Supply Chain Management Strategy – January 28, 2009

P&G – Being where future customers are

In December 2008, Procter & Gamble Co. (P&G), announced an aggressive expansion plan to build 19 production plants to cater to future consumers in developing countries (where the GDP has grown quickly and which have vast populations). By 2010, P&G wants to reach an additional 1 billion consumers. Presently, it caters to 3.5 billion people out of 6.5 billion globally.

Being cost-effective in hard-to-reach and hard-to-serve environments

P&G already has its presence in around 80 countries where it has 145 facilities. As per the new plan 18 new facilities will be built in developing countries like Malaysia, Romania, India and Pakistan. Competitors Unilever and Colgate-Palmolive already have a presence in emerging markets. Therefore, expansion is one thing, but doing so cost-effectively becomes paramount for P&G. Economic crisis and corruption pose additional pressures.

P&G targeting emerging markets

Exhibit: P&G’s target markets (future consumers) in developing countriesP&G's, Unilever's and Colgate-Palmolive's % of annual sales in emerging markets

P&G’s strategy to be cost-effective

Extending competitive advantage

  • Enter markets with products with less competition
  • Establish state-of-the-art facilities (In most cases by providing P&G technology to low-cost machine builders instead of buying a complete production unit)
  • Produce more affordable goods for low-income consumers.
  • Leave competition far behind