PREFACE

Development of various organizations has changed due to innovation and modernization after post independence era. So the need arises for managers to be trained in a professional manner. To get acquainted with the theoretical aspects of management and the practical implications of theory is greatly valuable for business administration students. The Master of Business Administration is a professional course, which develops a new level of knowledge & skills. MBA programme imparts the knowledge of concept & application of skill management. To experience the financial condition of the company we had assigned a project on PROCTER AND GAMBLE INDIA LIMITED Learning is a continuous process, and the project has indeed been an exhilarating and a fruitful experience for us.

Page 1

ACKNOWLEDGEMENT
It is with a sense of gratitude that we acknowledge the effort of a whole host of well-wishers who have in some way or the other contributed in their own special ways to the success of this effort. Individual effort alone can never contribute in totality, to the successful completion of any venture. At first, we wish to express our sincere gratitude to Prof. SANDHYA HARKHAWAT for giving us such a project in which we get a chance to perform in a proper way and showing our skills and talents. He helped a lot to us and guided us in each possible manner. We also thank the library staff and internet lab. staff for helping us in completion of the project. We also convey our thanks to all those who knowingly or unknowingly helped us to give this report a realistic dimension.

Page 2

TABLE OF CONTENTS

Sr. No.
1 2 3 4 5 6 7 8 9 10 11 12 13 Objectives

Contents

Page No.
4 5 6 7 8 9 12 35 56 59 62 65 66

Executive summary Research methodology Introduction Branches History Finance, Marketing, HR & General Management Strategies Products Financial analysis Competitor analysis Total quality management Conclusion Bibliography

Page 3

OBJECTIVES

To give brief knowledge about the company. To analyze the branches of company in other country. To study the matketing, finance and human resource strategy of the company. To study the competitor analysis of company. To analyze the quality assessment methods followed by the company.

Page 4

Executive Summary

Procter & Gamble Co. (P&G is a Fortune 500, American global corporation based in Cincinnati, Ohio, that manufactures a wide range of consumer goods. Here we have carried out a detailed analysis of companys

History Operations Branches & Subsidiaries Products P&G Productions Functions Controversies P&G India Financial Analysis Finance, Marketing, HR & General Management Strategies

Page 5

RESEARCH METHODOLOGY

This project is totally based on primary data basis. Here we had collected data from the internet. We had not used primary data, only secondary data from various websites of the company has been taken. We had collected various data regarding companys profile, marketing strategy, finance strategy and human resource strategy. We had also collected data regarding competitors of company.

Page 6

Procter & Gamble

INTRODUCTION
Based in Cincinnati, USA, Procter & Gamble (P&G) was one of the largest manufacturers of fast moving consumer goods (FMCG) in the world. In 1999, with a turnover of $38 billion, P&G ranked 61 among the FORTUNE Global 500 companies. The company marketed more than 300 brands to nearly five billion consumers worldwide. P&G had a significant market share in several product categories: laundry and cleaning (Tide, Cascade, Dawn), paper goods (Bounty, Charmin, Pampers), beauty care (Pantene, Olay, Cover Girl), food and beverages (Folgers, Pringles, Duncan Hines), and health care (Crest, Scope, Metamucil). In the early 1990s, a survey conducted by the consulting firm, Kurt Salmon Associates Inc, had revealed that almost a quarter of P&Gs products in a typical supermarket sold less than one unit a month. On the other hand, just 7.6% of the products accounted for 84.5% of sales. The remaining products went almost unnoticed by consumers. Complicated product lines and pricing were also causing problems for retailers who had to struggle with rebates and discounts. P&G CEO Durk Jager recalled: "We created a whole plethora of allowances and deals and conditions which were just simply confusing and added cost to the system." In the late 1990s, P&G had taken various initiatives to deal with these problems. The company had made attempts to streamline many of its marketing practices and cut costs. P&G had also made efforts to simplify its product line by standardizing formulas and packages worldwide and selling marginal brands. P&G had also been cutting inefficient promotion expenditure and curbing new product launches. In January 1999, Jager, a P&G veteran became the new CEO taking charge at a time when P&G was in the midst of a major restructuring exercise. Jager faced the challenging task of revamping P&Gs operations and marketing practices. Soon after taking over as the CEO, Jager told analysts that he would overhaul product development, testing and launch processes. He also announced plans to lay off 15,000 workers, take a $ 1.9 billion charge and close down up to ten plants to cut costs by $ 900 million annually. The biggest obstacle for Jager was P&Gs culture. Jager realized the need to change the mindset of the P&G employees who had been used to lifetime employment and a conservative management style. In June 1999, P&G launched the Organization 2005 Program to streamline its organization structure, and work processes. The program aimed to speed up decision making to enable the company to innovate and bring new products to the market more quickly. Till 1998, P&G had been organized along geographic lines with more than 100 profit centers. Under the new structure, P&G had seven global business units organized by product category.

Page 7

BRANCHES P & G (INDIA) P & G (JAPAN ) P & G (EUROPE) P & G (U.S.A.) P & G (FRANCE) P & G (GERMANY)

Page 8

HISTORY
EARLY HISTORY Procter & Gamble was established in 1837 when candle maker William Procter and his brotherin-law, soap maker James Gamble merged their small businesses. They set up a shop in Cincinnati and nicknamed it "porkopolis" because of its dependence on swine slaughterhouses. The shop made candles and soaps from the leftover fats. By 1859, P&G had become one of the largest companies in Cincinnati, with sales of $1 million. The company introduced Ivory, a floating soap, in 1879 and Crisco, the first all-vegetable shortening, in 1911. In the 1940s and 1950s, P&G embarked on a series of acquisitions. It acquired Spic and Span (1945), Duncan Hines (1956), Chairman Paper Mills (1957), Clorox (1957; sold in 1968) and Folgers Coffee (1963). In 1973, P&G began manufacturing and selling its products in Japan through the acquisition of Nippon Sunhome Company. In 1981, when John G. Smale became the CEO, P&Gs financial performance was under pressure. Manpower strength had crossed 100,000 due to P&Gs acquisitions. P&G also faced intense competition from companies such as Kimberley-Clark and Colgate. P&G stumbled in many categories, losing market share and profits. It had to withdraw its Rely tampons from the market after the product was linked to the deadly diseaseToxic Shock Syndrome. P&G responded by slowing down its research efforts. It also modified compensation plans for managers and plant workers to eliminate the obsession with short-term returns. P&G moved into health care when it purchased Richardson- Vicks and G D Searles nonprescription drugs division in 1985. In the same year, P&G announced several major organizational changes relating to category management, purchasing, manufacturing, engineering and distribution. In 1988, the company formed a joint venture to manufacture products in China. P&G became the biggest cosmetics company in America when it acquired Noxell (1989) and Max Factor (1991). In 1990, Ed Artzt, who had been heading P&Gs international operations since the 1980s, replaced Smale as the CEO. Two years later, the company initiated an everyday low-pricing policy that reduced its reliance on coupons and trade promotions. The move helped in smoothening demand fluctuations and allowed P&G to cut prices on major brands. A year later, P&G initiated another restructuring program, cutting 13,000 jobs and closing 30 manufacturing plants. After years of trying to penetrate the orange juice market, P&G disposed off its Citrus Hill juice line and took a $200 million charge in 1992. another Sun engineer designed their own microprocessor, SPARC (Scalable Processor Architecture). Suns initial objective in creating the SPARC chip was to create a processor that

Page 9

would be faster than the 68030 (Motorola processor) for running UNIX. By the end of 1988, the company had achieved this objective. As a next move, Sun decided to compete aggressively with Intel in the general-purpose microprocessor business. First, Sun tried to promote the SPARC architecture as an open architecture. Then it explained the advantage of UNIX compared to proprietary operating systems such as VMS which were only available to the inventor company. Sun licensed the SPARC architecture to many semiconductor companies around the world (including Fujitsu, Toshiba, LSI Logic, Texas Instruments and others) to ensure that there would be plenty of vendors to supply the chips at low prices. Sun also formed an international SPARC users group to demonstrate that SPARC was an open architecture. Sun claimed that UNIX based PCs using SPARC microprocessors would replace Windows based PCs. The company urged PC manufacturers to build Sun clones just like IBM PC clones. Sun, however, faced many problems. There were many semiconductor companies competing to supply a very small SPARC market. It seemed that none could afford the investments needed to keep the development going if they were to sell only a small quantity of chips. SPARC system clones were also competing for this small market. To make matters worse, Sun while claiming that UNIX was an open system, did not release its latest version to other PC manufacturers. Intels 486 quickly surpassed SPARCs performance in 1991. Intel had incorporated RISC and other better architectural ideas and was able to rapidly improve the performance of its chips. By 1990, it became quite clear that Suns assault on PCs and Intel microprocessors had been unsuccessful. In 1994, Sun shifted its emphasis to selling solutions, i.e. entire software/hardware packages with services required by customers. Sun targeted midsize companies and offered its systems as a less expensive but comparable alternative to IBM mainframes. Sun also offered them integration and consulting services through its service arm. In 1995, Sun introduced Java, a new programming language. Java language applications could be executed on many different processors and operating system architectures without the need to port application for those systems. Java also had a sophisticated security model, a key requirement for any Internet application. It used multiple program threads, which meant that more than one task could be run at a time, even on what would normally be a single task operating system. Virtually, any traditional PC application like a word processor, spread sheet or databases could be written as one or more Java applets.

Page 10

RECENT HISTORY In 1997, Suns rivalry with Microsoft deepened on the issue of distributing Java compatible products. Sun filed a suit in the court accusing Microsoft of violating the rules of the contract. During the same year, Sun entered into an agreement with Intel Corporation to optimize Suns Solaris operating environment for Intels Merced processor. Under this agreement, Intel agreed to support Suns efforts on porting and optimizing the applications for Solaris on Intel chips. Sun and IBM also began to modify Solaris software for Power PC-based machines. from retailers on Auroras behalf till March 1998. The people working in Duncan Hines would be re-deployed to other parts of P&Gs food and beverage business. In September 1998, P&G announced plans to redesign the companys management and operating structures. Under the Organization 2005 program, as it came to be known, P&G announced that it would revamp the work processes to improve efficiency and cut costs. P&G also explained that it would take several measures to provide a stimulating work environment to its employees. In October 1999, P&G signed a global cooperation agreement with Tupperware Corporation to explore joint-marketing and promotion opportunities. The $ 1.1 billion Tupperware, was one of the worlds leading direct sellers whose premium products reached consumers in more than 100 countries. The alliance would explore global business building opportunities including the copromotion and cross-endorsement of products.

Page 11

BUSINESS SEGMENTS
P&G had started as a soap and candle manufacturing company. Over the years, it had diversified into many businesses. The company had divided its entire business into five segments: Laundry and Cleaning, Paper, Beauty Care, Food and Beverage, and Health Care.

Table-A Business Segments SEGMENTS PRODUCTS IMPORTANT BRANDS

Laundry and Laundry detergents and bleaches, fabric Ariel, Bounce, Cascade, Cleaning conditioners, household cleaners and Mr. Clean, Febreze, dishwashing detergents. Dryel. Paper Beauty Care Diapers, facial tissue, toilet tissue, paper Pampers, Luvs, Always, towels, baby wipes, feminine protection. Whisper. Facial cleaners and moisturizers, hand and Clearasil, Head and body lotion, personal cleaning, color Shoulders, Oil of Olay, cosmetics, skin care cosmetics, deodorants, Old Spice, Pantene shampoos, hair conditioners, hair spray. Folgers,

Food and Snacks, coffee, juices, shortening and oil, Crisco, Beverage peanut butter. Pringles. Health Care

Toothpastes, toothbrushes, mouthwashes, allergy remedy, stomach remedy, cold remedies, decongestant, sinus remedy, throat Vicks Formula 44, Vicks drops, pharmaceuticals. vaporub, Actonel, Didronel, Crest, Metamucil

Source: Annual Report, 1999.

Page 12

In Laundry and Cleaning and Paper products, P&G achieved significant growth during 1998-99 in all the regions (North America, Europe, Middle East and Africa, Asia and Latin America). Volumes increased by 5 % in 1999 due to the reformulation of Tide for sanitization and clean rinse benefits and the launch of Febreze fabric refresher. Febreze, introduced in 1998, had exceeded all expectations and become one of the companys most successful brands. In Europe, P&G faced stiff competition from local players. In the Asian region, Japan recorded strong results despite continuing economic recession. This was mainly because of new product innovation and launch of new brands such as Febreze.

Table-B Business segment information

(Revenues in $ million) Segments 1997 1998 1999

Laundry and Cleaning Paper Beauty Care Food and Beverage Health Care Corporate and other Total
Source: www.pg.com

10,892 10,101 7,101 4,107 2,895 668 35,764

11,099 10,862 7,160 4,376 2,849 808 37,154

11,517 11,451 7,115 4,381 2,836 825 38,125

The paper segment generated satisfactory volume and earnings growth in North America. Tissue and Towels and feminine protection products also registered gains. The acquisition of Tambrands Inc. and its global brand Tampax gave a boost to the paper sector in North America. Beauty care was another profitable area in 1999. Much of the growth in this segment was due to the launch of Oil of Olay cosmetics and deodorants and good performance by Old Spice in 1998. The performance of Oil of Olay cosmetics exceeded expectations and increased P&Gs market share. The Food and beverages segment experienced a 5% decline in volumes in North America during 1999, due to stiff competition in the snacks market. In Europe, the segment did not perform well mainly due to competition from local juice brands.

Page 13

The Health care segment registered a 3% increase in volumes in North America in 1999. While all categories recorded an encouraging performance, pharmaceuticals made the strongest contribution.

MARKET RESEARCH
P&G was one of the first consumer product companies in the world to conduct formal market research. In 1879, when customers wrote to P&G for more of its "floating soap" (an accidental product that was a result of extra stirring during the soap making process), it quickly changed the soap so that all the bars would float. P&G was one of the pioneers in in-situ research. Researchers went into customers homes to observe them directly as they went about their daily chores. P&Gs in situ market research had helped in solving problems, which the customers themselves were not aware of. In the 1970s, P&Gs researchers had observed consumers opening detergent packages with screwdrivers and razors. Consumers did not feel there was any serious difficulty but P&G went ahead with efforts to develop a box which would be easy to open. The new design, which incorporated a plastic insert in the cardboard, became very popular. In another such study, P&G observed that some of the liquid laundry detergent, when poured ran down the front of the bottle. Customers were happy to wipe the drip with a piece of cloth. P&Gs researchers however saw an opportunity and reported the problem. Soon, P&G came up with a simple redesign of the spout that funneled any drips back into the bottle. This simple innovation led to a dramatic increase in sales. In many parts of Eastern Europe, P&Gs researchers found that the apartments were quite small. Since the bathroom was adjacent to the living room, the smell of the detergent filled the apartment whenever clothes were washed. The problem was worsened due to inferior detergents, having an offensive odor, made by sate owned factories. When P&G conducted market research, customers articulated the need for good cleansing power. P&G however, realized that fragrance would be equally important. The products launched by P&G ultimately became very popular in Eastern Europe. P&G had attempted to be meticulous and precise in its research methodology. It worked hard to use information objectively and critically. P&Gs researchers were aware that customers would sometimes wrongly interpret the questions asked of them. The researchers were trained to frame questions carefully so that customers found them easy to answer. In some cases, the answers given by the customers were ambiguous. Researchers were trained to detect ambiguity in answers and continue discussions with the customers to understand the true meaning. Researchers would ask customers whether "clean" meant the way it looked or the way it felt, whether clean hair meant lively, bouncy, fluffy, shiny or easy to comb and so on. P&G attached great importance to the quality and reliability of information. Managers regularly checked and validated data. Questionable information was ignored. P&G strongly believed that no research was better than wrong research. While determining the best fragrance for Camay soap, P&G realized that the smell of the perfume was quite different when it was diluted and became a part of the soap. Not only that, the strength of the fragrance changed as the soap was

Page 14

consumed and came in contact with water. As a result, P&G rejected its earlier research findings and decided to test the soap while in actual use. When P&Gs researchers reported quantitative research results, they also disclosed the statistical significance of the data. P&G used qualitative research findings very carefully. The company did not arrive at generalizations or take major decisions on the basis of a few focus groups. Instead, P&G used focus groups to gain useful insights. These insights then became the basis for developing the hypothesis to be tested or for designing a quantitative research program. For example one such hypothesis was whether using a fabric softener had any perceived connection with being a good mother P&G emphasized objectivity in market research. It realized the importance of separating facts from implications and actions that they might suggest. Research reports normally contained facts but not editorial matters. P&G believed that if researchers looked for conclusions, there might well be a bias that could distort an objective presentation of the data. Normally, it was the brand group and not the research department, which analyzed the information. To improve the quality of research, P&G imparted rigorous and extensive training to new entrants. They would typically be asked to spend months on the telephone and in the field conducting interviews with customers and collecting data. A trainer would be alongside the new recruit. Gradually, researchers learnt how customers responded to questions and how misinterpretations took place. The new entrants picked up skills in identifying ambiguous responses and probing for more accurate answers. Over a period of time, the research interview became more like a conversation as the researcher memorized the structure of the interview and did not find the need to use a questionnaire. P&G responded to consumer letters promptly. Letters, Emails and summaries of incoming phone calls were routinely circulated to brand managers, product development teams, production teams and the top management. In the 1970s, P&G began to follow up some of the correspondence with phone calls to get more inputs from the consumers. The company received over three million phone calls a year. When one consumer inquired whether Oil of Olay lotion came in unscented version, P&Gs brand group took the cue and developed an unscented version. The brand group also conducted focus groups among the telephone operators, who handled the Oil of Olay calls to identify key benefits, which customers were looking for. In the late 1990s, time and money constraints made it more efficient for P&G to send questionnaires by mail and conduct telephone surveys. Consumers were given scanners to register which groceries they purchased. This device registered the bar codes on packages before customers put them in the cupboard. For some customers, P&G also placed a box on the television sets to monitor what programs they watched. The company also used hidden video cameras in grocery store parking lots to monitor the habits of shoppers.

PRODUCT DEVELOPMENT
Though much of P&Gs product development was not highly innovative, the company sought to introduce products that offered a noticeable difference to consumers. Finding this difference

Page 15

involved detailed research into obscure aspects of consumer habits and practices. For instance, P&G collected washing machines from around the world to study how they worked and what kind of detergents would be suitable. In the test labs, a researcher used a ruler to measure how deep the lather was in a machine. Bar soaps were tested by continual hand washing to see how many movements were required to make a good lather. Touch testers at P&G were trained to determine the softness of towels. P&G chemists also undertook experiments to study how human skin reacted to their products. When P&G was developing its Wondra lotion, thousands of consumers were given the lotion in unmarked packages for home use. Each persons hands, elbows, and legs were examined under magnifying glasses before and after applying the lotion. Clinical trials constituted an important part of P&Gs product development activities. P&G regularly carried out tests on animals. Human tests however provided the most useful data. P&Gs "armpit sniffers" and "bad breath brigades", inhaled employees armpits before and after they used the companys deodorants and mouthwashes. "Trained judges" rated odor from zero (lack of offensive odor) to ten (very strong smell). P&Gs dentists enlisted employees for various experiments involving dental products. P&G sometimes took several years to develop a product. In the case of "Pampers", it took more than ten years just to figure out how to develop the product and commercialize production. Crest was another product that had taken a long time to develop. It took fifteen years after stannous fluoride had been identified as a potential anti cavity fighter to introduce Crest toothpaste in 1955. Experience had taught P&G the importance of offering customers value for money products. When P&G was ready with Pampers, it found that customers were resistant to the idea of using disposable diapers. Research revealed that cloth diapers accounted for about 99.8% of the diaper changes in the US. Customers also felt that the quality of cloth diapers was much better than that of disposable diapers. They also found the prevailing price of about 8.6 cents too high. Most families restricted the use of disposable diapers to special occasions such as while travelling. P&G felt that Pampers was substantially better than the prevailing brands. It test marketed Pampers at 10 cents per piece but soon realized that there would be few takers at this price. P&G realized that to bring down the price, it would have to reduce costs significantly. One way to do this was to increase volumes and generate economies of scale in manufacturing, marketing and procurement. Higher volumes would also be needed to convince supermarkets to distribute the product. Distribution through super markets would be more efficient as supermarkets operated on far lower margins compared to drugstores, the traditional outlets for diapers. P&G conducted three more test-marketing exercises before fixing a price of six cents per diaper. Pampers rapidly gained popularity among customers. In the late 1990s, 98% of diaper changes in the US were made with disposable diapers of which P&G accounted for more than one third. Pringles "newfangled potato chips" was a dismal failure when it was first introduced. Subsequently, P&G scientists developed a new technology that made uniform, elliptical chips from dehydrated potatoes. The chips were stacked in a "tennis ball container" to keep them from breaking or becoming stalea problem for conventional bagged potato chips. It took P&G years

Page 16

to determine the right taste. Pringles potato chips were made of Olestra-a fat free substitute that tasted and fried like a fat but did not digest like a fat. In the late 1990s, a study in the Journal of American Association concluded that consumers suffered no higher levels of gastric distress from Olestra-made potato chips than from traditional ones. The Journal however mentioned that consumers did not like the taste of Olestra chips. In 1998, P&G announced that it would soon begin selling fat-free Pringles made with a new recipe and a new flavor. Pantene was a small shampoo brand that came along with P&Gs Richardson-Vicks acquisition in 1985. Though a seemingly good product with the mystique of a high-priced department store brand, it was still a minor brand in its category. In the 1990s, P&G converted it into a shampooand-conditioner product with its patented "2-in-1" technology. Table-C Evolution of Product Line
1879- Ivory 1879- Floating Ivory 1911- Crisco 1946- Tide 1955- Crest 1956- Comet 1956- Pampers 1961- Head & Shoulders 1972- Bounce 1978- Didronel 1983- Always, Whisper 1984- Liquid Tide, Ariel, and Vizir 1985- Pantene 1985-Tarter Control Crest, 1985- Ultra Pampers, Luvs 1986- Pert Plus/Rejoice Shampoo 1998- Febreze All purpose soap that didnt give baby a rash. Floating bar soap. All-vegetable shortening. Heavy-duty synthetic laundry detergent. Fluoride toothpaste. Scouring cleanser with effective bleaching. Effective, economically priced disposable diaper. Effective dandruff- control shampoo. Dryer-added fabric softener. Prescription drug that reversed bone loss for those susceptible to osteoporosis. Feminine protection products. Liquid detergents that cleaned as well as powders. Shampoo cum Conditioner Toothpaste with an effective tarter control formula. Super baby pants incorporating new technology that made diapers thinner. Shampoo that enabled consumers to wash and condition their hair using only one product. Spray to eliminate smells in fabric.

Page 17

1998- Swiffer 1998- Dryel

A dry mop that traps dust. A home dry cleaning kit.

P&G attempted to improve its products on an ongoing basis. The company had improved Tide detergents product formulation and packaging more than seventy times. P&G had changed the formulation of its Crest toothpaste several times. In 1955, when Crest was first developed, it had stannous fluoride. Subsequently it began to use sodium fluoride, a more effective cavity fighter. Then researchers took on the challenge of coming up with a tarter-control product. P&G scientists discovered an anti-tarter ingredient, soluble pyrophosphate that reduced tarter. The Wall Street Journal named Crest tarter-control toothpaste one of the "milestones of the decade." In the 1990s, P&Gs product development activities seemed to have slowed down. In June 1999, the Economist magazine reported that P&Gs last real new product innovation had come way back in 1982, when it had launched its Always feminine hygiene range. Analysts felt that more consistent innovation would be needed to generate faster growth opportunities in the 1990s. P&Gs risk-averse culture seemed to be stifling innovation and standing in the way of commercializing new ideas quickly. The company responded by setting up innovation teams to explore promising ideas rapidly around the company and bring them fast to the market. P&G also indicated that it would take more risks, reduce pre-market laboratory testing requirements and launch products faster. In the late 1990s, P&G launched Swiffer, Febreze and Dryel, none of which were variants of old products. Febreze was launched in June 1998 and was a success with sales of $230 million in the US in its first year. Swiffer went from test marketing to global launch in just 18 months. P&G also looked outside for new ideas. To develop Nutri Delight, a fortified orange drink, P&G worked with UNICEF and licensed the technology that allowed iron to exist with iodine and vitamin A in stable form. This helped undernourished children put on weight. In the late 1990s, P&G announced the Organization 2005 program. P&G introduced changes in its new product development process to bring innovative offerings to the market faster. The Global Business Units (GBUs) would develop and sell products on a worldwide basis replacing the old system that allowed P&Gs country managers to set prices and handle products as they saw fit.

Page 18

In addition to marketing and pricing, GBUs would supervise new product development. P&G also planned to move away from its traditional "sequential" method of testing where products were first introduced in US cities before being launched globally. Test marketing new products worldwide instead of only in American cities was expected to cut down product development cycle time. P&G announced in September 1999, that it would launch a website, reflect.com, which would use an interactive question and answer process to understand each womans needs. P&Gs research and development lab would customize both the product and packaging to suit the requirement of each customer. P&G was confident that customization could be possible without any significant addition to costs. For several years, P&G had followed the strategy of producing technologically superior goods and used clever marketing to sell them at a price that would not only cover the high R&D costs but also generate adequate profits. In the early 1990s, P&G realized that most of the growth opportunities lay in emerging markets, where customers could not afford to pay premium prices for its technologically sophisticated products. Consequently, P&G changed its approach to R&D. P&G collected feedback from marketing executives regarding the preferred blend of price and features and then worked to make the product within the price limit. P&G offered Pampers Uni, a lower-priced and simpler version of the sophisticated Pampers line, in developing markets such as Brazil.

BRAND MANAGEMENT
When a P&G product emerged from the R&D department and was ready to be marketed, it was assigned to a brand manager. P&Gs classical brand management structure gave brand managers great power. A brand manager basically focussed on a single product or a small family of products coordinated activities ranging from market research and manufacturing to sales, package design and advertising. Each brand manager had profit and loss responsibility for his or her brand(s). P&Gs brand names were typically one or two syllables long, easy to pronounce, distinctive and easy to remember. P&G looked for design elements consistent with the brands positioning. The Tide graphics conveyed power and heavy duty. The baby on pampers suggested gentle softness. The shape of Mr.Clean bottle resembling its mascot Mr. Clean character with the cross-armed stance, suggested the strength of the product. P&G attempted to maintain consistency while presenting its brands to the consumers and was very cautious about changing anything about the brand that the consumer had become familiar with-- logo, package design, colors or flavors.

Page 19

Table-E Key Brands

Segments Fabric and Home Care Feminine Protection Health Care Food and Beverages Beauty Care Brands Ariel, Bounce, Cascade, Cheer, Dawn, Joy, Mr.Clean, Tide. Always, Always All days, Tampax, Whisper. Actonel, Crest, Didronel, Scope, Vicks Formula 44, Vicks Vaporub. Crisco, Folgers, NutriDelight Olean, Pringles, Punica,

Clearasil, Cover Girl, Head and Shoulders, Ivory, Oil of Olay, Old Spice, Pert Plus, Pantene Pro-V, Rejoice, Vidal Sassoon. Babysan, Luvs, Pampers, Pampers Wipes.

Baby Care
Source: Annual Report, 1999.

P&G encouraged the promotion of rival brands within the company to compete against one another. In the early 1920s, when Lux, Palmolive and Cashmere Bouquet soaps were introduced by its competitors, P&G introduced Camay. When Camay did not perform up to expectations, the management concluded that it had been held back by "too much Ivory thinking." They felt Camay had fared poorly because it had not been allowed to compete head-to-head with Ivory. The result was the creation of a brand management system which Time magazine referred to as "a free for all among brands, with no holds barred." P&G brands had different performance characteristics and provided distinguishable consumer benefits. For example, when Tide was introduced as the first heavy duty synthetic detergent in 1946, it was claimed to be the most effective detergent in the marketplace. Soon other effective detergents came to the market to compete. Some were positioned to compete head-to-head with Tide; others offered additional benefits such as cleaning and whitening. Other brands were positioned for different applications such as cleaning delicate fabrics. All these brands competed with one another around the edges, but they stood for different primary benefits. P&G maintained a fairly centralized approach to brand management. In the beginning, the approach worked well. However, over the years, excessive centralization began to create problems. Gradually, almost every decision was pushed to the top. There were rumors that a decision about whether the companys new decaffeinated instant Folgers Coffee should have a green or a gold cap had been taken all the way to the CEO. In the early 1980s, P&Gs share in a

Page 20

number of important markets began to slip, raising serious doubts about the effectiveness of its brand management strategies. In the 1990s, P&G responded to these difficulties, by taking steps to reorient its bureaucratic culture. It decided to replace the one-page memo by a talk sheet. The talk sheet was an informal outline that allowed managers at several levels to develop and refine a proposal through discussions, rather than through written memos alone. P&G also encouraged the formation of business teams and task forces in key result areas. The management also emphasized greater cooperation among the different functions. In the past, if a P&G brand manager put forward a proposal, it had to pass through the hierarchy of functional unit heads and the top management. Under the new approach, teams were often put together that included representatives from different functional areas who were involved right from the start of the proposal. This system enabled P&G to cut costs, reduce product development time and increase sales. P&G did not seem to believe in product life cycles and took steps to ensure that its brands did not mature. The company regularly revitalized its brands by improving their performance or adding functionality. In the 1950s, white cotton was the predominant fabric. So P&G improved Tides whitening power with fluorescers. In the 1960s and 1970s, brighter colors and synthetic fabrics became more popular resulting in clothes that were tougher to clean. P&Gs "Extra Action" Tide came with new technology that facilitated soil removal for all kinds of clothing. In 1984, a liquid version of Tide was introduced. In the case of Crest, the development of tartar control technology was a major achievement and added vitality to the brand in an important way. P&G also evolved a product through different forms, such as gels and pump dispensers. In the late 1990s, a key issue for P&G was rationalization of its product line. Hardly 25% of P&Gs new products remained in national distribution in the US for more than two years after the launch. The company began to review its brand extension policies. In the late 1980s, P&G had launched separate disposable diapers for boys and girls. In the late 1990s, P&G announced that its diapers had become so absorbent that such anatomical targeting was not necessary anymore. The company continued its efforts to prune the product line.

ADVERTISING
P&G was one of the worlds biggest advertisers. In 1999, the company spent approximately $ 5.5 billion on advertising worldwide. P&G used both print and electronic media to promote its brands across the globe. P&Gs first advertisement in 1882 featured Ivory Soap. This advertisement showed a pair of feminine hands using a heavy thread to divide a bar of Ivory into two cakes. It had the caption: "The Ivory is 99-44/100% pure." The text concluded with an incidental benefit: "The Ivory Soap will float." To dramatize the mildness of Ivory, P&G later introduced "The Ivory Baby" and provided every grocer with a life size cardboard cutout for display. To enhance the appeal, P&G pioneered the use of pre-printed color inserts in print advertisements. The company was the first to use outdoor posters for product advertising. P&G

Page 21

commissioned leading artists to paint babies and children for its advertisements. When P&G realized that listeners wanted to be entertained and not instructed, the companys program planners developed soap operas. When the TV arrived, Ivory Soap was among the first to be advertised. In 1939, researchers found that viewers wanted a TV show to flow as smoothly as a movie. P&G promptly developed a film at Hollywood. P&Gs Television commercials typically opened with a verbal statement of a problem or a situation that needed to be resolved. (Refer Table-F). The verbal opening line was usually the critical part of the commercial, while the visual played an important supporting role. Most P&G commercials spent only as much time with the problem as was necessary to convey the solution or the benefit. Traditionally, P&G commercials introduced the brand right at the beginning of the commercial or within five seconds. A few of the commercials inset the brand logo in the lower part of the screen at the outset of the commercial. P&G commercials rarely mentioned competitors by name. P&G referred to competitors brands as "the leading liquid detergent with bleaching power", "a premium detergent", "other leading liquid", or "regular shampoo" and so forth. Some of the commercials compared the end result for the P&G product and the competitors product. One advertisement explained that clothes cleaned in Tide were cleaner and brighter than those cleaned in "the leading liquid detergent with bleach power." Another emphasized that hair washed in Head and Shoulders had no dandruff while hair washed with "regular shampoo" was full of dandruff. Most of P&Gs print ads had a single, dominant visual. Often, the visuals enabled the viewers to identify themselves with the ads. Ads for Clearasil, Always, Oil of Olay, Pantene and other brands showed people with whom consumers could identify themselves. P&G ads also showed the products performance in action. For example, a bounty towel ad showed two visuals comparing the performance of a sponge and bounty towel. While one visual showed that a tray cleaned by sponge had traces of germs, the other visual showed a tray cleaned by bounty towel without any germs. In most of the P&G ads, the audio and video were tightly coordinated. (Refer Table-G). Statements in P&G commercials were normally supported by compatible visuals.

Some of the most striking P&G print ads used very few words. A Cheer ad showed a bright, lime-green shirt dominating the page with a label that used only six words: "HELP KEEP LIMES LIME. WASH IN CHEER." The Pantene Gold-Cap collection ad was a two-page spread that featured a woman with glorious golden hair. It used only nineteen words: "GLISTENING. GLEANING. GLORIOUS. GOLD. THE PANTENE GOLD COLLECTION. EXPERIENCE IT FOR YOURSELF. PANTENE. FOR HAIR SO HEALTHY IT SHINES." P&Gs print advertisements attempted to communicate the products benefits to the consumers in a credible way. Pantene Pro-V promised healthy hair because of its exclusive pro-vitamin formula that penetrated root to tip. Oil of Olay body wash ads promised superior skin care because the product had more moisturizer than even the best beauty bar. Clearasil ads promised to stop pimples before they appeared because the product worked deep down where the pimples formed. Tag lines were used to reinforce the brands strategic positioning: "FOR HAIR SO

Page 22

HEALTHY IT SHINES;" "IF ITS GOT TO BE CLEAN, ITS GOT TO BE TIDE;" "CASCADE. SO CLEAN ITS VIRTUALLY SPOTLESS." In the 1970s and 80s, P&G had been producing television shows to promote its products. In the early 1990s, P&G stopped producing television shows because of high production costs. However in the mid 1990s, P&G went back to Television shows in a big way. In March 1995, P&G announced a three year alliance with Paramount Television Group to produce Television shows. P&G feared that with the growing popularity of the Internet, interactive game channels and other ad-free media, traditional ad-sponsored programs would soon lose their importance. P&G felt it would have no place to run its commercials unless it owned some of the shows. In the late 1990s, P&G introduced fundamental changes in the way it dealt with its advertising agencies. Durk Jager announced that P&G would move towards pay-for-performance for advertising agencies and "squeezing more per dollar" from media spending. In September 1999, P&G announced that it would pay its agenciesSaatchi and Saatchi, Leo Burnett, Grey, and Euro RSCG a percentage of global sales effective from July 1, 2000. While the global norm was 2 percent of sales, it could vary depending on individual brand sales and strengths. Bob Wehling, P&Gs Global Marketing Officer commented: "Our overarching objective is to increase top-line sales growth. It will empower them to better align resources and talent, break down geographical barriers and focus on the global growth of P&Gs brands."

DISTRIBUTION
In the late 1980s and early 1990s, P&G noticed inefficiencies in its supply chain due to complicated product lines and pricing strategies. Complicated pricing was the result of special promotional offers to gain temporary market share rapidly. Special promotions led wholesalers and retailers to book orders for as much as three months supply of some products in order to take advantage of favorable terms. P&G estimated that one-third of the existing inventory was held in the pipeline between its plants and the consumer. Variations in product, pricing, labeling and packaging necessitated by extensive promotions had created a highly complicated supply chain system which did not add value for customers. P&G began to simplify its operations in the 1980s. It made efforts to prune the product range, consolidate suppliers and streamline manufacturing processes. P&G also realized the importance of streamlining logistics practices. By the 1990s, more than 40% of P&Gs shipments were automatically linked to withdrawals from customers warehouses. This minimized paperwork and reduced inventory costs. As part of its simplification exercise, P&G restructured its US hair care business by selling Lilt home permanents, and mega brands such as Prell and Ivory shampoo. The Head and Shoulders product line was reduced to 15 variations. P&G also tried to simplify the special deals offered to retailers and distributors. In 1990, P&G eliminated many of the discount schemes it offered to retailers and instead lowered the list prices on most of its products. P&G took several steps phased over a five year period (1992-97) to streamline its operations. In 1985, P&G introduced a program known as Continuous Replenishment (CRP). Using Electronic

Page 23

Data Interchange (EDI) P&G was able to approximate a "Just In Time" supply of products. In 1992, the company instituted a comprehensive program, called Efficient Consumer Response (ECR) to remove unwanted costs from the supply chain. ECR concentrated on four key areas: efficient replenishment, efficient promotion, efficient introduction and efficient assortment. Efficient replenishment linked the replenishment process to consumer demand. Efficient Assortment led to a 20% reduction in the number of stock keeping units (SKUs). Efficient introduction strengthened the criteria for introducing new products based on genuine customer needs. Efficient promotion enabled the success of the other elements of the ECR Program.

Table-D P&Gs Simplification Drive in the 1990s. Standardizing-Reducing promotions-Easing up on coupons-Cutting extra sizes, flavors and other variants to make it marginal easier for customers to find what they are looking for product Always sanitary pads used the same ads worldwide. A distribution system developed in Eastern Europe was Reapplying strategies that being exported to Asia work-Only items with a strong chance of making it to the top Trimming new product got the green light launchesGetting rid of brands-Cutting lines-P&G launched three other programs called Streamlined Logistics Initiatives (SLIs) to support its ECR program and further increase supply chain efficiency. Launched in 1994, SLI I began to simplify pricing and trade terms across all categories. The objective was to make P&G operate like a single, integrated company with one set of trade terms across all the five business segments. SLI II, introduced a year later, gave retailers new, low product prices if they met supply-chain efficiency criteria: two-hour carrier turnaround; on-time customer pick-up and electronic purchase orders. In 1997, P&G launched SLI III, called Streamlined 97, to reduce costs arising out of damaged merchandise in the supply chain. P&Gs Logistics Development Incentive (LDI) replaced the old item-by-item damage inspection programs with flat-rate compensation to the retailer. The LDI, reduced unloading times by 1-1/2 hours in 1997, saving the trade more than $60 million. Product formulas and packages Trade Fewer discounts and rebates Issuing fewer coupons

Page 24

GLOBALIZATION
P&G did not pursue overseas markets vigorously until after World War II. P&G had very limited export activities and its operations in Canada, Cuba, Philippines and Indonesia were regarded as mere extensions of its US operations. After the war, P&G began to view overseas markets as a potential source of growth and profits. In the late 1950s, and early 1960s, as P&G started expanding internationally, it built its overseas organization around geographic markets. P&G took full advantage of its superior technologies, product development capabilities and accumulated marketing expertise while expanding overseas. The management however quickly realized that consumer tastes and habits varied widely from one country to another and replication of products or strategies which had been successful in the US, in overseas markets would be a mistake. Subsidiary Managers were gradually given the freedom to develop, modify and promote products to suit local consumer needs. At the same time, P&G used tight central administrative systems and tracked performance against budgets. The top management also carefully reviewed major investment decisions. By the late 1970s, P&G faced a saturated and increasingly competitive market abroad, particularly in Europe. With costs rising much faster than revenues, P&G decided it could no longer allow product development to be driven by the local interests of each national subsidiary. The lack of coordination between the national subsidiaries had led to a great deal of duplication and overlapping efforts. P&G initiated a program that required European subsidiaries to collaborate in developing and executing Europewide product market strategies. Instead of trying to coordinate from headquarters, it delegated responsibility to Euro Brand Teams. A typical Euro Brand Team included brand and advertising managers from country subsidiaries and key functional managers from headquarters (marketing, manufacturing, logistics). Euro Brand Teams enabled managers to discuss issues such as standard pack sizes, consistent brand positioning, and common advertising themes. The teams also discussed strategic issues such as launch timing and the need to coordinate responses to moves by competitors. P&Gs attempts to share knowledge across subsidiaries had led to some innovative products. After a failed attempt to introduce a heavy liquid detergent in Europe, P&G scientists developed a new liquid detergent. The new product was successfully launched as Vazir in Europe. Meanwhile, researchers in the US had been working on a new liquid. Around the same time, P&Gs subsidiary in Japan was trying to develop a more robust surfactant (the liquid that removed greasy stain) that could be more effective for the cold water washes that were common in Japan. When P&Gs head of Research and Development for Europe was promoted to the head of R&D at P&G Headquarters, he stressed the need to have more coordination and cooperation among different subsidiaries. The world liquid detergent project became a test case. Plans to launch Omni, the liquid on which the US group had been working, were postponed until innovations from Europe and Japan had been incorporated. The result was the launch of Liquid Tide in the US, followed by the successful launch of Liquid Cheer in Japan and Liquid Ariel in Europe. P&G looked for good ideas that could be replicated in other countries. P&Gs success with Joy detergent in Japan in the late 1990s, was a good example. The highly concentrated version of the

Page 25

American dish-washing detergent was launched in Japan in 1996. It was based on a new technology developed specifically for Japan by P&Gs scientists in Europe. The commercial was an adaptation of the documentary style "Show and Smell" campaign originally created by Daz detergent in Britain and subsequently adapted to Gain in the US. The products leak-free cap, developed in Japan was later used on P&G products in the US. The Joy marketing program was so successful that it was later extended to the Philippines and other Asian markets. In the 1970s, P&G entered Japan through a joint venture with a small Japanese company named Nippon Sunhome. Eventually, P&G bought out its Japanese partner and took complete management control. Cheer laundry detergent a direct lift from the US was P&Gs first major product in the Japanese market. Cheer could clean clothes at three different temperatureshot, warm and cold. Most Japanese women washed their clothes in cold tap water. The idea of washing clothes in three different temperatures had no relevance for them. The product failed in the test market. P&G reintroduced Cheer in a high density formula in very compact packages. An appealing new lemon fragrance gave the brand the uniqueness it had earlier lacked. P&G finally managed to establish Cheer in the Japanese market. Later, Japanese scientists invented a low temperature bleach activator for use by Japanese customers. P&G used a new detergent formulation in a small space saving package and named it Ariel. With Cheer and Ariel, P&G successfully established itself in Japan. When P&G first introduced disposable baby diapers in Japan, it offered the American product without any modification. The American product was thicker and more expensive. Besides Asian babies were smaller than American babies. When the product failed, P&G offered a redesigned version that was smaller, three times thinner, less expensive and packed in a more compact way so that it was easier to store and carry while travelling. China was the largest emerging market in the world. P&G realized the tremendous market potential for its products. Disposable diapers were used in only about two percent of diaper changes in China compared to 98% in the US. The per capita consumption of toilet tissue was 5.4 rolls in China, compared to 53.3 in the US. P&G changed its marketing approach in China. It came up with a more reliable way to target and distribute product samplesthrough the Communist party. Retail outlets in China were very small and sold only a couple of units in a week or a month. Retail outlets made their own decisions regarding the assortment of brands to sell. P&G used street maps of Chinese cities to pinpoint the location of the retail stores and sent locally hired ground troops to sell and service each outlet. P&G customized its hair care products to suit the needs of Chinese customers. In China, dandruff seemed to be a big problem that few Chinese shampoos solved. P&G entered the market with Head and Shoulders followed by Rejoice (Pert in the US) and Pantene, adding anti dandruff formula to each of these products. The three shampoo brands together grabbed over 50% of the market in Chinas major cities. P&G advertised its products taking into account cultural differences across the globe. In Japan, it was considered highly impolite and inappropriate to discredit a competitors brand. On the other

Page 26

hand, the Japanese respected an objective presentation of relevant facts. The introductory Ariel advertisement presented the performance of the product in a factual and objective manner. It was left to the judgement of the Japanese consumer whether to use Ariel or a competitors product. P&G used different advertising campaigns for Camay soap. In France, the advertising was fairly direct with an overt display of affection. In the UK, the product was conveyed with traditional British wit and understatement. Whenever possible, P&G used existing packages, product formulas, and advertising campaigns in as many markets as possible, rather than customize the brand for each market. Pampers, Pantene, Whispers, Pringles and Oil of Olay were global brands whose products had more similarities than regional differences. Vidal Sassoon shampoos and conditioners contained a single fragrance worldwide, with variations only in amountless in Japan, where subtle scents were preferred, and more in Europe. Ariel detergent, a brand developed in Europe, was sold throughout Central and East Europe using the same packaging. Initially, P&G deputed managers from its domestic operations to key positions in overseas subsidiaries. However, P&G soon realized that this practice worked against sensitivity towards the local culture. Product and marketing failures in Japan convinced P&G to make more extensive use of local nationals. Subsequently, P&G relied less on expatriate American managers to fill international positions. Instead, it tried to attract foreign nationals attending leading American business schools. After a brief stint in the parent company, it transferred them to their home country. P&G also transferred its executives across the globe. P&G India had sent 10% of its executives outside India to other countries for short stints. The Indian company also had a few managers from abroad, not all of whom were in top positions. In the late 1990s, P&G generated over half of its revenues outside the US and Canada. P&Gs revenues in Asia had increased ten fold in the period 1990-99, to $ 3.6 billion. Sales in China alone, which the company entered in 1988 had been growing at a rate of more than 50% per year to reach $ 1 billion in 1999.

Page 27

Table-H Worldwide Sales 1997 North America Europe, Middle East and Africa Asia Latin America Corporate and Other Total Source: Annual Report, 1999. 17,625 11,587 3,573 2,306 673 35,764 1998 18,456 11,835 3,453 2,640 770 37,154 1999 18,977 11,878 3,648 2,825 797 38,125

HUMAN RESOURCES
In its formative years, the P&G management had treated workers like family members. In 1885, P&G decided to give workers Saturday afternoons off with pay. By 1887, P&G had started a Profit Sharing plan. In 1915, the company began to offer a sickness, disability, and life insurance plan. Eight years later the company guaranteed workers forty-eight weeks of employment in a year. While the Great Depression of the 1930s forced other manufacturers to shut down, P&Gs soap plants continued to function. P&G had traditionally encouraged lifetime employment by offering stock options and other benefits to those who stayed with the company. Even secretaries retired with P&G stock worth more than half a million dollars. In the 1990s, however, P&Gers tended to leave after a few years to take up senior level positions in competing firms. P&G had an elaborate recruitment process. Resumes were scanned for promising candidates, including those students who had not signed up for interviews. Top executives gave talks at colleges. Strong relationships were developed with college placement offices and faculty. P&G hired students for various functions such as finance, manufacturing, marketing, research, and sales. P&G hired from all major universities in general and from the big business schools, such as Harvard, Wharton, Stanford, and Northwestern in particular. P&G generally had more applicants than it needed. Written tests were conducted to evaluate an applicants aptitude for leadership and problem solving. P&G used its own version of the Graduate School Admission Test, known as the M Test. The test measured a candidates interpretative and reasoning skills. Studies inside P&G showed a strong positive correlation between high scores on the M Test and

Page 28

success on the job. P&Gs interviewing process was purposeful and behavior based. A candidates past experience and accomplishments were examined for leadership, problem solving capabilities, initiative, follow-through and ability to work with others. P&Gs manpower policies attempted to convert the companys 110,000 employees worldwide into "Proctoids". Fresh recruits from college campuses and those entering P&G as a result of acquisitions were "Procterized" P&G had taken various initiatives to develop its employees. Supervisors were encouraged to coach and help in the development of their subordinates. The vehicle for this process, used around the world, was the Work and Development Planning System (W&DP). An employees W&DP was linked to the OGSM (Objectives, Goals, Strategies and Measures) of his or her department. The departments OGSM was linked to the OGSM of the region and of the company as a whole. The W&DP had four components: the previous years plan versus the results; areas for further growth and development; near-term and long-term career interests; and a development and training plan for the year ahead. The W&DPs were reviewed annually and updated regularly. In addition to the formal review and updates of the W&DPs, supervisors were encouraged to supplement the program with informal, ongoing coaching. In 1992, P&G set up the P&G College to allow senior managers to share their experiences and insights with their juniors. New recruits spent several days at P&G college in their first year. There were different courses designed for first time managers. The faculty of the P&G College consisted of the CEO and the top management of the company. Some four thousand employees from various countries and different functions attended the programs offered by the college every year. P&G had about a thousand expatriates from different countries working in locations outside their own countries. These managers helped to spread the P&G culture around the world as they moved from country to country. Incoming expatriates were provided training to help them understand the local culture and social and business environments and learn the local language. P&Gs twenty-four page manual You and Procter & Gamble prescribed a code for ethics for the companys employees. Workers were reminded not to disturb other employees or visit other departments, except on official business. Promptness and neatness were also emphasized. Under the heading "Good Housekeeping", P&G prescribed a few simple rules: "Always keep your things in their proper places; space is provided for hats, coats and personal belongings. You are not supposed to eat at your desk, only in the employee cafeteria. If you have a drink, you are not to come back to work." P&G had prescribed a strict dress code for its employees. Managers had to be dressed in blue or grey suits. Some departments experimented with "casual Fridays," but most viewed it as a sacrilege not to wear suits. A memo from senior management later banned "casual Fridays. P&G discouraged its employees from making public announcements. Only senior management staff were allowed to talk in public on a limited number of topics. Technical people were instructed not to join trade organizations. While traveling, P&G employees usually did not use any luggage ID tags, which would reveal their identity. In most towns, where P&G plants were

Page 29

located, the security staff also hired a local police officer to act as a consultant to the plant. This gave P&G access to a lot of police information, such as records of those suspected to be trouble makers Senior managers had to sign documents, which forbid them from disclosing companyrelated information. In September 1998, P&G announced major structural changes under the Organization 2005 program. P&G wanted to take its global turnover from $38 billion in 1999 to $70 billion by 2005. The vehicle for growth would be a new structure and work culture based on Stretch, Innovation and Speed (SIS). Table F outlines the cultural goals identified by P&G.

Table-I Cultural Changes under the Organization 2005, Program Before Organization 2005 After Organization 2005

Misaligned objective with high penalties The organization is aligned on common for failure goals with trust as a foundation. Internal inspection keeps everyone under A focus on coaching and teaching enables control informed risk taking and team collaboration. Risk is avoided and victory is narrowly Victory is defined as stretch with trust and defined candor. Complexity is delegated down Leaders take on complex challenges.

Creating a slow moving organization that An organization driven by stretch, lacks stretch, innovation and speed innovation and speed toward breakthrough goals.
Source: The Financial Express, October 11, 1999.

In January 1999, P&G announced that it would cut 15,000 jobs worldwide over the next six years. More than 70% of the job cuts would be outside North America. Company sources mentioned that 10,000 job cuts would probably occur during fiscal year 2001. The rest would come in the following three years. The management also announced that 42% of the job cuts would occur in Europe, the Middle East and Africa, 29% in North America, 16% in Latin America and 13% in Asia. Under the Organization 2005 plan, P&G changed the way it looked at individual appraisals and moved from a conservative goal-setting plan to a stretch goal plan. Earlier P&G would appraise employees on the basis of targets set and their achievements. The system seemed to have a loophole. By setting low targets, an under performing manager could project himself as an

Page 30

achiever. Through the stretch element, P&G sought to ensure that merely achieving targets was not good enough. Appraisal would be on the basis of how the stretch targets were fixed and what attempts had been made to meet them. Under the Organization 2005 program, P&G discarded the old rules regarding business attire. P&G announced that it would be left to the individual to decide what was the appropriate dress to wear at the work place. P&G also introduced measures to play down the hierarchy. According to an employee: "Earlier the top executives were served tea in higher quality cups compared to what the junior level employees got. But that has changed. Now all P&G employees sip their brew in the same white bone-china which was earlier reserved for top executives". As part of the Organization 2005 Program, P&G India announced several changes. Under this program, P&G India had initiated Project Pride in 1999 to promote an open work culture. All the six dispersed offices of P&G in Mumbai would be brought under one roof by July 2000. This project also aimed to create a non-hierarchical office structure, which did not discriminate between senior and junior staffers. A high degree of enthusiasm was generated as employees could actually see their ideas being implemented. The CEO like all the other employees would also sit in a cubicle in the new office. Moreover, irrespective of the rank, all the cubicles would be of the same size throughout the organization. In 1998, P&G granted stock options to all eligible employees. On May 15, 1998, every employee was given an option to purchase one hundred shares, at the price of the stock on that date, anytime during the next ten years. The 1999 grants would be fully exercisable after three years and had a fifteen year life. P&G maintained the Procter and Gamble Profit Sharing Trust to provide funding for two primary post retirement benefits: a defined contribution profit sharing plan and US post retirement health care benefits. Outside the US many employees were covered by locally defined benefit pension, health care and life insurance plans.

SOCIAL RESPONSIBILITY
P&G had demonstrated its commitment to the environment in various ways. The company had promoted the use of refill packs and eliminated unnecessary packaging wherever possible. Consumers in the US and Canada could buy refills of Downy fabric softener and those in Europe and Latin America could buy refills of Mr. Clean products. In the 1990s, P&G started using more recycled plastic in its detergent bottles. P&G had taken various measures to make its products, packaging and operations safe for its employees, consumers and the environment. It continually monitored performance against environmental goals. In the 1990s, P&Gs focus on pollution control had resulted in a 37% reduction in waste, air and water emission from its plants. In 1999, P&G made a grant of $ 1.25 million to The Nature Conservancy, a private not for profit organization dedicated to preserving plants, animals and natural communities. In the 1980s, P&G worked with the Conservancy to preserve some 70 miles of shoreline along Floridas Big Bend Wilderness Coastline. In the mid 1990s, P&G donated $ 1 million to the Nature Conservancy for its "Last Great Places" campaign.

Page 31

In 1999, P&G launched a special program called "Open Minds" in association with UNICEF to encourage working children to go to school in India. The project was part of P&Gs ongoing program in association with UNICEF for educating children in Australia, the ASEAN countries and India. From the sales of large size packs of Vicks Vaporub, Whisper, Ariel, Head and Shoulders, and Pantene, P&G contributed towards the cost of educating working children to the "Open Minds" fund. P&G planned to raise approximately $ 250,000 during the period November 1999 to January 2000. Employees of P&G India, contributed one days salary as part of the Open Minds initiative.

FINANCE
In 1999, P&G recorded net sales of $ 38.13 billion, an increase of 3% over the previous year. The increase in sales was the result of better prices, increased volumes and a more favorable product mix in North America. Worldwide gross margin was 44.4 % in 1999, compared to 43.3 % in 1998. Operating income grew by 3% and cash flows from operations amounted to $ 5.54 billion. The North American region delivered satisfactory results in 1999, with net sales of $ 18.98 billion, an increase of 3% over the previous years $ 18.46 billion. Results in Europe, Middle East and Africa were mixed. The progress made on cost control, premium products and improved pricing was partially offset by the impact of the financial crisis in Russia and South East Asian countries. The region recorded sales of $ 11.88 billion in 1999 compared to $ 11.84 billion in 1998. The Asian region had showed some signs of recovery from the currency crisis. Net sales for the region were $ 3.65 billion, a growth of 6% over the previous year. The Latin American region continued to deliver good results despite a bleak economic scenario. Net sales grew by 7% to $ 2.83 billion against the previous years $ 2.64 billion. As P&G manufactured and sold its products in a number of countries, it faced in substantial foreign exchange exposure. To deal with this exposure, P&G had entered into foreign currency hedging transactions. The company used foreign currency Swaps to hedge intercompany financing transactions. Many of the raw materials used by P&G were subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. P&G used futures and options contracts, to manage volatility, especially in the case of food and beverage products.

FUTURE OUTLOOK
P&G had performed well in the late 1990s. Cost cutting measures had reduced expenses by over $3 billion since 1992. To strengthen its competitive position, P&G had identified several key result areas: Creating and launching new brands at record pace; establishing leadership positions in the more important developing markets of the world; growing its global brands with more consistent and speedy innovation; strengthening its relationship with the retail customers; and use of information technology as a strategic tool. In the late 1990s, P&G had restructured itself to decentralize decision making and facilitate faster implementation of new ideas. The companys goal-setting process required the employees

Page 32

to set stretch targets. P&G also introduced a new reward system that recognized extraordinary contributions at every level of the organization. Under the Organization 2005 program, P&G had identified a number of restructuring projects including consolidation of manufacturing facilities, standardization, and cost reduction. Organization 2005, would also streamline and standardize business services such as accounting, employee benefits management and information technology services. In the late 1990s, P&G set itself the ambitious goal of doubling its revenues from $ 38 billion in 1999 to $70 billion by 2005. P&G announced that it would cut down product development time. It would also test market products worldwide in sharp contrast to its traditional practice of first test marketing a product in the US. In advertising, P&G faced formidable challenges. P&Gs advertisements in the US had been traditionally directed towards housewives who tuned in to Soap Operas that P&G sponsored. In the late 1990s, with women going to work, P&G seemed to have lost this audience. However, some analysts felt that the biggest obstacle that P&G faced in the late 1990s, was probably its culture. They opined that the success of Organization 2005 program would depend on how the tradition bound P&G managers adjusted to the new work ethos.

EXHIBIT I
PROCTER AND GAMBLE VALUES, PURPOSE AND PRINCIPLES

PURPOSE We will provide products of superior quality and value that improve the lives of the world's consumers. As a result, consumers will reward us with leadership sales and profit growth,,

Page 33

allowing our people, our shareholders, and the communities in which we live and work to prosper. PRINCIPLES We show respect for all individuals. The interests of the company and the individual are inseparable. We are strategically focused in our work. Innovation is the cornerstone of our success. We are externally focused. We value personal mastery. We seek to be the best. Mutual interdependency is a way of life. Source: www.pg.com PROCTER AND GAMBLE GEOGRAPHIC SEGMENT INFORMATION In $ million Geographic Segments North Americ a Europe , Middle East and Africa 18, 977 11, 878 18, 456 17, 625 2, 710 2, 474 2, 253 11, 390 11, 063 10, 280 11, 835 11, 587 1, 214 1, 092 956 6, 286 5, 998 5, 433 Asia Latin Americ a Corporat e and Other Total

Net Sales

1999 1998 1997 1999 1998 1997 1999 1998 1997

3, 648 3, 453 3, 573 279 174 275 2, 793 2, 499 2, 726

2, 825 2, 640 2, 306 318 274 256 1, 577 1, 519 1, 389

797 770 673 -758 -234 -325 10, 067 9, 887 7, 716

38, 125 37, 154 35, 764 3, 763 3, 780 3, 415 32, 113 30, 966 27, 544

Net Earnings

Identifiable Assets

Page 34

P&G India

P&G Hygiene & Health Care Ltd P&G Home Products Ltd

Products

Ariel Duracell Gillette Head & Shoulders Old Spice Oral B Pampers Pantene Pringles Tide Vicks Whisper

Page 35

Tide (brand)

Tide is the name of a popular laundry detergent on the market in the United States, Canada and other countries. It is manufactured by Procter & Gamble. Tide is marketed under various subbrands, such as 2x Ultra Tide. First introduced in test markets in 1946 with national distribution reached in 1949, Tide was touted as "America's Washday Favorite." It quickly gained dominance in the detergent market, dwarfing the sales of other P&G products, such as Ivory Snow, as well as the competition from Rinso. The latter two were soap powders and flakes. Originally, Tide was a white powdered bead, but the brand line was later expanded to include an orange-tinted clear liquid form in 1984. Today, most formulations of liquid Tide are dark blue with the exception of Tide Free, which is clear. An addition to the Tide Family, Tide Cold Water was formulated to tackle strains while saving energy because it does not require hot or even warm water. Tide is recognized for its distinctive orange-and-yellow bullseye logo. The original logo was designed by Donald Deskey, a famous industrial and identity designer. Tide was the first product to be nationally packaged using Day-Glo colors, strikingly eye catching when first introduced. The logo people see today is a product of a slight modification for the product's fiftieth anniversary in 1996. Currently, the Tide brand is given to over half a dozen powders and liquid detergents in the United States alone. The potential of dodecyl benzene sulfonate, the basis for Tide, was confirmed by SRI in 1948 through strategic scientific and business consulting activities for the petroleum company Chevron. In Latin America the Tide formula is marketed under the name Ace. and in Turkey under the name "Alo". In 2006 the development of Tide was designated an ACS National Historical Chemical Landmark in recognition of its significance as the first heavy-duty synthetic detergent.

Page 36

Head & Shoulders

Head & Shoulders is a brand of anti-dandruff shampoo produced by Procter & Gamble. Head & Shoulders Classic Clean Shampoo is the top selling shampoo in the United States by Dollar Sales. Procter & Gamble researchers first decided on making a new anti-dandruff shampoo in 1950, when massive public opinion made it clear that the current products on the market were not helping their scalp problems. Nearly a decade of research went into making a new formula, which introduced the product pyrithione zinc into a shampoo for the first time. Head & Shoulders was first introduced to the U.S. market in November 1961, as a blue-green shampoo formula. Unlike other shampoos, Head & Shoulders had relatively few variations until the late 1990s and early 2000s, and there are now in excess of ten different kinds of shampoo for different hair types under the Head & Shoulders banner. It has since then grown into a billion dollar brand. The people responsible for this were Robert Jongstra (Procter & Gamble General Manager) and Olga Barr (Saatchi & Saatchi Global Creative Director). A study conducted by University Medical Center Sart Tilman (Belgium) comparing the efficacy of the active ingredient in Head & Shoulders (zinc pyrithione) versus the active ingredient in Nizoral (ketoconazole) found that "Ketoconazole [Nizoral] 2% shampoo was significantly superior to zinc pyrithione [Head & Shoulders] 1% shampoo in the treatment of subjects with severe dandruff or seborrheic dermatitis of the scalp". The brand's "Extra Strength" product had a cameo role in the 2001 film Evolution, where its startling copper orange color was shown. Head and Shoulders' original ocean blue formulation is more widely recognized. Head & Shoulders Classic Clean Shampoo is the #1 selling Shampoo in the United States by Dollar Sales. Head & Shoulders can also claim the TOP FIVE selling individual Shampoo Category SKUs in the United States by Dollar Sales. (AC Nielsen FD+ / 52wks Ending 11/24/2007)

Page 37

Head & Shoulders can also claim 10 of the top 30 selling individual Shampoo Category SKUs in the United States by Dollar Sales. Head & Shoulders has enjoyed 26 consecutive weeks of both $ and VOL consumption growth in the United States.

Product list

Classic Clean Shampoo / Classic Clean 2n1 Dry Scalp Shampoo / Dry Scalp 2n1 Ocean Lift Shampoo / Ocean Lift 2n1 Smooth & Silky Shampoo / Smooth & Silky 2n1 Restoring Shine / Restoring Shine 2n1 Refresh Shampoo / Refresh 2n1 Sensitive Care Shampoo / Sensitive Care 2n1 Extra Volume / Extra Volume 2n1 Citrus Breeze / Citrus Breeze 2n1 Intensive Treatment Shampoo (1% selenium sulfide) Intensive Solutions Shampoo (2% pyrithione zinc) Classic Clean Conditioner Dry Scalp Conditioner

Page 38

Pampers

Product information Diapers

Pampers Diapers come in sizes going all the way up to Size 7.

History 1960s
Pampers were introduced in 1961. They were the creation of a man named Vic Mills who just happened to work for Procter & Gamble, and was looking for an easier way to diaper his grandchildren. He thought it was a mess to use cloth diapers and it occurred to him that the pulp mill owned by Procter and Gamble might produce a clean, absorbent paper that just might work for a disposable diaper. From that idea, Pampers were born. Mills assigned a group to research the possibility of designing a diaper that was absorbent, disposable and prevented leaks. He used the very first disposable diapers developed out of this project on his granddaughter. P&G tested this as-yet unnamed disposable diaper in Rochester, New York in 1959 and, after discarding early names such as Tads, Solos and Larks, came up with the Pampers brand. Pampers entered into a test market in Peoria, Illinois. Although the first test was unsuccessful, it led to an improved Pampers product at a lower cost that eventually replaced cloth diapers as the preferred way to diaper babies. These early diapers were bulky, heavy products composed of fluff pulp with a rayon topsheet, polyethylene backsheet. Supermarkets and drugstores did not know how to stock these new diapers. For a while they were found everywhere from the convenience section, the food aisle, the paper product section, and even in the drug section. In 1966, Pampers launched a new C-fold design and by 1969 started a "third size". It was also by this time that Pampers became a national brand in the United States.

Page 39

1970s
In the 1970s Procter and Gamble replaced the pin on design with tapes in 1971 so that parents could take a quick peek at what was going on in the diaper and save their fingers from any accidents. Pampers Toddler Size, Extra Absorbent Daytime, Improved Newborn and Premature Infant Size were also introduced.

1980s
In the 1980s Pampers introduced Cushion Quilted lining and Value Packs. As the brand matured sales slowed - a natural part of the product's life cycle. Procter & Gamble's Paper Division President Dick Nicolosi sought the counsel of new product and positioning strategist Martin Calle and Calle & Company to revitalize the brand. Martin Calle restaged the brand as Pampers Phases Developmental Diapers. The strategy convinced moms that being a toddler was simply another "phase" in the development of their newborn and infant. Pampers phases introduced size 5 (also known as size XL) to hour-glass shaped disposable diapers - successfully arresting well over $2.8 billion in toddler migration to arch rival Kimberly-Clark's Pull-Ups brand. At the time P&G had no plans or capital allocated to manufacture and market a rival line of "pants-like" diapers or "cruisers". Of greatest strategic import to Pamper's Phases launch was that it captured significant lost opportunity sales at a time no one could envision how to generate an incremental diaper usage occasion via traditional consumer knowledge resources. In 1984 Pampers changed all their diapers to an hourglass shape, a feature that was first introduced on Luvs in 1976, and had evolved into an industry standard. In 1986 the first thin diapers made with absorbent gelling material, elastic leg gathers, tabs that could be refastened and a softer liner was released. This made the average weight of a typical medium size diaper decrease by about 50%. In 1987 Pampers and Huggies both introduced new frontal tape systems which allow multiple repositioning of the lateral tape without tearing the diaper. This would become an industry standard until the early 2000s.

1990s
In the 1990s Pampers introduced Ultra Dry Thins diapers that pulled moisture into the core, then sprang back to absorb even more. Also such short lived features as stretch panels were introduced. They were supposed to help make the diapers more comfortable. In 1995 Pampers Premium was introduced and was hailed as a diaper with breathable side panels. The '90s also

Page 40

saw the introduction of gender specific diapers in the Pampers brand and also the return to unisex diapers towards the end of the decade. In 1993 Pampers first attempt at training pants was introduced these were simply known as Pampers Trainers and would be a short lived product. Pampers would not try doing training pants again until the introduction of Easy Ups.

Pampers Size 6
In 1998 Procter & Gamble introduced its largest diaper ever: Pampers Baby Dry Size 6. It was promoted in an advertising campaign featuring famous pediatrician and child development expert Dr. T. Berry Brazelton. Dr. Brazelton had taken a no stress, go slow approach to toilet training for about 30 years and according to P&G, he recommended a larger size diaper be introduced. Consumer research also showed a need for the larger size, the company said. In the commercial Dr. Brazelton said to let the child decide when the time is right to potty train. The Size 6 Diapers were billed as for growing toddlers. Huggies also introduced a Size 6 diaper at this time.

Controversy
Since the diapers were introduced, there was a controversy going on between pediatrician, T. Berry Brazelton and syndicated columnist and best-selling author of books for parents, John Rosemond. The controversy was about the length of time a baby should wear diapers and when to start toilet training. Rosemond believes it is a "slap to the intelligence of a human being that one would allow baby to continue soiling and wetting himself past age 2." Rosemond believes the process is simple and as straightforward as housebreaking a 4-month-old puppy. Brazelton said there is more to it than that. Parents who force toilet training, he says, can cause lasting problems. "Don't rush your toddler into toilet training or let anyone else tell you it's time. It's got to be his choice," Brazelton advised in a television commercial for Pampers "Size 6" diapers, suitable for children 35 pounds and over." The trend for late toilet training helped spur the introduction of the giant-sized diaper, designed for toddlers. While Rosemond concedes that Brazelton has been giving the same advice for decades, he criticized the pediatrician for serving as a consultant to Pampers, a division of Procter & Gamble, and for appearing in Pampers commercials.

Uses for Incontinence

When the Size 6 Diaper was introduced many school age children who still have bedwetting accidents began wearing them at night. Pampers Size 6 is about the size of size 6 underwear and can fit children up to about 70 pounds depending on dimension. For comparison, the average weight of a nine-year old child (male or female) in the United States is 69 pounds.

Page 41

Some incontinent adults found that the diaper made a good insert for their Adult Diaper because the Pampers have lots of Super Absorbent Polymer (SAP). The Idea when using the Pampers is to cut the plastic backing of the Pampers, and stuff it inside the Adult Diaper. This is so when the Pampers gets saturated, the excess wetness goes through the holes into the adult diaper. The Pampers size 6 when first introduced had a "hard" plastic tape that would be uncomfortable against the skin of the adult, especially the corners which were surprisingly sharp and uncomfortable. For this reason the tapes had to be completely removed. It was said this idea worked for most adults. This idea fell into disuse with the introduction of such products as Depend boost liners. Other incontinent adults use Pampers Size 6 as an insert into their regular underwear for minor incontinence.

Advertising
Print ads

Print ads often appear in magazines and other periodicals, especially ones geared to parenting. (Examples)

Product placement

Pampers paid $50,000 to be featured in the film Three Men and a Baby. Procter & Gamble is looking at promoting its products such as Pampers more through the use of the product on TV shows.

Television commercials One method used to advertise Pampers is by the placement of commercials during soap operas produced by Procter and Gamble, such as As The World Turns and Guiding Light, and also during the airing of Parenting Shows. P&G has also sponsored the program Make Room for Baby on the Discovery Health Channel. There was also a lot of Product Placement on this show with each new parent getting a changing table stocked with Pampers products.

Other ways

Page 42

An example of a billboard.

Pampers has placed billboards in some countries. Pampers has a direct marketing program where they mail relevant content in books to mothers with babies.

North American license

Sesame Street characters are on North American merchandise, such as diapers and wipes. Other merchandise, including the training pants, features Go, Diego, Go!, Marvel superheroes (especially Spider-Man) and Dora the Explorer.

Asian market characters

Pampers introduced a mascot called "Pampa" ("Bang Bang" in China), an elephant, in several markets in East Asia. The mascot and related characters were designed by Sony Creative

Competition
The main competitor in the United States is the Huggies brand.

Page 43

Old Spice

Old Spice is an American brand of male grooming products. It is manufactured by Procter & Gamble, which acquired the brand in 1990 from the Shulton Company.

History

The first Old Spice product, a fragrance called Early American Old Spice for women, was introduced in 1937, closely followed by Old Spice for men in 1938. The Old Spice products were manufactured by the Shulton Company that was founded in 1934 by William Lightfoot Schultz. The earliest of the men's products were dominated by shaving soap and aftershave lotion. Early American Old Spice was developed around a colonial theme. When Old Spice was introduced, William Lightfoot Schultz was interested in maintaining a colonial framework for those products and chose a nautical theme for Old Spice. Thus, sailing ships, in particular colonial sailing ships, were used as a trademark. Through continuous use and advertising, the various ships have become a valuable trademark identifying the Old Spice product for men. The original ships used on the packaging were the Grand Turk and the Friendship. Other ships used on Old Spice packaging include the Wesley, Salem, Birmingham and Hamilton.

Page 44

Procter & Gamble purchased Old Spice from the Shulton Company in June 1990. The clipper ship was replaced by the Sailboat/Yacht logo in the fragrance bottles in February 1992. More recently, P&G has introduced many forms of deodorant sticks, body washes, and body sprays in several scents under the Old Spice brand. Old Spice is now the No. 1 antiperspirant/deodorant stick and body wash brand in the United States. In early 2008 the original Old Spice Scent was repackaged as "Classic Scent," both in the After Shave and Cologne versions. Both products now come in plastic bottles in lieu of the original traditional white glass bottles. The stoppers in the top of the product are now red instead of gray.

Products
Old Spices buoy-shaped bottle cologne has been its staple product, available in its original scent as well as newer Pure Sport. In 2006, Old Spice introduced an all-new fragrance, OS Signature, which won FHMs 2006 Grooming Award for Best Sporty Fragrance. Current Old Spice Red Zone products include a "Scratch-and-sniff" version of the OS Signature fragrance as a method of promoting the new scent. Old Spice currently has three lines of grooming products and each line features a variety of products and scents. "High Endurance" is promoted as a basic grooming line, and includes antiperspirant, deodorant, body wash, hair & body wash, and shaving products. "Original" is aimed at people who prefer the original scent of Old Spice, including a Deodorant Stick, Body Wash, Body Sprays, and a Shaving Product. "Red Zone" is aimed as a higher-end line, including an antiperspirant, deodorant, body wash, and body spray. The High Endurance line has a line tied into Old Spice-sponsored NASCAR driver Tony Stewart that was launched in 2006. They also come in various fragrances. High Endurance: Pure Sport, Fresh, Arctic Force, Pacific Surge, Original, Mountain Rush, and Smooth Blast. Red Zone: Pure Sport, After Hours, Showtime, Glacial Falls, Aqua Reef, Deep Cleansing, Hydrowash, Vitality and Swagger. Original: "Classic" Scent (Original)

Marketing
In 2007, B-movie actor Bruce Campbell starred in a commercial for Old Spice in which he spoke about his experience, dressed in a robe and pacing around in a fancy den. On the table next to the armchair is the Necronomicon, and next to the fireplace is a chainsaw, both references to Campbell's most famous role as Ash Williams, the protagonist of the Evil Dead series. He recently performed in another commercial for Old Spice, singing a lounge version of Duran Duran's "Hungry Like the Wolf" to five attractive women.

Page 45

Old Spice is a sponsor of NASCAR driver Tony Stewart, who featured in a TV advertisement showing Old Spice logos printed on the armpits of his Busch Series race suit, signifying both Old Spice being a deodorant and Stewart's numerous wins

Global Gillette

Global Gillette is a business unit of Procter & Gamble. It is the successor of The Gillette Company, which was founded by King C. Gillette in 1901 as a safety razor manufacturer. It was based in Boston, Massachusetts, United States. On October 1, 2005, Procter & Gamble finalized its purchase of The Gillette Company. As a result of this merger, the Gillette Company no longer exists. Its last day of market trading symbol G on the New York Stock Exchange - was September 30, 2005. The merger created the world's largest personal care and household products company. Before the merger, Gillette had grown to become a leading global supplier of products under a variety of brands. In addition to Gillette, the company marketed under Braun, Duracell and OralB, among others. In July 2007, Global Gillette was dissolved and incorporated into Procter & Gamble's other two main divisions, Procter & Gamble Beauty and Procter & Gamble Household Care. Gillette's brands and products were divided between the two accordingly.

Gillette firsts
Since the companies inception, Gillette has introduced a number of technologies that are now a part of nearly every razor.

Safety razor (Gillette Safety Razor invented in 1895 and patented in 1904) Razor marketed specifically to women (Milady Dcollete, 1916) Razor dispenser (1946) Stainless Steel blades (Super Stainless, 1963) Double-blade razor (Trac II, 1971) Disposable double-blade razor (Good News!, 1971) Razor with a pivot point (Atra, 1977) Razor with a lubricating strip (Atra Plus, 1985) Razor with spring-loaded blades (Sensor, 1990) Razor with microfins (Sensor Excel, 1995) Razor with three blades (Mach3, 1998) Manual Razor with battery power (M3Power, 2004) Razor with five blades (Fusion, 2007) Razor with rear trim blade (Fusion, 2007)

Page 46

Duracell

Duracell is a brand of batteries manufactured by Procter and Gamble. Additionally, Duracell owns the Procell professional-use brand.

Products
Duracell manufactures alkaline batteries in many common sizes, such as AAA, AA, C, D, and 9V. Lesser used sizes such as AAAA (primarily for pagers, penlights and blood glucose meters) and J size batteries (for hospital devices) are also manufactured along with a range of "button" batteries using Zinc-air chemistry, used in calculators, hearing aids and other small (mostly medical related) devices.

A Duracell AA battery.

Duracell also manufactures specialty batteries, including NiMH rechargeable batteries and batteries for cameras, watches, hearing aids, etc. Their two main battery brands are "Coppertop", marketed as longer-lasting, and "Ultra", directed mainly at users of digital devices and devices that need more power. The Coppertop and Ultra brands of batteries use the alkaline-manganese dioxide chemistry. Duracell also has a line of lithium chemistry batteries and products, now manufactured outside of the U.S. In recent years, Duracell's innovations expanded to include new battery designs with their prismatic batteries, which are prismatic in shape rather than cylindrical. Prismatic cells were made available in both alkaline and lithium designs. In 2006, Duracell introduced "Power PixTM" batteries with metal hydroxy technology, designed to supply longer life in digital cameras and other high drain devices by up to twice the number of photos typically achievable with alkaline batteries.

Page 47

Duracell batteries are also bulk packaged for end users under the brand name Procell.

Business
Duracell introduced many battery formats, including AAA (R03) in the 1950s and AA (R6 Penlight) in 1960. It merged with Gillette in 1996, and became part of Procter & Gamble when P&G acquired Gillette in 2005. Duracell's main competitor is the Energizer battery brand. Duracell continues to have manufacturing facilities in the U.S. (primarily in the southeast) and in Asia and Europe. Duracell's global headquarters is located in Bethel, Connecticut, about an hour from New York City.

History
Duracell originated via the partnership of scientist Samuel Ruben and businessman Philip Rogers Mallory, who met during the 1920s. The P.R. Mallory Company produced mercury cells for military equipment use, trumping the Zn-air battery technology used then in virtually all applications. During the late 1970s, when the company's concerns for the now-known effects of mercury began, mercury quickly became an obsolete ingredient in all their manufacturing processes. It was replaced by alkaline technology. During the 1950s Kodak introduced cameras with integral flash: the design required a new cell size and thus size AAA was developed. In 1964 the term "Duracell" was formally introduced as a brand. The name is a portmanteau for "durable cell".

Page 48

Oral-B

Oral-B is a brand name of toothbrush and other dental care products (such as dental floss) manufactured by Procter & Gamble who acquired Gillette in 2005. The brand also includes power toothbrushes and interdental products (such as irrigators and oral care centers). Gillette claims that Oral-B toothbrushes are "used by more dentists and consumers than any other brand in the U.S. and in many international markets.

Page 49

Ariel (laundry)

Ariel is a marketing line of laundry detergents made by Procter & Gamble. It is the flagship brand in Procter & Gamble's United Kingdom, Mexico, Japan and Turkey portfolios.

History
Ariel first appeared on the Mexican market circa 1968 making proofs in Sinaloa and Sonora states, and was a detergent with stain-removing enzymes. It was a high-sudsing powder designed for twin-tub and top-loading washing machines. With the rise in popularity of automatic frontloading washing machines, a suitable low-suds variant was launched in the early 1970s. The mid-eighties saw the range expanding to encompass liquid detergent and compact powder. The compact powder was originally known as "Ariel Ultra"; and was subsequently reformulated into the nineties as "Ariel Futur" ("Future", dropping the "e"). This was possibly in response to Unilever's launch of the ultimately doomed "Persil Power", which was seen to damage clothes. Compact powders never proved popular in the UK; so when the tablet variant appeared in July 1999, the compact version disappeared. In 2003, Ariel brought out its quickwash action to its detergents, to allow consumers to be able to do their laundry on a quickwash cycle.

Product range
The available range in the UK currently includes:

Ariel Biological: automatic (low suds) powder, liquid, tablets, and liquitabs. Ariel Colour and Style: automatic powder, tablets, liquid and liquitabs. Ariel Sensitive (formerly known as "non-biological"): automatic powder, tablets, liquid and liquitabs Ariel Stain Pen: a stain pre-treatment product. Ariel Handwash: twin-tub powder; also refers to a high-suds version of liquid sold in smaller bottles - was sold as "Travel Wash": a product to take on holiday, to launder small quantities of clothes.

Page 50

Pantene

Pantene is a brand of hair care products owned by Procter & Gamble. The brand's best-known product is the conditioning shampoo Pantene Pro V. In the late-80s, model/actress Kelly LeBrock starred in a series of Pantene print and television ads with the slogan, "Don't hate me because I'm beautiful." As of 2005, Maria Menounos serves as spokeswoman on Pantene's TV commercials. In the UK, Anna Friel has been appearing in adverts since May 2006.Natasha Bedingfield's hit song Unwritten is used in Pantene Ads all over the world. Pantene sponsors the Miss Egypt pageant.

Page 51

Pringles

Pringles Logo. This version has been used since 2001.

Pringles are a brand of potato snacks produced by Procter & Gamble. Pringles were first sold in the United States in October of 1968; they were not rolled out across America until the mid1970s. They were originally known as "Pringle's Newfangled Potato Chips", but the name was changed for introduction to the national market. Procter & Gamble chose the Pringles name from a Cincinnati telephone book, selecting Pringle Avenue in Finneytown, Ohio for its pleasing sound. Pringles are advertised in the United States with the slogan "Everything Pops with Pringles", and in the UK and elsewhere with "Once you pop, you just can't stop." In North America, Pringles are not marketed as potato chips, but rather "potato crisps". This is a food labeling requirement, since Pringles are made from a dough rather than from sliced fresh potatoes. According to the patent, Pringles were invented by Alexander Liepa of Montgomery, Ohio. Science Fiction and Fantasy author Gene Wolfe developed the machine that cooks them; the dough making and rolling portion was designed by Len Hooper. Pringles are especially known for their packaging (invented by Fred Baur), which consists of an upright tubular can with a foilcoated interior, and a resealable plastic lid; it also has a famous logo, a stylized representation of a man with a large moustache and parted bangs (until 2001, the man, commonly known as "Julius Pringles", had eyebrows and his bowtie housed the product name.) The crisps are made to a uniform size and a hyperbolic paraboloid saddle shape, so that they stack very efficiently within the container, rather than being packaged loosely in a bag. The cans come in 170g, 163g, 50g, and 23g sizes. In early 2007, the company introduced an 80g size.

Page 52

Three Pringles cans:Sour Cream & Onion (left), Hot & Spicy (center), and Cheese & Onion (right).

Pringles come in several flavours, and occasionally Procter & Gamble produces limited edition runs. Some flavours may be distributed only to limited market areas. Seasonal flavours, past and present, include ketchup, chili cheese dog, and Cajun. At one point in the early 90's, "Corn Pringles" were available. The canister was black and had cartoon images of corn as well as the normal packaging standards. The crisps were made of corn and resembled a corn chip in flavour and texture.

Page 53

Vicks

Vicks VapoRub Indias Number One Cold Rub provides safe and effective multi-symptom relief from the six symptoms of cold, namely blocked nose, cough, body ache, headache, muscle-stiffness and breathing difficulty. Its tough competitors are Headrosa, Tiger Balm & Zandu Balm from Zandu.

Page 54

Whisper

Whisper Maxi Regular offers you superior and faster absorbency than ordinary sanitary napkins. Available in a convenient Fold n Wrap wrapper, which helps you to carry and dispose the pad easily and with discretion. Recommended for regular flow. Its tough competitors are Carefree & Stayfree from Johnson & Johnson.

Page 55

Financial Analysis
Procter and Gamble Hygiene and Health Care

Jun '03

Jun '04

Jun '05

Jun '06

Jun '07

Sales Turnover Other Income Total Income Total Expenses Operating Profit Profit On Sale Of Assets Profit On Sale Of Investments Gain/Loss On Foreign Exchange VRS Adjustment Other Extraordinary Income/Expenses Total Extraordinary Income/Expenses Tax On Extraordinary Items Net Extra Ordinary Income/Expenses Gross Profit Interest

442.39 14.81 457.2 350.95 91.44 -----

577.24 15.03 592.27 451.87 125.37 -----

684.92 46.62 731.54 551.51 133.41 -----

566.73 64.28 631.01 436.97 129.76 -----

540.38 14.37 554.75 400.26 140.12 -----

----106.25 0.54

----140.4 0.4

-10.21 --180.03 0.05

-7.33 --194.04 0.11

----154.49 0.01

Page 56

PBDT Depreciation Depreciation On Revaluation Of Assets PBT Tax Net Profit Prior Years Income/Expenses Depreciation for Previous Years Written Back/ Provided Dividend Dividend Tax Dividend (%) Earnings Per Share Book Value Equity Reserves Face Value

105.71 13.06

140 12.83

190.19 12.4

201.26 7.92

154.48 8.98

-92.65 24.61 68.04 --

-127.17 35 92.17 --

-177.79 53.18 124.61 --

-193.34 53.83 139.51 --

-145.5 44.96 100.54 -10.72

----31.44 -21.64 208.72 10

----28.39 -32.46 216.66 10

----38.39 -32.46 193.22 10

----42.98 -32.46 240.2 10

----30.97 -32.46 258.72 10

CAPITAL STRUCTURE Period Instrument Authorize Issued d Capital Capital (cr) (cr) 35 32.46 -PAIDUP-

From To 2005 200 Equity 6 Share

Shares (nos) 3246073 6

Face Capital Valu e 10 32.46

Page 57

2004 2003 2002 2001 2000 1999 1997 1992 1988 1984 1983 1980 1978 1973 1968 1966

200 5 200 4 200 3 200 2 200 1 200 0 199 9 199 7 199 2 198 8 198 4 198 3 198 0 197 8 197 3 196 8

Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share

35 35 25 25 25 25 25 15 10 5 5 5 5 1.1 0.7 0.5

32.46 32.46 21.64 21.64 21.64 21.64 21.64 14.43 6.68 3.71 2.48 1.8 1.5 1.1 0.7 0.5

3246073 6 3246073 6 2164049 1 2164049 1 2164049 1 2164049 1 2164049 1 1442699 4 6682500 3712500 2475000 1800000 1500000 1100000 700000 500000 10

10 10 10 10 10 10 10 10 10 10 10 10 10 10 10

32.46 32.46 21.64 21.64 21.64 21.64 21.64 14.43 6.68 3.71 2.48 1.8 1.5 1.1 0.7 0.5

Page 58

Investment of P&G hygiene and healthcare products in various schemes

As on date Asset No. of Holding

Size shares*
(Rs. cr.)

% Value
(Rs. cr.)

Scheme Name UTI Dividend Yield Fund (G) DSP-MLSmall & Mid Cap Fund (G) Birla Dividend Yield Plus (G) UTI MNC Fund (G) Sundaram S.M.I.L.E Fund (G)

29Feb-08 29Feb-08 29Feb-08 29Feb-08 29Feb-08 31Jan-08

792 1,169.5 3 289.17 167.23 238.97

119,13 5 102,03 4 57,910 30,000 384

1.06 0.64 1.46 1.29 0.01

8.3952 7.4485 4.2274 2.1573 0.028

DSP-MLSmall & MidCap- Inst (G)

0.81

67

0.62

0.005

Valuation Ratios P/E Price to Cash Flow Ratio Price To Sales (TTM) Price To Book Per Share Ratios Dividend Per Share Book Value Per Share EPS Fully Diluted Revenue Per Share Profit Margins Operating Margin Net Profit Margin Dividends Dividend Yield Dividend Yield - 5 Yr. Avg. Dividend Per Share (TTM) Dividend Payout Ratio Growth (%) 5 Year Annual Growth Revenue - 5 Year Growth Dividends Per Share - 5 Year Growth

19.88 14.3 2.54 3.03 1.28 21.72 3.04 22.5 22.59 13.52 2.13 1.83 1.4 39.77 18.9 13.7 10.63

Page 59

EPS - 5 Year Growth Financial Strength Quick Ratio Current Ratio LT Debt to Equity Total Debt to Equity Return on Equity (ROE) Per Share Return on Assets (ROA) Return on Invested Capital (ROIC) Assets Asset Turnover Inventory Turnover

13.72 0.4 0.78 35.06 53.12 15.61 8.17 11.01 0.55 5.12

Page 60

COMPETITORS ANALYSIS
There are so many competitors of p&g such as unilever, Johnson and Johnson , nestle, dabur, etc .But the biggest competitor is Hindustan Unilever. P&G hired an independent contractor to spy on the company's competitors (especially Unilever) in the hair care business. This independent contractor in turn hired many sub-contractors to perform this secret operation. The operation was managed from a 'safe house' called 'Ranch' in Cincinnati, P&G's hometown. Since late 2000, the agents of these sub-contractors, which P&G later called rogue operators (espionage agents), collected extensive information on Unilever's hair care business in the US. To gain access to such classified information, these agents resorted to dumpster diving and also misrepresented themselves to Unilever employees as market analysts and journalists. The operation focused on gaining access to classified information about Unilever's best selling hair care brands such as Salon Selectives, ThermaSilk, Finesse, and Helene Curtis. These brands competed directly with P&G's popular hair care brands such as Pantene, Wash & Go, Head & Shoulders, etc. COMPARISON OF P&G AS COMPARED TO OTHERS As part of its initial strategy, P&G has delivered twin hits to two very profitable segments of HLL - detergents and shampoos. However, analysts say the introduction of its world-wide bestseller Crest may hurt HLL more, since Colgate and Dabur have also been rather aggressive in pushing their products. To be sure, some analysts feel that P&G's small presence as yet is rather too weak to make any significant gains in market share even after the price cuts. P&G was a not even a close competitor to HLL, commanding a measly 5 per cent of the total detergents market while HLL had a commanding 40 per cent. But they give credit to P&G for forcing HLL to cut prices by over 20 per cent and analysts say the pricing pressure in this segment will inevitably reduce its profitability. Once that is done, P&G would look at building its sales and distribution to build on initial gains. Another point is that P&G, which markets its detergents through its unlisted company, can afford to take a hit in the bottomline by funding losses from abroad. But HLL, as a publicly listed company, will face selling pressure in the share market.

Page 61

Distribution HLL's biggest strength so far has been its unmatched distribution reach. This enabled the company to make the most of an undeveloped and undercapitalised retail market. Analysts see the advent of organised retailing having the effect of diminishing the power of FMCG companies to insulate their margins. Analysts say organised retailers are set to increase their market share from less than 2 per cent currently to over 10 per cent over the next five years. "Organised retailing thrives on extracting incremental margins from manufacturers, and FMCG players would not be insulated from this for long, impacting their realisations in the process," says an analyst. To add to the gloom, the much promised rural boost has not kicked in as yet. In the past, when the company was already struggling for topline growth, it made up for the slack by fairly steady bottomline growth. But looking ahead, even this will be under pressure, given the price wars. The key development to watch is the increase in rural demand. Analysts say cash flows from the kharif harvest will start flowing in from the quarter starting April. This could see highly penetrated categories like soaps and detergents, which have consistently registered a declining sales trend, seeing a turnaround in fortunes. The reason for the optimism is the farming community in the country is likely to garner a higher cash surplus by about Rs 40,000 crore (Rs 400 billion) after the kharif crop harvest compared with last year. The fact that about 50 per cent of HLL's revenues come from the rural areas is a factor that would work to its advantage. Analysts say the company needs to support sales by heightened market activity for new categories. HLL's poor showing in growing businesses such as bakery products and water and the absence of new growth engines have not gone down well with analysts. This is compounded by the fact that incremental consumer demand for FMCGs remains low. Analysts expect earnings growth to remain subdued over the next couple of years on account of sedate topline growth and subdued margin gains. They expect an EPS of Rs 8.2 FY05. The telling point is that the stock has lost its allure with analysts. "Earlier HLL used to be an attractive dividend yield play around the Rs 135 levels. Now that growth has faded off, there are many stocks in the sector like Nestle which are looking more attractive," says Sampath. However, the stock does have its share of support. "The stock has been punished more than it deserves," says an analyst with a leading domestic brokerage and research house.

Page 62

He adds that the stock is presently perceived negatively because of Q4 numbers and the price cuts. But price cuts can improve volumes and the impact on profits may not be more than 10 per cent. HLL has an enviable position in certain segments like skincare which commands loyalty and is not affected much by price changes. Once rural demand kicks in, things will look much better two or three quarters down the road. That could possibly pave the way for a re-rating, he adds. But then, most punters will probably wait the period out to check whether the quarterly numbers reflect the rural revival.

Hindustan Lever to give P&G a run for its money

P&G's turnover has been growing in the range of 35-40 per cent between 1991 and 1996 to Rs 331 crore. In comparison, HLL has announced that a merger with its group concern will double its turnover. The last three years have seen a sales growth of about 30 per cent year-on-year for P&G, 27 per cent for Pond's and 20 per cent in the case of Colgate-Palmolive. In absolute terms, this is no comparison for a company which established its base in 1991, say analysts. However, the swelling financial clout of multinational HLL, which has been growing both through M&As and organically, may pose an indirect competition to competitors. P&G, according to analysts, will not be directly affected by HLL's estimated strong double-digit growth. However, indirectly, it would be impacted in terms ofthe growing critical mass and increased media mileage for HLL. The fact that HLL has an advantage with the highest media spend, itself justifies its financial strength.

Page 63

QUALITY CONTROLMANAGEMENT

Introduction /
Procter & Gamble is a leading international corporation producing fast moving consumer goods in nearly 50 categories. They were interested in automating several internal processes and have issued a call for proposals. INGATE is proud to receive a contract for this effort, and developed the Maintenance Tracking Tool, to support the process of decision making.

Maintenance Tracking Tool /

Any manufacturing company, faced with the requirements of large volume, high-quality production, must confront a number of challenges:

Organizing plant maintenance Reduction of unplanned shutdowns Simplifying and streamlining the decision making process Streamlining workflow Immediate availability of equipment maintenance information.

In addition to these issues, Procter & Gamble had additional requirements as a result of their world-class reputation and high productivity requirements. To stay competitive and be the leader in their field, P&G saw a need for ongoing improvements in these areas:

Quality assurance and control Production cost control Risk management Management of preventive maintenance .

Our Solution /
To address all of these concerns, we developed the Maintenance Tracking Tool - a system providing equipment maintenance automation. MTT provides complete control of the preventive maintenance process.

Our Development Process /

In-depth analysis of the issues of concern, in cooperation with P&G, gave our team a good opportunity to define and design the principle functions of MTT.

Page 64

Our design covered system functionality to a level of detail that included user interface prototypes. Initial implementation was aimed at delivering critical elements; separate system elements could be tuned independently. As a result, P&G and our team were better positioned to control all stages of project development. Installation of development releases of the system promoted accelerated system integration: - Early and aggressive testing of software modules - Training the potential users - Early feedback, and references. Our approach made it possible to develop a high quality system in the timeframe needed.

Basic Technologies
MTT is based on J2EE technologies RUP development methodology MS SQL Server 2000 is used to store: - All equipment data - Maintenance requests - All related maintenance tracking data Integration with SAP/R3, for access to master data.

Security: A Role-Based Model /

MTT supports authentication of users and uses information about each user to promote effective use of the system.

Additional Features /
MTT presents a number of services simplifying data processing: SAP/R3 user services MS Office synchronization Event notification services Maintenance management services

Page 65

Error handling system. Benefits

MTT provides: Simplification and automation of the workflow process; Streamlined decision-making for equipment maintenance tracking; A more agile planning process; Improved cost control.

Our solutions will benefit a company in the following ways: Clearly visible results at every stage of development. Our client controls the project development process. We provide expertise and support formulating requirements and the user interface. The final result is clear before the project is over.

Page 66

CONCLUSION

We can conclude that the all over condition of P&G at world level in FMCG industry is very great. It is ruling as a king in FMCG at world level. Its condition in India is favourable, but here it has competitors like Hindustan Unilever, Dabur, etc. It has its product in every segment of households. However in India, its products are not having much customers as here unilever is more popular. P&gs rank is after Unilever. It sets all strategies of marketing, finance and human resourse strategy in very well manner.Unilever is also now started challenging P&G at world after the Hindustan lever became unilever. Now the competitions between two players went globally. Apart from this the quality measures and quality tests of this company is very much effectively implemented. The overall performance of the company is good.

Page 67

BIBLIOGRAPHY

www.google.com www.pg.co.in www.wikipedia.com www.hll.co.in www.icmr.com www.moneycontrol.com www.rediffmoney.com

Page 68