Case_15_ProctorGambleTNrev - Teaching Note Case 2 Edward...

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Teaching Note: Case 15 – Proctor & Gamble Case Objectives 1. To investigate what it means to be a strategic leader. 2. To examine how to enact change, and how to create a learning organization. 3. To discuss how intangible internal resources can drive competitive strategy. See the table below to determine where to use this case: Chapter Use Key Concepts Additional Readings or Exercises 3: Internal Analysis Intangible resources 4: Intellectual Assets Human capital; intellectual capital 5: Business-Level Strategy Generic strategies NOTE additional question about strategy under a new leader (Lafley has retired) 10: Organizational Design Organizational structure; modular organization 11: Strategic Leadership Leadership; barriers to change; learning organization NOTE, embedded video and news stories about Lafley leadership and innovation Case Synopsis Procter & Gamble had made several bold, innovative moves over the years to build itself into one of the best known consumer product firms. However, by the 1990’s P&G seemed to have lost its way. The dynamics of the industry were changing as power shifted from manufacturers to massive retailers, resulting in these retailers further squeezing P&G‘s profits. In January 1999, the firm turned to Durk I. Jaeger to try to create new momentum. Jaeger rolled out many radical changes, most of which resulted in a further deterioration in the profits of the firm. Faced with a growing crisis, the board replaced Jager with Alan G. “A.G.” Lafley, a 23-year P&G veteran. After his appointment in 2000, Lafley implemented a series of changes that were designed to radically alter the firm. Determined to create a more ouwardly focused and flexible company, Lafley broke down the walls between management and the employees, and made drastic changes in the organizational structure and workforce of the company. In order to better focus on serving the needs of the consumers, Lafley put a tremendous amount of emphasis on the firm’s brands. Feeling that P&G had often let technology, rather than consumer needs, dictate its new products, Lafley was intent on shifting the focus of P&G back to its consumers. Lafley also challenged the supremacy of P&G’s research and development operations. Confronting head-on the stubbornly held notion that everything must be invented within P&G, he asserted that half of the firm’s new products should come from the outside. Under his tenure, the percentage of new product
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ideas coming from outside the firm increased from 10 percent, when he took over, to almost 50 percent. Lafley had many ideas about how to make P&G relevant in the 21st century. Starting with the acquisition of Gillette n 2004, he shifted the focus of the firm away from its traditional reliance on household care to make aggressive inroads into health and beauty products, including prestige fragrances. These areas subsequently accounted for the majority of the firm’s sales and profits. However, in January 2009, Procter & Gamble (P&G) announced that its revenues had declined by 3.2 percent during its previous quarter, with lower sales in nearly every business unit. Consumers were coping with the
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