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.
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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.
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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...
Excerpts Contd... >>
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