People around the globe are using different domestic products made by Procter and Gamble. This is the reason why Procter and Gamble is considered as one of the primary source of producing customers goods. The products which are made under the label are further divided into six different categories that are: Paper wares, feminine products, laundry and cleaning, food and drinks, health care and beauty care. Oil of Olay, Pantene, Ariel, head and Shoulder, Sunny delight are the leading brands of Procter and Gamble (Wherrity, 2006).
These brands are responsible for half of the sales for the company. With the successful deployment of Porter Five forces model, the industrial environment and marketing success of the company can be analyzed.
Porter’s Five Forces Model
The objective of Porter Five Forces Model is to beat the competition of market by overcoming the challenges offered by rival companies. The five forces model was analysis developed by Michael E. Porter in 1979. According to this model the five forces that can affect the profits of company and can help to determine the prevailing competition in market are:
• New competition threat
• Threat due to substitute services or products
• Bargaining Power of suppliers
• Bargaining Power of Buyers
• Threat of established rivals
From the above mentioned factors three are part of horizontal competition that are marketing threats of rivals, new entrants and of substitute products. However, bargain power of customers and suppliers are vertical competition factors. Various companies use this model as checklist for developing any marketing strategy and also use “Value Chain” along with this model.
Threat of New Entrants
Due to the vast range of Procter and Gamble products, it is very hard for a new company to come and participate. However, the company holds considerable shares of market and also has established reputations therefore, no new entrant can compete with the company without heavy amount of capital and complete marketing strategy based on comprehensive research. Though small companies with specialization in particular products can offer competition to Procter and gamble in specific areas.
Bargain Power of Supplier
The bargain power of supplier is coped with mutually dependent relationship of company with its suppliers. Procter and Gamble request some good materials in order to produce products of good quality and sell them at sensible price. Likewise, suppliers in market are always in search of reputed clients that can help them to generate good amount of revenue. The standard reputation maintained by Procter and Gamble offers advantage to the company in this regard. Therefore, the prevailing crisis of credit and fluctuation in interest rates do not affect the terms of company with suppliers.
Bargain power of Consumers
As with the bargaining power that is alarmed by the costumers, Procter and Gamble can deal with it easily. The wide range of household products produced by company maintains the revenue of company even in time of recession. It is due to the type of various products and the demands of products in everyday life of consumers, that this company plays an effective role in reducing rate of recession in economy of US.
Threat of Substitute Products
Although Procter & Gamble has to deal with the presence of various substitutes in market nowadays, however quality offered by P&G in its all products ensure the sustainability of company in market all over the world. In this regard company has adopted variety of collaboration strategies with their customers in order to develop better understanding of consumer demands and their response.
These factors allow the industry to know about their buyers that are they happy with Procter and Gamble products or will choose some other brand over Procter and Gamble. The quality in Procter and Gamble products is always maintained and it ensures costumer trustworthiness and value for their money.
Threat of established rivals
Procter and Gamble is one of most successful company offering quality products in present times. For more than half of a century this company is dominating the world of household products in different parts of world. This success of company is because of flexible attitude of company towards modifying user requirements and shifting market conditions. The successful marketing and business strategies of company ensures growth in revenue and constant reputation in world of business.
It is a buyer oriented industry which is ready to know about the requirement of their costumers sooner than any other. P&G is now familiar with the business war going in the market but it has also formed a business map to compete. With Porter’s five forces model Procter and Gamble can successfully eradicate its rival companies and beat the competition anywhere in world.
Recommendation on the Basis of Porter Five Forces Model
After the creation of Porter Five Forces Model, P&G now, can make an assure success in the competition going around the globe. Some of recommendation on basis of five forces model are as follow:
• Future of any company is dependent on its buyers. In 2006, 15% of the income of Procter and Gamble was collected by Wal-Mart. This mutual sharing of Wal-Mart bought up a good deal with P&G. Due to this scenario company generate reduce revenue that time. Therefore, buyers should be considered while developing any strategy for company.
• To maintain the reputation of company among the presence of substitutes in market, it is important for P&G to deliver quality products with innovative alterations. They should also introduce new and feasible products in market to retain its position among consumers.
• As an example, P&G has bring in new and more long lasting diapers in the market place to hit the opposition. The efficiency and effectiveness of product can contribute to good will of company.
• The prices of products should be controlled so that consumer loyalty can be retained even in times of recession. People will certainly prefer quality products when they are getting right value for their money.
Procter & Gamble (2012). Website:http://www.pg.com/en_US/company/index.shtml Retrieved: 19th Oct, 2012
Wherrity, Constance (2006). “Dial Agrees to Buy P&G Deodorant Brands”. Pierce Mattie Public Relations New York blog.
Dyer, Davis; Dalzell, Frederick; Olegario, Rowena (2004).Rising Tide: Lessons from 165 Years of Brand Building at Procter & Gamble. Harvard Business School Press.