The Procter & Gamble Company has grown to become one of the biggest firms in the global consumer goods industry. This business situation is partially a result of the company’s effectiveness in addressing the concerns identifiable in a PESTEL/PESTLE analysis of the business. The PESTEL/PESTLE Analysis framework is a managerial tool for determining how the external environment affects the business. Many of Procter & Gamble’s strategies are based on an understanding of the external factors in the remote or macro-environment of the consumer goods industry. In this case, P&G takes strategic steps to exploit opportunities and thwart threats based on such external factors. With a prominent market position, Procter & Gamble proves effective in these strategic endeavors. However, the remote or macro-environment is dynamic. Such dynamism, over time, presents new challenges against Procter & Gamble’s operations. Thus, the company must modify its strategies accordingly. A PESTEL/PESTLE analysis of Procter & Gamble helps identify these challenges and provides basis for new strategies for the consumer goods business.
A PESTEL/PESTLE analysis of the Procter & Gamble Company helps identify external factors in the remote or macro-environment of the consumer goods industry. The political, economic, social/sociocultural, technological, ecological/environmental, and legal (PESTEL/PESTLE) external factors define the strategic options of the business. Procter & Gamble must develop solutions that evolve to match changes in these external factors linked to the dynamics of the consumer goods market. The company can also enhance the accuracy of its analysis of the external environment through a combination of the PESTEL/PESTLE analysis and other strategic analysis tools, such as Porter’s Five Forces Analysis (Read: Porter’s Five Forces Analysis of the Procter & Gamble Company).
Political Factors Affecting Procter & Gamble’s Business
The political landscape impacts how Procter & Gamble implements strategies that satisfy policies and governmental requirements on business development. This element of the PESTEL/PESTLE Analysis framework evaluates the influence of governments and related organizations or institutions on the remote or macro-environment. Procter & Gamble must address the effects of the following political external factors on its consumer goods business performance:
- Rising governmental support for e-commerce (threat & opportunity)
- Stable overall governmental support for globalization (opportunity)
- Governmental support for higher energy efficiency (opportunity)
Rising governmental support for e-commerce is a threat against Procter & Gamble, increasing competitive rivalry in the consumer goods industry. However, this political external factor also creates opportunities for the company to generate more revenues through its online store, P&G Shop. This opportunity is significant because limited online market presence is a weakness shown in the SWOT analysis of Procter & Gamble. On the other hand, stable overall governmental support for globalization is an opportunity for firms to increase their penetration in various markets around the world. Also, stable governmental support for higher energy efficiency presents the opportunity to improve Procter & Gamble’s environmental footprint by accessing such support in the remote or macro-environment. For example, the company can benefit from government programs for cost-effective energy solutions for business. In this element of the PESTEL/PESTLE analysis, Procter & Gamble has opportunities for improving its business performance.
Economic Factors Important to P&G
The Procter & Gamble Company’s performance in the consumer goods industry is directly based on the economies where the business operates. The effects of economic trends and issues on the remote or macro-environment are determined in this element of the PESTEL/PESTLE Analysis framework. The following economic external factors are most notable in the case of Procter & Gamble:
- High growth rate of developing markets (opportunity)
- Improving disposable income levels (opportunity)
- Economic stability of the majority of developed markets (opportunity)
The opportunity linked to the high growth rate of developing markets supports Procter & Gamble’s potential growth. For example, increasing penetration into developing countries can drive the company’s overall global growth. Procter & Gamble’s marketing mix or 4Ps should reflect the corresponding changes. The company also has the opportunity to grow based on improving disposable income levels. This economic external factor corresponds to customers’ rising purchasing capacity for consumer goods from firms like Procter & Gamble. Moreover, the stability of the majority of developed markets contributes to the considerable stability of P&G’s remote or macro-environment. These conditions indicate that the Procter & Gamble Company has growth opportunities based on this element of the PESTEL/PESTLE analysis.
Social/Sociocultural Factors Influencing P&G’s Business Environment
Social trends and changes affect Procter & Gamble in terms of the behaviors of customers and workers, among other considerations. This element of the PESTEL/PESTLE Analysis framework deals with the influence of sociocultural conditions on business opportunities and threats in the remote or macro-environment of firms. Procter & Gamble must include the following sociocultural external factors in its strategic formulation for the consumer goods market:
- Increasing preference for high-quality consumer goods (opportunity)
- Increasing preference for healthful products (opportunity)
- Declining population growth rate in developed countries (threat)
As countries develop, consumers are increasing their preference for high-quality products from firms like Procter & Gamble. This social external factor creates opportunity for business growth in the remote or macro-environment of the consumer goods industry. For example, P&G can expect potential revenue increase by enhancing the quality of its products. On the other hand, the increasing preference for healthful products presents another growth opportunity for Procter & Gamble. The company can improve the health impact of its consumer goods accordingly. Despite such opportunities, Procter & Gamble experiences the threat of a declining population growth rate in many developed countries. This sociocultural external factor reduces long-term business growth potential in developed markets. In this element of the PESTEL/PESTLE analysis of Procter & Gamble, strategies must account for growth opportunities, especially in developing countries.
Technological Factors in Procter & Gamble’s Business
The Procter & Gamble Company depends on technologies to support its consumer goods business. Also, technological advancements affect consumers’ behaviors and purchases decisions. Such effects of technological tools, changes and trends are identified in this element of the PESTEL/PESTLE Analysis framework. The following technological external factors are significant in Procter & Gamble’s remote or macro-environment:
- Growing online market (opportunity)
- Business automation (opportunity)
- Increasing fuel efficiency in transportation (opportunity)
Procter & Gamble has opportunity to increase its revenues from online sales, based on a growing global online market. In addition, the company can improve its business efficiencies through automation. This technological external factor should influence strategic decisions in Procter & Gamble’s operations management. For example, the company’s operations managers can include business automation in solutions to maximize productivity. On the other hand, the increasing fuel efficiency in transportation supports Procter & Gamble’s efforts to minimize the costs involved in its supply chain and consumer goods distribution network. This external factor promotes cost-effectiveness in P&G’s remote or macro-environment. Based on this element of the PESTEL/PESTLE analysis, technological trends can support Procter & Gamble’s growth.
Ecological/Environmental Factors
The situation of the natural environment impacts how Procter & Gamble satisfies its consumer goods business goals and objectives. In this element of the PESTEL/PESTLE Analysis framework, ecological changes and issues are considered. The Procter & Gamble Company needs to develop suitable approaches to address the following ecological external factors in its remote or macro-environment:
- Growing opposition to forest conversion to oil palm plantations (threat)
- Changing weather patterns and linked effects on farming (threat)
- Increasing availability of recyclable materials (opportunity)
The growing opposition to forest conversion to oil palm plantations is a potential threat to Procter & Gamble’s supply chain. For example, this ecological external factor affects the availability of palm oil used in some of the company’s consumer goods. In addition, the changing weather patterns and linked effects on farming can disrupt Procter & Gamble’s supply chain, particularly the supply of vegetable oils and other raw materials used for producing soaps, detergents, and other consumer goods. On the other hand, P&G has the opportunity to improve its environmental footprint by using available recyclable materials. Including this effort in Procter & Gamble’s corporate social responsibility strategy can improve brand image and consumer perception and loyalty. Such effort can also encourage a general improvement of corporate responsibility in the remote or macro-environment of the consumer goods industry. This element of the PESTEL/PESTLE analysis of the Procter & Gamble Company highlights threats that require strategic consideration.
Legal Factors in the Procter & Gamble Company’s Operations
Procter & Gamble’s strategies include measures to ensure legal compliance of its consumer goods business. The impact of rules and regulations on firms and the remote or macro-environment are evaluated in this element of the PESTEL/PESTLE Analysis framework. The following legal external factors shape the strategies of Procter & Gamble:
- Increasing product safety regulations (opportunity)
- Expansion of environmental protection regulations (threat & opportunity)
- Increasing business sustainability regulations (threat & opportunity)
Procter & Gamble has the opportunity to grow by addressing increasing product regulations relevant to the consumer goods industry. For example, the company can enhance its product safety standards, leading to higher quality output. On the other hand, the expansion of environmental protection regulations is a threat that could impact P&G’s supply chain and business practices. However, this legal external factor also makes the remote or macro-environment more supportive of Procter & Gamble’s efforts to contribute to environmental protection. In relation, the company has the opportunity to strengthen its corporate and brand image by improving its business sustainability status, addressing increasing business sustainability regulations. Nonetheless, this legal external factor is also a threat to Procter & Gamble in terms of potential restrictions on business operations. Thus, the company must continue its sustainability initiatives. In this element of the PESTEL/PESTLE analysis of Procter & Gamble, a proactive approach to compliance can address opportunities and threats.
Summary & Recommendations – PESTEL/PESTLE Analysis of Procter & Gamble
Summary. The Procter & Gamble Company has the organizational and business characteristics to remain stable, given the opportunities and threats based on external factors in the consumer goods industry. However, the company must adopt strategic reforms to effectively exploit the opportunities and overcome the threats. The results of this PESTEL/PESTLE analysis show that Procter & Gamble has opportunities for growth, organizational improvement, and stronger corporate and brand image. Most of the identified external factors create opportunities for the company. However, some external factors threaten Procter & Gamble’s consumer goods business. For example, the company faces ecological and regulatory threats in the remote or macro-environment. Strategic reform must consider the long-term impacts of these threats to maximize the benefits of opportunities available to Procter & Gamble.
Recommendations. The external factors in Procter & Gamble’s remote or macro-environment point to issues that require medium-term and long-term planning for strategic changes in the business. The significance of each of these external factors in P&G’s operations fluctuates over time. Thus, regular monitoring is needed to ensure the relevance and effectiveness of Procter & Gamble’s strategies. This PESTEL/PESTLE analysis of Procter & Gamble leads to the following recommendations to ensure the long-term success of the consumer goods business:
- Expand e-commerce operations through P&G Shop
- Further improve product quality
- Expand Procter & Gamble’s business sustainability and environmental conservation measures
References
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- The Procter & Gamble Company – P&G Shop.
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