Question

Find a journal article online about a company that recently added or dropped a product or service, or a company that decided to outsource. In the subject line of your post, include the name of the article that you read. Post a link to that article with your initial post, and provide a summary and a reaction to the article. The summary should be approximately 250 words. The summary should describe the major points of the article, and the reaction should demonstrate your interpretation of the article and how you can apply that knowledge.

Please include proper citations in your discussion post. Points will be deducted if proper citations are not used

TYIA

Answer 1

PROCTER AND GAMBLE

After years of expansion into areas like pet food and beauty products, Procter & Gamble announced in 2014 that it would cut as many as 100 brands from its arsenal to focus on others, like Tide, that made the company a powerhouse over the decades.

The move is part of a strategy to improve the company’s financial performance by doubling down on about 80 brands that generate 95 percent of the profits and 90 percent of sales, according to A. G. Lafley, the firm’s chief executive. The company, and the industry at large, have faced pressure as consumers continue to spend less than they did before the financial crisis.

You've likely never heard of many of P&G's brands. That's because out of the 180 or so names P&G owns, it counts on only 50 for more than 90 percent of its sales and profits. Those are what it calls its Leadership Brands, the ones that stores want and the ones that resound with consumers.

As for the rest? They failed to take hold or just have niche followings. They're taking up too much space on the books with little to no payoff. Meanwhile, P&G's sales and profit have been sluggish, and its stock price has given investors little to cheer about. That's why the company is taking the unprecedented step of dumping more than half of its stable of brands. It wants to slim down, become nimbler and focus on the names that make serious money.

While Mr. Lafley did not say which of the estimated 100 brands would either be discontinued or sold off, he said that taken together they had aggregate sales declines of 3 percent a year over the last three years. The cuts would leave about 70 to 80 more lucrative products remaining.

Mr. Dibadj said that Procter & Gamble might not just be considering sales. “It’s not just big or small,” he said. “A strategic fit is also going to be important.”

Mr. Dibadj speculated that Procter & Gamble could also choose to divest itself of brands that did not necessarily fit in with its traditional baby and family products, like the battery maker Duracell or the Braun line of small electronic appliances.

Beauty, too, has been a trouble spot for the company. Excluding certain currency adjustments and one-time events, the company reported that sales in the unit declined 3 percent in the fourth quarter, in contrast to the corporate average for beauty products of 2 percent growth, according to Nik Modi, an analyst with RBC Capital Markets.

While Olay, Pantene and Cover Girl were on Mr. Dibadj’s list of companies Procter & Gamble was likely to keep, he speculated that the company might divest itself of a number of other beauty lines, including Naomi Campbell’s line of perfumes and colognes and the hair care line Frederic

“It’s not just by chance that P.&G.'s beauty business has underperformed for such a long period of time,” Mr. Modi said. “Maybe they just don’t have what it takes to be in the beauty business.”

Mr. Modi said that part of Procter & Gamble’s challenge was that it relied on a global strategy, whereas beauty is a more “nuanced” business.

Consumers are still spending less five years after the financial crisis, and Procter & Gamble, like other manufacturers, have been under pressure to improve sales and cut costs. Last year, it also faced pressure from one of its main investors, the hedge fund manager William A. Ackman, who helped push the board to oust the previous chief executive, Robert A. McDonald.

Analysts said there are also fundamental issues that make it harder for P&G to grow in this environment, including the company's lack of local manufacturing presence, which has saved competitors like Unilever money on labor and production costs and has pressured P&G's margins. Some products sold in Brazil, for instance, are made in Europe, according to analysts.

The corporate structure where decisions are made, and business is reported, is done so by category—i.e. beauty or grooming—instead of geographically focused by region, which is how Colgate operates. P&G's structure may result in a misunderstanding of local consumer markets and tastes and an inability to be nimble regarding changes and decisions on brands and execution, particularly important for the localized beauty market.

John Faucher, who covers the stock at JPMorgan, said P&G has room to lower prices, especially as the brands have lost their premium value to competitors over the years, cut costs further, and innovate with new products.

SLUGGISH SALES

P&G’s revenue growth has been sluggish, with sales missing Wall Street’s estimates in nine of the last 13 quarters The company says it has been hurt by “choppy” growth in developed markets, tough competition and a strengthening U.S. dollar.

P&G has sought to cut expenses by streamlining management, reducing costs and cutting jobs under a five-year, $10 billion restructuring plan announced in 2012.Its organic sales, which excludes divestitures and acquisitions, rose 2 percent in the fourth quarter, but currency losses wiped out the gains. Net sales fell 1 percent to $20.16 billion, missing the average analyst estimate.

P&G said it expected fiscal 2015 organic sales to rise by a low- to mid-single digit percentage and core earnings to rise by a mid-single digit. A 7 percent fall in operating expenses in the quarter helped P&G post a core profit of 95 cents per share, beating the average analyst estimate of 91 cents.

“PG’s earnings quality is below its potential,” BMO Capital Markets analysts wrote in a note.