Procter & Gamble (P&G) is a leading manufacturer of personal and home care products. P&G is an international company that operates in 40 different countries. This paper will examine the environmental factors that affect how effective P&G’s global marketing efforts are. These factors known as environmental forces include social and economic forces, as well as technological, regulatory, and competitive forces.
Any business operating internationally is impacted by these environmental factors which affect how the company will market its product. Understanding how these forces impact its operations will help P&G understand the interworkings of the economy both globally and domestically and the trends that currently impact its marketing efforts, which will help P&G, create and successfully implement its marketing plan. Operating Globally:
In this day and age, globalization has allowed companies to operate internationally. According to Panayotou (2000), “Globalization is an on-going process of global integration that encompasses economic integration through trade, political interaction, information technology, and culture. Globalization brings people, culture, and information together. Globalization has helped P&G operate globally because it lowers trade barriers and increases the dependence between countries for goods and services, which means there is a bigger market for the goods that companies like P&G offers.
Globalization came about as countries saw that other countries could produce products better and cheaper than another country could (comparative advantage), so countries began producing what they had an advantage in and selling it to other countries. This trading of products became an accepted practice and eventually spurred economic growth. This caused countries and businesses to begin operating in the global market because it allowed companies to tap into this greater demand and new market for goods and services, which would expand their customer base and profit potential. Procter & Gamble: The Importance of Demographics & Physical Infrastructure
P&G knows that when operating globally the company needs to market its product, and this means you have to have a clear understanding of the market of people that will be using the product. This means understanding the people and their different cultures. Every country has a different culture. Culture tells a story about where people come from, who they are, and what is socially acceptable. Culture affects the way people perceive the world around them, and this means it will affect the way products should be marketed. A significant part of our culture is our background, characteristics, and demographics.
Demographics provide vital information about a country’s people. Information about a country’s demographics help P&G to determine the right people to market its products to and how to appeal to them in its marketing plan. P&G manufacturers and sells its products world-wide including nations outside North America, Western Europe, Japan and Korea where there is a growing demand for its products. These countries represent places with high populations of people who are aging and take care of themselves, which means they need basic household items which P&G manufacturers such as detergents and grooming products.
P&G is well- positioned in the industry segments and markets in which it operates. P&G’s success is a result of its ability to adapt its marketing mix to the standards and culture of the country in which it operates. It does this by having a good understanding of the country’s demographics and its physical infrastructure which help facilitate the development and operations of its companies. A countries physical infrastructure helps marketers determine how products will go from the manufacturer, to retailers, to the customer. Going Global: The Effect of Trade Practices and Agreements
Trade is an integral part of any country’s growth and stability. Trade is fostered by global economic interdependence and gives counties access to a wider array of products and services. Over the past decade trade has become global; trade negotiations have expanded to include more countries and are now regulated by international agreements and the World Trade Organization (Boundless, 2013). Trade has created a global economic interdependency. Global economic interdependence illustrates the ideal that no country is completely self-sufficient. “There is a need for trade among nations for goods and services as well as the resources needed to survive and grow in the global economy” (Nebraska Department of Education, 2013, para1).
This means that decisions made in one country will directly affect what happens in another country making countries more susceptible to economic problems. Although, trade increases a country’s wealth trade also leads to inequality which is why countries have trade agreements. Trade agreements are negotiated by each nation who has their own interests’ in-mind, which means some level of protectionism to protect industries that are essential to that nation (Boundless, 2013). Costs of Operating Globally: Foreign Corrupt Practices Act of 1977
Any company with international operations is susceptible to a number of risks. These risks include complying with U.S. laws affecting operations outside of the United States, such as the Foreign Corrupt Practices Act. The Foreign Corruption Act was developed to eliminate the potential of bribery to foreign officials, thwart money laundering, and reduce corruption and restore confidence in the business system.
When operating internationally, companies must abide by several laws and legislation on the local, national, and international level. This is because the company conducts business with other nations and this means abiding by the laws, rules and customs which govern the business transaction between the two nations. Furthermore, companies must also take into account that political systems directly influence international relations between nations.
This is because each country has it own laws and acceptable business practices. As well as its own political system that determines what a company can do when trying to conduct business in that country. When conducting business with different countries it is important to be aware of its political systems as it determines where products can be marketed and what laws must be abided by (Chavis, 2013).
Technology changes the way companies operate and conduct business. Technology allows companies with international operations to achieve success by allowing them to be innovative. Technology helps companies improve its equipment and manufacturing processes and anticipating consumer acceptance. On a global perspective, technology allows companies to go outside the traditional confines of selling a product and enables them to sell their products virtually anywhere. Technology has influenced every aspect of business from increasing efficiency to providing access to information and changing how companies communicate with their customers. Social Responsibility, Ethics, & Legal Obligations:
To be profitable companies must understand that there is more to staying in business than earning a hefty amount of money. Companies must also consider the social implications of their operations. This is especially important for companies operating in the global market because a damaging reputation can impact its sales domestically and internationally. Any company looking to stay in business must abide by the laws and legislation of the company in which it is operating. For example, P&G is subject to tax regulations in the United States and multiple foreign jurisdictions, and it is their responsibility to be aware of any changes in the laws and regulations of these countries.
In business, social responsibility and ethics go hand in hand. A company that seeks to have a positive impact on society is usually a company that seeks to operate responsibly and in doing so the company upholds the highest moral and ethical standards. Ethics help ensure that companies use good business practices in its operations and help companies fulfill its social responsibility to help improve the lives of its people.
For P&G social responsibility and ethics drive the company. P&G is in the business of “providing products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come” (P&G, 2013, para.2). P&G believes that by being socially responsible, and ethical its “consumers will reward P&G with leadership sales, profit and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper” (P&G, 2013). Conclusion
International companies understand that success is not just creating an appealing marketing campaign. To be successful companies have to plan extensively and have a good understanding of the global market. To market a product internationally companies must examine and plan for the environmental factors that influence how effective their global marketing efforts are. In doing so, the company will effectively reach its new market of customers and create a unique position in the minds of its customer which creates brand loyalty, generates sales, and increase profit potential.