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Innovation at P&G: AG Lafley’s New Challenge
Backgroung Note
P&G was born when two brothers-in-law, William Procter and James Gamble, decided to merge their businesses of making candles and soaps as the raw materials they used were similar. They set upa shop in Cincinnati and named it ‘Porkopolis’ because of its dependence on swine slaughterhouses for its supply of raw material. The brothers-in-law made candles and soap from the fat leftover from pigs slaughtered for food. By the year 1859, business was booming and it had become the biggest business in Cincinnati with annual sales of US$ 1 million. The firm introduced some innovative products like Ivory, a floating soap, in 1879 and Crisco, the first all-vegetable shortening in 1911. In the year 1905, as the size of the business grew further, it was incorporated as a company. Its first manufacturing plant outside the US was setup in the year 1915 in Canada. |
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The period of rapid growth came to a halt in the 1980s when the company came under financial pressure. It found itself with an excess of manpower due to the acquisitions it had made and this increased its cost burden. P&G also faced severe competition from companies like Kimberly-Clark Corporatio (Kimberly-Clark) and Colgate-Palmolive Company (Colgate). As a result of this increased competition, P&G lost market share in many product categories.This further dented its profits.
