Ethics

Procter & Gamble prides themselves on being an ethical company.  They are not a business that comes to mind when thinking of ethical controversies that arise in the media.  Purpose, values, and principles are what lead Procter & Gamble employees through their work weeks.

 "Our Purpose unifies us in a common cause and growth 

strategy of improving more consumers’ lives in small but meaningful ways each day. 

It inspires us to make a positive contribution every day.  

Our Values reflect the behaviors that shape the tone of how we work with
each other and with our partners.  Our Principles articulate our unique 

approach to doing our work."

Their Worldwide Business Manual covers every aspect of ethics in the work place, how to report them, and expectations of employees and their behavior.  They say"[o]ur character has been built on the foundation of integrity, trust, and respect since our beginning in 1837."

The Organizational Structure

P&G's organizational structure is difficult to define because it does not perfectly match the book's options.  They have a form of divisional structure that allows them to think globally and act locally.    

Procter & Gamble have 2 Global Business Units that "focus solely on consumers, brands, and competitors around the world" (P&G.com).  The Market Development Organizations are responsible for knowing what the consumers want and what the competitors are doing in each segment of their business.  The Global Business Services provides business support services.  The Corporate Functions "ensure ongoing functional innovation and capability improvement" (P&G.com).  The main goal of this structure is to eliminate inefficiencies that are often present within large companies.

Corporate Governance

Directly from the Procter & Gamble website, "Corporate Governance is the interaction of the management, shareholders and Board of Directors to help ensure that all investors—both shareholders and creditors—are protected against managers acting solely in their own best interest."  P&G takes corporate governance very seriously, they have noticed that corporate governance is most successful when management acts as long-term investors in the company.  


One way that P&G promotes corporate governance among its employees is through their retirement plans.  Each employee's plan consists of P&G stock which creates a sense of ownership for the employees.  Corporate executives are required to hold P&G stock valued in reference to their base salary.  These two economic tools help to align the interests of employees, executives, and directs with the economic interests of the company.  


P&G employees make all decisions in the workplace based on Purpose, Values, and Principles.  There is a strong internal control environment in place that is monitored by audit and self assessment.  This measure ensures integrity among employees.  Every employee is required to be trained on the Company’s Worldwide Business Conduct Manual.  P&G prides itself on corporate governance and takes it seriously as it is easily seen through these examples.

International Expansion

Procter & Gamble first became an international company in 1930 with their acquisition of Thomas Hedley Co., an English company.  Procter & Gamble sells their products in 180 countries around the world.  Their Global Business Units consist of beauty & grooming and household care.  With its strong international presence, in countries where people can make as little as $2 a day, a new perspective needed to be found.  P&G launched a skunkworks to approach this demographic of their customers.  The market for developing countries is growing at a much larger rate than that of developed countries, 6% to 8% annually versus 1% to 2%.  P&G also relies on something called "mass prestige" that capitalizes on the middle and upper classes that purchase Procter & Gamble products like Tide, Crest, and Max Factor.  I think that P&G's strategies relating to pursuing the developing markets since the recession yet still relying on the middle and upper class markets is a great balance to have.  "It's a myth to say poor people only want function," says Graulty, who has headed P&G's $2-a-day initiative since October 2009. "They care about beauty. Just like us." (P&G and the $2 a day market)

Business Level Strategy

What is Procter & Gamble's business level strategy? 

There are three options to choose from: overall cost leadership, differentiation, and focus strategy.  I believe that P & G focuses on differentiation with their brands.  They do not provide the lowest cost on all of their items.  Tide laundry detergent is one of the more expensive brands.  Their shaving products, dish soap, and toilet paper brands also fall on the higher end of the price spectrum.  Procter & Gamble's products are not entirely unique, you can find many brands of laundry detergent, makeup, and bath soap, however P & G has a differentiated portfolio of brands and these brands are trusted and found in many homes in the United States.  Their reputation provides them with a solid customer base as well.  

Book Value vs. Market Value

Procter & Gamble has a higher market value than they do book value.  What this means is that their intangible assets have a high value.  Human capital and social capital are part of these intangible assets.  Along with them is "knowledge."  The two parts of knowledge are explicit and tacit knowledge.  It is a good thing for Procter & Gamble that their market value is higher than their book value.  Other companies that share this type of ratio are Apple, Google, Microsoft, and Oracle.

Procter & Gamble employees volunteering at Meals on Wheels.

Internal Analysis

An internal analysis consists of examining a company's tangible resources, intangible resources, and organizational capabilities.

Tangible Resources: 

• Wide variety of brands and products offered

• Around 129,000 employees dedicated to the purpose statement of P & G
• Manufacturing facilities in the United States, China and other parts of Asia, Latin America, Mexico, Canada, Europe, Africa, and Australia 

Intangible Resources: 

• Brand/reputation that has existed since 1837
• Partnerships with the top retail stores in the United States and other countries as well 
• 24 leading brands that sell over 1 billion dollars annually

Organizational Capabilities: 

• Successful management 
• Commitments to environmental and social responsibility 
• Good relationships with suppliers  

This photo is of the Procter & Gamble headquarters in Cincinatti, Ohio.