P&G's Success Story in China

            
 
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Case Details:

Case Code : BSTR194
Case Length : 16 Pages
Pages Period : 1998-2005
Organization : P&G
Pub Date : 2006
Teaching Note :Not Available
Countries : China
Industry : FMCG

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Brand Stretching

Brand stretching was another strategy adopted by P&G in China. This strategy had a considerable risk element. If the strategy failed, it could potentially damage the brand name and sales of the original brand.

To avoid cannibalization while stretching a brand, P&G conducted extensive studies to understand the preferences of different groups of consumers so as to develop a distinctive product that could also be differentiated at the point of sale. After careful deliberations, eight years after the Chinese launch of P&G's Crest toothpaste, it launched 'New Crest' toothpaste in 2004, with a price 30 percent lower than that of its premium product and on par with its competitor - Colgate's middle-market toothpaste. At the time of the launch of this product, Crest was a premium brand in China and by 2000, Crest held about 55% market share of the up-market segment. About 70% of the total toothpaste market consisted of middle and lower-end segments...

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The HR Strategies

P&G's HR strategy focused on superior recruiting and retention of its employees. In its initial years in China, P&G brought in experienced Americans to manage the country's operations. The company also hired Chinese at that time but gave them a set plan to follow. It trained these locals to think the American way.

With time, the locals gained experience and were absorbed into senior positions. P&G believed in promoting from within the organization and so the company recruited people who were starting their career or had little work experience. P&G was among the first multinationals to conduct campus placements in reputed Chinese universities and had gained strong awareness among university students. It provided world-class training programs to build general business skills as well as core functional skills. Achievers were also given overseas assignments. In May 2005, P&G employed 4,000 people in China, out of which only about 50 were not Chinese...

The Challenges

Though P&G's Chinese operations were highly successful, the company faced challenges in the form of fierce competition from local Chinese manufacturers and the presence of fake products. P&G faced stiff competition from local companies such as the Nice group (that manufactured detergents) and C-Bons (a national shampoo and skin care products company). To avoid direct competition from global FMCG companies such as P&G, these local companies had concentrated on lower segment consumers and had emerged as leaders in this segment...

Exhibits

Exhibit I: Break-Up of P&G's Revenues from the Emerging Markets (2002)
Exhibit II: Financial Details of P&G
Exhibit III: P&G's Revenues in Greater China
Exhibit IV: Changing Habits of the Chinese Consumer
Exhibit V: Distribution of Urban and Rural Population in China
Exhibit VI: Classification of Towns and Cities Among Different Chinese Geographical Regions


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