Market Structure of Procter and Gamble

This study analyzes the market structure in which Procter and Gamble operates, including monopoly and oligopoly. It discusses the company's products, market analysis, different market structures, and the nature of the industry. It also explores the advantages of operating in multiple market structures and the impact of government interventions.

Management
Economics-
Assessment 2

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Description of company and its products...............................................................................1
Analysis of market in which Procter and Gamble operate.....................................................2
Different market structures in which company operated along with its characteristics.........4
Nature of the industry in which company operates................................................................6
Conclusion.......................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Economic management refers a process of management of resources, income and
expenditures of community and business enterprises (Burkaltseva, Dudin and Reutov, 2018).
Current study will discuss the type of market structure in which Procter and Gamble operate. It is
an American multinational consumer goods, founded in the year of 1837 by William Procter. It
offers wide variety of products and services such as: personal care, hygiene products and baby
care products. This current study is about to discuss effectiveness and reasons of analysing
company to the great extent in order to make them able to identify their current situation and
position as where they stand in the market. It will also show different types of market structure in
which companies operate such as monopoly, oligopoly and others. The type of product decides
the type of market structure as whether they are unique or not. Lastly, it will show effectiveness
of operating in different market structures as well as government interventions.
MAIN BODY
Description of company and its products
In the context of Procter and Gamble it can be said that it is one of the well-known,
effective American consumer goods company with headquarter in US.
Products and services: It provides wide range of personal care, consumer health and hygiene
products. For knowing more about its effectiveness it is important to analyse its one of products
ranges and making it able to know its actual position in the market as it can allow it to take
competitive advantages. Its different products include: health care, beauty grooming, baby wipes
and other products. It is found that Pamper is one of the biggest brands of Procter and Gamble
and in this it has launched new baby diaper which has around 360 fit a stretch waistband. It is
comfy and make baby move easily without making them feel irritation and according to the P&G
it feels like they are wearing a yoga pant. Before launching it, they tested on some toddlers in
order to see if they can move, stretch, climb by wearing it or not. It is also found that around 25
million babies in 100 countries wear pampers which means it is being liked by them (Allen,
Procter and Gamble Co, 2019).
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History: Founder, James Gamble of this company settled in Cincinnati and after his
marriage his father in law helped him out and made him business partner Hence, Procter and
Gamble created in the year of 1837. In the year of 1880, it started marketing a new product an
inexpensive soap which floated in water. By doing so, it succeeds and started marketing new
categories of products. In 1930, it expanded its business internationally with acquisition of
Thomas hedley.
Analysis of market in which Procter and Gamble operate
It is found that P&G operates and provides its products and services worldwide excluding
North Korea and Cuba. It operates in the fastest growing economies in the world, Asia which has
more than half of the world’s population. One of the main reasons of success of this company
and development of business in such countries is its marketing strategy. It makes use of market
penetration strategy in which it focuses on selling its existing range of products in existing
markets by using unique features and using attractive promotional strategies in order to gain
market share and making them profitable.
Different companies operate in different types of market structure and it depends upon
their nature of products as whether they have monopoly, oligopoly and others. The type of
market structure states effectiveness of products and company of taking competitive advantages.
For example:
Monopoly: It is the type of market structure in which there is only a single seller of a unique
product. There is no competition in such market because seller in this market for their unique
product is called a solo seller. It is highly effective marketing structure in which customers do
not have option of going and switching shop and all profit is being captured by the solo seller
(Manna, 2017).
Oligopoly: It refers a structure where markets are dominated by small number of firms. Or it can
be said that this type of market is being shared by small as well as many producers and sellers so,
there is a state of limited competition and few firms in this type of market have high chances of
taking competitive advantages and attracting customers. But prices are being kept competitive
(Geras’kin and Chkhartishvili, 2017).
In the context of P&G it can be said that P&G operates in Oligopoly market structure
because there are few firms who sell similar products and services. But there are some products
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in which P&G is considered the only seller and known as Monopolist such as: producer of Crest.
In the context of Pamper which is the largest brand of P&G it is found that it is also a monopoly
because there is 1 other brand for similar product in the market which is Huggies and it is from
Kimberly Clark and has around 22% market share. But as compare to P&G it has less market
share because P&G has around 35% global market share.
Figure 1: Diaper segments by market share
Sources: (Pamper segmentation. 2018)
From the above data it can be said that market share of P&G in diaper brand is more than other
brands as it covered around 50&% market share in 2015-2017 whereas, Kimberly Clark has only
8%. So, from this market share and revenue data it can also be said that P&G is in the great
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position in the market but still there are some areas in which it requires improvement as at
present Kimberly Clark is also increasing market share.
Figure 2: Revenue generation
Sources: (Revenue Comparison of Procter and Gamble with Unilever, 2019)
Unilever is one of the main competitors of this company and as compare to Unilever it can be
said that P&G is in better position in the market. On the basis of above data it can be seen clearly
and can be said that overall revenue of P&G as compare to Unilever is increasing year by year
and more than Unilever’s revenue.
Different market structures in which company operated along with its characteristics
There are different types of market structure in which different companies according to their
nature of products and services operate such as perfect, monopoly and monopolistic. There are
some industries which operate in more than 1 types of market structure as there some products
are monopoly and some are oligopoly. One of the main example of such industry is Procter and
Gamble as its some products are oligopoly such as pamper brand and other is considered as
monopoly such as: crest toothpaste.
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Oligopoly: It is a type of market structure in which more than 1 firm and some small firms
provide similar products to customers and try to gain competitive advantages. There are several
advantages and disadvantages of this market structure which few sellers in some industries take
and can easily increase market share and profit as well as because customers do not have more
choice and options of buying products and switching shop. One of the main examples of this
type of market structure is soft drink which is being dominated by Pepsi and Coca cola. There
are several products range of P&G which comes under this structure like Pamper brand, some
beauty products and others (Kaymaz and Kaymaz, 2019). So, it can be said that it has been
operating in this structure. Some advantages and disadvantages of this market structure include:
Advantages
 One of the main advantages is there are few sellers in this type.
 Difficult to enter in such industry and competing as a start-up company.
 This structure simplifies market for customers.
Disadvantages
 There is a lack of innovation in this market.
 Price fixing is common in this structure.
 Bargaining power of consumers is high.
Monopoly: It refers a market and include firm who is the sole seller of their products. A market
where there is no close substitute and the only seller takes all advantages of this market and can
make changes in prices and other elements as per his own. It includes those firms which sells
unique products and there is lack of imitability by other firms. Procter and Gamble has one of its
products such as Crest toothpaste which comes under this structure. As there is no close
substitute of this product. So, from this product line it can be said that P&G operates in this
market structure also. There are some advantages and limitations of this market structure which
include:
 International competitiveness is one of the main advantages as by expanding business
company can increase its profit margin.
 Company can make changes in its regulations, policies and pricing strategies at is own as
there is no involvement of other companies.
 It avoids duplication of products and services and consumers do not have high bargaining
power (Song and Wang, 2018).
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Disadvantages:
 It is not good for consumers as there is a high price than other market structure.
 A decline in consumer surplus is other main limitation.
 There is a high entry risk and cost.
Perfect competition: It refers a hypothetical market where competition among different players
is at its greatest possible level. There are large numbers of buyers and sellers are available who
have perfect knowledge of the market. They require setting their own criteria for attracting
customers and taking advantages of competition. So, by setting a criteria and selling an identical
product they sell products. There is no influence of market share on prices.
Advantages
 Consumer exploitation is low.
 There is no barrier of market entry and exit.
Disadvantages
 There is no scope of economies of scale as there are high numbers of firms.
 Lack of supernormal profit.
So, from the above discussed market structure it can be said that P&G operates in both
monopoly and oligopoly market structure and focusing on taking advantages of competition.
Nature of the industry in which company operates
There are different types of marker structures in which company operates. There are some
companies and industries which either operate in monopoly, oligopoly, perfect and others
structures. But there are some industries and companies which operate in more than one market
structure because of their variety of products ranges. Industries of consumer goods which offers
different varieties and categories of products. For example: Procter and gamble as it operates
worldwide in health, beauty, baby care and others. Some of its products are unique and that is
why they are covered under monopoly and some are covered under oligopoly.
There are several advantages when companies operate in more than 1 market structure.
Increased market share: One of the main advantages of using more than 1 market share or
comes under more than 1 market structure is company can increase market share. P&G comes
under monopoly and oligopoly structure and by doing so it can take advantages of both market
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structures. P&G has some of its products which come under monopoly which means it is the
only seller and by selling its unique products, making changes in products, pricing strategies it
can attract wider range of customers and gain market share by expanding business (Goodarzi,
Aflaki and Masini, 2019). Also by providing products under oligopoly structure, it can compete
with others firms and for gaining market share it can make some modifications in its products
features.
Products differentiated: It is one of the other main advantages of operating and using more
than 1 market structures is products differentiated. It is already stated that by operating in
oligopoly structure and for taking competitive advantages it tries to make changes in its
strategies by modifying products and adding more features in it. If it becomes fail in some
products selling and competing with other firms in oligopoly market structure then it can focus
on other products range which is being sold in other market structure which can help it out in
making stable position in the market (Yudaruddin, 2018).
So, overall it can be said that using and operating products in more than 1 market
structures can be more optimal for P&G.
Government interventions: Government interventions refer regulations, policies and taxations
which affects market. Government intervene in markets with the main aim of promoting general
economic fairness. Some common examples of government interventions include: implementing
some regulations on complies which motivate them to minimize pollution and making them able
to become sustainable. Some interventions are good and some are bad for community and
companies. There are some government interventions related to this company which has critical
impacts such as:
Corporate sustainability: It is founded that P&G participates in political process in order to
help them out in shaping public policy for fulfilling corporate purpose. In addition, it is also
found that for that it delivers improved and qualitative products to customers in order to improve
their lives. Legislative priorities of Procter and Gamble are being analysed as well as reviewed
regularly with senior business leaders as it helps them out in improving image in the eye of
people and attracting them to the great extent (Structure and Governance. 2020).
CSR programme developed by this company also contribute in children education which
overall improve lives of community. It is all impact of government policy. Investment in
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recycling education in communities also increase investment in research and development which
allows them to improvise their products and economy as well.
There are some taxation and welfare programme which is also being developed by
government as their main aim is to promote economic fairness. For this they allocate resources,
provide financial supports to those who requires them the most and it allows small scale
companies in providing employment opportunities which lead to improve economic condition.
But on the other hand, it is found that lack of incentives, political pressure and government
failure has some negative effects. It become seasons of market disputes which direct affects
society as due to some changes in external and other environmental factors firms increase prices
in their products and services and people have to pay for this. It affects them to the great extent.
So, it can be said that some interventions like taxation policy is good for some people and bad
for others as it is all because of the income gap between developing and developed countries
(Fang, Nie and Penny, 2020). So, overall it can be said that some government policy have
positive effects on community and company and some has negative effects but by making use of
effective strategies and reducing the gap between the developing and developed countries
negative effects can be minimized..
Conclusion
From the above study it has been summarized that different types of market structure like
oligopoly and monopoly played a vital role as it allows companies in selling their products and
taking competitive advantages. Further, it has also shown advantages as well as disadvantages of
all types of market structure which also allow companies in deciding and making improvements
in their products ranges and services. This study has also shown importance of government
interventions and roles of government in making companies able to expand business and allow
customers to buy their products to the great extent. It is beneficial for both customers’ and
companies as it allows both in increasing profit and having qualitative products.
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REFERENCES
Books & Journals
Allen, M.R., Procter and Gamble Co, 2019. Packaged consumer product. U.S. Patent 10,457,447.
Burkaltseva, D., Dudin, M. and Reutov, V., 2018. Ensuring economic security at different levels
of economic management. Монографии сотрудников ИПР РАН.
Fang, Y., Nie, Y. and Penny, M., 2020. Transmission dynamics of the COVID‐19 outbreak and
effectiveness of government interventions: A data‐driven analysis. Journal of medical
virology, 92(6), pp.645-659.
Geras’kin, M.I. and Chkhartishvili, A.G., 2017. Structural modeling of oligopoly market under
the nonlinear functions of demand and agents’ costs. Automation and Remote
Control, 78(2), pp.332-348.
Goodarzi, S., Aflaki, S. and Masini, A., 2019. Optimal feed‐in tariff policies: The impact of
market structure and technology characteristics. Production and Operations
Management, 28(5), pp.1108-1128.
Kaymaz, M.O. and Kaymaz, O., 2019. Learning from oligopoly rivalry: Implications for
business financial statements. Accounting and Management Information
Systems, 18(4), pp.509-558.
Manna, E., 2017. Exercises on Perfect Competition, Monopoly, Market Structure and Market
Power.
Song, M. and Wang, S., 2018. Market competition, green technology progress and comparative
advantages in China. Management Decision.
Yudaruddin, R., 2018. Market structure, conduct and performance: Evidence from Indonesia
banking industry. EKUITAS (Jurnal Ekonomi dan Keuangan), 19(3), pp.299-317.
ONLINE
Pamper segmentation. 2018. Online Available through:
<https://www.business-standard.com/article/companies/why-major-dry-profitability-
making-firms-are-exiting-baby-diaper-market-118070800444_1.html >
Revenue Comparison of Procter and Gamble with Unilever. 2019. Online Available through: <
https://www.nasdaq.com/articles/how-do-procter-gambles-revenues-and-key-metrics-
compare-with-its-close-competitor-unilever>
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Structure and Governance. 2020. Online Available through: < https://us.pg.com/structure-and-
governance/our-political-involvement/>
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