Procter and Gamble Company (P&G) was founded by William Procter and James Gamble, in 1837. Both men were immigrants to the United States. The company began by selling soap and candles, but after the invention of Edison's electric light bulb in 1850, candle sales were so slow that they stopped production. Things looked up, however, because the U.S. Government began to order loads of soap from Procter and Gamble for Union soldiers during the Civil War. With the increase of production demands, the company began to investigate more productive and less time-consuming ways to make soap. That eventually led the firm to many more innovative ideas and many more lines of soap, for hair, laundry, and eventually dishwashers. Other kinds of products would be born as well. A company is formed The two men might not have met had they not married the sisters Olivia and Elizabeth Norris. Their new father-in-law suggested that they become business partners. In 1837, the Procter and Gamble Company was born. With intentions of heading farther west than they managed, William Procter (emigrating from England), and James Gamble (emigrating from Ireland), settled in Cincinnati, the 'Queen City of the West.' Procter had a sick wife to look after, while Gamble had medical problems of his own to overcome. Those factors compelled the future proprietors to 'stay put,' so that destiny would ensure a great company in Ohio. After Proctor's wife died of a terminal illness, he quickly prospered as a candle maker. Meanwhile, Gamble was making ends meet as an apprentice soapmaker. A few months later, on April 12th, 1837, Procter and Gamble started to make and sell mass quantities of candles and soap. A company built of soap In 1859, 22 years after the partnership was formed, P&G had reached $1 million in total sales, in spite of declining candle sales. Fortunately, three years later during the Civil War, Procter and Gamble was awarded numerous contracts to supply soap and candles to Union armies. Those orders kept the factory of 80 employees busy day and night. The fact that P&G supplied soldiers enhanced the company's reputation for heavy-duty quality. That was reinforced when troops came home from the war carrying P&G's soap among their belongings. By the year 1879, a new generation of the company was emerging — while unveiling improved ideas. Founders' sons Harley Procter and Norris Gamble helped to put a new spark into P&G. Norris Gamble developed an inexpensive white soap equal to the former high-quality, imported castiles. Inspiration for the soap's name — Ivory — came to Harley Procter, where he would place $11,000 towards well-spent advertising. The name became an ideal match for the soap's virtual purity ('99 and 44/100ths percent pure'), mildness, and long-lasting quality. By 1890, P&G was selling more than 30 types of soap, including Ivory. The year 1890 also brought an end to 53 years of the business as a partnership. The partners incorporated, and raised additional capital for expansion. William A. Procter, one of two sons of the founder, was then named the first president. P&G then set up one of the earliest product research labs in America at Ivorydale (a newly constructed plant in Cincinnati) to study and improve the soap-making process. In 1907, following the death of his father, William A. Procter, a new president was named, William C. Procter. Expansion and Crisco The year 1911 saw the introduction of P&G's new Crisco product, and by 1915, the company built its first manufacturing facility outside of the United States, in Canada. The plant employed 75 people. By 1943, following the passing of William C. Procter, new president Richard R. Deupree continued the company's robust progress. The introduction of hair products and household cleaning products gained the growing company even more ground, responding to an increasing demand for daily consumer products. When Deupree took the helm in 1930, he didn't take long to supply the Far East with such products — by means of the Philippine Manufacturing Company. Household products and pharmaceuticals P&G weathered The Great Depression and World War II kept it perking. Most people who grew accustomed to P&G's convenience products couldn't put them down. What that allowed was more research and development of past products as well as newly introduced 'conveniences.' By 1978, Procter and Gamble seemed to have covered all bases in household products. From 'Tide' laundry detergent to feminine products, P&G dominated the industry with company expansions throughout Japan, China, Europe, and other parts of the world. The company's introduction of pharmaceuticals in the form of Didronel (a treatment for Paget's disease), spurred a further upward spiral of corporate profits. Still a diverse company Today, after nearly two centuries of research, development, and expansion, there are more than 300 P&G products available to the general public. If you brush your teeth, wash your hair, or take a prescription drug, chances are good that what you're using originated in a Procter and Gamble plant.

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The Procter & Gamble Company applies its generic strategy to achieve competitive advantage in the consumer goods industry. Michael Porter’s model for generic competitive strategies focuses on business approaches that lead to competitiveness and resilience amid competition. In the case of Procter & Gamble’s generic strategy, the emphasis is on product quality and value. These factors are significant in supporting P&G’s efforts to achieve and maintain a leadership position in the consumer goods industry. It is worth noting that quality and value are also included as major points in Procter & Gamble’s vision statement and mission statement. Moreover, the company applies intensive growth strategies alongside its generic strategy. These intensive strategies facilitate Procter & Gamble’s growth in terms of market performance. Considering the tough competition in the consumer goods market, it is essential that these intensive growth strategies are effective and relevant to the current market conditions affecting Procter & Gamble.

Procter & Gamble’s generic competitive strategy (Porter’s model) defines the main approach of the business to achieve competitiveness. In this regard, the generic strategy also influences managerial decisions, in terms of marketing, research and development (R&D), and innovation. On the other hand, Procter & Gamble’s intensive growth strategies depict the strategic approach of the business in addressing consumer goods markets. These intensive strategies affect the company’s growth and expansion plans.

Procter & Gamble’s Generic Strategy (Porter’s Model)

Procter & Gamble uses differentiation as its generic strategy for competitive advantage. Differentiation involves developing the uniqueness of the business and its products to attract target customers. In this case, Procter & Gamble highlights quality and value in its consumer goods. For example, the company offers high quality cleaning agents, like Tide laundry detergent, at affordable prices. Based on this generic competitive strategy, a suitable strategic objective is to maintain P&G’s high investments for R&D to ensure high-quality and valuable products. Another strategic objective based on Procter & Gamble’s generic strategy of differentiation is to maintain effective marketing strategies that emphasize the uniqueness of such products. Such product uniqueness determines pricing and promotional activities. These considerations are included in Procter & Gamble’s marketing mix or 4Ps.

The cost leadership generic strategy (also known as the low cost provider strategy) is partially applied on some of Procter & Gamble’s products, focusing on cost or pricing to achieve competitive advantage. For example, Pantene hair care products are priced relatively lower compared to competitors like Unilever’s Dove hair care products. Procter & Gamble’s marketing mix also considers this generic competitive strategy. A strategic objective based on the cost leadership generic strategy is to develop Procter & Gamble’s competitive advantage based on cost-minimization approaches. For example, automation is increasingly used to minimize cost and maximize efficiency in Procter & Gamble’s production processes.

Procter & Gamble’s Intensive Strategies (Intensive Growth Strategies)

Market Penetration (Primary Intensive Strategy). The Procter & Gamble Company’s primary intensive growth strategy is market penetration. In this intensive strategy, the main aim is to increase the company’s market share. Procter & Gamble does so through marketing campaigns to increase consumer awareness about the company’s consumer goods. This strategy is especially significant for low-performing products in the market. In addition, Procter & Gamble implements this intensive strategy through beneficial agreements with retailers. For example, P&G grows its market share by offering higher retail profit margins for some large retailers. In return such retailers display Procter & Gamble’s products in prominent locations or shelves in their stores. The differentiation generic strategy creates competitive advantage that helps increase success in applying the market penetration intensive strategy. A strategic objective based on this intensive growth strategy is to increase Procter & Gamble’s market share through aggressive marketing.

Product Development (Secondary Intensive Strategy). Product development is used as a secondary intensive growth strategy in Procter & Gamble’s business. This intensive strategy involves design and production processes for products that attract target customers. Procter & Gamble applies product development to support continuous business growth, while addressing competition. For example, P&G develops new products to increase its share of the global consumers goods market. In addition, Procter & Gamble increases its competitiveness by continually enhancing current products. The differentiation generic strategy directly determines the kinds of products that the company develops, especially in terms of competitive advantage based on quality and value. A strategic objective associated with this intensive strategy is to grow Procter & Gamble through continuous innovation.

Market Development. The Procter & Gamble Company uses market development as a supporting intensive growth strategy. Market development contributes to the company’s growth through entry into new markets or market segments. For example, Procter & Gamble could enter new market segments when it creates an entirely new product line or when it changes its market focus. In this way, Procter & Gamble can expect a new revenue stream. The generic strategy of differentiation makes it easier for P&G to enter new markets or market segments when implementing this intensive growth strategy. Also, a strategic objective based on market development is to increase Procter & Gamble’s R&D investment for new product lines, or to reform its marketing strategies to enter new segments in a growing or stable consumer goods market.

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Diversification. Diversification is one of Procter & Gamble’s supporting intensive growth strategies. This intensive strategy involves establishing new business operations. For example, every acquisition and corresponding business diversification in Procter & Gamble’s history has led to considerable growth. However, this intensive growth strategy is considerably difficult to implement because of its large-scale effects on P&G’s business organization. For instance, each acquisition leads to adjustments in Procter & Gamble’s organizational structure. The differentiation generic strategy helps build competitive advantage the company needs to succeed in new business operations. Also, this intensive strategy leads to the strategic objective of using an aggressive approach to acquire other firms to grow Procter & Gamble’s business.

References

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• Dess, G. G., & Davis, P. S. (1984). Porter’s (1980) generic strategies as determinants of strategic group membership and organizational performance. Academy of Management Journal, 27(3), 467-488.
• Glazer, R. (1999). Competitive Advantage Through Information-Intensive Strategies. Handbook of Services Marketing and Management, 409.
• Merchant, H. (2014). Configurations of governance structure, generic strategy, and firm size. Global Strategy Journal, 4(4), 292-309.
• Parnell, J. A. (1997). New evidence in the generic strategy and business performance debate: A research note. British Journal of Management, 8(2), 175-181.
• Spry, A., & Lukas, B. A. (2016). Brand Portfolio Architecture and Firm Performance: The Moderating Impact of Generic Strategy. In Looking Forward, Looking Back: Drawing on the Past to Shape the Future of Marketing (pp. 866-867). Springer International Publishing.
• The Consumer Goods Industry in the United States – U.S. International Trade Administration.
• The Procter & Gamble Company – Who We Are.
• The Procter & Gamble Company, Form 10-K.
• Varadarajan, P., & Dillon, W. R. (1982). Intensive growth strategies: A closer examination. Journal of Business Research, 10(4), 503-522.