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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"China is a focus market on two grounds: it is a developing market, and it is big. Our aspiration is market share leadership in all P&G core categories in China, and this is a challenge because of the diversity and scale of the country. The diversity is in the consumers - affluent versus modest, as well as in geography - east versus west China and in the trade channels - global retailers, modern Chinese retailers, traditional trade such as mom-and-pop groceries and kiosks." 1

- Laurent Philippe, Former President, Procter & Gamble China, in 2004.

"The potential is enormous for us in China. One out of five people in the world lives there, and we have the kinds of products people use day in and day out." 2

- John Pepper, President-Worldwide, Procter & Gamble, in 1996.

Introduction

In November 2005, the US-based fast moving consumer goods (FMCG) manufacturer - Procter & Gamble (P&G) outbid other major companies for prime-time advertising slots on the China Central Television3 (CCTV) investing 394 million yuan4 for 2006 advertisement space. P&G had been the biggest bidder for advertisement space for 2005 as well, spending about 385 million yuan. Earlier, in 2004, P&G had invested just 180 million yuan.

This sharp step-up reflected the increased importance P&G attached to advertising its products in the fast growing Chinese economy. P&G President and Chief Executive AG Lafley said investing in China made sense because demand for items such as Crest toothpaste and Tide detergent was rising faster in developing countries than in developed countries. This sharp step-up reflected the increased importance P&G attached to advertising its products in the fast growing Chinese economy. P&G President and Chief Executive AG Lafley said investing in China made sense because demand for items such as Crest toothpaste and Tide detergent was rising faster in developing countries than in developed countries.

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The company manufactured and marketed nearly 300 brands to consumers in over 160 countries across the globe. It employed about 102,000 people. P&G had a high market share in several product categories: laundry and cleaning (Tide, Cascade, Dawn), paper goods (Bounty, Charmin, Pampers), beauty care (Pantene, Olay, Cover Girl), food and beverages (Folgers, Pringles, Duncan Hines) and health care (Crest, Scope, Metamucil).

Over its history of more than 168 years, P&G acquired several companies, strengthening its position in all categories of FMCG. By 2003, the company had 13 products that generated more than US$ 1 billion sales annually. In October 2005, P&G acquired the US-based Gillette Company5 (Gillette). P&G had established a strong presence in emerging economies such as China and Russia. Having reached a saturation point in terms of revenue growth in developed economies, P&G began focusing aggressively on developing countries such as China, India, Russia and Brazil. P&G entered China in 1988. Analysts attribute P&G's success in China to its localization strategies. The company customized product packaging, product formulas and advertising campaigns to cater to the Chinese market.

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1] Jacques Penhirin, "Understanding the Chinese Consumer," Special Edition: What Global Executives Think, www.mckinseyquarterly.com, 2004.

2] Rob Daumeyer, "P&G Builds China Sales," www.bizjournals.com, July 12, 1996.

3] China Central Television (CCTV) is China's largest national television network.

4] Yuan is the Chinese unit of currency. As of December 2 2005, 1 US$ equals 8.08 Chinese Yuan Renminbi.

5] The Gillette Company was founded in Boston by King C. Gillette in 1901. The company was widely acknowledged as the pioneer in shaving technology. The first product manufactured was the safety razor. Other popular Gillette brands included Braun, Duracell and Oral-B.

 

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