We conduct a Procter and Gamble P&G PESTLE Analysis that told us the external factors that impact the operations of P&G.
Have you ever been in a shop to buy groceries and wondered how come the majority of the products are manufactured by a single company named P&G?
Today, this article will tell you how a single company is manufacturing ten different categories of products under 65 renowned brands. If you look around your house, every other product you see belongs to P&G. Isn't that crazy?
You must be thinking about how did P&G manage to become so big that all the supermarkets are currently flooded with P&G products. To get your question answered, you'll have to follow our lead, and by the end of this article, all your answers will be answered related to P&G.
So, without wasting time, let's proceed further and conduct Procter and Gamble P&G PESTLE Analysis. This PEST analysis will tell us the external factors that impact the operations of P&G.
However, before proceeding to the PESTLE analysis, let's look at the history of P&G so that we know how the company got established and what made it successful.
The roots of P&G can be traced back to 1837, the year of the financial crisis. That's when two relatives, William Procter and James Gamble, came into a partnership to form a company.
Before joining hands in a partnership, William Procter was a Candlemaker, while James Gamble was a soap maker. Hence, initially, P&G began its operations by selling candles and soaps.
The company kept selling soaps and candles, which helped its sales to reach the $1 million mark. Then, after some time, the civil war started, during which P&G sold candles and soaps to soldiers. This helped the company to grow further.
By 1890, P&G had developed 30 different soaps, which significantly increased the company's customer base. As the company grew financially, it decided to move its operations abroad, and in 1915, P&G started its production in Canada for the first time.
From there onwards, the company kept expanding its operations in international markets. In the later decades, P&G diversified its portfolio by acquiring several companies and launching new products such as laundry detergents, toothpaste, toilet paper, etc.
In 2005, P&G made a big move in the business by acquiring Gillette. This made P&G the largest consumer goods company by overtaking Unilever. After acquiring Gillette, several brands, such as Gillette razors, Duracell, Oral-B, and Braun, came under the flag of P&G.
Besides manufacturing products for domestic and personal purposes, P&G also entered the pharmaceutical, food, and beverages industry by acquiring different companies.
Currently, P&G is one of the top consumer goods manufacturers, also known as FMCGs. Moreover, P&G is also currently financially sound. In 2022, P&G managed to generate revenue of $80.18 billion.
P&G has spread its operations all across the globe. Today, 180 countries sell the products manufactured by P&G. Since P&G has tapped so many markets, this has led to an increase in its customer base. Currently, 5 billion people use products offered by P&G.
To carry out such vast operations across the globe, P&G has employed 106,000 professionals in different parts of the world.
After taking a look at the history and the current operations of P&G, now let me give you a little brief about what PESTLE analysis is. A PESTLE analysis is a tool that identifies how different external factors, such as Political, Economic, Social, Technological, Legal, and Environmental factors, impact an organization's operations.
This tool is used by business analysts to see what external factors are impacting an organization so that measures can be taken accordingly. Anyways, now that you know the significance of PESTLE analysis. Let's proceed further and carry out a P&G PESTLE analysis.
Political Factors Affecting P&G
The first section of the PESTLE analysis highlights the political factors that impact the operations of any organization. In this section, we will discuss how different political factors affect P&G.
Every business operates in a country with the approval of its government. The government's policies and rules define a company's business practices.
Like any other company, P&G is also highly influenced by the ongoing political activity in its environment. Political unrest is one of the reasons that can hugely impact the operations of P&G.
Since P&G is a multinational company that sells its products in 180 countries, political unrest or a political conflict between countries can impact the operations of P&G adversely. For example, as the Russia and Ukraine conflict took place recently, P&G had to suspend all its operations in Russia, due to which it will now observe a financial loss.
Besides the political unrest, the government's tax policies significantly impact P&G. If a government gives tax reliefs to manufacturing companies like P&G, the brand will increase its manufacturing which will be beneficial for the company.
However, in case of an increase in tax imposed by the government, P&G may decide to shut down its operations in that specific country and move elsewhere.
Along with the tax policies, the trade policies adopted by the government also impact the operations of P&G since P&G benefits from the trade. Relaxed and open trade policies will help P&G grow.
Economic Factors
Businesses require a feasible economic environment to function. In this section, we will look at how different economic factors, such as inflation, interest rate, and exchange rate, influence the performance of P&G.
Economic factors directly impact the operations of any organization, and P&G is no exception. Although many economic factors affect the operations of P&G. However, inflation is one of the economic factors that directly impact the sales of P&G.
High inflation lowers the purchasing power of consumers. Hence, the demand for products falls when inflation is high in an economy. This is why high levels of inflation adversely affect the sales of P&G and cause a reduction in the company's revenue.
Besides inflation, the interest rate also affects the sales of P&G. If the interest rate in a country rises, people start depositing their money in the banks. This behavior causes a reduction in the demand for products which is why high-interest rates will impact P&G negatively.
Besides the interest rate, the exchange rate also matters a lot for manufacturers like P&G. A stable exchange rate suits P&G because it keeps the price of P&G's raw materials stable.
Social Factors
Any organization needs to analyze the social constraints and norms of the society where it operates. Social factors play an integral role in shaping the practices of an organization. This section will take a close look into some of the social factors that affect the operations of P&G.
The population is one of the social factors that holds great significance for P&G. If there is a higher population, P&G will gain benefits since the demand for the products of P&G will increase. However, in some developed countries like the USA, the population growth rate has decreased to 0.1%.
A decreasing growth rate of the population will cause the sales of P&G to fall in the long term. Hence, it will impact P&G negatively. Besides that, consumer choice and preference in an economy really affect P&G.
For example, many third world countries won't have a high demand for P&G's famine care or health care products. In such countries, P&G should focus on selling other products instead of those not in demand.
Another social factor that affects the operations of P&G is changing trends. Different trends are born within societies that impact the sales of brands. For example, the trend of "No Shave November" impacts the sale of P&G. In 2019, Gillette observed a loss of $8 billion as the demand for shaving products fell due to "No Shave November."
Technological Factors
Technological factors impact the operations of businesses significantly. Let's see what some of the technological factors that affect P&G are.
As technological developments occur, businesses adopt technology to do well in the market. Similarly, P&G's competitor, Nestle, is also trying to use technology to increase its market share. Nestle is currently spending $1.8 billion on R&D to get ahead of its competitors.
Technology is acting as a threat to P&G currently since its competitors are using it to get ahead of P&G. On the contrary, technology has also provided P&G an opportunity to market its products in the best way possible by using social media.
Other than that, the emergence of eCommerce is beneficial for P&G since it allows the manufacturing company to use online platforms to sell its products. This increases the reach of P&G. Moreover, operating at online stores lowers the operational costs of P&G, which helps it secure huge profits.
Legal Factors
Legal factors significantly affect the operations of every organization. This section will discuss the legal factors impacting a huge manufacturing company like P&G.
Every business is bound to abide by the laws present in society. Similarly, no matter how big of a company P&G is, it still has to ensure that it has zero-tolerance policy issues like racial and gender discrimination.
Any compromise on such issues can result in lawsuits filed against P&G, which can lead to the heavy imposition of penalties on P&G. Other than that, P&G has to take care of the safety and security of the staff employed by the brand.
Suppose P&G fails to take care of its workforce. In that case, legal action can be taken against it, which will affect P&G negatively regarding finances and reputation.
Moreover, since P&G is using the internet for marketing and retail purposes, it has a legal obligation to protect its consumers' data. Otherwise, the company can be charged for a data breach that will adversely affect the company.
Environmental Factors
The last section of the PESTLE analysis looks at how environmental factors impact the operations of businesses. So now, let's look at how environmental factors impact P&G.
Campaigns are being launched by governments and private institutions for the preservation of the environment. Moreover, governments are making policies to limit greenhouse gas emissions and taking action on improper waste disposal.
In such an environment, P&G has to make sure that it minimizes the emission of greenhouse gases and properly disposes of waste, or else it could face severe consequences in the form of penalties.
Besides that, as people are getting more aware of the preservation of the environment, they are demanding that companies stop the usage of plastic in packaging. Meanwhile, all the products of P&G are packed in plastic.
P&G should look for alternative packing materials, or else the customers of P&G might announce to boycott the brand due to its excessive use of plastic.
Procter and Gamble P&G PESTLE Analysis: Final Word
P&G is one of the leading FMCGs manufacturing companies. It has been operating in the market for centuries, and today, we decided to conduct a P&G PESTLE analysis.
Before proceeding with that, we shed light on the history of P&G so that our readers know the company's background. After that, we discussed the current situation of P&G.
Then, we proceeded further and carried out P&G's PESTLE analysis. In this PESTLE analysis, we discussed how different Political, Economic, Social, Technological, Legal, and Environmental factors create an impact on the performance of P&G.
All the factors discussed above are the external factors affecting P&G. In case you're wondering what are some of the internal factors that affect P&G, do look at our P&G SWOT Analysis.
At the end of this article, we hope this article has made you aware of the framework of PESTLE analysis. However, if you want to have a look at more PESTLE analysis, here are some more examples.
