1) P&G transitioned from geographic to matrix to a mix of organizational structures in response to growth, changing market demands, and lack of standardization. This led to issues of coordination and conflicting goals.
2) In Europe, P&G initially operated country-specific subsidiaries but transitioned to category management across regions to promote standardization and enable regional strategies in response to a more integrated European market.
3) P&G adopted a global matrix structure to coordinate global strategies and replicate technologies quickly. However, this led to conflicting goals between functions and regions, as well as issues with cooperation and slow decision-making.
1) P&G transitioned from geographic to matrix to a mix of organizational structures in response to growth, changing market demands, and lack of standardization. This led to issues of coordination and conflicting goals.
2) In Europe, P&G initially operated country-specific subsidiaries but transitioned to category management across regions to promote standardization and enable regional strategies in response to a more integrated European market.
3) P&G adopted a global matrix structure to coordinate global strategies and replicate technologies quickly. However, this led to conflicting goals between functions and regions, as well as issues with cooperation and slow decision-making.
1) P&G transitioned from geographic to matrix to a mix of organizational structures in response to growth, changing market demands, and lack of standardization. This led to issues of coordination and conflicting goals.
2) In Europe, P&G initially operated country-specific subsidiaries but transitioned to category management across regions to promote standardization and enable regional strategies in response to a more integrated European market.
3) P&G adopted a global matrix structure to coordinate global strategies and replicate technologies quickly. However, this led to conflicting goals between functions and regions, as well as issues with cooperation and slow decision-making.
1) P&G transitioned from geographic to matrix to a mix of organizational structures in response to growth, changing market demands, and lack of standardization. This led to issues of coordination and conflicting goals.
2) In Europe, P&G initially operated country-specific subsidiaries but transitioned to category management across regions to promote standardization and enable regional strategies in response to a more integrated European market.
3) P&G adopted a global matrix structure to coordinate global strategies and replicate technologies quickly. However, this led to conflicting goals between functions and regions, as well as issues with cooperation and slow decision-making.
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Strategic Management
(Case 3) By Group 3 IIM Calcutta Larunika Gaur (0203/53), Lakshay Pandhi (0201/53), Manpreet Singh Mokha (0216/53), Keshav Bagri (0182/53), Himang (0154/53), Kunal Suraiya (0194/53)
Executive Summary (1/2)
Transition in organizational structure
Organization 2005
What actually happened
Company moved from geographic/category
based org structures to matrix to a mix of everythingGrowth in 1999 in product portfolio and need for individual focus for different Solution 1
categories due to change in market demand propelled P&G to move to
matrix organizational structure
Solution 2
Lack of standardization and coordination led to transition from geographic
to category management in Europe
Solution 3
Conflicting goals among regional/category managers and lack of
cooperation led to movement away from matrix structures in 1990s
Solution 4
Solution 5
Solution 6
Lack of innovation and conflicts propelled P&G to go with organization
2005; formation of different units for marketing and innovation, cost rationalization some characteristics Should still go with Organization 2005 but focus on certain main categories/regions along with proper marketing plan is required After the whole fiasco of 2000, Lafley was appointed as the CEO; to revive P&G, he focused on certain categories/regions and optimized spending by product managers
Executive Summary (2/2)
XXX Beauty and PHC industries form largest %age sales for P&G
Bargaining Power of Suppliers Low No direct reliance on specific suppliers Standard reputation of P&G offers advantage
Transition in organizational structure
Organization 2005
What actually happened
Threat of New Entrants
Low-Moderate High investment Presence of other Big players such as Unilever, ColgatePalmolive Strong R&D capabilities of the existing firms Highly Differentiated product is required Intensity of Rivalry in the industry High Many Local, Regional & global competitors-Unilever, Estee Lauder & CP
Also competes with other
Branded products and retailers private labeled products
Threat of Substitutes Low-Moderate Most products are necessities Similar kind of products by different firms
Bargaining Power of Buyers
Moderate-High 15% of P&Gs Sales are to retailers Price-sensitive sectors Low switching costs
Executive Summary
Transition in the US (1/2)
What actually happened
Organization 2005
A largely homogenous U.S. market allowed P&G
to operate as a product division and create nationwide brands U.S. Divisional Structure - Sharing of best Benefits
President Foods VP
Toilet Goods VP
Soaps & Detergent VP
Basic Research
R&D
Brand Managers
Manufacturi ng
Corporate Functions
Sales
The 1954 Product Division Model developed along two key
dimensions: functions and brand Individual operating divisions were created to better manage growing lines of products, each with its own line and staff organizations Profitability>> Responsibility of brand managers
Wind s of Chan ge
practices and talents
across brands Promoted cutting edge competencies in R&D, Manufacturing, Research Corporate R&D fostered innovative connections eg. Invention of Fluoride toothpaste Greater autonomy to managers to work as separate units Allowed senior specialists to focus on corporate issues
By the 1980s product categories changed and required more differentiated
functional activity Brands had to be run as bigger categories than as differentiated units The changed necessitated that middle level managers reported both to the functional leaders as well as to their business leaders
Executive Summary
Transition in the US (2/2)
Organization 2005
What actually happened
Growth in product portfolio and need for
individual focus for different categories propelled movementCentralized to matrix Divisions
Household Cleaning Division VP
U.S. President
Laundry Division VP
Functions Sales VP
R&D VP
Category Business Units
Detergent GM
Sales Laundry Director
R&D Laundry Director
Brands
Tide Brand Manager
Sales Detergent
R&D Detergent
Manufacturin g VP
Mfg Laundry Director
Why Matrix?
- Focus on differentiated market demand - Growth in the amount of brands and products - Change in the market demand - Improve integration and decision efficiency
Threats Mfg Detergent
- Problem of coordination - Defining product managers authority over staff - Gaining support of other functional managers
Product categories required more differentiated
functional activities but at the same time required P&G US to retain its functional strengths With the advent of matrix, brands were now managed as components of category portfolios by category general managers The 39 category business units were created which were run by a general manager Transiti to whom both brand and functional managers would report on Functional leaders reported directly to their business leadership and also to their functional leadership (as indicated by the dotted lines)
Executive Summary
Transition in Europe (1/2)
What actually happened
Organization 2005
Lack of standardization and coordination led to
transition from geographic to category management in Europe Initial Structure
Dimensions Country, function and brand Mini U.S.es in each country Portfolio of self managed subsidiaries Country managers responsible for profitability
Transition
Non US importance growing significantly Regional Committees Large country managers and corporate function leaders Europe split into three regions Faced objection from smallcountry managers Lack of typical European consumer would defeat the purpose of standardization
Benefits
The strategy adopted was a huge success Eliminated needless country-wise product variations Made competitive responses across regions possible Acted as a deterrent to competition and hopefuls
Executive Summary
Transition in Europe (2/2)
What actually happened
Organization 2005
A graphical representation of the shift in the
organizational structure in Europe 1960 1980 President, Overseas Operations
Country Managers
Country Specific Function
Geographic Line Management
Long time Problems interval for brand globalization European corporate functions disconnected from US operations Focus on product and brand fragmented by country No possibility of region-wide category or brand strategy Lack of coordination and difficulty in scaling up Lack of standardization in products and packaging led to
From 1980s President, Europe
Europe Product VPs
Country Categories
Country Brand Management
Brussels Corporate Functions
Transition to a global cube (1/2)
Executive Summary
What actually happened
Organization 2005
As P&G expanded, it realized the importance of
having a scalable, standardized model to achieve rapid globalization Why Global Global CEO
Categories Global
detergent Category Leader
Europe President (Brussels)
R&D SVP
Sales SVP (Cincinnati)
functions
Product supply SVP (Cincinnati)
Europe Detergent GM Regional Categories
Detergent Germany GM
Country Categories
Ariel Brand Manager, Germany
Mfg Laundry Director
R&D Global Detergent VP (Cincinnati) Detergent R&D Director, Europe (Brussels)
Detergent Sales Director, R&D Europe
Detergent
Detergent Product Supply Director, Europe
Detergent Sales Manager, Germany
Global expansion opportunities called for a structure
that was universally adaptable, promoted leanness and improved coordination The Transiti on
Global Matrix? Better coordinate strategies Quick replication of product category platform tech. Bring standardization, eliminate redundancy Improve supply chain integration Threats Power concentrated within functions; complex structures Conflicting goals amongst functions causing strategic misalignment Rollout decisions hinged upon regional managers
Global category presidencies were created which reported to the Global CEO Global R&D functional VPs reported to category presidents. Functional VPs reported to their functional SVPs additionally Global category presidents collaborated with R&D category VPs to create scalable platform tech. Four regions created in 95: LATAM, EAME, North America and Asia, each with
Executive Summary
Transition to a global cube (2/2)
Organization 2005
What actually happened
A Global Matrix structure eventually led to
conflicting goals, poor cooperation and unsustainable profits tio c n
Category A Ge hy ogr Geograph Category ap y1 A Function GeographCategory 1 y1 A FunctionGeograph 1 Category y2 B Function Category Geograph 1 B y1 Function Geograph y2 1 Function 1
Catego ry
Fu n
A functional manager within a
geography was expected to report to the country category head, as well as the global functional head This structure often leads to conflicting goals. For example, the functional head might focus on cost efficiency while the category head may favor increased top line through stimulating investments Competitors quickly imitated supply chain consolidation, which indicated an unsustainable competitive advantage This structure leads issues of cooperation and coordination Complexity of authority structures led to opportunity losses and slow decision making
Executive Summary
Transition in organizational structure
Organization 2005 (1/2)
What actually happened
Lack of innovation & conflicts among
regional/category heads propelled P&G to come up with Organization 2005 Organization 2005 Characteristics and Need
Setting up of GBUs, MDOs
Cost savings by workforce and GBS where they are rationalization and Responsible for innovation, reduction in management marketing and systems layers through product-s management, respectively supply consolidations
Lack of cooperation between
category and regional managers Lack of cooperation between different functions Increasing competitive pressures
Change in routine Overhauling the performance activities and movement appraisal system with the To individual decision contribution of performmaking from committees ance based pay increasing
Sources: Own Analysis; Case
Low focus on innovation in
products Inability of the organization to assign accountability to profit centers
Executive Summary
Transition in organizational structure
Organization 2005 (2/2)
What actually happened
Proper marketing and focus on certain
categories/regions could have helped Lafley make Organization 2005 a success Lafley should continue Organization 2005 -
Negative Positive Impact on Profitability
Assessment
Cost rationalization in the form of employee layoffs and leaner hierarchy
Development of new brands and categories
Focusing on GBUs alone
and ignoring MBOs and GBS Ignoring existing weak spots
Low High Impact on Sales Sources: Own Analysis; Case
with Organization 2005 as the thinking behind the program was right. However, focus should be improved by investing in major categories and paying special attention to the weak geographies. Development of new products without understanding the markets led to build up pipeline. Loss of market share in major product categories and regional disparities
Executive Summary
Transition in organizational structure
Organization 2005
What actually happened
A focus on bigger businesses and products, and
rationing of costs set the ball rolling for P&G turnaround in 2000 Corrective Measures Concentrate Concentrate on on the the four four biggest biggest businesses businesses
laundry, laundry, baby baby care, care, hair hair care care and and feminine feminine care care
and and prevent prevent fall fall in in the the market market share share
Paying Paying special special attention attention to to troubled markets, such as troubled markets, such as Japan Japan and and Western Western Europe Europe
Sell Sell products products which which did did not not align with companys align with companys broader broader focus focus (eg. (eg. Clearsil) Clearsil) and focus energies and focus energies on on products where the products where the company company possessed possessed advantage advantage
Click here for the
trend in sales and profits Sources:Enquirer.com
Rationing Rationing of of funds funds given given to to the managers
an the managers an aberration aberration from from Jagers Jagers rule rule
who allowed them to who allowed them to spend spend according according to to stretched sales forecasts stretched sales forecasts Helping Helping in in reviving reviving the the strength strength of of the the marketing marketing training training department department which which was was overlooked overlooked by by the the previous previous CEO CEO
