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P&G Case Study

  1. 1. 1 Procter & Gamble Company: Comprehensive Project Analysis HBS Case 2 Presentation Presented by Julie & David Biz Pro 9th Senior May 6th, 2016
  2. 2. Executive Summary 2 1 Accelerate the occupation of the performance segment. • Though the overall LDL market slows down, the segment still grows fast. • P&G has a strong competitive advantage in this segment. • To achieve the goal, improve Dawn with H-80 formula and improve Joy with no-spot formula is necessary with desirable net profit. 2 Maintain the current market share in the mildness segment. • The mildness market goes down with CAGR -1.14%, which is unpromising. • Colgate-Palmolive is very strong competitor in this segment. • To achieve the goal, further advertisement on Ivory Liquid is require. The cost can be covered if we get 0.54% further of the market share.
  3. 3. Strategic Analysis of Current LDL Market 3Senior Presentation
  4. 4. The performance market beats other segments in both volume and growth aspects. 21.0 22.0 23.0 24.0 25.0 26.0 27.0 Case(M) Mildness Segment (36%) Projected 54.0 56.0 58.0 60.0 62.0 64.0 Case(M) Total Market 0.62% 5.0 10.0 15.0 20.0 25.0 Case(M) Performance Segment (35%) 15.0 16.0 17.0 18.0 19.0 20.0 21.0 22.0 Case(M) Price Segment (29%) -1.14% Projected Projected Projected -1.25% 5.69% The performance grows with CAGR 5.69%, while other segment declines. 4Source: Company Record.
  5. 5. No strong competitor exists in the performance segment, but there is in the mildness segment. P&G Lever Brother Colgate-Palmolive No strong competitors in performance segment, but Colgate is quite strong in mildness segment. Performance (35%) Mildness (36%) 0% 4% 8% 12% 16% Dawn Joy Sunlight C-P Ivory Lux Dove Palmolive Dermassage LDLMarketShare Performance Segment • P&G’s brands dominate the performance segment • No other strong competitor Mildness Segment • P&G’s is the largest player in the mildness segment • Colgate-Palmolive is strong in the mildness segment Key implications for the competitors analysis: 5Source: Company Research.
  6. 6. We suggest accelerate in the performance segment and develop the mildness segment. Market Size & Future Growth P&G’s Competitive Position Performance Segment Price Segment Mildness Segment Whole LDL Market Develop and maintain the current market share. Accelerate occupation of performance segment Do not invest in the declining market Opportunistic Segment 6
  7. 7. Growth Opportunity Evaluation 7Senior Presentation
  8. 8. Ivory Joy H-80 and no-spot formula fit customers’ current needs, but Dawn has the same feature as H-80 formula has. Key Concerns for LDL Consumers Dawn P&G’s Brand H-80 8 Source: Company Research. 77% 81% 85% 85% 57% 83% 82% 77% 80% 88% 93% 0% 25% 50% 75% 100% Mildness to skin Mildness to hand Long-lasting suds Economical Plesant Odor Not need much No-spot Removing cooked-on foods Leaving dishes shiny Getting dishes clean Cutting grease Score 5-6 Score 3-4 Score 1-2 No Response No-spot
  9. 9. Launching product require initial cost USD 80 M. Long payback period and cannibalization are key concerns for launching a new brand. 9 Source: Company research & modeling by the team. Assumption: • Based on the experience of Dawn and Ivory, 10% market share could be reached. • Approximately 40% of the market share of a new brand comes from cannibalization. 23.0 22.5 13.1 13.1 -10.9 -11.2 -12.0 -7.0 -2.0 3.0 8.0 13.0 18.0 23.0 28.0 1985 1986 1985 1986 1985 1986 USDM 7.59.8 9.8 Cash Flow from New Brand Cannibalization Cash Flow Incremental Cash Flow 7.5 12.2 11.3 -3.3 -3.3 Performance Mildness Price Payback 7.33 yrs Payback 10.14 yrs Payback 7.89 yrs
  10. 10. Implementing H-80 on Dawn generates $30.17 M in 5 years, which is the best option for product improvement. Launching product require initial cost USD 30 M. 10 Source: Company research & modeling by the team. Assumption: • 8% market share is added. • 15% market share of pad market is added due to the cross selling effect. 12.4 12.0 12.6 12.1 12.3 10.2 12.1 11.3 6.1 6.3 5.8 5.7 -4.6 -4.7 -4.8 -4.9 -4.5 -4.7 -4.9 -5.1 -6.0 -1.0 4.0 9.0 14.0 1983 1984 1985 1986 1983 1984 1985 1986 1983 1984 1985 1986 USDM Cash Flow from Improvement Cannibalization Cash Flow Incremental Cash Flow 7.8 7.4 7.8 7.2 7.8 7.85.5 6.1 Dawn Payback 4.91 yrs Joy Payback 5.57 yrs Ivory Payback 6.24 yrs
  11. 11. 2 Cost reduction is the direct benefit. Cost reduction benefit suggests us to implement the no-spot formula on Joy. 11 Source: Company research & modeling by the team. Implement no-spot formula on Joy 1 Metric Result (1982 – 1986) Increase Net Profit $12.00 M Return on Investment 20% Payback period 4.25 year No-spot formula fits customers’ need.
  12. 12. Advertising Ivory helps to increase trial rate and is profitable if acquiring 0.54% of LDLs market. 12 Source: Company research & modeling by the team. Metric Result (1982 – 1986) Increase Net Profit $4.41 M Return on Investment 10.25% Payback period 4.54 year The break-even point of the advertisement is 0.54% new LDLs market share. Advertising more on Ivory. • Increase GRP from 300 to 365 (20% larger advertisement coverage ) • Maintain the market share Key financial metrics of advertisement -100% -50% 0% 50% 100% 150% 0.00% 0.50% 1.00% 1.50% ReturnonInvestment(%) Increasing Market Share Sensitive Analysis of Increased Ivory Market Share Break-even at 0.54%
  13. 13. Final Conclusion 13Senior Presentation
  14. 14. Improving Dawn with H-80, improving Joy with no-spot, and advertising more on Ivory Liquid. 14 Segment Key Strategy Action & Result Performance Segment • Focus on this segment • Accelerate expansion • Fit customers’ need • Dawn with H-80 to get stable cash flow (payback 4.91 years) • Joy with no-spot to save the cost (payback 4.25 years) Mildness Segment • Maintain the current market share • Ivory with advertisement to maintain the market share Price Segment • Do not invest in the declining market • No action to conduct in the price segment
  15. 15. Thanks for your attention. 15Senior Presentation

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