Procter&Gamble (0NOF) SWOT Analysis / TOWS Matrix / MBA Resources
Personal & Household Prods.
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Procter&Gamble (United Kingdom)
Based on various researches at Oak Spring University , Procter&Gamble is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, technology disruption, increasing transportation and logistics costs, increasing commodity prices, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, increasing energy prices,
geopolitical disruptions, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Procter&Gamble can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Procter&Gamble, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Procter&Gamble operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Procter&Gamble can be done for the following purposes –
1. Strategic planning of Procter&Gamble
2. Improving business portfolio management of Procter&Gamble
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Personal & Household Prods. sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Procter&Gamble
Strengths of Procter&Gamble | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Procter&Gamble are -
Cross disciplinary teams
– Horizontal connected teams at the Procter&Gamble are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Low bargaining power of suppliers
– Suppliers of Procter&Gamble in the Consumer/Non-Cyclical sector have low bargaining power. Procter&Gamble has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Procter&Gamble to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Personal & Household Prods. industry
– Procter&Gamble is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Procter&Gamble has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Personal & Household Prods. industry. Secondly the value chain collaborators of Procter&Gamble have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Procter&Gamble has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Procter&Gamble staying ahead in the Personal & Household Prods. industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Procter&Gamble has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Analytics focus
– Procter&Gamble is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Personal & Household Prods. industry. The technology infrastructure of United Kingdom is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Sustainable margins compare to other players in Personal & Household Prods. industry
– Procter&Gamble has clearly differentiated products in the market place. This has enabled Procter&Gamble to fetch slight price premium compare to the competitors in the Personal & Household Prods. industry. The sustainable margins have also helped Procter&Gamble to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Procter&Gamble in Personal & Household Prods. industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Procter&Gamble is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Procter&Gamble is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Procter&Gamble emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Procter&Gamble has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Procter&Gamble has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Digital Transformation in Personal & Household Prods. industry
- digital transformation varies from industry to industry. For Procter&Gamble digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Procter&Gamble has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Weaknesses of Procter&Gamble | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Procter&Gamble are -
Interest costs
– Compare to the competition, Procter&Gamble has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Increasing silos among functional specialists
– The organizational structure of Procter&Gamble is dominated by functional specialists. It is not different from other players in the Personal & Household Prods. industry, but Procter&Gamble needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Procter&Gamble to focus more on services in the Personal & Household Prods. industry rather than just following the product oriented approach.
High bargaining power of channel partners in Personal & Household Prods. industry
– because of the regulatory requirements in United Kingdom, Procter&Gamble is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Personal & Household Prods. industry.
No frontier risks strategy
– From the 10K / annual statement of Procter&Gamble, it seems that company is thinking out the frontier risks that can impact Personal & Household Prods. industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High operating costs
– Compare to the competitors, Procter&Gamble has high operating costs in the Personal & Household Prods. industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Procter&Gamble lucrative customers.
Compensation and incentives
– The revenue per employee of Procter&Gamble is just above the Personal & Household Prods. industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on Procter&Gamble ‘s star products
– The top 2 products and services of Procter&Gamble still accounts for major business revenue. This dependence on star products in Personal & Household Prods. industry has resulted into insufficient focus on developing new products, even though Procter&Gamble has relatively successful track record of launching new products.
Skills based hiring in Personal & Household Prods. industry
– The stress on hiring functional specialists at Procter&Gamble has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Low market penetration in new markets
– Outside its home market of United Kingdom, Procter&Gamble needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Procter&Gamble has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High cash cycle compare to competitors
Procter&Gamble has a high cash cycle compare to other players in the Personal & Household Prods. industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Procter&Gamble Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Procter&Gamble are -
Leveraging digital technologies
– Procter&Gamble can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Procter&Gamble can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Procter&Gamble can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Building a culture of innovation
– managers at Procter&Gamble can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Personal & Household Prods. industry.
Developing new processes and practices
– Procter&Gamble can develop new processes and procedures in Personal & Household Prods. industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Procter&Gamble in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Personal & Household Prods. industry, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Procter&Gamble has opened avenues for new revenue streams for the organization in Personal & Household Prods. industry. This can help Procter&Gamble to build a more holistic ecosystem for Procter&Gamble products in the Personal & Household Prods. industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Procter&Gamble is facing challenges because of the dominance of functional experts in the organization. Procter&Gamble can utilize new technology in the field of Personal & Household Prods. industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for Procter&Gamble to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Better consumer reach
– The expansion of the 5G network will help Procter&Gamble to increase its market reach. Procter&Gamble will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Personal & Household Prods. industry, but it has also influenced the consumer preferences. Procter&Gamble can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Procter&Gamble can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Procter&Gamble has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Procter&Gamble External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Procter&Gamble are -
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Procter&Gamble in the Personal & Household Prods. sector and impact the bottomline of the organization.
Regulatory challenges
– Procter&Gamble needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Personal & Household Prods. industry regulations.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Procter&Gamble will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Procter&Gamble can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Procter&Gamble prominent markets.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Procter&Gamble.
Technology acceleration in Forth Industrial Revolution
– Procter&Gamble has witnessed rapid integration of technology during Covid-19 in the Personal & Household Prods. industry. As one of the leading players in the industry, Procter&Gamble needs to keep up with the evolution of technology in the Personal & Household Prods. sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Consumer confidence and its impact on Procter&Gamble demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Personal & Household Prods. industry and other sectors.
Environmental challenges
– Procter&Gamble needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Procter&Gamble can take advantage of this fund but it will also bring new competitors in the Personal & Household Prods. industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Procter&Gamble may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Personal & Household Prods. sector.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Personal & Household Prods. industry are lowering. It can presents Procter&Gamble with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Personal & Household Prods. sector.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Procter&Gamble business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Procter&Gamble Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Procter&Gamble needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Procter&Gamble is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Procter&Gamble is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Procter&Gamble to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Procter&Gamble needs to make to build a sustainable competitive advantage.
