each was focused on a different sector of the company’s business.

2. 3 other types of organizations separate from GBU are which supported Market Development Organizations, Corporate Functions, and Global Business Services.

Global Business Services (GBS):

1. Established 7/1/99 as part of a larger reorganization at P&G. Main point of the effort was to move P&G from operating by regions to operating by products. GBS saved P&G several hundred million dollars in its first 3 years of operations.

2. Brought together internal services such as finance, accounting, employee services, customer logistics, purchasing, and information technology, into a single global organization providing services to all P&G business units.

3. GBS reduced headcount, wrote more effective procedures, and shared knowledge across teams in an attempt to provide faster, cheaper and higher quality support for the rest of the company.

“What should P&G do with its Global Business Services unit?”

Four options P&G Considered for GBS (each was evaluated on the basis of potential cost savings, service level improvements, and the impact it would have on employees.)

1. Spin off GBS as a separate entity. GBS would continue to support P&G, but as a separate entity that also supported other firms.

2. Contract with an outside company for the services that GBS currently provided. Similar to typical outsourcing deal, GBS employees would have the option to continue to work on P&G campuses around the world and serve P&G units, but be employed by an outside company.

3. Outsource GBS divisions separately to best-of-breed companies. Similar to Option 2 with respect to GBS employee retention, but P&G would contract with several different companies to provide specialized support.

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4. Keep GBS in-house. The least disruptive option.

Employee Reactions:

1. P&G announced “strategic opportunities for GBS” making it clear that current GBS employees could be sent to work for a different company or companies. The reasons why they made the announcement were:

Management knew that it would be impossible to conceal the strategic ideas from employees.

Thought that potentially destructive rumors would surface if employees were kept in the dark.

Wanted the GBS managers’ and employees’ input.

2. Reactions were mixed:

Employees felt betrayed because GBS had done so much to save P&G money and now they thought the company was trying to get rid of them.

Some saw it as opportunity.

Some transferred out of the dept.

Some quit before they could be laid off.

3. Work productivity declined:

IT Manager quoted: “Nonessential tasks got put off or dropped as a result of poor morale.”

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Management Issues with Outsourcing Options:

Concern with whether or not they wanted to lead the market in an outsourcing deal of this size. Deal to outsource GBS was estimated to be valued at $7-8B over a 10 year period.

P&G would have to negotiate employment terms for GBS employees. Issues at hand were:

1. Guaranteed employment.

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2. Length of employment.

3. Salary/Benefits.

4. Credit for years of service.

Culture fit with providers. P&G Management was concerned with cultural compatibility and many P&G employees worried that if the outsourcing option was chosen, they would be asked to work for a company that did not share P&G’s values and culture.

Globalization policies of P & G:

For years now, more than half of P&G's revenue has come from countries outside of the United States. Also, more than half of the brands P&G makes are only available outside of North America.

More than almost any other company, Proctor & Gamble get what it takes to be successful outside of their home market. After conducting in-home research in China, P&G realized that the Chinese will only buy shampoo in what Americans consider "travel size" containers. P&G refashioned their containers to fit Chinese expectations, and sales skyrocketed. In countless other products, P&G demonstrates a willingness to make changes to appeal to global markets.

Benefits of P & G business globalization:

1. To exchange management experience.

2. To enhance the sales volume.

3. To enhance industrial competitiveness.

Limitation & solutions of P & G’s globalization:

1. Communication barrier of a dishonor company.

2. Divergences in prices.

Global strategy:

Strategy focusing on increasing profitability by reaping cost reductions from experience curve and location economies.

‘‘Think globally and Act locally but also think locally and Act globally.’’

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Advantage of globalization:

1. Increased free trade between nations.

2. Corporations have greater flexibility to operate across borders.

3. Global mass media ties the world together.

4. Greater ease and speed of transportation for goods and people.

5. Reduction of cultural barriers increases the global village effect.

6. Spread of democratic ideals to developed nations.

7. Reduction of likelihood of war between developed nations.

8. Increases in environmental protection in developed nations.

Change in balance trade of P&G in 20th century:

The company has had a long tradition of organic growth for its product line, but it shifted its strategy to complete a series of acquisitions in the second half of the 20th century to broaden its product line. These acquisitions included Folgers Coffee, Old Spice, Richardson-Vicks, and lams Company. The latest acquisition was the Gillette Company, which made P&G the biggest consumer goods company in the world. It also added many household name products to P&G’s product line such as Gillette razor, Duracell batteries, and Oral-B toothbrushes. In 2007, 23 of P&G’s brands had more than a billion dollars in net annual sales, and another 18 products had sales that ranged between $500 million and $1 billion.

Since 2007 the company has been structured into three global business units (GBUs). Each of these GBUs is responsible for its own business segments. The first is the Beauty GBU, which includes both the Beauty and the Grooming Segment. The Household GBU comprises both the Baby & Family Care Segment and the Fabric Care and Home Care Segment. The third Unit, Health & Well-Being, includes the Health Care and the Snacks, Coffee, and Pet Care Segments.

www.wikipedia.org

Effect of Globalization on Poverty:

Globalization has helped raise the standard of living for many people worldwide. It has also, however, driven many deeper into poverty. Small businesses and third world countries are not capable of updating their technology as often as their larger, wealthier counterparts. Unable to compete with multinational firms and wealthy nations, small businesses and third world countries are forced to do business locally, not growing and reaching their full potential.

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Benefits of Trade Bloc:

A trade bloc is an official agreement within a group of countries to trade with exterior nations. Implementing a trade bloc reaps significant economic advantages.

Foreign Direct Investment

An increase in foreign direct investment results from trade blocs and benefits the economies of participating nations. Larger markets are created, resulting in lower costs to manufacture products locally.

Economies of Scale

The larger markets created via trading blocs permit economies of scale. The average cost of production is decreased because bulk production is allowed.

Competition

Trade blocs bring manufacturers in numerous countries closer together, resulting in greater competition. Accordingly, the increased competition promotes greater efficiency within firms.

Trade Effects

Trade blocs eliminate tariffs, thus driving the cost of imports down. As a result, demand changes and consumers make purchases based on the lowest prices, allowing firms with a competitive advantage in production to thrive.

Market Efficiency

The increased consumption experienced with changes in demand combines with a greater amount of products being manufactured to result in an efficient market.

Economies of scale:

Economies of scale are a concept that arises in the context of production of a good or service, and other similar activities undertaken by a business or non business organization. "Economies of scale" refers to economic efficiency those results from carrying out a process on a larger and larger scale.

Economies of scale are a key advantage for a business that is able to grow.

Most firms find that, as their production output increases, they can achieve lower costs per unit.

Economies of scale are the cost advantages that a business can exploit by expanding their scale of production. The effect of economies of scale is to reduce the average (unit) costs of production. (www.ehow.com)

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Globalization and Growth

The terms “globalization” and “growth” lump together several different phenomena.

Globalization might mean capital market integration, goods and service market integration, migration agreements, cultural interchange, or some combination of all of these. We refer to these separately. We similarly distinguish between forms of growth in the discussion of theory, though the empirical section does not distinguish between steady state growth and growth during transitions to a steady state.

Theory

There are essentially three sources of economic growth: growth in inputs of production; improvements in the efficiency of allocation of inputs across economic activities; and innovation that creates new products, new uses for existing products, or brings about more efficient use of inputs. The combination of changes in these three dimensions that brings about higher long-run growth depends on the economy’s characteristics.

Whether or not a change in rate of accumulation of a factor of production or the efficiency of factor allocation, for example, has long-run or only transitional effects on growth depends in part on the technology of production. An exogenous change in the rate of investment or opening the economy to foreign trade has only a transitional effect on growth in a Solow type two-factor constant-returns-to-scale growth model if the marginal product of capital declines to zero as capital increases indefinitely relative to labor. On the other hand, if the technology is such that the marginal product of capital is bounded away from zero, transitional as well as steady state growth effects could arise from an exogenous change in investment or foreign trade policy.

Being open to trade and investment contributes to each of the three sources of growth. Domestic resources are allocated more efficiently when the economy can specialize in those activities in which it has comparative advantage. By being open to capital, labor and other resource flows, an economy is able to augment relatively scarce domestic resources and use part of its abundant resources elsewhere where they earn a higher return. Clearly, efficiency of resource use in each nation and across the world is enhanced by the freedom of movement of resources. Finally, the fruits of innovation anywhere in the world become available everywhere in such an open world.

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The Consequences of Globalization

Mainly, the general views about globalization can be categorized into four main perspectives that are economic, technological, development, and societal respectively.

1. The Economic Perspective: of globalization is the growth of world trade as a proportion of output .It is reflected in the explosion of foreign direct investment (FDI): FDI in developing countries has increased from $2.2 billion in 1970 to $154 billion in 1997. It has resulted also in national capital markets becoming increasingly integrated, to the point where some $1.3 trillion per day crosses the foreign exchange markets of the world, of which less than 2% is directly attributable to trade transactions.

2. The Technological Perspective: involves Information Communication Technology (ICT) what explains this globalization? It certainly lies in the development of technology. The costs of transport, of travel, and above all the costs of communicating information have fallen dramatically in the postwar period, almost entirely because of the progress of technology

3. The Development Perspective: is the most controversial and important of all. It touches the heart of dichotomy which today globalization phenomenon faces. It tries to find the clues of the increasing divide between the rich and the poor, the existing cleavage between the ICT haves and have-nots, under the umbrella of one world concept of integrated markets and capital flows. Above all it challenges the greatest protagonists of globalization, the global institutions of World Bank, IMF, and even WTO one hand. One the other it has created a massive wave of antagonists threatening the industrial nations through anti-globalization relays, protests, and strikes.

4. The Societal Perspective: focuses on some key factors which have become pivotal to ensure the longevity of success of developed nations and that are their sensitivity to the community, cultural norms, and environmental care. This includes the condition of human rights, women empowerment, gender sensitization, civic education, status of women in the society, political status becoming more democratic, freedom of speech, rule of law, equal access to resources and level of education.

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Globalization is also a key to future environmental changes. Decisions made by the private sector, in its search for comparative advantages, are increasingly affecting where and how people live and work. Globalization is having a major impact on population migration, population distribution, particularly through accelerating urbanization trends, and growth of mega-cities. These population changes are in turn impacting on security, governance, poverty, health and environmental factors

Globalization research raises many questions with respect to contemporary forms of power--economic, political, and cultural--as well as strategies to challenge power and promote alternatives. To what extent do globalization processes produce global convergence, for example, towards economic insecurity? Do local conditions produce "varieties of globalization" at local levels? Are states overwhelmed by corporate power? To what extent do states shape the new global economy? With respect to questions of resistance, in what ways do globalization processes facilitate or constrain new opportunities for collective action? In the age of transnational corporate institutions, in what ways has social activism responded to this transnational context?

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SWOT ANALYSIS:

Strengths

1. The large scale, on which the P & G operates, is one of its strengths. It is a global leader for different product categories like fabric, home, baby, beauty etc.

2. The strong branding of P & G makes it one of the most successful brands in the world.

3. It has an extensive experience in marketing in different market segments & is one of the best marketers in the world.

4. P & G is tightly integrated with some of the largest retailers in United States of America as well as world around. And around the world Distribution channels all over the world

5. P & G is known for its diverse brand portfolio. The company is able to customize its global products and brands according to the local preferences.

6. P & G invests greatly in its research and development to.

Weaknesses

1. Many of the top brands of P & G are losing their market share rapidly.

2. The beauty and health products by P & G are mostly for women.

3. P & G does not make and offer any private label products for the retail customers and is, missing an opportunity.

4. The large scale operation of the company makes the culture heavy and processes slow.

5. P & G does not divest its weak or poor brands.

6. The major customers of P & G are located at some of the places & it concentrates heavily as them.

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Opportunities

1. An opportunity for P & G is health and beauty products for men.

2. P & G has doubled its Environmental Goals for the year 2012 and thus, promises more value for the environment concerned customers today.

3. Using the online social networks and internet marketing techniques is also an opportunity for P & G.

4. Divest brands that are not in accordance or do not meet P & G’s long-term goals

5. Company is constantly trying to pursue growth overseas.

Threats

1. There is a cut throat competition in the fast moving consumer’s goods markets today.

2. The competitors are making their product portfolios diverse day b day and using different marketing and promotional strategies to increase their market share.

3. In the market many substitutes are available for P & G products at cheaper prices.

4. The private label growth is also a serious threat to the P & G’s market share.

5. Due to recession, the consumer spending has decreased globally. Also, the prices for raw materials are increasing so cost to the company is increasing.

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CONCLUSION:

Proctor and Gamble of Pakistan is a subsidiary of Procter and Gamble USA established in1990 and started production in 1991.The P&G Company were founded in 1837 in Cincinnati, Ohio and from the very beginning have been a leading manufacturer and marketer of the consumer goods. Company sells more than 250 brands in more than 130 countries and its operations are in more than 70 countries. It is therefore also rated in the top 25 of the FORTUNE 500 companies.

Procter and Gamble is actually the name of two persons William Procter and James Gamble. Both of them wives were sisters and their father in-law asked them to become partners. In the start Procter’s business was candle making and Gamble’s business was soap making. The Partnership year 1837 was a difficult time to start the business although Cincinnati was a bustling market place; the nation was gripped by financial panic. Hundreds of banks were closing around the country. In the 1850s, despite rumors of an impending civil war in the US, they built a new plant to sustain their growing business.

Later they pioneered one of the nation’s profit sharing programs and were among the first in American industry to invest in the research laboratory. By 1890, the fledgling partnership between the Procter and Gamble had grown into multimillion dollar corporation .Television in USA introduced in

1939and P&G is the only company that commercialize its product just after five months .With the passage of time P&G acquire different other companies to enhance the business. In 1980, as it approached its 150th anniversary, P&G was poised for a most dramatic period of growth in its history. Company serves 106000emloyees all over the world.

P& G is a recognized leader in the development, manufacturing and marketing of superior fabric & home care, baby care, feminine care, tissues & towel, beauty care, health care, and food.

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RECOMMENDATION:

1. Human resource and development department must try to make all the employees aware of their training policies.

2. It should be taken proper care of, that the policies are followed full and fairly.

3. General awareness programmers 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.

REFERENCES:1. Associated Press "Procter & Gamble"

2. P&G 2009 AR Results of Operations

3. P&G 2009 AR 2009 Results Summer

4. PG 2008 Annual Report, page 9

5. Financial Times, "P&G to shift 'centre of gravity' with growth in emerging markets"

6. PG, "Connect + Develop"

7. Fast Company ranks Proctor & Gamble 11th most innovative

8. P&G "P&G to Unveil Flurry of Products"

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9. PG 2008 Annual Report, "Overview," page 40

10. www.pg.com

BIBILOGRAPHY:

1. King, Anthony (ed.), Culture, Globalization, and the World-System (Basingstoke: Macmillan, 1991).

2. Kofman, E. and G. Youngs, eds., Globalization: Theory and Practice (New York: Frances Pinter, 1996).

3. Baylis, J. and S. Smith, eds.,The Globalization of World Politics (Oxford: Oxford University Press, 1997).

4. Blank, Stephen, "How Globalization and Freer Trade are Cereating a New Architecture of North America," Hofstra Labor Law Journal, 10 (Spring 1993), 609-

5. Boyer, Robert and Daniel Drache, eds., States against Markets: The Limits of Globalization (New York: Routledge, 1996).

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6. Bradley, Stephen P., Jerry A. Hausmann, and Richard L. Nolan, eds., Globalization, Technology, and Competition: The Fusion of Computers and Telecommunications in the 1990s (Boston: Harvard Business School Press, 1993).

7. Casson, Marc, ed., International Business and Global Integration (Basingstoke: Macmillan, 1992).

8. Chase-Dunn, Chris, Global Formation: Structures of the World Economy (Cambridge, Mass.: Blackwell, 1989).

9. Cerny, Philip G., "Globalization and the Changing Logic of Collective Action," International Organization, 49 (1995), 595-625.

10. Cerny, Philip G., "The Dynamics of Financial Globalization: Technology, Market Structure, and Policy Response," Policy Sciences, 27 (1994).

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