Restructuring P&G

 
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Case Details:

Case Code : BSTR068
Case Length : 20 Pages
Period : 2003
Organization : Procter & Gamble
Pub Date : 2003
Teaching Note :Not Available
Countries : USA
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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EXCERPTS

The 'Organization 2005' Program

In January 1999, Jager, a P&G veteran became the new CEO taking charge at a time when P&G was in the midst of a corporate restructuring exercise that started in September 1998.

Jager faced the challenging task of revamping P&G's operations and marketing practices. Soon after taking over as the CEO, Jager told analysts that he would overhaul product development, testing and launch processes. The biggest obstacle for Jager was P&G's culture. Jager realized the need to change the mindset of the P&G employees who had been used to lifetime employment and a conservative management style. On July 1, 1999, P&G officially launched the Organization 2005 program. It was a program of six-year duration, during which, P&G planned to retrench 15,000 employees globally. The cost of this program was estimated to be $1.9 billion and it was expected to generate an annual savings (after tax deductions) of approximately $900 million per annum by 2004...

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Change in Organization Structure

Till 1998, P&G had been organized along geographic lines with more than 100 profit centers. Under Organization 2005 program, P&G sought to reorganize its organizational structure (Refer Exhibit III and IV) from four geographically-based business units to five product-based global business units - Baby, Feminine & Family Care, Beauty Care, Fabric & Home Care, Food & Beverages, and Health Care.

The restructuring exercise aimed at boosting P&G's growth (in terms of sales and profits), speed and innovation and expedition of management decision-making for the company's global-marketing initiatives.

It also aimed to fix the strategy-formulation and profit-creation responsibilities on products rather than on regions. The global business units (GBUs) had to devise global strategies for all P&G's brands and the heads of GBU were held accountable for their unit's profit. The sourcing, R&D and manufacturing operations were also undertaken by the GBU...

Standardization of Work Processes

One of the major objectives of Organization 2005 program was to significantly improve all inefficient work processes of P&G including its product development, supply chain management and marketing functions. In order to achieve this objective, P&G undertook several IT initiatives including collaborative technologies, B2C e-commerce, web-enabled supply chain and a data warehouse project for supplying timely data to company's various operations located globally...

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