Procter And Gamble Essay Example

faster decision making.. Features:  New Organizational Structure where: Profit responsibility shifted from P&G four regional organizations to seven global business units (GBU’s) who were now responsible for worldwide products in their category development, manufacturing and marketing. We believe that this is a more efficient way of managing the units as the GBU has a worldwide focus and also knows the adaptation for emerging markets. ? The regional organizations were transformed into seven market development organizations and are responsible for the local implementation of the GBUs’ global strategy.

Undoubtedly the most challenging and difficult change probably lies within the company culture itself, to change the culture it takes a lot of effort, is a long term task, that can not be done over night. 2. What factors should Lafley take into account in determining whether to continue or to abandon Organization 2005? Fail in performance this is what we have to concentrate why? More attention to the customer relationship and sale performance Emerging market need adaptation and localization of the product difficult to combne with a global organization.

Probably rate ond type of new producti introduction not succesfull meanwhile the core brand still have a good market share. Internal confidence and leadership of Jaeger too aggressive for a successful change of culture.  Past performance In 2000, it will be one year that the Organization 2005 project was ongoing. We should be able to measure whether or not it contributed to improve the situation. When looking at the result of 2000, we can see that actually, the net income even decreased by 5. 9% compared to the previous years despite the fact that the sales increased by

4. % (and with constant COGS)! So we should analyse the reason of this poor performance and understand whether it is because of some efficiency problem of the new restructuration.  Adequacy of the Organization 2005 structure to P&Gs’ coordination interfaces in the value chain of the company: can this new organization really match optimize/minimize the coordination requirements? In order to illustrate this point, let’s take 2 extreme examples: SKII and Pringles potato chips. The SKII is a typical example of product that cannot be developed in a GBU of the new Organization 2005 structure.

Because Japanese women are very demanding in term of quality of skin care products, the global R&D was unable to match the requirements of this special market. So it was no surprise that the decision of P&G was actually to get help from Japanese team to develop this product. Still we can think that some parts of the value chain can still be globalized as the below value chain of SKII analysis shows. But each time we switch from localized to globalized process and vice versa, there is a head over cost and efficiency loss (due to coordination between different teams).

We can clearly see that in this example, the new organization won’t help to achieve better efficiency and in fact even play against that purpose. On the other extreme side, if we take a product like Springles that is a quite standardized product among all the world, then there is no difficulty to have a GBU and it actually really make sense to do so. [pic] • Product Contribution to sales Another important thing to consider whether to keep Organization

2005 or not is to look at the product and brand portfolio and identify which can be globalized and which contribute most to the sales?

In fact, each product or brand has a capacity of being globalized. Some cannot at all and will definitely lead to loss of dramatic marketshare (detergent or skin care examples). Some others can be fully globalized (potato chips). And finally, the rest are in the middle and the answer is not so clear. [pic] Then the next step, it to understand what are the contribution of each product or brand to the total sales? It surely doesn’t make sense to globalize a product serving a specific market and loss its contribution if this contribution is not negligible.

The picture below shows 3 different situations where GBU structure makes senses, another situation where it doesn’t and a third situation where the answer is not clear! Market Maturity. Actually, a product capacity of being globalized is not an intrinsic attribute of the product itself. It is also depends on the market it is serving. Mature markets are more prone of accepting globalized products. Emerging markets like China or Russia are absolutely not ready for that and need time to get used to western values. Mature Markets vs.

Emerging Markets like China or Russia not ready to accept ‘globalized’ products. Current Organization 2005 didn’t take into consideration the cases of emerging markets. Market Situation: At that time, the market was under the influence of Internet bubble that started to burst. Are we going through a major technology change Are customer needs changing, is a new industry coming into existence Cost of the reorganization

together with the difficulty of implementing this reorganization Expected improvements for the TSR Key customers like Wal-Mart or Carrefour! Will the new structure with GBUs really help to increase the sales with these key customers or will it make it more complicated? According to my understanding, this new organization should lead to a more complicated interactions with key customers as they will need to coordinate with more contact windows (7 now versus 4 initially Disagreed with Raffi, as it will be more efficient as we have MDO and GBS working together. The crisis of confidence, mostly leadership confidence, Change Management and how to get all the manger’s units and others involved. Stock price, relation ship with the Wall Street, will (i) be hated like Jager on Wall Street.  P&G is a very complex company with huge variety of brands and products, with 110 00 employees in 140 different countries. This complexity needed minimum requirements to the structure and more attention to the coordination within one product area. It needed to coordinate within each function and it needed to coordinate within each country. Can I create more Share holder value or Total shareholder Return with the new organisation Does it serve my customers, will the new organisation make live easier for them Where to play and how to win  Are the changes a threat to the resources and capabilities? Advise Lafley (a) on whether to proceed with or cancel Organization 2005; (b) Whether changes to be made in the organization structure adopted under Organization 2005 (as show in Figure 8. 2). What advice would you give to Mr Lafley regarding the implementation of Organization 2005?

We

will advice Lafley to proceed with a slightly modified version of Organization 2005 because we think that P&G should focus more on differentiation than on low cost as they always did in their whole history. So innovation should be a key success factor to achieve this target and the organizational structure should really motivate innovation. In order to achieve this innovation target, organizing the company so that it focuses on product makes sense. So we support the ideas of GBU by product type.

Have to work hardly in the internal consensus for the new type of organization developing and right level of coordination between the business unit involving the middle and high level management in the new orientation motivating them. However, we would also consider the cases of some emerging markets and key customers like Wal-Mart or Carrefour separately. Have a special focusing in the customer relationship in order to create to right mood and education in the customer and in the market to develop new product but also new culture.

Interesting the example of SK II and the related differences between customer in Us and japan. For emerging markets, we should consider that countries like Russia and China just recently opened their door at that time and just started to be in contact with other countries (for example, they don’t have the history of the TV series from the west that are great sources of western values). The population were not educated with tastes from western countries yet even if we can imagine that they were eager to know more about.

So for these special countries with promising market but with totally unknown market

conditions and tastes, we would have created one dedicated division for each of these countries. However, we would also prepare mechanisms that will allow P&G to integrate these special divisions later in the primary organizational structure once these markets would be mature enough to accept more global products (let’s say 10 to 15 years later). For key customers, I would also pay attention to facilitate sales of our products and not make them more complex than it was before (actually, it should even be easier if we want to increase the sales).

In order to address this issue, I would create a specific department like ‘Key Account Department’ that will solely contain sales personal in charge of one particular key customer on the global and local point of view. Such person will help coordinate the different internal GBUs with their customers. Each of these persons from this department will be the unique contact window. It will be better to conduct the changes less aggressively and immediately adjust the project according to the market responds.

Further more we think the change needs better communication and buy in and how it works, or should work, should be organized an planned before, seeing that even the current CEO Lafley him self said in the case of SK-II that the management was disrupted, so he himself experienced it, which should make it “simple” for him to communicate such issue with the other management positions. Conclusion: This case puts us at the heart of business strategy and let us feels some of the different aspects to consider when changing the organizational structure of a company.