P&G's Success Story in China

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Case Details:

Case Code : BSTR194
Case Length : 16 Pages
Pages Period : 1998-2005
Organization : P&G
Pub Date : 2006
Teaching Note :Not Available
Countries : China
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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Introduction Contd...

P&G brought variations in products such as toothpastes and cosmetics to suit the needs and preferences of Chinese consumers. However, Head & Shoulders, Pantene, Whisper and Pringles were products that were same across the world, including China.

The Chinese FMCG market was expected to grow by 5-6% in 2006. As of May 2005, sales of P&G in mainland China, Hong Kong and Taiwan totaled US$ 2 billion, with a cumulative average annual growth rate of 25 percent between 2002 and 2005. In 2005, P&G China's contribution to the global revenues of P&G was 3.5%. China was also the sixth largest market for the company. In China, P&G had moved away from its 'premium' image to a company that catered to all segments of the population. According to Gilbert Cloyd, the Chief Technology Officer of P&G, "We've changed our standard of innovation so we can serve more of the world's consumers. So it's now a better brand experience for the target consumer and a lower product cost structure than the competition can deliver."6

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About P&G

P&G was established in April 1837 with the merger of the candle-making business of William Procter (Procter) and the soap-making business of Procter's co-brother, James Gamble (Gamble). They set up a shop in Cincinnati, Ohio and nicknamed the shop "Porkopolis" as their candles and soaps were made from the leftover fat of swine.

By 1859, P&G achieved sales of US$ 1 million. The company introduced Ivory, a floating soap, in 1879. P&G was incorporated in the year 1890 to raise funds for further expansion and by 1904 P&G began focusing on building a business outside of Cincinnati to cater to a wider consumer base. In 1911, Crisco, the first all-vegetable shortening was launched. In 1915, P&G built its first manufacturing facility outside the US, in Canada. This facility employed about 75 people and produced Ivory soap and Crisco. In 1930, P&G set up its first overseas subsidiary in the UK with the purchase of Thomas Hedley & Sons Company Limited, which owned the popular Fairy soap. In 1931, under the leadership of Neil McElroy, P&G's promotion department manager, the brand management system was initiated...

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6] Rob Katz, "How P&G Switched to the Low-Income Customer," www.nextbillion.net, November 15, 2005.


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