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Procter & Gamble 2000 A The SpinBrush And Innovation At P&G Case Solution

Solution Id Length Case Author Case Publisher
1687 823 Words (4 Pages) William A. Sahlman, R. Matthew Willis Harvard Business School : 804099
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Towards the first half of 2000, P&G’s financial situation was quite uncertain. It was continuously failing to meet its earnings targets despite increasing net incomes. Its stock price had also fallen by 44 percent. Therefore, P&G was under substantial pressure from shareholders to improve its financial performance and introduce innovative products. Its price-to-earnings (PER) ratio of 24.4 was also quite low compared to its main competitor Colgate-Palmolive’s 46.2.

Following questions are answered in this case study solution

  1. Corporate Setting- What was the corporate setting at the time of the case?

  2. How were new ideas / opportunities identified? 

  3. Technical

  4. Marketing

  5. Financial

  6. Organizational 

  7. Competition

  8. Other – culture 

  9. Recommendations to P&G

Case Analysis for Procter & Gamble 2000 A The SpinBrush And Innovation At P&G Case Solution

1. Corporate Setting- What was the corporate setting at the time of the case?

At the time of the case, Procter & Gamble (P&G) was a growing organization with increasing net revenues from the year 1998 till 2000. Despite the increasing popularity of Colgate, P&G still managed to have 26.3 percent of the share of the U.S. toothpaste market in 1999. However, Colgate-Palmolive’s share had grown at a more rapid pace from 25% in 1997 to 31% in 1999. Therefore, P&G faced strong competition from Colgate-Palmolive in the toothpaste category. Moreover, it was also under-performing in the stock market with falling prices. In 2000, the stock price had declined by 44 percent. Consequently, the CEO Durk Jager was expelled and the coveted position was occupied by A.G. Lafley.

2. How were new ideas / opportunities identified? 

After increasing pressure from shareholders, P&G’s new CEO, A.G. Lafley was encouraging brand managers to be more resourceful in how they saw innovation and products created by other companies. As a result, new opportunities were identified by first valuing a particular brand or product. Moreover, resulting synergies from any new opportunity would also be identified along with deciding how the subsequent value would be allocated. It was vital for the new idea or opportunity to be a fit with P&G’s standards and values. A large sum of money was also allocated by P&G on research and development of new products.

3. Technical

Although P&G spent a large amount of money on new product development, it had still not tried to develop its own electric toothbrush. The process of technological innovation was also time consuming. Even if Crest licensed SpinBrush technology, large companies like Unilever, Gillette and Colgate could easily introduce their own inexpensive electric toothbrush considering their resources and time.

4. Marketing

When it came to marketing, P&G was well known as a powerhouse. For instance, its marketing expenses in 2000 were $ 12,166 million and the cumulative annual growth rate (CAGR) was 8.5 percent. Therefore, a key concern of John Osher, SpinBrush’s founder was that if P&G acquired SpinBrush it would be marketed and managed like P&G’s other products. However, he wanted to maintain the company’s low marketing and advertising spend.

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