History of American business. Procter and Gamble

 История развития компании Procter and Gamble

 The company Procter and Gamble was founded in 1837 in Cincinnati (USA) by the Englishman William Procter and the Irishman James Gamble (Procter and Gamble - history). First the partners simply made candles and soap, distributing their production in Cincinnati. The validity and the perspective approach to the business allowed them to endure civil war, unprecedented financial, economic and political storms in the USA in the middle of the 19th century. By the end of century it was one of the most advanced American companies. 

By 1890 Procter and Gamble was already selling their production all over the country. They were selling more than 30 various types of soap, including well-known Ivory. The growing demand allowed the company to construct a new factory in Kansas City, and after a while they developed the activity outside the USA (the factory in Ontario, Canada was the first outside affiliate). By the present time Procter and Gamble has branches already more than in 50 countries of the world.

Now the Company is the world leader in manufacture and sale of consumer goods and production of industrial appointment. Procter and Gamble, the main office of which is in Cincinnati (Ohio, USA) realizes the production more than in 140 countries of the world. For 160 years which passed from the moment of its foundation, Procter and Gamble turned into the company with an annual turnover of more than $35 billion. The number of its employees all over the world makes about 110 thousand persons. The company makes over 40 groups of products, and there are more than 300 issues in assortment.

In early 1990s Procter&Gamble offered a complex service in the decision of problems of laundries in the Central and Eastern Europe on all the levels of production. On the basis of laboratory analyses, the company forms recommendations about all processes of processing of linen. Procter&Gamble closely co-operates with the independent organizations – the Hohenstein institute in Germany and the TZU institute in Brno, Czech Republic. In 2000 the process of interaction with laundries became bilateral - laundries actively co-operate with Procter&Gamble, communicate and carry out their recommendations. It led to strengthening of positions of laundries co-operating with Procter&Gamble and to working out of a new universal series of washing-up liquids - Ariel Expert SYSTEM. The highest quality of Ariel Expert System is proved in practice in many countries of Central and the Eastern Europe (Czech Republic, Hungary, Baltic, Slovakia etc.) and Russia.

The company, founded in 1837 by William Prokter and James Gamble, now occupies the leading position in the market of consumer goods. Such brands as Tide, Ariel, Lenor, Head and Shoulders, Pantene, Camay, Old Spice, Blend-a-Med, Oral-B, Pringles, Gillette, Duracell are well-known to all of us. And it is far not the full list of the trade marks belonging to Procter and Gamble.

Though "trade secrets are valuable corporate assets, critical to the success of many, if not most, businesses”, some secrets of P&G are revealed (Kurtz, J., Schuler, D., 2008)

The secret of success of Procter and Gamble is based on those principles which the company management cling to throughout many years. Charles of L. Dekker tells about them in the book "99 secrets of success P&G" (Decker, 1998).

1. People are the main value of the company

Procter and Gamble became one of the first companies which established the partner relations with the employees. In 1880s P&G introduced the program of participation of employees in organization’s profits. Today workers of the company own approximately 25% of P&G shares. The cooperation principle allows Procter and Gamble to receive business partners among its workers.

2. Trust of consumers is above all

Individual relations with the consumer are an unsurpassed competitive advantage of P&G. Once one of assistants of a brand-manager offered the management of Procter and Gamble to increase an outlet of a tooth-paste tube, so that it should finish sooner and as consequence should be bought more often. Managers of the company resolutely rejected this idea as it would deceive the consumer.

In 1980 the quantity of cases of a toxic shock among women sharply increased. Physicians specified the connection of this disease with the use of tampons Rely which were produced by P&G at that time. In spite of the fact that sales of Rely gave P&G good profit, the company management decided to refuse from producing that product as it was a big risk that exactly Rely could be the reason for that disease and that could ruin the consumers’ trust. 

3. Bad quality cannot be compensated by good marketing

Before offering the market a new product, P&G carries out blind testing. This is a research during which the consumers use two goods simultaneously not knowing the name of them. It the product of P&G does not compete with its rival it is not launched into market.

4. Consumers are a valuable source of the information

Due to good contact with consumers Procter and Gamble reveals problems at early stages and traces new tendencies in the market.

After Oil of Olay was launched, buyers started to address to P&G with the question whether the company produced the same lotion but without fragrance.  Soon after there appeared Oil of Olay without fragrance. P&G informed the concerned consumers of the presence of the new goods and sent them the free sample and the decent sum of money out of gratitude.

5. Goods cost is defined by the consumer

The consumer will not buy the goods if its price is too high in comparison with its obvious advantages. When P&G introduced Pampers, there already existed several trademarks of disposable diapers, but they were of low quality and too expensive for consumers to use them regularly. P&G improved the quality of the diapers and reduced the price down to 10 cents per piece. But this price was also too high. P&G decided to increase sales volumes to reduce the price. Before that diapers were sold only in drugstores, but P&G convinced supermarkets to sell Pampers. Due to this decision it managed to reduce the price for diapers down to 6 cents per piece. And that was exactly the decent sum of money that consumers were ready to pay for regular buying and using Pampers.

6. Errors are the conductors of new ideas

All great companies are distinguished by the ability to benefit from the errors made. In 1879 when in P&G components of soap Ivory were mixed up mechanically, it happened so that the operator, who left for a dinner, forgot to switch off the machine. After his return, the worker was astonished: due to long mixing the mass turned into foamy mixture. Together with the chief they came to the conclusion that nothing terrible had happened for all components had not changed and the soap was sent to the forming department. Soon after that orders for the "soap that floats" started to arrive (Bellis). So, thanks to the error of the operator there appeared a new mark of the soap Floating Ivory, which became one of the most favorite goods of Procter and Gamble.

7. The reckoning on profitability and long-term profit

In Procter and Gamble close attention is paid to achievement of the planned indicators of profit and business growth. The goods which are bringing the income lower than average is taken out of production. P&G works for its prospect that distinguishes it from many companies preferring short-term benefit to investments into the future. The company constantly puts in modernization of the manufactures and modern technologies.

8. To win means to do things in the best way

Having reached the leading positions Procter and Gamble does not wait when its competitors catch it up. The company constantly works on improvement, development and perfection of processes and technologies.

9. The main task of the chief is to train

Procter and Gamble considers its activity to be the constant training. The chiefs of the company are, first of all, teachers and instructors for the subordinates. Precisely for this reason in P&G the chief is responsible not only for own achievements, but also for the growth of his subordinates. On the average 10% of working hours the employees spend on compulsory education. People accepted to the company, regularly attend classes at the P&G College and continue studying alongside their promotion.

10. To attract best people and to bring up the leaders

In Procter and Gamble the team game is very important. The leaders have nothing to do but to attract the best people and to develop their potential. It makes the company thoroughly consider the question of the hiring the employees.

Another reason why P&G chooses only the best is that the company clings to the rule that only its own employees are promoted to the leading positions but not the managers from other companies.

The P&G employees are expected to take the responsibility in decision-making. Money beneficiary system stimulates this.

Today the company represents about 300 trade marks in more than 160 countries of the world in the world market. The gross annual turnover of the company makes more than $68 billion today. The basic directions of its activity are the manufacture of goods with high consumer properties in 5 basic categories: cosmetics and perfumery means and the goods of personal hygiene, the goods for house care, the goods for health care, the goods of family using and means for children care, and also forages for animals.

The company P&G looks into future with optimism and puts the ambitious purposes before the partners. The company plans to use the crisis period to strengthen positions of the leader in the world market. The four-year plan of development of Procter&Gamble also includes an active development of business in Russia which in last years shows high rates of development.