The Evolution of Strategy at Proctor and Gamble

Founded in 1837, Cincinnati-based Procter &Gamble has long been one of the world’s most international of companies. Today P&G is a global colossus in the consumer products business with annual sales in excess of $50 billion, some 54 percent of which are generated outside of the United States. P&G sells more than 300 brands- including Ivory soap, Tide, Pampers, IAM per food, Crisco, and Folgers- to consumers in 160 countries. It has operations in 80 countries and employs close to 100,000 people globally. P&G established its first foreign factory in 1915 when it opened a plant in Canada to produce Ivory soap and Crisco. This was followed in 1930 by the establishment of the company’s first foreign subsidiary in Britain. The pace of international expansion quickened in the 1950s and 1960s as P&G expanded rapidly in Western Europe, and then again in the 1970s when the company entered Japan and other Asian nations. Sometimes P&G entered a nation by acquiring an established competitor and its brands, as occurred in the case of Great Britain and Japan, but more typically the company set up operations from the ground floor.

By the late 1970s, the strategy at P&G was well established. The company developed new products in Cincinnati and then relied on semiautonomous foreign subsidiaries to manufacture, market, and distribute those products in different nations. In many cases, foreign subsidiaries had their own production facilities and tailored the packaging, brand name, and marketing message to local tasted and preferences. For years this strategy delivered a steady stream of new products and reliable growth in sales and profits. By the 1990s, however, profit growth at P&G was slowing.

The essence of the problem was simple; P&G’s costs were too high because of extensive duplication of manufacturing,