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Managing and Sustaining Profitable Growth Group Presentation :Procter & Gamble : Organization 2005 (A)Haris Suhendra 11400...
Table of Contents:About Procter & Gamble              Problems      Business Analysis      Recommendation                 ...
From Candle and Soap to multinational empireFounded in Cincinnati, Ohio by William Procter and James Gamble.Differentiatio...
Procter and Gamble Net Sales, 1985-2000                                          4
Procter and Gamble Share Price History, 1997-2000                                                    5
About Procter and Gamble | The Organizational Structure Changes                                                         Or...
About Procter and Gamble | The Organizational Structure ChangesUnited StatesThe organizational model was developedon two k...
About Procter and Gamble | The Organizational Structure Changes  Global Matrix  • In late 1980s, expansion opportunities  ...
About Procter and Gamble | The Organizational Structure Changes  Global Matrix Problems  • Most functions nominally had st...
About Procter and Gamble | The Organizational Structure Changes  Organization 2005  • Introduced by Durk Jager as an aggre...
Situation (2)Standardization of Work Processes• One of the major objectives of Organization 2005 program was to  significa...
Revamping the Corporate Culture•   The Organization 2005 program made    efforts to change P&G from :    conservative,    ...
About Procter and Gamble | The Organizational Structure Changes  Dismantling matrix organization and replacing with interd...
About Procter and Gamble | The Organizational Structure Changes                                                           ...
Problems           Problems                      15
ProblemsDurk Jager , had introduced a restructuring program named “Organization 2005” –designed to accelerate sales and in...
Business Analysis                    17
Strength                                  Weakness                                         The corporate ability to creat...
RecommendationsNot just strategy but Organization                                19
Recommendation - To ensure the success out change program “organization 2005”                                        Build...
Recommendation - To ensure the success out change program “organization 2005”                                          Sha...
Recommendation - To ensure the success out change program “organization 2005”                                         Mars...
- not just strategy but organization -                                         23
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  1. 1. Managing and Sustaining Profitable Growth Group Presentation :Procter & Gamble : Organization 2005 (A)Haris Suhendra 1140003494 | Pramita Wardani 1140003121 1
  2. 2. Table of Contents:About Procter & Gamble Problems Business Analysis Recommendation 2
  3. 3. From Candle and Soap to multinational empireFounded in Cincinnati, Ohio by William Procter and James Gamble.Differentiation of P&G is an aggressive investment strategy building a large factory in the 1850s despite rumors ofimpending civil wars. Keywords for P&G : Rapid growth, innovations in HR managements, R&D, Distributions, Marketingand organizational designs. About Procter and Gamble | P&G History 3
  4. 4. Procter and Gamble Net Sales, 1985-2000 4
  5. 5. Procter and Gamble Share Price History, 1997-2000 5
  6. 6. About Procter and Gamble | The Organizational Structure Changes Organizational Structure: (1948-1987) • Two different models for US and Europe were adopted, as US market was more homogenous, a nationwide brand and product division management was adopted. • Western Europe is a heterogeneous market with different languages, culture and laws therefore a decentralized model was adopted. 6
  7. 7. About Procter and Gamble | The Organizational Structure ChangesUnited StatesThe organizational model was developedon two key dimensions: functions andbrand.In 1987 structure was changed andfunctional units were centralized.EuropeP&G organizational model developedalong three key dimensions:Geography , function , brand. In 1963 ,the European Technical Center (ETC) inBrussels was establish to act ascentralized R&D and process-engineering unit.Problems in Europe: Corporate R&D were completely disconnected from US operations.European functional organizations were also in isolation from US counterparts. Unstandardized , sub-scale production was expensive and unreliable. Country R&D wereexpensive to maintain. 7
  8. 8. About Procter and Gamble | The Organizational Structure Changes Global Matrix • In late 1980s, expansion opportunities in Japan and other parts of world led P&G to develop globalization model. Corporate functions in Brussels still lacked direct control of country functional activities. P&G started migrating to a global matrix structure, country functions were consolidated into continental functions reporting through functional leadership and direct reporting through the regional business manager. • In 1995 this structure was extended to rest of the world through creation of four regions – North America , Latin America , Europe /Middle East/Africa and Asia. 8
  9. 9. About Procter and Gamble | The Organizational Structure Changes Global Matrix Problems • Most functions nominally had straight line reporting through regional management and also reporting through functional management, the function retained a high degree of de-facto control. • They develop their own strategic agenda, maximize power, do not coordinate with other functions and business units. • As regional managers were responsible for profit and loss they were hesitate to launch new product. 9
  10. 10. About Procter and Gamble | The Organizational Structure Changes Organization 2005 • Introduced by Durk Jager as an aggressive restructuring program • Designed to generate bolder innovations and accelerate their global rollout in order to double P&G sales to 70billion in 2005 and achieve annual earning growth of 13-15% • P&G chain of formal command was based on Geographical, Product, Function. It changed to : product, geography, business process • The Plan also called to eliminate 6 management layers, reducing from 13 to 7 • Focus was more on rolling out new products at faster rate. Implementation of 3M concept i.e product launched in last 3 year should make up certain percentage of total turnover. • Previously organization was more decentralized and centralization coupled with separations and negative growth rate has weaken moral of employees • Jager decided that P&G would sell its products under the same name all around the world. So in Germany, the name of its dishwashing liquid suddenly changed from Fairy to Dawn • Large level of transfers (2000 from Europe to Geneva ) and relocation led to moral and behavioral changes. 10
  11. 11. Situation (2)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. 11
  12. 12. Revamping the Corporate Culture• The Organization 2005 program made efforts to change P&G from : conservative, modern, quick-moving lethargic and and internet-savvy bureaucratic organization.• The new structure was directed towards revamping the work culture of P&G so as to focus on its new Stretch, Innovation and Speed (SIS) philosophy. Emphasizing on innovation, Jager said, “Organization 2005 is focused on one thing: leveraging P&G’s innovative capability. 12
  13. 13. About Procter and Gamble | The Organizational Structure Changes Dismantling matrix organization and replacing with interdependent organizations: • Global Business Units (GBUs) focus solely on consumers, brands and competitors around the world. They are responsible for the innovation pipeline, profitability and shareholder returns. • Market Development Organizations (MDOs) are charged with knowing consumers and retailers in each market where P&G competes and integrating the innovations flowing from the GBUs into business plans that work in each country. • Global Business Services (GBS) utilizes P&G talent and expert partners to provide best-in-class business support services at the lowest possible costs to leverage P&G’s scale for a winning advantage. • Lean Corporate Functions ensure ongoing functional innovation and capability improvement. Play video 13
  14. 14. About Procter and Gamble | The Organizational Structure Changes 14
  15. 15. Problems Problems 15
  16. 16. ProblemsDurk Jager , had introduced a restructuring program named “Organization 2005” –designed to accelerate sales and innovations. In past P&G chain of formalcommand put geography first, followed by product and function.In new design, P&G was structured as 3 interdependent global organizations, oneorganized by product category, one by geography and one by business process.Problems • Missed Earnings in 2000 • In the fourth-quarter profits were flat against the expectation 15-17% increase • P&G lowered its future quarterly sales growth estimates to 2-3% • P&G Stock lost 7%, falling to $57 after the announcement • Loss of US market share in 16 out of 30 categories • Lack of immediate results, job reductions, reduced employee morale led to reduced profits and stock price reduced to half in last six months. 16
  17. 17. Business Analysis 17
  18. 18. Strength Weakness  The corporate ability to create new • Organization 2005 affected human strategy resources and overall employment  Prompts organizational as there is massive transfer of workforce to work on innovations employees to various countries and competitive advantage; that resulted to the difficulty of  Strong global brand adapting to changes. • The confrontational management style of Jager and failure to conduct more intensive researchSWOT Matrix Opportunities Strength – Opportunity and development Weakness – Opportunity • integration of information  Expand the business to  Campaign about the new CEO. technology another country  Build Leadership Strategy • the strategic arrangement of  The product could be globally  Campaign about value of the organizational structure into business units with five key standardize, but it must P&G product elements contains local taste in their • expand its operations and even products development potential business cooperation Threats Strength – Threats Weakness – Threats • The inability to handle change  Innovation in technology for • Must create a good corporate management efficiency culture phase by phase • the unprecedented business  Create a good customer • Corporate must have a good trends and rapid competition service and communication to communication and the 18 their customers executives must support all employees 18
  19. 19. RecommendationsNot just strategy but Organization 19
  20. 20. Recommendation - To ensure the success out change program “organization 2005” Building an organization with the competences, capabilities, and resource strengths to execute strategy successfully. • The key to success full transformation is employee buy in. • Proactive two way communication is the key to achieve that. • The top management of the organization has to meet a good number of employee across all level, functions and countries to seek feedback and provide clarification on Organizations 2005 20
  21. 21. Recommendation - To ensure the success out change program “organization 2005” Shaping the work environment and corporate culture to fit the strategy. • The Change should be implemented globally at a rapid speed • It requires aggressive plan and executives to implement the same • The new structure and work has to be designed across all global operations, assignment of people finalized and communicated and the new organizations started up on schedule 21
  22. 22. Recommendation - To ensure the success out change program “organization 2005” Marshaling resources behind the drive for good strategy execution and operating excellence. • An important element should be to give the great degree of standardizations to the local management align their own design with global strategy • This will give a feeling of independence to the local management while the global standard will also be met 22
  23. 23. - not just strategy but organization - 23

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