Threat of Competition: HIGH
P&G’s market environment is highly competitive, with global, regional, and local competitors. In many of the markets and industry segments in which P&G sells its products, P&G competes against other branded products as well as retailers’ private-label brands.
There are many different options for consumer products. Consumers can choose not solely based on price but also brand strength and now there is even a push for environmentally friendly products. Although the options are abundant, the threat is still more moderate because of the brand equity in most products. Advertising and marketing are a large part of swaying consumers to purchase one product over another and the economies of scale that are presented with large companies (P&G) favor them in the advertising. Advertising also helps establish the brand loyalty.
Although the consumer has many options to choose from it all comes down to the value and quality of the product. Product quality and performance are important and P&G focuses on providing a quality offering to the consumer. Competition is even present with the non-branded products and with consumer spending and disposable income low, competition is increasing.
Threat of New Entrants: LOW-MODERATE
The threat of new entrants seems to be low overall but it depends on which business segment of Procter & Gamble the threat is coming from. It is a low probability for a new entrant to become as big and as well capitalized as P&G. The biggest barriers to entry are derived from research and development. Since competition is somewhat intense, a new entrant must enter the market with a product that is differentiated. Again, reputable companies with successful brand names have established relationships with retailers and have advantages when competing for shelf space. Nearly all the markets that P&G participates in are mature markets making it less attractive for new entrants.
Threat of Substitutes: LOW-MODERATE
The threat of substitutes is moderate and not high because most of the products that P&G sells are necessities. There is no substitute for laundry detergent besides different types of laundry detergent. The only true substitute is to not wash your clothes or wash them without laundry detergent. It is similar for shaving and using diapers. However, some of the business segments i.e. snacks and beauty do have substitute products. That is why the threat of substitutes is low to moderate.
Power of Suppliers: LOW
Procter & Gamble does not seem to have any reliance on specific suppliers and P&G forms joint ventures and partnerships for new products. The sheer size of P&G also helps it deal with suppliers in delivering the product because companies want to work with P&G.
Power of Buyers: MODERATE
The power of buyers is moderate because as mentioned, 15% of P&G’s sales are to Wal-Mart who is a very demanding buyer. There are two tiers of buyers, the retailers and the end consumer. The retailers have more power in dealing with P&G because they have large contracts for many stores (Wal-Mart stores, Albertsons). Yet, many of these retailers enjoy having P&G products because of the profit potential they bring. The end consumer has moderate to high power. Although they have the decision on choosing substitutes or the competition, the success of P&G’s brands and the brand loyalty they have created thus far have shown that the consumers enjoy its products.