PESTEL Analysis of P&G (Procter and Gamble)
When you visit a grocery store, you will be surprised to see that most products are produced by a single brand called P&G. It stands for Procter and Gamble, a leading American multinational consumer goods corporation. Every product you see, if you visit your pantry or kitchen, is a P&G creation. That is crazy. This article will explain how one organization produces 10 distinctive product categories under 65 well-known brands. This PESTEL analysis of P&G will help determine the company’s major business factors and operations.
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You must be wondering how P&G grew to the size that their products are now overrun in every supermarket. By following our example, you can get all the P&G-related answers to your questions by the end of this blog.
So, let’s conduct the PESTEL analysis of P&G in order to unearth its external and internal business operations. But before moving further, let’s look at the company’s success story and history.
History of P&G
The year 1837, when the financial crisis first began, is when P&G first emerged. At that point, two relatives, James Gamble and William Procter formed a business partnership. William Procter and James Gamble were both soap manufacturers before forming a coalition. As a result, P&G (Procter and Gamble) initially focused on selling soaps and candles.
The business continued to sell soaps and candles, which contributed to its sales reaching the $1 million threshold. After a while, the civil war broke out, and P&G began selling soaps and candles to troops. This facilitated the company’s continued expansion. The number of soaps P&G had created by 1890 – 30 different varieties – had greatly expanded the company’s clientele. As the business prospered financially, it made the decision to expand overseas. As a result, P&G began manufacturing goods in Canada in 1915.
From that point forward, the business continued to grow its operations in foreign markets. P&G diversified its product line by acquiring various companies and introducing new goods like toothpaste, toilet paper, and laundry detergents. In later decades, P&G diversified its product line. By successfully acquiring Gillette in 2005, P&G made a significant move in the industry. Following Gillette’s purchase, several companies, including Braun, Duracell, Oral-B, and Gillette razors, became part of P&G. As a result, P&G surpassed Unilever to become an enormous consumer goods corporation.
P&G acquired various businesses to expand its product line beyond those for local and personal use to include the beverage, pharmaceutical, and food industries. P&G is currently among the top FMCG (fast-moving consumer goods) manufacturers. Furthermore, The company is currently in good financial health. P&G succeeded in making $80.18 billion in revenue in 2022. P&G has expanded its business operations all over the world. Today, P&G products are available in 180+ different nations. P&G has developed its customer base due to reaching out to so many markets. Currently, 5 billion people are taking advantage of P&G products.
P&G has 106,000 experts working in various locations worldwide to conduct extensive operations. A PESTEL Analysis that explains Political, Economic, Social, Technological, Environmental, and Legal) shows how various external factors, such as Political, Economic, Social, and Technological (PEST) factors, impact a company’s business operations. After examining P&G’s past and present activities of P&G (Procter and Gamble), allow us to explain PESTEL analysis quickly.
Business analysts use this tool to determine how external factors affect a company so that appropriate action can be taken. Anyway, now that you know the importance of the PESTEL analysis, let’s continue by performing a PESTEL analysis of P&G.
Political Factors Impacting P&G
The PESTEL analysis’s first section focuses on the political elements that impact any company’s daily operations. The impact of various political factors on P&G (Procter and Gamble) will be covered in this section.
In a nation, the government has given every business the go-ahead. The laws and regulations of the government specify how companies must conduct themselves. One of the factors that may significantly affect P&G’s business operations is political unrest. Like any other business, P&G is impacted dramatically by the current political scenario in its surroundings.
P&G can suffer adverse effects from political conflict or political unrest between nations because it is a multinational corporation that sends its products to 180+ countries. For instance, P&G recently had to halt all operations in Russia due to the conflict between Ukraine and Russia, which caused it to suffer substantial financial damage.
Along with the political unrest, the heavy tax policies from the government have had a significant impact on P&G. Government tax breaks for manufacturing corporations like P&G will increase production, which will be profitable for the business. Nevertheless, P&G might choose to cease operations in that nation and relocate elsewhere if the government decides to impose a tax increase.
Because P&G benefits from trade, government trade policies also have an impact on the company’s business practices in addition to tax policies. Open and lax trade regulations will promote P&G’s expansion.
Economic Factors Impacting P&G
For businesses to be successful, the economy must be viable. This section will examine the effects of various economic variables on P&G’s performance, including exchange rates, inflation, and interest rates.
Every organization, including P&G, is directly impacted by various economic factors. Even so, a variety of economic factors have an impact on P&G’s business. However, one of the economic factors that have a direct effect on P&G’s sales is inflation. The high inflation rate diminishes customers’ purchasing power. As a result, when inflation is high, so does consumer demand. Because of this, high inflation negatively impacts P&G’s sales and lowers the organization’s revenue.
The interest rate also has an impact on P&G (Procter and Gamble) sales in addition to inflation. People start saving their money when the interest rate in a nation increases. High-interest rates will harm P&G because of this behavior, which reduces consumer demand for goods.
For businesses like P&G, the exchange rate is another important factor besides interest rates. P&G benefits from a stable exchange rate because it maintains a steady price for raw materials for the company.
Social Factors Impacting P&G
Social factors significantly shape the practices of an organization. An organization must evaluate the social norms and restrictions of the society in which it functions. This section will examine the social influences on P&G’s operations in detail.
One social factor that is very important to P&G is the population. P&G will benefit from a larger population because there will be greater demand for its goods. However, the growth rate of the population has dropped to 0.1 percent in some developed nations, like the United States of America.
Long-term sales of P&G will decrease due to a declining population growth rate. Consequently, it will have a negative effect on the organization. Additionally, P&G (Procter and Gamble) is significantly impacted by consumer preference and choice in an economy.
For instance, P&G’s health care and beauty care products will be in low demand in many third-world nations. P&G should concentrate on selling different products in these nations rather than those that are in low demand.
Adapting trends is another social factor that has an impact on P&G’s operations. Different societal trends emerge and have an effect on brand sales. For instance, the “No Shave November” trend affects P&G’s sales. Due to the decline in shaving product demand brought on by “No Shave November,” Gillette experienced a loss of $8 billion in 2019.
Technological Factors Impacting P&G
Significant technological influences have an effect on how businesses operate. Let’s examine some of the technological elements that impact P&G.
Businesses use technology to succeed in the market as technological advancements take place. Similar to P&G, Nestle is attempting to use technology to grow its market share. In order to outpace its rivals, Nestle is currently investing $1.08 billion in research and development.
Nowadays, technology poses a risk to P&G because its rivals are exploiting it to overtake the organization. Contrarily, technology has given P&G a chance to present and advertise its products in the most effective way possible through the use of social platforms.
In addition, P&G benefits from the growth of E-commerce because it now enables the manufacturing firm to use online marketplaces to sell its goods. P&G’s reach expanded as a result. Additionally, by working with online retailers, P&G can lower its operating expenses and increase its ability to make significant profits.
Environmental Factors Impacting P&G
This section of the PESTEL analysis of P&G examines the effects of environmental factors on business operations.
Private and government organizations are starting campaigns to protect the environment. Additionally, authorities are enacting laws to regulate improper waste disposal and reduce greenhouse gas emissions. In such a setting, P&G must ensure that greenhouse gas emissions are minimal and that waste is recycled correctly, or it risks facing harsh penalties.
All P&G products are currently plastic-wrapped. To avoid customers announcing a boycott of P&G due to its drastic use of plastic, P&G should look into alternative wrapping materials. In addition, consumers are pressuring businesses to stop using plastic in wrapping as they become more conscious of the need to protect the environment.
Legal Factors Impacting P&G
Legal issues significantly impact all organizations’ operations. The legal matters that a sizable manufacturing company like P&G must deal with are covered in this section.
Every company must follow the laws that govern society. Like P&G, no matter how large a company is, it must maintain a zero-tolerance policy regarding problems such as gender and racial discrimination. The security and safety of the organization’s employees must also be a concern for P&G (Procter and Gamble). Any agreement reached on these matters could give rise to legal action against P&G, which might result in P&G being subject to severe fines.
Let’s say P&G neglects to care for its employees. Legal action may be taken in that situation, which would be detrimental to P&G’s public image and profits. P&G is additionally required by law to protect its customers’ data because it uses the Internet for retail and promotional activities. Otherwise, the business risked being held accountable for a data breach with negative repercussions.
The Bottom Line | PESTLE Analysis of P&G
One of the top FMCG product manufacturers is P&G. Today; we conducted a PESTEL analysis of P&G because it has been active in the market for decades. Before moving on, we provided some background information for our readers to understand the history of P&G (Procter and Gamble). After this, we discussed P&G’s current state of affairs. We discussed different aspects of the company from political, economical, social factors, technological, environmental, and legal perspectives.
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