Ideal Strategy of Business Company
Procter and Gamble’s business culture has been characterized by an evolution of its internationalization strategies. Initially, the company pursued a localization strategy. While producing various products in the United States, Procter and Gamble simultaneously opened semi-autonomous subsidiaries across the globe in order to manufacture customized products that effectively serviced local markets’ needs. This was the international expansion strategy that the company continued to pursue up until the early 1990’s.
During the early 1990’s, the company started to face increased cost pressures as existing trade barriers (particularly in Europe) started to disappear. As trade became liberated, competition intensified in Procter and Gamble’s target markets; the company saw the need to minimize its cost structure so as to be able to compete in the newly liberated market. Another factor that influenced, and precipitated, the change in the company’s strategy, was the appearance of ‘big box’ retailers such as Walmart. In an attempt to rapidly adapt to the changing market dynamic, Procter and Gamble decided to close some of its locally established plants and to exploit all possible economies of scale through its subsidiaries. Furthermore, the company attempted to create global brands (as opposed to the local brands they had been managing thus far) so as to minimize costs.
Procter and Gamble’s Cost Structure
Upon realizing that the strategic changes initially performed were insufficient to overcome its increased cost pressures, the company decided to evolve into a transnational strategy. At the time cost pressures increased, but local responsiveness pressures were still a factor that Procter and Gamble had to address. Therefore, additional changes included partial process centralization at regional centers to further promote product standardization. The idea was to minimize local responsiveness (without eliminating it entirely) and to minimize the company’s cost structure through an increasingly centralized operation. Through this decision to initiate an evolutionary process into a transnational strategy, the company intends to increase profitability via product standardization, which allow for minimum costs and lower prices that result in higher sales volumes and increased revenue.
Based on this, it is clear that Procter and Gamble is a company that takes risks, but these risks are calculated, and founded on certainty. I can personally relate, since I also try to take calculated risks that are founded on certainty. For example, I once attended a soccer game knowing that I had a final the following day. However, I chose not to study because I knew I had an A on the subject, and the teacher always exempt students who had a grade of B+ or higher on the assignment. My decision was to not study and go to the match. In hindsight, it was a risk, because I did not make sure that I was exempt, but it goes to show that taking calculated risks under conditions of certainty can lead to successful outcomes.