Strategic Management : PROCTER & GAMBLE Co
For many organizations, the basic premise that drives them is to ensure the attainment of a competitive advantage that would ensure they remain superior over their rivals. In order to critically attain this competitive advantage, it is important for these organizations to clearly understand the internal strengths, weaknesses and the potential impact that these factors will have on ensuring the company’s competitive advantage. With the knowledge of this information, management can then be effectively guided by implementing adequate business decisions that will enable them to boost overall the market position. This paper critically examines how Proctor and Gamble Co have used their resources to enhance a sustainable competitive advantage.
Competitive advantage
The Grants Model, also described as the Resource-Based View strategy, is one of the common plans that organizations apply in order to attain a competitive edge over other organizations in their market. Grant created this strategic archetype in order to institute a response against Porter’s perspectives on sustainable competitive advantage. Indeed, the respective strategy bases an organization’s assets as the main aspects that guarantee its performance as well as the competitive edge. If every company in a specific market possess access to corresponding assets, then it is impossible for a single organization to utilize a strategy that organizations within the market are unable to implement. Because of this, the maintenance of an organization’s competitive edge considerably depends on the exclusivity of its assets.
In this regard, the resource based theory is founded on two major premises that individual organizations have a number of distinct, specific resources and capabilities and that the resources are not currently possessed and can therefore be easily developed by a host of other organizations. This essentially means that the control of a number of key resources can often lead to effective growth thereby ensuring that it is able to distinctly outperform other firms. More critically, the possession of these resources will not provide competitors with the opportunity to challenge the organization since they are not in possession of similar resources (Porter & Kramer, 2006; pp 79-80).
The premise of Resource based View often enhances a more comprehensive understanding of the competitive advantage through the application of what Barney (1991; pg. 49-50) had initially put forward as the Value, rareness, Imitability and Organization Framework. Essentially, this argument puts it that the five values are critical in enabling organizations to understand the aspect of competitive advantage. Moreover, a clear understanding of these values can enable a firm to critically distinguish how some advantages are temporary and how others are sustainable. Barney & Hesterley(2010; p. 69) and argue that value can be used to refer to the significance of a resource as compared to its performance essentially meaning that a resource can only be termed as valuable if it ensures that a firm’s level of competitiveness is assured.
The fact that a number of organizations that have a comprehensive range of valuable resources but do not compete well are proof that these firms have not learned the importance of the resource/value combination. Moreover, firms need to understand that the control of valuable resources is firmly in their hands however this must be strengthened with the knowledge that possession of the valuable resources is not the only condition to ensure the creation of sustainable competitive advantage( Barney & Hesterley,2010; p. 70; Drevich & Kriauciunas, 2011: pg 254-255)
Powell (2003, pg 285-286) argues that a clearly formulated and comprehensively implemented strategy is key towards ensuring that a firm is able to attain high aspect o competitive advantage. In this regard, the resource based view often provides organizations with the opportunity to not only plan but also distinctly execute their Organizational strategies. This is because the resource based view enables a close examination of the company’s internal resources and capabilities and more importantly how this knowledge can be used to achieve a distinct amount of competitive advantage.
Organisational Resources and capabilities
Morgan et al(2004;pg 90-91; Huselid et al, 1997; pg 171-172)argue that resources can be classified as either being tangible or intangible with tangible resources being described as human , physical , Organisational as well as financial whereas intangible resources defined as reputational, regulatory, positional as well as functional, social and cultural. Out of the above resources those touching on human resources as well as intangible resources are perceived as the most critical with regard to ensuring that organizations not only achieve but also sustain a competitive advantage. This is attributed to the fact that their natures are not only precious but are often inimitable as compared to the other resources. this essentially means that resources often form the core framework towards enabling firms to achieve sustainable competitive advantage which translates in the long run to a more superior organizational performance(Makadok, 2001:pg 387-388).
A wide amount of research reveals that there is distinct relationship of capabilities and competitive advantage (King, 2007: pg. 156-157; Hill & Jones, 2007: pg 12-13). In this regard, capabilities are defined as aspects such as organizational skills, core competencies, product development, and technological capabilities. Indeed organizational capabilities are perceived as a critical element in any organization’s strategy. This is because the knowledge possessed by an organization is key ingredients in attaining this competitive advantage (Felin & Hesterley, 2007: pg. 195-196; Teece et al, 1997: pg 509-510).
Ainuddin et al (2007: pg. 47-48) and Shay Rothaermael(1999: pg 559-560) have also argued that there is a distinct relationship between an organization’s capabilities and the firm’s level of competitive advantage. This essentially refers to the extent to which an organization puts in place structures that will allow for training programmes and job rotation. Moreover, a distinct relationship has also been found between the extents to which an organization puts in place strong relationship building capabilities. In this regard, relationship building cultivates strong relationships with suppliers and most distributors but also with their clients.
How Proctor and Gamble is using resources and capabilities to achieve sustainable competitive advantage
Proctor and Gamble Co have grown to the extent where it is among the largest firms dealing with consumer products. With sales reaching up to $ 51.4 billion in various segments including fabric and home care, beauty , baby and family care, healthcare as well as snacks and beverages, the company has cemented itself as a market leader in this industry(Procter and Gamble, 2013: pg. 1). In the 1990s, the company’s management made the decision to distinctly change its corporate strategy. The company sought to ensure that it does not only reduced its cost structure but also that it developed a differentiated business level strategy all in an attempt to ensure that its revenues and profits were increased. This change was pushed by the distinct knowledge that the international market was going through a rapid transition and advances in globalization therefore required corporations to make drastic changes. In addition, the distinct reduction of trade barriers as well as tariffs essentially required organizations to put in place measures that would assure a sustainable competitive advantage that would also ensure that the company also benefited from economies of scale (Warren, 2012; pg 1).
The company has sought to ensure that a link is established between the corporate strategy and its structure. With this in mind, the company has put in place a transnational global strategy which is defined by a hybrid organizational structure. This particular strategy critically considers the geographical makeup of multiple marketplaces thus ensuring that the company continuously comes up with brands that are suited to an individual market (Warren, 2012; pg 1). This particular strategy has also been useful in enabling the organization to significantly cut back on cost while at the same time allowing for the company to effectively meet the customers’ wants. The company has also sought to ensure that its research and development as well as innovation functions remain centralized even as it has sought to promote management empowerment in the global business units. This has had the subsequent consequence of ensuring that the company is able to make and distribute its products at a much faster rate. Moreover, empowering management has enabled the process of decision-making to be distinctly efficient and more responsive to the needs of the specific market that the company has branched into (Warren, 2012; pg 1).
Human resources are critical towards the achievement of a competitive advantage and especially the role that enhancing information capability plays in assuring that a firm not only achieves but also sustains the firm’s performance. With this in mind, Proctor and Gamble’s management sought to raise employee morale by putting in place pay incentives. This was a strategy to ensure that employee loyalty was achieved and subsequently ensure that employee productivity was boosted. The strategic leadership model employed by management at the firm was significant in ensuring that Proctor and Gamble achieved a distinct advantage over its competitors. This is because measures were put in place to ensure that factors such as distribution, logistics, supply chain as well as the processes of manufacturing were all effectively co-ordinated across the various markets that the firm had gained access into. This was helpful in enabling the company to distinctly cut back on costs which was essential in developing the company’s competitive advantage (Warren, 2012: pg. 1).
The company also sought to ensure that IT systems was essentially integrated into the company’s processes. The management set up strategic alliances with IT firms in a bid to ensure that the company was able to use the firms technological system in a bid to ensure that IT costs were distinctly reduced as the company sought to expand into more markets(Warren, 2012: pg. 1). In addition, the company has put in place measures to ensure that they are constantly engaged in acquisitions and mergers that have been critical in assuring the cementing of their positive financial growth. The acquisitions have also been key in helping to compliment the global strategy already in place while at the same time ensuring that the company has a better understanding of its target markets. The company has also put in place a system of direct contact where employees are encouraged to communicate their issues directly with management. This has been key in ensuring the enhancement of co-operation as well as cohersion between the different functions of the organization. This factor has been critical in eliminating the costs that come with the transfer of problems (Rothaermael & Hess, 2007,pg. 898-899)
Conclusion
Proctor and Gamble have been able to sustain its market dominance through putting up structures and strategies that ensure it is able to adequately meet the needs of its customers. Through a system of coordination, the company has not only been able to distinctly cut back on costs but has been able to empower its employees thus cultivating employee loyalty and subsequently assuring employee productivity. Moreover, the leadership of the company has been able to ensure the company engages in mergers and acquisitions as well as an effective use of technology systems which is critical in assuring competitive advantage. These mergers have been essential in providing the company with a distinct amount of knowledge on the needs of its target markets and therefore enable the company to come up with products that are locally responsive. Moreover, the strategy of direct contact has sought to ensure that the company’s management is not only able to identify issues within the organization but also promote cohesion and cooperation within the company aspects that have been key in ensuring the effectiveness of the company’s processes.
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