Management Economics Assignment: Procter & Gamble Market Analysis

This report provides a comprehensive analysis of Procter & Gamble (P&G) from a management economics perspective. It begins with an overview of the company, its products, and its history, emphasizing its evolution from its inception in 1837. The report then analyzes the market structure in which P&G operates, identifying its position within the consumer goods industry, particularly the monopolistic competition market. The report examines how P&G's market structure has evolved over time, highlighting its historical periods of monopoly power. Furthermore, the report considers the nature of the industry, including the role of government intervention and its impact on the company's operations and market dynamics. The report concludes by summarizing the key findings and insights regarding P&G's market position, competitive strategies, and the influence of economic factors.

Management Economics

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Describe the company, its products/services and history............................................................1
Analysing the market it has been operating ever since its inception..........................................2
Examining if the company operates in a different market structure in its history......................3
Considering the nature of the industry in which the firm operates.............................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Management economics is mainly associated with the effective application of the
economic concept, tools, theories and methodology in order to solve various practical problems
associated with the business (Hirschey and Bentzen, 2016). This study will highlight on
analysing the market in which the company operates its business. It will also further examine if
the company has operated within different market structure. Moreover, this report will also
consider the nature of the industry in which the business operates.
MAIN BODY
Describe the company, its products/services and history.
Procter and Gamble Company is considered to be one of the top leading American
multinational consumer good cooperation which in turn was founded in the year 1837 by
William Procter and James Gamble. This company is headquartered in Cincinnati, Ohio in
United States. The key products associated with the Procter and Gamble Company are cleaning
agents, beauty care products, personal care products, personal healthcare products and
diagnostics, etc. The Procter and gamble Company portfolio comprises of fabric care, home care,
feminine care, baby care, family care, personal health care, oral care, hair care, skin and personal
care and grooming are the key range of products which in turn has been used by the company.
Procter and Gamble Company in turn tends to have high degree strongest portfolio and tends
offer trusted quality products to the customers. It tends to offer clear, reliable and accessible
products to the customers. The areas which in turn has been served by the Procter and Gamble
Company is worldwide which helps in attaining higher market share and profitability.
History
Candlemaker William Procter is born in England and James Gamble was born in Ireland.
They both have settled in Ohio. In the 1859, the sales of the Procter and Gamble Company has
reached $1 million and around 80 employees has worked for the company. At the time of
American Civil war, the company had a contract to deliver and supply soap and candles to the
Union army. Procter and gamble Company tends to highly specialize in various range of
consumer health, personal care, hygiene products and personal health products. Moreover, in the
year 1890, Procter and Gamble Company tends to create a market of new product of inexpensive
soaps which can be effectively floated within the water. The company has built factories across
United States because the demand for the particular product has effectively outgrown the
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capacity of the Cincinnati facilities. In the year 1957 the Procter and Gamble Company has sold
his first evert toothpaste which contains fluoride.
Analysing the market it has been operating ever since its inception.
Monopoly: Monopoly market is referred to as the existence of the supplier who is the only
supplier of certain set of commodity (Hill, 2016). There is only a single seller within the market
and has the advantage to set the specific price for the products and services offered by the
monopoly firm.
Monopolistic competition: Monopolistic competition is considered to be as a type of imperfect
competition where within the specific industry large number of competitors tend to offer similar
set of products and services within the market. Moreover, there is a high degree of barrier to
entry and exist within monopolistic competitive industry.
Oligopoly: Oligopoly on the other hand is considered to be as an effective market structure
which in turn tends to have small degree of firms. Here the market is significantly dominated by
small group of large number of sellers within the market (Brickley, Smith, and Zimmerman,
2015). Oligopoly market tends to have their own set of market structure.
Perfect competition: Perfect competition is considered to be as a theoretical market structure
which states that, all the companies tend to sell identical set of products. The firm are the price
takers and the market share does not have any influence on the price.
Procter and gamble Company is considered to be as the part of consumer goods industry.
As per the United States report of 2019, it has been estimated that consumer goods market is one
of the largest industry in the globe which tends is estimated to be $635 billion. Among which
Procter and gamble Company, Nestle and PepsiCo are considered to be one of the top leading
consumer goods industry across the globe. As per the 2019 report, it has been evaluated that,
Procter and gamble Company tends to have a revenue of around US$67.68 billion. The revenue
of the Procter and gamble Company has increased at a significant amount which has helped the
company to position itself at an effective market share. Procter and gamble Company tends to
have one of the key leading market share of 25% in global laundry care market within the
consumer good industry (Datta, 2017). The revenue of the Procter and gamble Company was
estimated to be 6768 crores as per the 2019 report.
The Procter and gamble Company tends to operate within monopolistic competition
market where the large number of number of competitors tend to offer similar range of products
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and services within the market at a very competitive price. Moreover, there is a high degree of
barrier to entry and exist within monopolistic competitive industry.
Examining if the company operates in a different market structure in its history.
The Procter and gamble Company had a monopoly market in the history as they used to
provide soap and candle to the soldiers of the Union army initially. In the 1859, the sales of the
Procter and Gamble Company has reached $1 million and around 80 employees has worked for
the company. The prices at which such goods and services were offered were very economical
and reasonable (Campbell, 2018). The company has increased the profit year after year which
eventually leads to higher operational growth and sustainability for the mere future. The
company tends to focus on expanding the business to various international levels which
eventually leads to higher market share. Monopoly market is considered to be as the existence of
the supplier who is the only supplier of certain set of commodity i.e., soap and candle earlier.
Within the monopoly market there is only a single seller within the market and tends to have
high degree of advantage to set the specific price for the products and services offered by the
monopoly firm. Consumer goods industry in turn is considered to be as one of the most top
leading industry across the globe. Moreover, the consumer goods market is expected to rise to
$15,361.8 billion by the year 2025. The Procter and Gamble Company in turn tends to focus on
effectively producing wide range of products to the customers to large number of people from
across the globe in order to gain high degree of marker share, customer base and profitability.
The revenue of the Procter and Gamble Company has significantly increased from US$ 56,741
million in the year 2005 to US$ 67,684 million in the year 2019. Moreover, the net income of the
Procter and Gamble Company has significantly increased from US$ 6,923 million in the year
2005 to US$ 15,326 million in the year 2017. The total assets income of the Procter and Gamble
Company has significantly increased from US$ 61,527 million in the year 2005 to US$ 115,095
million in the year 2019.
Considering the nature of the industry in which the firm operates.
Do you think operating in a different market structure is more optimal for this firm?
The Procter and Gamble Company in turn tends to have a product type divisional market
structure where all the decision in turn has been taken by the top managers of the company
which in turn eventually leads to better internal business process and operations of the business
(Rylková, 2016). Monopolistic market completion is considered to be very relevant for the
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Procter and Gamble Company because it is considered to be very useful in maximizing the
profits of the organization by effectively producing goods at a certain degree of level which
helps the firm to attain marginal revenue equal to the marginal cost. The monopolistic
competitive market in turn is considered to be very useful in creating the market power. The
monopolistic competitive companies in turn tends to set a low degree of price by producing more
than the monopoly firms in order to gain high degree of advantage (Balsmeier, and Czarnitzki,
2017). The monopolistic competitive market in turn tends to have high degree of price in order to
determine the price of the product. One of the key significant advantage associated with the
monopolistic competitive market is that it does have significant degree of barrier to the entry and
also the market of Procter and Gamble Company is relatively contestable (Turban and et.al.,
2017). It is useful for the organization to effectively attain high degree of economies of scale and
improves the operational function of the company.
Would you suggest greater/lesser government intervention?
Government intervention is considered to be prominent for the society and also to intervene
society and also help to intervene in the market In order to promote economic fairness.
Government intervention is considered to be very prominent because it tells in maximising social
welfare and is also one of the most prominent reason for government intervention. For example
breaking up of monopolies and also regulating negative external factors such as
pollution. Government intervention is very useful because it helps in regulating monopolies and
also helps in promoting competition (Foxall, 2016). Moreover, government intervention is very
useful for promoting greater income equality for high degree of fairness for the society.
Government intervention is considered to be very prominent because it helps in increasing the
economic efficiency and is also very useful in promoting an equitable and fairer range of
distribution of income across the nation. Government intervention tends to results in protecting
individual rights by setting various range of guidelines, regulations and protocols in order to
perform business operations in a legal and sustainable manner (Government Intervention and
Disequilibrium, 2020). Government intervention is very useful because it helps is combating
market inequities with the help of effective taxation and subsidy policy and appropriate set of
regulations.
Maximising social welfare is also one of the most effective reason because it helps in
breaking up with external negativities. Government intervention is very useful because it helps in
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promoting economic welfare and also to promote other goals such as national advancement and
unity. Government intervention is very useful in minimising the damages which in turn has been
caused by the natural occurring economic events such as recession and inflation. It is very useful
in minimising the harsh impacts of economic forces (Rao, 2018). Moreover, government
intervention is useful in raising entry cost and also limiting the development of various set of
infrastructure in a monopolistic power. No regulation and no government intervention will
eventually result in diminish set of resources and negative impact on the operations of the
business (Trefor, 2015). Effective government regulations in turn is considered to be very useful
in minimizing the various set of regulations which helps in addressing issues such as stifled
innovation, diminishing resources and minimized level of trade.
CONCLUSION
From the conducted study it has been summarized that, the Procter and gamble Company
tends to operate within monopolistic competition market. The monopolistic competitive market
in turn tends to have high degree of price in order to determine the price of the product. Procter
and gamble Company tends to have one of the key leading market share of 25% in global
laundry care market within the consumer good industry. It has been summarized that,
government intervention tends to results in protecting individual rights by setting various range
of guidelines, regulations and protocols in order to perform business operations in a legal and
sustainable manner.
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REFERENCES
Books and Journals
Balsmeier, B. and Czarnitzki, D., 2017. Ownership concentration, institutional development and
firm performance in Central and Eastern Europe. Managerial and Decision Economics, 38(2),
pp.178-192.
Brickley, J., Smith, C. and Zimmerman, J., 2015. Managerial economics and organizational
architecture. McGraw-Hill Education.
Campbell, D.E., 2018. Incentives: Motivation and the economics of information. Cambridge
University Press.
Datta, D., 2017. Managerial Economics. PHI Learning Pvt. Ltd..
Foxall, G.R., 2016. Operant behavioral economics. Managerial and Decision Economics, 37(4-
5), pp.215-223.
Hill, S., 2016. Managerial economics: the analysis of business decisions. Macmillan
International Higher Education.
Hirschey, M. and Bentzen, E., 2016. Managerial economics. Cengage Learning.
Rao, P., 2018. Insurmountable Business Problems and Optimal Managerial Decisions:
Significance of Elasticity of Demand. International Journal of Advances in Agriculture Sciences.
Rylková, Ž., 2016. Economic value added in managerial economics. Scientific papers of the
University of Pardubice. Series D, Faculty of Economics and Administration. 38/2016.
Trefor, J., 2015. Business Economics and Managerial Decision Making.
Turban, E and et.al., 2017. Electronic commerce 2018: a managerial and social networks
perspective. Springer.
Online
Government Intervention and Disequilibrium .2020. ONLINE]. Available through<
https://courses.lumenlearning.com/boundless-economics/chapter/government-intervention-and-
disequilibrium/>
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