Procter & Gamble : Organization 2005 and Beyond
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Authors: Ravi Madapati,
Faculty Member,
ICMR (IBS Center for Management Research).
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Organization 2005 under Lafley Contd...
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This would be achieved by streamlining P&G's cost structure by further reducing overhead, and manufacturing costs. The company expected savings on this count to be approximately $600-700 mn annually by fiscal year 2003/04. These savings would be in addition to those projected in the original Organization 2005 program. During 2000 Lafley reduced staffing by about 9,600 jobs worldwide, or 9% of P&G's workforce. About 40% were in US and about 60% outside US. Two-thirds of the reductions came from non manufacturing functions across all levels in the company. In manufacturing functions, reductions came as a result of both plant closures and rationalization. P&G also completed the remaining 7,800 separations that were part of the Organization 2005 restructuring announced in 1999. Separations from the new program combined with remaining separations from the Organization 2005 program totaled 17,400. The company anticipated that part of the reduction would have to be made through involuntary separations, but it intended to minimize that number. The company also continued to review its businesses and new investments with the goal of achieving sharper focus on its core businesses. |
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While no decisions had been reached, the company believed it could incur additional restructuring costs as a result of this strategic review. Lafley said4:
"The cost benefits of strengthened competitiveness and improved productivity are significant, but this is not just a cost-cutting program. No one ever cost-saves their way to sustainable growth. We will invest these savings in getting our consumer value and pricing right, continuing to invest in innovation on core businesses and the most promising new businesses, and continuing to provide strong marketing and sales support for our brands. All of these actions are necessary to deliver P&G's long-term financial goals."
To boost growth Lafley introduced new product extensions. Big brands like Tampax (tampons) rolled out new extensions in 2002. Other brands also planned new products. P&G started shipping its new Ohm by Olay line of body care products, which was the company's first skin-care foray that used natural products like ginger and jasmine, and also included new technologies such as a body mist. Research oriented units like P&G Pharmaceuticals continued to invest in new products.
Sales of the unit's flagship brand, the Actonel osteoporosis drug, approached $400 mn in 2002. In baby care, Pampers rolled out its Baby Stages line in Europe and North America. In laundry, Tide and Downy were offered in different fragrances.
4] P&G press release: Procter & Gamble announces next step in overall plan to restore competitiveness and growth, March 22, 2001.