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Management Accounting (Học viện Ngân hàng)

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Ten internal strengths of P&G

Strong consumer goods brands - Strong consumer goods brands ensure Procter & Gamble’s
competitive advantage. For example, Tide and Pampers are household names that contribute to
consumer loyalty and P&G’s stable market share (Andrew, 2017).
The sales revenue increase among pandemic (2021) – According to annual report of P&G (2021)
organic sales increased by more than 6% in the fiscal year, core earnings per share increased by
11%, currency neutral core earnings per share increased by 11%, and adjusted free cash flow
productivity increased by 107 percent. These are excellent achievements under difficult
conditions, on top of equally excellent performances prior to the pandemic.
Efficient product distribution network - In relation, Procter & Gamble maintains a high-
efficiency global product distribution network. This network involves company-owned facilities
as well as third-party service providers. (Andrew, 2017).
Excellent R&D – An advantage of P&G is its excellent R&D due to which it has innovated and
brought many products in the market which have taken the market by storm. This is the reason
that P&G has a good bottomline. All its products are innovative in nature (Hitesh, 2019).
Multi national and Multi product line presence – P&G is a Multi national company being
originated from United States. It has a fantastic multi national presence and is known to operate
in a whopping 180 countries. (Hitesh, 2019).
The value of shares of P&G has increased steadily over the years - Quarterly core earnings per
share increased by 15% on average in 2019. Over the last six quarters, the company's core profits
per share have grown by an average of 9%. (Annual report 2021).
Fantastic distribution channel – P&G brands have covered all distribution channels, whether
rural, urban, modern, or online. The demand for P&G products is extremely high.
Sales increased strongly, especially in two major markets, the US (8%) and China (12%) (Annual
report 2021).
Market Leader in FMCG Market: Two out of three Indian customers use Procter & Gamble
products. To emerge as a market leader in the Indian market, Procter & Gamble has used a
targeting approach.
P&G e-commerce sales increase significantly - Due to the epidemic situation, consumers tend to
buy goods through e-commerce sites. E-commerce sales increased by 35% year over year to
more than $10 billion, accounting for 14% of total Company sales. (Annual report 2021).
Ten internal weaknesses of P&G company
Firstly, it is the unability of P&G to control fake products sold under their brand name.
According to Liang Yun, public relations manager for Procter & Gamble (China) Ltd, since the
success of P&G in China in 2001, the development of its fake products has increased noticeably
that have cost the company at least $150 million so far. Conforming to Valentina Ulibarri, Ariel,
Gillette and Head & Shoulders are three most common conterfeits of this brand. They impact up

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to 20% of sales in the most important countries in Latin America. Althought P&G has partered
with CBP to stem counterfeits in the supply chain for many years, it is a big problem for the firm
today.
Secondly, Procter & Gamble company is much relied on their third parties in many
aspects of business that can create many risks. In P&G’s annual report in 2021, it is stated that
due to the wide-ranging scale and scope of its business, they must rely on relationships with third
parties, including suppliers, contract manufacturers, distributors, contractors, commercial banks,
joint venture partners and external business partners, for certain functions. Thus, if they do not
manage their third-party relationships strictly and effectively, their results of operations and cash
flows could be adversely impacted.
In addition, the annual report shows that P&G’s costs are subject to fluctuations,
particularly due to changes in the prices of commodities (including certain petroleum-derived
materials like resins and paper-based materials like pulp) and raw and packaging materials and
the costs of labor, transportation (including trucks and containers), energy, pension and
healthcare. In 2021, their raw material and transport freight costs have risen sharply. This has
effected directly on the revenue of the company.
The next one is the problem on imitible products. In the SWOT analysis of Mr. Andrew
Thomption in 2017, he supposes that the imitible nature of P&G’s product is major weakness of
this company. Mr Hitesh Bhasin also shares the same opinion with the previous determination.
Reasonably, P&G’s products are lack of distinctive competency because they are easy to be
replaced by similar products from other brands. For example, in terms of frabic and home care
product, Ariel Matic can be replaced easily by Omo Matic or Surf Matic. As a result, the firm
may be reduced its market share in the future.
Besides, the limitation of product diversity and innovation is also a problem of P&G.
Althought it is declared in the 2021 annual report that the firm has a focal point on R&D, there
are not much change in the diversity of its product lines. Instead, the P&G’s innovation efforts
are mainly focused on already existing brands. In the last few years, P&G has not performed well
in the innovation of a completely new brand or market segment, a quality for which it was
known. Evidently, in the skin and personal care segment, the market trend changes every single
month, a new fragrance be introduced or a new variant be introduced in the market continuously.
However, Ivory brand was the oldest brand, published in 1897 Olay brand was first introduced in
1952, Secret brand has existed since 1956, the latest brand of P&G is Native brand, founded in
2015. Furthermore, increasing recalls in recent years were a difficulty P&G had to face. Product
recalls such as aerosol products from Pantene, Herbal Essences, Old Spice, which had a bad
influence on the P&G’s brand image. Thereby these recalls will increase costs and
simultaneously degrade the company’s financial performance.
Another weakness is its limited online presence. The development of e-commerce in
recent years is strong and indispensibe. Retail companies and manufacturers are continuously
increasing their online operations. For example, many small and large consumer goods firms are
using their respective ecommerce websites to sell products online. However, when we search for
Procter & Gamble’s ecommerce website and the P&G Shop, its presence is not common as its

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wide-world operating scale, mainly in the United Sates. Althought the ecommerce sales of the
company were up to 35%, but lower than its competitors, such as: Unilever with an increase of
49% in ecommerce sales in 2021 (Chloe Rigby, 2021).
According to Mr Hitesh Bhasin, organization structure of P&G causes slow decision
making. He supposes that P&G is an old organization and as there are so many ABU’s and
portfolio’s to manage, the decision making is said to be slow and hence it affects the organizatoin
as a whole.
Next, P&G’s growth rate is stagnent in recent years. After having reached 74.4 Billion
dollars in 2014, the company has seen its net sales declining in the recent years. Revenue has
kept declining till 2017 to reach 65.1 Billion dollars in 2017. Then since 2018, the revenue has
started to grow slightly. Generally, over the last 5 years, revenue of P&G illustated a stagnate
growth. (Procter & Gamble Revenue 2010-2021)
After that, total inventories increased by 12.02% to $6673 billion in 2021. (Annual
report, 2021). Otherwises, the inventory turnover of P&G had a decrease from to 7.4 to 6.4
during the period 2018-2021. This will impact on the sales of company.
Lastly, the small product portfolio in the men beauty and health care industry can be seen
as a weakness of P&G. Because the firm’s products focus on the demand of customer. Men’s
personal care market is expected to hit $166 billion in 2022, according to Allied Market
Research. Nearly 40% of adults aged 18-22 have shown interest in gender-neutral beauty
products, according to NPD’s iGen Beauty Consumer report. Male-targeted skin-care product
sales have jumped 7% in the past year, NPD said. However, the company did not recognized the
development rate of men beauty and health care products. Appatently, P&G is not sensitive
ennough to recognize the opportunity to rebust the company.
Here is the IEF matrix for P&G company :
IFE Matrix of P&G Company
Strengths Weight Rating Weighted score
1. Strong consumer goods brands 0.08 4 0.32
2. The sales revenue increase among pandemic 0.07 4 0.28
3. Efficient product distribution network 0.08 4 0.32
4. Excellent R&D 0.04 3 0.12
5. Multi national and Multi product line presence 0.05 3 0.15
6. The value of shares of P&G has increased
0.05 3 0.15
steadily over the years
7. Fantastic distribution channel 0.05 3 0.15
8. Sales increased strongly in 2 main market 0.06 3 0.18
9. Market Leader in FMCG Market 0.07 4 0.28
10. P&G e-commerce sales increase significantly 0.05 3 0.15

Weaknesses

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11. Unability of P&G to control fake products sold

0.06 1 0.06
under their brand name
12. P&G is much relied on their third parties in many
0.07 1 0.07
aspects of business
13. Cost is subject to fluctuations 0.04 2 0.08
14. Imitible products 0.09 1 0.09
15. Limitation of product diversity & innovation 0.05 1 0.05
16. Limited online presence 0.02 2 0.04
17. Organization structure causes slow decision
0.02 2 0.04
making
18. Stagnant Growth 0.01 2 0.02
19. Inventory increased by 12.02% in 2021 0.03 2 0.06
20. The small product portfolio in the men beauty
0.01 2 0.02
and health care industry
TOTAL 1 2.63

The table reveals that the two most important factors to be successful in consumer goods
industry of P&G are “strong consumer goods brand” and “Efficient product distribution
network”. Obviosly, although there are many competitors and new entrants, the strong brand of
P&G helps the company to stay its leading position in its industry. Its distribution network is
extremely effective and efficient such that people can find its products easily in common grocery
stores. The major weaknesses of the company are the problem with imitable products and their
dependence on the third parties in many aspects of business. Evidently, imitable products have a
direct impact on the sales and market share of P&G. And the firm is a multinational company
with so many business partnerships over the world, if one of them gets a failure, the reputaion,
sales, supply chain, etc. of P&G can be effected. Overall, the company receives a 2.63 total
weighted score, which on on a 1 to 4 scale is more than halfway, indicating the company has a
strong internal position. Besides, there is definitely room for improvement in its operations,
strategies, policies, and procedures.

Sources:

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Bhasin, H. (2019). SWOT analysis of Procter and Gamble. Retrived March 7th from
https://www.marketing91.com/swot-analysis-procter-gamble/
P&G company. (2021). Annual report of P&G 2021. Retrived March 7th from:
https://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_PG_2021.pdf
Thompson, A. (2017). Procter & Gramble SWOT Analysis & Recommendations. Retrived
March 7th from: http://panmore.com/procter-gamble-swot-analysis-recommendations
Ulibarri, V. (2019). Ariel, Gillette and Head & Shoulder: P&G’s Most Counterfeit Brands in
Latin America. Retrived March 7th from https://www.brandsprotectionnews.com/en/ariel-
gillette-and-head-shoulders-procter-gambles-most-counterfeit-brands-in-latin-america/
Warfield, N. (2019). Men are a multibilion dollar growth opportunity for the beauty industry.
Retrived Mar 8th from: Men are a multibillion dollar growth opportunity for the beauty
industry (cnbc.com)
P&G website. (2021). P&G Issues Voluntary Recall of Aerosol Dry Conditioner Spray Products
and Aerosol Dry Shampoo Spray Products. Retrived Mar 8 th from: P&G Issues Voluntary
Recall of Aerosol Dry Conditioner Spray Products and Aerosol Dry Shampoo Spray
Products | Procter & Gamble News (pg.com)

THOMPSON, A., 2017. Procter & Gamble SWOT Analysis & Recommendations - Panmore
Institute. [online] Panmore Institute. Available at: <http://panmore.com/procter-gamble-swot-
analysis-recommendations> [Accessed 9 March 2022].
Bhasin, H., 2019. SWOT analysis of Procter and Gamble - P & G SWOT analysis. [online]
Marketing91. Available at: <https://www.marketing91.com/swot-analysis-procter-gamble/>
[Accessed 9 March 2022].
Projects4mba.com. 2020. SWOT Analysis of Procter & Gamble - P&G SWOT Analysis
[Explained]. [online] Available at: <https://www.projects4mba.com/swot-analysis-procter-
gamble/5013/> [Accessed 9 March 2022].

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