P&G

Chapter I

Industry Profile

The Fast-Moving Consumer Goods (FMCG) industry primarily deals with the
production, distribution and marketing of consumer-packaged goods, i.e. those
categories of products that are consumed at regular intervals. Examples
include food & beverage, personal care, pharmaceuticals, plastic goods, paper
& stationery and household products etc. The industry is vast and offers a wide
range of job opportunities in functions such as sales, supply chain, finance,
marketing, operations, purchasing, human resources, product development and
general management.

FMCG sector in India play a very important role in economy. The FMCG
industry is the fourth largest sector in the Indian economy. Household and
personal care products accounts for 50% of the sales in the industry, healthcare
accounts for 31-32% and food and beverage accounts for remaining 18-19%.

It has a strong MNC presence and is characterized by a well-established

distribution network, intense competition between the organized and
unorganized segments and low operational cost. There is more comparative
advantage to FMCG companies in India as raw material availability, cheaper
labour cost, and presence across the entire value chain. FMCG companies are
among the top contenders that pursue the brand positioning process to
establish their products in the market. Despite recent inflationary pressures and
price hikes, various FMCG companies continued their growth momentum
through product diversification and introducing new variants of the existing
products. Moreover, the FMCG companies are also successful in passing on
the increasing cost to consumers through a well-thought-out blend of price
hikes, reduction in packaged size and alternative product mix. 

The Following are the typical characteristics of FMCGs

 Frequent purchase
 Low price
 High Volumes
 Low margins

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 Extensive distribution networks

Major FMCG companies in India are Dabur India Ltd, Godrej consumer
products, Nestle, HUL, ITC ltd, Marico ltd, Britannia Industries ltd, Hatsun
Argo Product ltd.

Introduction of Procter and Gamble

The Proctor and Gamble Company (P&G) is an American based multinational

consumer goods manufacturing corporation. The Proctor and Gamble (P&G)
company have the headquarters in the downtown Cincinnati, Ohio, United
States of America. The Proctor and Gamble (P&G) company were founded by
an English person name William Procter and an Irish American person named
James Gamble. It was founded in the year 1837 in the month of October on
31st. The Proctor and Gamble company (P&G) is well known and specialized
for its wide range of product especially in the “range of personal health or
consumer health, and personal care and hygiene products”. All the various
type of personal health/consumer health, and personal care and hygiene
products are organized and categorised into various segments. Those segments
may include “Beauty products, Grooming products, Health Care products,
Fabric & Home Care products, Baby care products and Feminine & Family
Care products.” In addition, The Procter & Gamble Company (P&G) before it
sold the Pringles chips to the Kellogg company, the product portfolio of the
following, multinational consumer goods manufacturing company also
included the foods, snacks, and beverages.   

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Chapter II

Organization Profile

Type Public

Industry Consumer goods

Founded October 31, 1837

Founders William Procter

James Gamble

Headquarter Cincinnati, Ohio, United states

Area Served Worldwide (Except Cuba and North Korea)

Key People David. S. Taylor (Chairman, President and CEO)

Number of employees 97000

Website www.pg.com

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Background

The Proctor and Gamble

Candlemaker William Procter, born in England, and soap maker James

Gamble, born in Ireland, both emigrated from the United Kingdom. They
settled in Cincinnati, Ohio initially and met when they married sisters Olivia
and Elizabeth Norris.[7] Alexander Norris, their father-in-law, persuaded them
to become business partners, and in 1837 Procter & Gamble was created.

Company (P&G) is an American based multinational consumer goods

manufacturing corporation. The Proctor and Gamble (P&G) company founded
in October 31, 1837 by William Procter and James Gamble and have the
headquarters in the downtown Cincinnati, Ohio, United States of America

In 1858–1859, sales reached $1 million. By that point, about 80 employees

worked for Procter & Gamble. During the American Civil War, the company
won contracts to supply the Union Army with soap and candles. In addition to
the increased profits experienced during the war, the military contracts
introduced soldiers from all over the country to Procter & Gamble's products.

n the 1880s, Procter & Gamble began to market a new product, an inexpensive
soap that floated in water.[8] The company called the soap Ivory.[8] William
Arnett Procter, William Procter's grandson, began a profit-sharing program for
the company's workforce in 1887. By giving the workers a stake in the
company, he correctly assumed that they would be less likely to go on strike.

1890, First R&D lab. R&D quickly becomes a critical function at P&G and
first lab is added to the Ivorydale facility. By the 1920s, R&D is an integrated
division of P&G company, employing a staff of several hundred young people.
The research department develops a way to improve products, then passes on
its findings to be translated into new manufacturing processes.

The company began to build factories in other locations in the United States
because the demand for products had outgrown the capacity of the Cincinnati
facilities. The company's leaders began to diversify its products, as well, and in
1911, began producing Crisco, a shortening made of vegetable oils rather

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than animal fats.[8] As radio became more popular in the 1920s and 1930s, the
company sponsored a number of radio programs.

International expansion

The company moved into other countries, both in terms of manufacturing and
product sales, becoming an international corporation with its 1930 acquisition
of the Thomas Hedley Co. based in Newcastle upon Tyne, England. After this
acquisition, Procter & Gamble had their UK Headquarters at 'Hedley House'
in Newcastle upon Tyne, until quite recently, when they moved to The
Heights, Brooklands. Numerous new products and brand names were
introduced over time, and Procter & Gamble began branching out into new
areas. 

Richardson Hindustan Limited (RHL) was established in 1964, as a public

limited company and obtained an industrial license to manufacture Menthol
and Vicks range of products. In 1984, it became an affiliate of Procter and
Gamble (P&G), USA.
P&G operates under three entities in India - two listed entities 'Procter &
Gamble Hygiene and Health Care Limited' and 'Gillette India Limited', as well
as one 100 per cent subsidiary of the parent company in the US called 'Procter
& Gamble Home Products'.

One of the most revolutionary products to come out on the market was the
company's disposable Pampers diaper, first test-marketed in 1961, the same
year Procter & Gamble came out with Head & Shoulders.[13] Prior to this
point, disposable diapers were not popular, although Johnson & Johnson had
developed a product called Chux. Babies always wore cloth diapers, which
were leaky and labour-intensive to wash. Pampers provided a convenient
alternative, albeit at the environmental cost of more waste
requiring landfilling. Amid the recent concern’s parents have voiced on the
ingredients in diapers, Pampers launched Pampers Pure collection in 2018,
which is a "natural" diaper alternative.

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Procter & Gamble acquired a number of other companies that diversified its
product line and significantly increased profits. These acquisitions
included Folgers Coffee, Norwich Eaton Pharmaceuticals (the makers
of Pepto-Bismol), Richardson-Vicks, Noxell (Noxzema), Shulton's Old
Spice, Max Factor, the Iams Company, and Pantene, among others. 

Nature of Business

The Proctor and Gamble Company (P&G) is an American based multinational

consumer goods manufacturing corporation. The Proctor and Gamble (P&G)
company have the headquarters in the downtown Cincinnati, Ohio, United
States of America. The Company is in fast moving consumer goods business
comprising primarily in to business segments such as, Baby Care (Pampers),
Fabric care (Ariel and Tide), Feminine Care ( Whisper), Grooming ( Gillette),
Hair Care (Head and Shoulder, Herbal Essences, Pantene), Home Care ( Ambi
pur), Oral Care ( Oral-B), Personal Health Care ( Vicks), Skin and Personal
Care (Olay and Old Spice).

Vision

To be the best consumer products and services company in the world.

Mission

To provide branded products and services of superior quality and value that
improve the lives of the world’s consumer, now and for generations to come.

Values

Integrity

 We always try to do the right thing.

 We are honest and straightforward with each other.
 We operate within the letter and spirit of the law.
 We uphold the values and principles of P&G in every action and decision.
 We are data-based and intellectually honest in advocating proposals, including
recognizing risks.

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Leadership

 We are all leaders in our area of responsibility, with a deep commitment to

delivering leadership results.
 We have a clear vision of where we are going.
 We focus our resources to achieve leadership objectives and strategies
 We develop the capability to deliver our strategies and eliminate
organizational barriers.

Ownership

 We accept personal accountability to meet our business needs, improve our

systems and help others improve their effectiveness.
 We all act like owners, treating the Company’s assets as our own and behaving
with the Company’s long-term success in mind.

Passion of winning

 We are determined to be the best at doing what matters most.

 We have a healthy dissatisfaction with the status quo.
 We have a compelling desire to improve and to win in the marketplace.

Trust

 We respect our P&G colleagues, customers and consumers, and treat them as
we want to be treated.
 We have confidence in each other’s capabilities and intentions.
 We believe that people work best when there is a foundation of trust.

Our Principles

 We show respect for all Individuals

 We believe that all individuals can and want to contribute to their fullest
potential.
We value differences.
 We inspire and enable people to achieve high expectations, standards and
challenging goals.

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 We are honest with people about their performance.

The Interests of the Company and the Individual Are Inseparable

 We believe that doing what is right for the business with integrity will lead to
mutual success for both the Company and the individual.
 Our quest for mutual success ties in together.
 We encourage stock ownership and ownership behaviour.

We Are Strategically Focused in Our Work

 We operate against clearly articulated and aligned objectives and strategies.

 We only do work and only ask for work that adds value to the business.
 We simplify, standardize and streamline our current work whenever possible.

Innovation is the Cornerstone of Our Success

 We place great value on big, new consumer innovations.

 We challenge convention and reinvent the way we do business to better win in

the marketplace.

We Value Mastery

 We believe it is the responsibility of all individuals to continually develop

themselves and others.

 We encourage and expect outstanding technical mastery and executional

excellence.

We Seek to Be the Best

 We strive to be the best in all areas of strategic importance to the Company.

 We benchmark our performance rigorously versus the very best internally and
externally.

 We learn from both our successes and our failures.

We Are Externally Focused

 We develop superior understanding of consumers and their needs.

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 We create and deliver products, packaging and concepts that build winning
brand equities.
 We develop close, mutually productive relationships with our customers and
our suppliers.
 We are good corporate citizens.

 We incorporate sustainability into our products, packaging and operations.

Mutual Interdependency is a Way of Life

 We work together with confidence and trust across business units, functions,
categories and geographies.
 We take pride in results from reapplying others’ ideas.

 We build superior relationships with all the parties who contribute to fulfilling
our Corporate Purpose, including our customers and suppliers, universities and
governments.

Workflow

End to End supply chain- From Factory to Shelf

The past 30 years have been a massive change in P&G’s supply chain
operations. Without a doubt, digital technology is being one of the biggest
drivers of such transformation. According to Supply Chain 4.0 in Consumer
Goods, the focus of the supply chain management role has altered to
“advanced planning processes” based more on the actual demand from end
consumers enabled by digital analytical forecasting and integrating operations
planning. Such demand-driven model, in which sensing and responding to
demand as quickly as possible, requires manufactures to reconsider its
production to shipment network design. In order to meet such demand, P&G
integrated data-driven production flow of operations that significantly
improved responsiveness as well as transparency. As a result, the digital
pieces of the supply chain that used to be discrete individual steps now become
more holistic, real-time management of the entire ecosystem.

P&G has leveraged large-scale application of advanced analytics and digital

technology to excel in its ability to manage complicated global supply chain

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with more than 130 manufacturing sites serving over 180 countries. One of the
key drivers is an “end-to-end model” that connected the siloed steps from
suppliers to retailers to provide the most value to the end consumers, “with
faster-than-ever response times”. The concept of integrating the whole value
chain allow every stakeholder of its eco chain to minimize the unnecessary
inventory as well as to speed up the system.

P&G integrates its supply chain software with its suppliers, distributors and
retailers with a notion of joint business planning with key stakeholders. To
fully integrate different parts of the chain, understanding that digital
automation of workflows that allows high visibility of any movement in each
step is a key to enable end-to-end model. Digital automation of workflows
empowered by use of algorithm-driven tools to reduce exceptions, enables
end-to-end planning, connecting headquarters, manufacturing plants,
distributor, and retailers.

One highlight in logistics capability, called “Distributor Connect” connects

P&G with distributors. Digitally enabled operational program, it allows all the
transportation, from raw materials from suppliers to finished goods to retailers,
be accessible in one source of data, on their laptop or mobile, for the supply
managers to track the status of the delivery. With enhanced real time visibility
of where things move, Distributor Connect significantly reduces inventory
across the ecosystem and the ‘deadhead,’ trucks not optimally utilized, by
about 15%. 

Similarly, not only does P&G support with mobile-phone applications that
enable retailers to check the status and order more products, it fully
incorporates “GDSN,” Global Data Synchronization Network with the
operation with retailers. GDSN enables 100% automated commerce without
human intervention. This capability significantly improves the human error
between retailers and companies and save cost for all the parties.

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Products

Baby Care

Fabric Care

Procter & Gamble has two of its world leading detergents- Tide and Ariel, in
India to Cater to the Main concerns of the Indian households, namely,
outstanding whiteness and stain removal.

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Feminine Care

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Grooming

Haircare

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Home care

Oral Care

Personal Health Care

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Skin and Personal Care

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Ownership Pattern of P&G

Holder’s No. of Shares % of Share

Name holding

No. of Shares 32460736 100

Promoters 619683 1.91

Foreign 833788 2.57

Institutions

NBank 1795870 5.53

Mutual Funds

Central Govt 8408 .03

Others 899001 2.77

General 3523004 10.85

Public

Financial 2470892 7.61

Institutions

Foreign 22310090 68.73

Promoters

Awards and Achievements

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Innovation

 New Product pace setters

Market Research Company

 Most Innovative companies

P&G Careers

A workplace built on cultural and gender diversity and equal rights for women
and men make us one of the best companies to work for.
 Fortune- World’s most admired companies
 Forbes- Most Reputable companies (World and America)
 Glassdoor- Best Place to work
 DiversityINC- Top 50 companies for Diversity
 Global tech research company- Supply chain masters.
 Human Right campaign- Corporate equality index

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Competitors Analysis

 Hindustan Unilever ltd

 Godrej consumer products ltd
 Dabur India ltd
 Colgate Palmolive Ltd

Procter & Gamble is undoubtedly one of the biggest consumer goods names
around. But there are several different companies that aim to chip away at its
segments individually. Notably, along with the big names noted below, Procter
& Gamble also competes with countless smaller companies in the international
segments in which it reports revenue.

Family Care
In the baby, feminine, and family care segment, major competitors include
Colgate-Palmolive—with brand names like Tender Care—Unilever's Zwitsal,
and Church and Dwight Co.'s Viviscal and Rephresh. This segment accounted
for 27% of Procter & Gamble's 2019 net sales with brands like Luvs, Bounty,
and Charmin

Beauty

P&G's beauty segment represented 19% of the company's net sales for the
2019 fiscal year.6 Avon is a major competitor to Procter & Gamble and is
known as one of the world's largest direct-selling beauty, household, and
personal care companies. The company uses salespeople—often referred to as
Avon Ladies—brochures, and mailouts to advertise and sell its products.

Other names in the beauty industry that rival P&G include Colgate-Palmolive,
Estee Lauder, Revlon, and Unilever.

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Healthcare

This segment accounted for 12% of net sales in 2019. You'll probably
recognize popular names like Vicks, Pepto Bismol, and Prilosec. But there are
plenty of other companies that give P&G a run for its money. Major
competitors like Colgate-Palmolive, Church and Dwight Co., Ecolab, Stepan
Company, and United-Guardian.

Grooming

Gillette is the dominant market player in the grooming segment. This segment

accounted for 9% of Procter & Gamble's net sales in 2019. But Bic is one of its
major competitors with a large international presence. This segment has also
seen a rise in start-up’s—notably, in the shaving space with names like Dollar
Shave Club (now owned by Unilever). P&G purchased subscription-based
grooming company Billie—one of the first for women—in January 2020 for
an undisclosed amount.

Market Share

Future Growth and Prospects

Ambition 2030 aims to enable and inspire positive impact on the environment
and society while creating value for the Company and consumers. Our
Ambition 2030 goals span our brands, our supply chain, society and our
employees. We know P&G alone does not have all the answers. It will take
partnerships and collaboration to make meaningful progress and take
responsible consumption to the next level.

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Brands

 100% of P&G leadership brands will enable and inspire responsible

consumption
 100% of packaging will be recyclable or reusable
 P&G will build even greater trust through transparency, ingredient, innovation
and sharing safety science.

Supply chain

 P&G will reduce their footprint and strive for circular solutions
 P&G will protect and enhance the forests we depend on
 P&G will improve livelihoods of palm smallholders by increasing yields from
existing lands.

Society

 P&G will find solutions so no P&G packaging will find its way to the ocean
 P&G will protect water for people and nature in priority basins
 P&G will advance recycling solutions for absorbent Hygiene products

Employees

 P&G will integrate social and environmental sustainability as a key strategy in

business plans
 P&G will educate employees at all levels
 P&G will reward progress and integrate recognition in the individual’s
performance assessment.

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CHAPTER III

McKinsey 7s model
 
It is a tool that analyses firm’s organizational design by looking at 7 key
internal elements: strategy, structure, systems, shared values, style, staff and
skills, in order to identify if they are effectively aligned and allow organization
to achieve its objectives.

The McKinsey 7S Model is an organizational tool that assesses the wellbeing

of seven internal factors of an organization as a means of determining whether
a company has the structural support to be successful. The Model comprises a
mix of hard elements, which are clear-cut and influenced by management, and
soft elements, which are fuzzier and influenced by corporate culture.

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With respect to organization under study.

 Strategy: The plan devised to maintain and build competitive advantage over
the competition. It is a key approach for an organization to achieve its goals.
1. Market penetration: This strategy involves an attempt to increase market share
by targeting the right potential market and customers.
2. Product development: This involves developing new products for existing and
potential customers and existing markets by thinking about how new products
can meet customer needs more closely and outperform competitors.
3. Market development: Finding a new group of buyers for an existing product.
4. Diversification: Involves the production of new category of products that
compliments the existing portfolio, in order to penetrate a new but related
market.

 Structure: organisational structure is made up of Global Business Units

(GBU), Selling and Market Operations (SMOs), Global Business Services
(GBS) and Corporate Functions. It combines global scale benefits with a local
focus on consumers and retail customers in each country where P&G products
are sold.

The Procter & Gamble Company’s organizational structure is primarily based

on the company’s product portfolio. This corporate structure also addresses
P&G’s business needs based on organizational function and consumer goods
market geography. The organizational structure or corporate structure is the set
of arrangements or design that defines the system of relationships among units
in Procter & Gamble’s business. These units include individuals and groups. In
this case, Procter & Gamble’s organizational structure determines how
business needs and issues are addressed.

The Procter & Gamble Company has a product-type divisional organizational

structure. The main structural characteristic in this case is the set of product-
type divisions that influence P&G’s managerial decisions and internal business
processes.

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 Systems: The day today functioning of workforce of getting the job done. The
daily activities and procedures that staff members engage in to get the work
done. P&G’s Integrated Work System (IWS) is a proprietary way of
improving manufacturing reliability, reducing costs and elevating productivity.
IWS is a disruptive way of working predicated on two primary principles: the
drive to zero losses and 100 percent employee ownership.
 Shared Values: They are the norms and standards that guide employee
behaviour and company actions and thus, are the foundation of every
organization. The authors of the framework emphasize that all elements must
be given equal importance to achieve the best results
The foundation of P&G’s culture is divided into purpose, values and

principles. These ideals have stayed with the company for generations.
Values: P&G’s values include integrity, leadership, ownership, passion and
trust.
Principles: P&G has eight core principles. These include respect, integrity and
mutual success, strategic focus, innovation, mastery, being the best, teamwork,
and external focus.
Purpose: Providing quality brands that play a unique role in the world.

 Skills: Skills are the skill set and capabilities of the organization’s human
resources. Core competencies or skills of employees are intangible but they a
major role in attaining sustainable competitive advantage. 
As P&G is in FMCG sector, employees need have the following skills.
1. An innate sense of persuasion,
2. Skills across disciplines
3. Understanding Insights.
4. Working under pressure
5. Technology skills.
6. Excellent sales and Negotiation skills.
7. Good communication and people skills

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 Style: P&G develops leaders whose objective stands focused on enhancing

consumers’ lives in all parts around the globe.  Therefore, P&G utilizes two-
dimensional manner of leadership as it is interested in the production as well in
their clients. People are believed to be the major asset of P&G. Democratic
leaders have absolute credence and conviction in their subservient(s), and they
provide their subordinates with the ability to make decision for themselves.
Such type of leaders constantly stimulates their subordinates with the repay for
gaining objectives and motivates them to announce new ideas and opinions. In
case of P&G, a democratic leader builds the company from within. P&G
respects all workers and clients and therefore tries to propose them their
credence under the terms and conditions, which customers and employees treat
in a similar way
In addition, servant leadership is also an important constituent of two-
dimensional manner utilized by P&G’s CEO, as the company acknowledges
that customers are their boss. In case of servant leadership, leaders place the
requirements of their customers first. The overall leadership philosophy of
P&G CEO is defined as “Build from Within”.

 Staff: The most valuable strategic asset of an organization is its staff or human
resources. This element focuses on the number of employees, recruitment,
development of employees, remuneration and other motivational
considerations. 
P&G Brands and P&G People are the foundation of our success. P&G People
bring our Values to life as we focus on improving consumers’ lives now and
for generations to come. At P&G, we strive to promote a work environment of
confidence and trust. Our employees hold themselves and one another
accountable for operating with trust and integrity, for stepping up as leaders
and owners of the business, and for competing honourably with a passion to
win. P&G is committed to creating a work environment that fosters open
communication and supports employees in reporting potential violations.

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Retaliation of any kind is inconsistent with our Values of Integrity and Trust
and simply will not be tolerated.

Porters Five Force Model

Porter's Five Forces is a model that identifies and analyses five competitive
forces that shape every industry and helps determine an industry's weaknesses

and strengths. Five Forces analysis is frequently used to identify an industry's

structure to determine corporate strategy.

Competitive Rivalry

The industry in which PG operates includes extreme competition as there are

many other brands and companies in the industry as well. Several companies
are manufacturing the same products as the P&G Company. There is almost
zero switching consumers cost. By displaying ads, providing gifts with their
products, the large amount of discount to the consumers and launching more
trends, several companies handle this issue by these acts. As a result, they got
success in finding new consumers. There is high competition for P&G
Company among the other companies in the market 

Bargaining Power of the supplier

In the market, there is many groups of suppliers for P&G. Technology

products, packing for the products and raw materials are include in the

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supplies. Because P&G Company purchases many products, they are perfect
for the suppliers. The switching cost in the company P&G for the supplier is
meagre. There is low bargaining power of suppliers in the case of P&G

Bargaining Power of Buyer

In the industry in which P&G operates, there is not much difference in the
products that are being produced. Price sensitivity is low in the case of P&G.
The bargaining power of buyers is moderate for P&G

Threats of substitutes

The intensity of the threat of substitution against Procter & Gamble is

strengthened through low switching costs. This external factor refers to the
negative consequences of consumers' movement away from P&G's brands to
other companies' brands. However, the low availability of substitutes weakens
such threat. Moreover, the low variety of substitutes further reduces their
impact on Procter & Gamble. For example, homemade personal care items are
typically available in only one or a few variants. The combination of these
external factors imposes a weak force on Procter & Gamble and the industry
environment. Thus, this element of the Five Forces analysis indicates that the
threat of substitution is a minor concern in the consumer goods business

Threats of New Entrants

In the consumer industry, there are certain barriers. A large capital is required
to be invested at the start, development of economies of scale takes time and
strong channels are not easy to get access to. The existing players have grown
to become corporate giants now and can easily acquire any new entrants. This
makes the threat new entrants a moderate threat for P&G.

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Chapter IV

SWOT analysis

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

Strengths and weaknesses are internal to your company—things that you have
some control over and can change. SWOT analysis assesses internal and
external factors, as well as current and future potential.

Internal Analysis

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Strength:

 Brand equity: One of the best advantages of P&G is that it owns brands
which are very valuable by themselves. It owns Gillette which is the
138th ranked brand in the world and has a 20 billion dollar brand
valuation. It also owns Tide  and Ariel which are in the top
500. Duracell, Pampers, Pantene,  Vicks, Whisper, Olay are all famous
brands by themselves. Naturally, P&G is an umbrella brand company
and the parent brand have a fantastic valuation.
 Economies of scale: With such top players in its product portfolio,
Economies of scale is a major advantage with P&G. It shares resources
such as warehouses, accounts, factories, and any other fixed incomes
which are otherwise an unscalable cost expenditure. As the operation
rises, the economies of scale also increase.

 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
bottom-line. All its products are innovative in nature.
 Multinational and Multi product line presence – P&G is a
Multinational company being originated from United States. It has a
fantastic multinational presence and is known to operate in a whopping
180 countries. Besides operating in so many countries, it also has a
fantastic product line. On latest count, it had 65 brands, each of which
will have their own product line. So you can understand the depth
of operations at P&G.

Weakness:

 Regular change is needed – In the beauty and personal care products, the
market trend is that every single month, the market demands that the
products be changed. A new fragrance be introduced or a new variant be
introduced in the market. This regular change is an inherent requirement
of the market, affecting the profit of the firm.

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 Low organic growth – Rate of Increase in customer base is slow as

saturation curve is reached and lower innovation is happening. As a
result, P&G is going through a phase of low organic growth. For P&G to
overcome this, it has to pull off some unique marketing and product
gimmicks to get the sales going.
 Weak presence in online marketplace.
 Lack of flexibility of the business due to its massive size.
 Its products have stiff competition from big domestic players and
international brands

External Analysis

Opportunity:

 Formation of strategic cooperation with local businesses

 Focusing on health and beauty products for men
 Playing a greater emphasis on CSR
 New product development
 Mergers and acquisitions can be done to strengthen the brand
 P&G can leverage its strong name and powerful brands to diversify into
more consumer products
  P&G can tap rural markets and increase penetration in urban areas

Threats:

 Increasing competition from local manufacturers in global markets

 Emergence of more CSR-related scandals
 Introduction of trade barriers in key international markets
 Inability to sustain competitive advantage in long-term perspective

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P&G

 Intense and increasing competition amongst other FMCG companies can

affect the market share of Procter and Gamble.
 Competition from unbranded and local products

Chapter V

Financial Statement analysis

Financial statement analysis is the process of reviewing and analyzing a company's

financial statements to make better economic decisions. These statements include the
income statement, balance sheet, statement of cash flows, and a statement of changes
in equity. Financial statement analysis is a method or process involving specific
techniques for evaluating risks, performance, financial health, and future prospects of
an organization.
It is used by a variety of stakeholders, such as credit and equity investors, the
government, the public, and decision-makers within the organization. These
stakeholders have different interests and apply a variety of different techniques to
meet their needs. For example, equity investors are interested in the long-term
earnings power of the organization and perhaps the sustainability and growth of
dividend payments. Creditors want to ensure the interest and principal is paid on the
organization’s debt securities (e.g., bonds) when due.

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Tools for financial statement analysis

 Comparative Financial Statements
 Common Size Statements
 Trend Analysis
 Ratio Analysis

Ratio Analysis

Ratio analysis is used for analysing and interpreting financial statements. It also helps
in decision making process by providing useful inference.
The most popular way to analyse the financial statements is computing ratios. It is an
important and widely used tool of analysis of financial statements. While developing
a meaningful relationship between the individual items or group of items of balance
sheets and income statements, it highlights the key performance indicators, such as,
liquidity, solvency and profitability of a business entity. The tool of ratio analysis
performs in a way that it makes the process of comprehension of financial statements
simpler, at the same time, it reveals a lot about the changes in the financial condition
of a business entity.
Balance Sheet of P&G

Balance sheet of P&G

Amounts in Millions. 2019 2018
Assets    
CURRENT ASSETS    
Cash and cash equivalents $ 4,239 $ 2,569
Available-for-sale investment securities 6,048 9,281
Accounts receivable 4,951 4,686
INVENTORIES    
Materials and supplies 1,289 1,335
Work in process 612 588
Finished goods 3,116 2,815
Total inventories 5,017 4,738
Prepaid expenses and other current assets 2,218 2,046
TOTAL CURRENT ASSETS 22,473 23,320
PROPERTY, PLANT AND EQUIPMENT, NET 21,271 20,600
GOODWILL 40,273 45,175
TRADEMARKS AND OTHER INTANGIBLE
24,215 23,902
ASSETS, NET

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OTHER NONCURRENT ASSETS 6,863 5,313

$
TOTAL ASSETS $ 118,310
115,095
     
Liabilities and Shareholders' Equity    
CURRENT LIABILITIES    
Accounts payable $ 11,260 $ 10,344
Accrued and other liabilities 9,054 7,470
Debt due within one year 9,697 10,423
TOTAL CURRENT LIABILITIES 30,011 28,237
LONG-TERM DEBT 20,395 20,863
DEFERRED INCOME TAXES 6,899 6,163
OTHER NONCURRENT LIABILITIES 10,211 10,164
TOTAL LIABILITIES 67,516 65,427
SHAREHOLDERS' EQUITY    
Convertible Class A preferred stock, stated value $1
928 967
per share (600 shares authorized)
Non-Voting Class B preferred stock, stated value $1
— —
per share (200 shares authorized)
Common stock, stated value $1 per share (10,000
   
shares authorized; shares issued:
2019 - 4,009.2, 2018 - 4,009.2) 4,009 4,009
Additional paid-in capital 63,827 63,846
Reserve for ESOP debt retirement -1,146 -1,204
Accumulated other comprehensive income/(loss) -14,936 -14,749
Treasury stock, at cost (shares held: 2019 - 1,504.5, -
-99,217
2018 -1,511.2) 1,00,406
Retained earnings 94,918 98,641
Noncontrolling interest 385 590
TOTAL SHAREHOLDERS' EQUITY 47,579 52,883
TOTAL LIABILITIES AND SHAREHOLDERS' $
$ 118,310
EQUITY 115,095

Ratio Analysis

 Current Ratio
Current Ratio is a comparison of current assets to current liabilities, calculated
by dividing the current assets by current liabilities. Potential creditors use this
ratio to measure a company’s liquidity or ability to pay off short-term debts.
Formula
Current ratio = Current Assets
Current Liabilities

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 Current Ratio
Quick Ratio
P&G
0.84 0.66
0.82
0.66
0.8
0.64
0.78 Particulars 2019 2018
0.62
0.76 0.83
0.74 0.58
Current Asset 22473 23320
0.6 0.75
0.72
0.58 0.7 Current Liability 30011 28237
2019
0.56 Current Ratio 0.749 0.826
2018
0.54
2019 2018

Interpretation:
From the above graph, we know that current ratio of P&G for the year
2019 is 0.749 and in 2018 it was 0.826. Current ratio has decreased from
the previous year. The ideal ratio is 2:1.

 Quick Ratio
This quick ratio is the same as the current ratio except that it excludes
inventories form the current assets, inventories are usual the least liquid
portion of the current assets and may be difficult to dispose of especially
if they are slow moving and become absolute
Quick Ratio= Quick Assets
Current Liabilities

Particulars 2019 2018

Quick Assets 17456 18582

Current Liability 30011 28237

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 Cash Ratio
P&G
0.14
0.16
0.14
0.12 0.09
Quick Ratio 0.582 0.658
0.1
0.08
0.06
0.04
0.02
0
2019 2018

Interpretation:

From the above graph, we know that quick ration of P&G for the year
2019 was 0.582 and in 2018 it was 0.658. Quick ratio has decreased
from the previous year.

 Cash Ratio
The cash ratio is ratio of a company’s total cash and cash equivalents to
its current liabilities. This information is useful to creditors when
deciding how much debt, if any, they would be willing to extend to the
asking party. The cash ratio is generally a more conservative look at a
company’s ability to cover its liabilities than many other liquidity ratios
because other assets, including accounts receivable, are left out of the
equation

Cash Ratio= Cash + Cash Equivalents

Current Liabilities

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 Proprietary Ratio
P&G

0.45
0.44
Particulars 2019 2018
0.43
0.42 Cash and Cash equivalents 4239 2569
0.41
0.4 Current Liability 30011 28237
0.39
2019 Cash Ratio 2018 0.141 0.091

Interpretation:
From the above graph, we know that cash ratio of P&G for the year
2019 was 0.141 and in the year 2018 it was 0.091. Cash ratio has
increased from the previous year.

 Proprietary ratio
Tt is also called as capital ratio or net worth to total asset ratio. The ratio
in between the share of owners in the total assets of the company. A
lower ratio indicates greater risk to the creditors. A ratio below 0.5 is
alarming of the creditors

Formula
Proprietary ratio= Shareholders fund
Total Assets

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Particulars 2019 2018

Shareholders fund 47579 52883

Total Asset 115095 118310

Proprietary Ratio 0.41 0.45

Interpretation:
From the above graph, we know that proprietary ratio of P&G for the
year 2019 was 0.41 and in the year 2018 it was 0.45. Proprietary ratio
has decreased from the previous year.

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