Porter’s Five Forces Analysis of Procter & Gamble
|Name||Procter & Gamble Company|
|Founded||October 31, 1837|
|Headquarters||Cincinnati, Ohio, United States|
|CEOs||Jon R. Moelle|
|Revenues||US $ 80.187billion,2022|
|Profit||US $14.742 billion, 2022|
|Year end||30th June|
|Competitors||Colgate-Palmolive, Church and Dwight, and Unilever|
The company was founded by William Procter and James Gamble in 1837 and is headquartered in Cincinnati, Ohio.As of 2022, three of the company’s brands were ranked within the top fifteen personal care brands in the world; the leading one being Pampers, which had a brand value of approximately 20 billion U.S. dollars. Procter & Gamble made an annual revenue of US $ 80.187 billion and net profit of US $ 14.742 billion in 2022. The company’s total asset as at 2022 amounted to US $ 117.208 billion. The ranking of the company is 63 in Forbes 2000 list 2022. The market value of the company was US $ 386.53 billion in 2021.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis is a widely used model to evaluate companies’ strategies in reference to its industry for neutralizing the competition and increase the margins, it is developed by Professor Michael E. Porter in 1979, at Harvard Business School.
Procter & Gamble Rivalry among Existing Competitor
- Procter & Gamble Business Segments: The Companyoperates through five industry-based Sector Business Units: Baby, Feminine and Family Care; Beauty; Health Care; Grooming; and Fabric and Home Care. The company has operations in more than 80 with approximately 300 brands which are sold in more than 160 countries globally.The company’s most profitable business segment is the fabric and home care, which generated net sales of over US $27 billion globally in 2022.
- Procter & Gamble Operations Year 2022:In the year 2022, net sales increased 5% to US $80.2 billion on a 2% increasein unit volume.Net earnings increased US $0.4 billion or 3% versus yearago to US $14.8 billion.
The Company has manufacturing and assembling facilities in Asia, having over three billion consumers. P&G Asia includes: China, Japan, Korea, Hong Kong, India, Australia, New Zealand, Indonesia, Philippines, Singapore, Taiwan, Vietnam, Thailand, Sri Lanka, Malaysia, Bangladesh. P&G Asia, employs about 800 scientists.
The company also has manufacturing facilities in North America region operates in Canada, Puerto Rico and the United States, where sales make up more than 40% of the company’s total.
Today, P&G has a presence in every countryin Western Europe; the region represents about a quarter of P&G’stotal business and have about 35 manufacturing facilities. In Western Europe, P&G markets over 100brands and has a clear leadership position in 5 top categories. P&G Western Europe employs about 3,000 scientists working in nineInnovation Centers in the UK.
Central & Eastern Europe, Middle EastAnd Africa (CEEMEA) is P&G’s largest geographic region, stretching from the westernedges of Turkey to the far eastern regions of Russia and including nearlyall of Africa.
In Latin America the companyemploys people across 14 countries, including 19 manufacturing sites,12 distributions centers and a service center.
- Unilever Group is also proved to be one of key players by giving a record sale of € 52.444 billion and net profit of € 6.049 billion in 2021.The company’s sales in North America were €10,627 million and in Latin America were €6,217 million in 2021.In 2021, the most valuable UK brand was Unilever, its brand value was estimated at 27.91 billion euros. The largest product segment of the Unilever Group is its personal care segment, which generated approximately 21.9 billion euros in revenue in 2021. The Unilever Group also figures in a ranking of the leading beverages company worldwide, with sales amounting to approximately 9.57 billion U.S. dollars. The company is also a leader in the frozen dessert industry, with its ice cream brand, Ben & Jerry’s, recently generating unit sales of around 202 million in the United States alone, thus becoming the top-ranked ice cream brand among U.S. consumers.The company also make household brands used by 3.4 billion consumers every day. The company has 148,000 people working in factories, labs, offices and homes around the world.
- Church & Dwightgave tough competition by generating a sale of US$5.19 billion , with a net income of US$ 0.827 billion in 2021.The company operate its business in three segments: Consumer Domestic, Consumer International and the Specialty. Headquartered in Ewing, New Jersey, the company currently generates net sales of about five billion U.S. dollars annually and employs about 5,100 people worldwide.The company is one of the leading vendors of liquid laundry detergent in the United States, with annual sales reaching over one billion U.S. dollars. In 2021, the household products segment of Church & Dwight made up 41 % of the company’s sales share.
In 2021 net sales grew 6.0% over 2020, with gains in all threesegments.In the domestic business, six out of 13 “power brands” met or exceeded category growth for the full year2021.With the acquisition of THERABREATH, the company now have 14 “power brands”
- Investment in Research & Development-Marketing Cost and Brand Image :The existing battles among the brands with a challenge of changing trend towards cashless, contactless, and autonomous shopping and delivery requires high investments ito better design the products and services for an accelerated customer satisfaction.Recently, Procter & Gamble’s advertising expenditure amounted to approximately eight billion U.S. dollars. In the United States alone, Procter & Gamble spent 163 million U.S. dollars promoting its Olay brand in 2021.
Procter & Gamble Threat of New Entrants
- Global Retail Industry: According to analysts’ projections, the retail industry’s growth is expected to slow slightly this year. 2023’s retail industry growth forecast is just fractionally lower at 4.5%. This is set to slow further to 4.2% and 3.9% in 2024 and 2025, respectively. In 2026, the global retail industry’s growth rate is forecast at 3.4%—the slowest growth rate expected from 2021 to 2026.Overall, in the period from 2020 to 2026, the average annual retail industry growth rate is expected at approximately 4.3% as total retail sales worldwide rise from $24.7 trillion in 2020 to a projected $33.9 trillion in 2026
- High Capital Investment:The existing retailers invest a lot in sales and marketing, distribution, and product development. If another party wants to join the industry, they should put down a huge amount of initial capital to compete against existing players.
- Economies of Scale: The existing giants like Walmart, Target etc. have economies of scale i.e. there average cost is lower due to production of items in large quantities leading to lower cost. New entrants will therefore be unable to compete due to high cost.
Procter & Gamble Bargaining Power of Suppliers
- Large Number of Suppliers: There are large number of suppliers in the retail industry. Hence there is a tough competition between suppliers, this makes it difficult for them to affect the retail industry.
- Suppliers Collaboration: The company has more than 60,000 suppliers worldwide. The company partners with its suppliers so that can run their business with sustainability and also has a Supply Chain Financing program to support its suppliers.Hence; the company has close ties and collaboration with the suppliers.
Procter & Gamble Bargaining Power of Buyers
- Large Number of Buyers: The company has approximately 5 billion consumers in 180 countries. Due large number of buyers, they consumers has low influence in the industry.
- Customer Satisfaction – After Sales ServicesIn case of wholesale and retail industry after sales service includes on time delivery, easy return and exchange of products etc. The better these services, the greater customer satisfaction.
Procter & Gamble Threat of Substitute Products or Services
- Similar Entities:Substitutes for retail products are not available in any other industry. The threat of substitute exist among the firms in the industry for e.g. people can shift from Walmart to Costco. Hence; force is strong. However there is a variety of products in the retail sector and there is no other way to shift.
- Low Switching Cost:Buyers can easily switch from one supplier to another because of the easy availability of plenty of substitutes with better price offerings, volumes purchased by the buyers, sensitivity towards the pricing/cost related factors and poor loyalty towards the brand.
- Basic information about Procter & Gamble | Available at Forbes
- Procter & Gamble’s net sales worldwide from 2014 to 2022(Aug 30, 2022), by business segment| Available at Statista
- Percentage of Procter & Gamble’s net sales worldwide in 2022, by region(Aug 30, 2022), by business segment| Available at Statista
- Procter & Gamble’s net sales share worldwide from 2012 to 2022, by business segment(Aug 30, 2022), by business segment| Available at Statista
- Net sales of Procter & Gamble in the United States from 2014 to 2022(Aug 30, 2022), by business segment| Available at Statista
- Total number of employees of Procter & Gamble worldwide from 2007 to 2022(Aug 30, 2022), by business segment| Available at Statista
- Procter & Gamble – statistics & facts(Feb 6, 2023)| Available at Statista
- P&G Global Operations| Available at pg.com
- Global revenue of the Unilever Group from 2010 to 2021, by product segment(Mar 28, 2022)| Available at Statista
- Unilever – statistics & facts(Feb 7, 2023)| Available at Statista
- Leading UK corporate brands in 2021, by brand value(Jan 6, 2023)| Available at Statista
- Number of employees of Church & Dwight worldwide from 2009 to 2021(Mar 17, 2022) | Available at Statista
- Net sales share of Church & Dwight worldwide from 2011 to 2021, by product segment(Mar 17, 2022)| Available at Statista
- Church & Dwight – statistics & facts(Jan 27, 2023)| Available at Statista
- Net sales of Church & Dwight worldwide from 2009 to 2021(Mar 17, 2022)| Available at Statista
- Supporting P&G’s Suppliers At A Critical Time(April 08,2020)| Available at pg.com
- Forbes Global 2000 List 2022(May 12, 2022)| Available at Forbes