The SWOT analysis

The nerd analysisPG is a global manu eventurer and securities intentnesser of consumer products. It operates in five distinct business segments stuff and home c be, beauty care, baby and family care, health care and snacks and beverages. It has some of the most well-known and established scars in its portfolio but faces intense competition from other global consumer giants as well as local companies.Strengths cosmic scale of operationsPG has satisfying scale advantages. It is the global leader in all its quatern issue categories fabric and home care, beauty care, baby and family care, health care. Its products are sold in oer clx countries worldwide with manufacturing capabilities in over 42 countries. The social club manufactures and markets close to 300 products. It derives substantial economies from its scale of operations in finance, logistics, marketing, research, unsanded product development, renewal, technology and other functions. The callers huge buying power (from commodities to media) is being increasingly leveraged through global procurement and services. A voluminous scale gives PG significant competitive advantage against the smaller, nonunionised players in local markets.Strong brandingPG is unrivaled of the worlds most successful brand creation and brand building companies. The company participates in more than 40 product categories with 300 brands in roughly 60 markets. Some of its very well-known brands include Tide, Pampers, Bounty, Charmin, Cover Girl, Pantene, and Clairol. Moreover, as of 2004, the company had 13 brands with sales surpassing one billion dollars. Together, these brands have sales of over $24 billion. PG continuous involvement in consumer research dishs it understand, anticipate and respond to consumer needs and wants and hence create marketing and advertising innovations more effectively and efficiently than many other companies. PG brand leadership helps it implement brand building innovations with reta il and media partners in shipway that few companies can match. It has one of the largest and strongest portfolios of trusted, quality brands, including Pampers, Tide, Ariel, Always, Whisper, Pantene, Bounty, Pringles, Folgers, Charmin, Downy, Lenor, Iams, pate, Clairol Nice n Easy, Actonel, Dawn and Olay. These brands have leading market share in their respective categories, an offer the company a significant edge over its competitors. harvest-home innovationPG creates more new brands and categories than any other consumer goods company. In 2003, three of the carousel 10 new non- fare products introduced in the US were PG products. Over the past eight years, PG has introduced the number one or number devil new non-food products in the US every year. PGs brand-creation and product development leadership is driven by the companys commodious research and development capacity. The company has nearly 7500 researchers working in 20 technical centres on four continents. It has more th an 29,000 patented technologies for its products.Strong performance in core categoriesOn a worldwide basis, fabric home care, beauty care, and baby family care products are Procter Gambles largest businesses, contributing a total of roughly 80% of sales. PGs fabric and home care is also its largest and oldest business and it continues to grow to record levels. The segments net sales grew 10% to $15.26 billion in 2005. The baby and family care and heath care divisions recorded an nevertheless higher appendage in net sales. The net sales from the baby and family care division grew 11% to $11.9 billion duration health care business recorded net sales harvest of 11% to $7.8 billion in 2005. Strong performance by its core business groups is one of the prime reasons contributing to the companys above industry average revenue developing rates, and has significantly helped the company to grow to a stage where it is virtually hedged against threat from smaller new entrants.Developin g markets infrastructurePGs growing markets infrastructure is a huge strategic advantage. The company has developed a best in class distribution infrastructure consisting of exclusive distributors in fast growing markets like China, Russia, Poland, the Philippines and India. Unlike most of its competitors, who use agnostic jobbers that sell a phase of competing products, PGs ne devilrk, while independently owned and operated, sell only PG HPC products (although often they carry various no competing food products). PGs scale allows these distributors to achieve higher dollar profit (not profit margin) while insuring that PGs products get all the distributors attention. Moreover, because of the large distribution pipe (unlike the multi-tributary wholesaler system), PG is able get the breadth of its products to market faster and more efficiently, even in the outer micturatees of some of these growing markets, without multiple wholesaler markups that typically occur under the whole saler system. The companys highly efficient markets infrastructure has helped the company in considerably increasing the speed at which its products reach the market and the companys overall market scalability vis--vis its peers.WeaknessesCustomer concentrationThe companys operations are heavily concentrated among its top customers. PGs largest customer, Wal-Mart, accounted for 18% (2003), 17% (2002) and 15% (2001) of sales. PGs top 10 customers account for 35% of its sales. A financial mischance experienced any of these customers or a substantial decrease in sales to any one of the top customers could materially affect revenues and profitability of the company.Performance of the Clairol businessSince the acquisition of Clairol in 2001, PG has been assertive in using its distribution channels overseas to expand Clairol Herbal Essences shampoos and conditioners into new markets. In the US, however, the brands rapid growth before PG acquired Clairol has proven difficult to maintain and Herbal Essences has lost share in an environment of aggressive competitive promotional spending. With regard to the hair changeants side of Clairol, its 35% market share (approximately) in the US (number two position) has slipped elevate to market share leader LOreal. This in a scenario where global hair color is expected to grow at mid-to-high single digit rates in the next few years. The companys softness to grow its Clairol business could have a negative effect on the PG Beauty division.Overexposure to mature marketsPG clay largely a mature-market company, with only 26% of sales and 22% of profits generated outside the US and westerly Europe. Moreover the company is primarily exposed to mature categories in these markets, such as laundry detergents and paper. This indicates that the company focuses on leveraging its scale which often means growing where it already has a sizeable detergent and/or consumer paper business. The downside is that this strategy does not neces sarily align its portfolio to tap growth, mainly in developing and emerging markets. As a result only 35% of PGs sales are in developing and emerging countries and its total market share in the FMCG segment isestimated to be below 20% as compared with 27% for Unilever. In contrast, its share in developed markets is estimated at 37% or twice Unilevers 18%. The companys overexposure to mature markets could act as a setback to rising growth prospects.OpportunitiesDeveloping marketsThe consumer products business in developing markets is expected to be a significant opportunity for FMCG majors globally. This is primarily due to the fact that these markets are witnessing growth across three basic demographic factors population growth, folk formation and household income growth. These factors have driven developed market growth for decades and are now driving strong growth in many developing markets. China, for example, is now considered one of the most lucrative markets by FMCG companie s, which could be further explored by the company. Due to growth across developing markets, PG can look towards achieving substantial growth by focusing on these higher-growth, structurally attractive markets.Gillette acquisitionPG and Gillette are currently category captains at retailers in many of their respective product categories (given their leadership market share positions in their categories). Therefore the combination of these two dominant players will imply that they would to able to summon their competitive advantages across a wider variety of let out categories, thereby increasing their competitive onslaught on smaller home and personal care (HPC competitors and esoteric labels. Furthermore, the two companies also benefit from synergies in verbal care, which could be a significant positive for PG. opposite revenue upsides expected from the merger include Gillettes growth potential in emerging markets cross-leveraging shaving and spit out care brands and technologie s and, go-to-market efficiencies. The Gillette merger is expected to significantly add value to the company and help it further confirm its already leading market position.New product stockPG has announced a full pipeline of new products to come in 2005. This is a clear evidence of PGs intense commitment and focus on its core business. Some of the most noted announcements include the drivees of Hugo Boss Skin Care for men carry ax Fresh tampons (the companys first scented flushable tampon, priced at a 10-15% premium to base Tampax) Iams Savory Sauces for mark and Iams MultiCat pet food Charmin Basic toilet tissue (launched in February 2005 and Bounty Basic paper towels (launched in April 2005), both selling at a 15% discount to the brands base products Bounty Glass and get up Care towels Charmin Mega Roll toilet tissue and Tide Simple Pleasures. The launch of new products would significantly help the company in pushing forward its revenue generation across some of the otherwis e grow product categories in the FMCG market.ThreatsIntense competitionPG operates in a very competitive market, with rivals including consumer giants such as Johnson Johnson, Unilever and Kimberly-Clark. Each of these has revenues in excess of $10 billion. Private labels or store brands strive to match innovation quickly and try to present a compelling value alternative in many categories. This requires the company to continually strive to develop innovative products and price its goods competitively. For instance, sales in PGs beauty division could neutralize sequentially as a result of an aggressive innovation drive from LOreal. Throughout 2005, LOreal is expected to launch a large number of new products globally. An increase in competitive onslaught by a majority of the companys competitors is expected to further challenge the companys growth.Increase in prices of raw materialsThe company is witnessing a significant increase in its raw material prices. Oil prices are up an av erage of nearly 40% year-to-date in calendar 2005 (after increasing 34% in 2004 and 19% in 2003), while resin prices are up an average of 14% (versus a 13% increase in 2004 and 21% increase in 2003) and pulp prices are up 8% (after rising 18% in 2004 and 14% in 2003). As a result of PG is facing higher commodities costs, which is expected to have a negative bearing over the companys earnings.ECs Gillette deal stipulationsIn 2005 EC announced that its only stipulation to the closing of the Gillette deal is PGs sale of its Crest Spinbrush business (brand which holds only a roughly 5% share of the power toothbrush market in Europe, representing nearly $200 million in sales to PG globally) as well as the licensing out of its oral care brand names associated with the Spinbrush, including Crest, Blend-a-Dent and Blend-a-Med. The licensing out of some of PGs oral care brand names has embossed a concern over the companys ability to preserve the integrity of those brands given that those br ands represent important future growth drivers for PGs toothpaste business. Furthermore this also raises a risk of the US Federal Trade Commission communicate the company to further divest some of its other businesses.Uncertainty in pharmaceuticals businessPGs Intrinsa, a prescription dose designed to counteract the loss of sexual desire in post-menopausal women, was rejected by the FDA in December 2004. The company is still waiting to hear from the FDA as to the extent of the required further ravel of the product, to the extent its economical (the sample size is not too broad and the time frame of the test is not too long) span.. Concerns are also being raised over the FDA status of another do drugs soon to be launched by PG, Pexelizumab (a drug designed to reduce infarction and mortality post cardiac bypass surgery). This is primarily because the companys pharmaceuticals track record is marred by the withdrawal of both Vioxx and celecoxib from the market, in highly-publicized cases. The companys poor pharmaceuticals track record combined with an uncertain outlook for two of its major drug releases is expected to negatively impact the companys ability to grow in the highly lucrative over-the-counter pharmaceuticals market.