Procter & Gamble Co.

Summary

Procter & Gamble Co. (P & G) is a US based MNC in Downtown, Cincinnati, Ohio. Candlemaker William Procter from The United Kingdom and Soapmaker James Gamble met when they married the sisters Olivia and Elizabeth Norris. They were suggested to become business partners by their father-in-law,  as a result of which  P & G is built on Oct 31, 1837. Currently leaded by David Taylor as President and CEO.

By 1858-59, the company reached a profit of $1 million. The company won contracts to supply for Union Army in American Civil War and increased the earnings on a high scale Nation-wide.  The company attained the reputation through its commitment towards quality. The company later started innovating products like IVORY soap and CRISCO, a shortening made from vegetable oils instead of animal fats, etc. In the era of radios 1920s to 1930s, the company sponsored for many radio programs known as "soap operas."  By 1930s the company started to expand internationally with a wide range of products like detergents, toothpaste, paper products like tissue papers, etc.  But there were few revolutionary products innovated in 1961 like Pampers- disposable diapers for babies and Head & Shoulders shampoo.

By manufacturing various new products and diversification in R & D, the company expanded its business worldwide but had to undergo many structural reorganizations based on the region of expansion. For the United States, the company first focused on product division management and later shifted to matrix structures. For the European markets, they moved from geographical grouping to category management. By 2005, all these structures and routines failed, and the then CEO Jager Durk resigned. Then A.G Lafley took charge as President-CEO. Apart from repairing the lost sales, he helped to build the sales to around $90 million to $1 Billion.

Why did the US organizational structure shift from product grouping in the 1950s to the matrix in the 1980s? Why did the European organizational structure shift from geographic grouping in the 1950s to category management in the 1980s? Why were the two structures integrated into a global cube in the 1990s?

The sizeable homogenous market of United States lent itself to national brand and product division management. In 1954, P&G had to create individual operating divisions to better manage growing lines of products, each with its line and staff organizations. There are several pros and cons of the product based grouping. The advantages are:

• The company can major product groups to concentrate on their priorities, within the total business plan.
• A proper procedure can be maintained for supplying the major groupings in the company with their specialist resource.
• It will also encourage the senior members of the organization to focus on corporate issues, then on the production matters

The main disadvantage is that individual divisions would promote their objectives to endanger broader, corporate strategies. Hence the senior directors need to have sufficient control over corporate intentions and plan accordingly.

US developed within this model in two dimensions, namely brands and functions. This helped the brand managers to focus on the profitability and the company strategies compared to the product dynamics. Brand managers competed with the market place to improve the strategies and the techniques. In 1987, the US P&G migrated to the matrix model where the strategies and techniques will be dealt by the general category managers instead of brand managers as US was lacking functional strength. The matrix model involves permanent location for staff and departments for individual activities. Matrix model has an edge over the former because of its security, flexibility as well it encourages the staff in order to achieve a well-maintained management structure.

Europe had a vast P & G division overseas because of its heterogeneous nature of market which includes different languages,cultures,laws etc. The geographic management structure of Europe involved three dimensional expansions in country, brand and function. And this model did not involve brand managers, whereas the strategies and profits were monitored by the country managers. The opportunities from the developing market of Western Europe seemed very attractive for P & G for global expansion and therefore P & G opted to migrate to global matrix structure.  No sooner, P & G  turned into a billionaire MNC with profit of $38 Billion marketing for 50 categories of products from toilet paper to the pharmaceutical ranging in more than 300 brands. But the competitors were grabbing the market share steadily as a result in 1998, P & G announced a reconstruction of the structure. But this caused a negative impact and the then CEO Durk Jager resigned and A. G Lafley took oath in 2005 as CEO. He managed to repair the loss and also to bring back the profits to some extent.