Proctor and Gamble 2006 Annual Report Download - page 29

The Procter &Gamble Company and Subsidiaries 27Management’s Discussion and Analysis
Duracell and Braun: We compete in the batteries category, where
we have approximately a 45% share of the alkaline battery market
globally. We generally have the number one or number two market
share position in the markets in which we compete behind the
Duracell brand. Our Braun brand spans across electric razors and small
electrical appliances.
GLOBAL OPERATIONS
Market Development Organization
Our MDO organization is responsible for developing go-to-market
plans at the local level. The MDO includes dedicated retail customer,
trade channel and country-specific teams. It is organized along seven
geographic regions: North America, Western Europe, Northeast Asia,
Central &Eastern Europe/Middle East/Africa, Latin America, ASEAN/
Australia/India and Greater China. Throughout MD&A, we reference
business results in developing markets, which we define as the aggregate
of Central &Eastern Europe/Middle East/Africa, Latin America,
ASEAN/Australia/India and Greater China.
Global Business Services
The GBS organization is responsible for providing world-class solutions
at a low cost and with minimal capital investment. GBS provides
technology, processes and standard data tools to enable the GBUs
and the MDO to better understand the business and better serve
customers and consumers.
Strategic Focus
P&G is focused on strategies that we believe are right for the long-term
health of the Company and will increase returns for our shareholders.
The Company’s annual financial targets through 2010 are:
•Net sales growth of 5% to 7% (excluding the impact of foreign
exchange). This is comprised of:
°4% to 6% organic sales growth through 2010:
– 3% to 5% pre-Gillette organic sales target, plus
– 1% of growth acceleration through 2010 behind revenue
synergies associated with the Gillette acquisition.
°1% of additional growth from acquisitions.
•Diluted net earnings per share growth of 10% or better, excluding
the impacts of Gillette dilution.
•Free cash flow productivity of 90% or greater (defined as the ratio of
operating cash flow less capital expenditures to net earnings).
In order to achieve these targets, we focus on our core strengths of
consumer understanding, branding, innovation, go-to-market capability
and global scale and scope against the following growth areas:
•Grow our leading brands in our biggest markets and with our
winning customers.
•Invest in faster-growing businesses with higher gross margins that
are less asset-intensive.
•Grow disproportionately in developing markets and with lower-
income consumers.
Sustainability
To sustain consistent and reliable sales and earnings growth in line
with our financial targets, we have identified four key enablers:
•Building a diversified and balanced portfolio consisting of
foundation businesses and higher growth businesses. Foundation
businesses include many of our established product categories,
primarily within Household Care. These businesses provide a base
for steady growth and strong operating cash flows. We are focused
on expanding these categories through innovative products,
offering our brands in more parts of the world and tailoring our
products to meet the needs of more consumers (including lower-
income consumers). Our foundation businesses are complemented
with our portfolio of higher growth businesses, primarily Beauty
and Health Care. These businesses generally have higher gross
margins and lower capital requirements than the balance of the
Company’s portfolio and tend to have faster market growth rates
than our foundation businesses. Over the past several years, we
have increased the size of our higher growth business portfolio by
growing base Beauty and Health Care brands and through acquisitions,
including Clairol in 2001, Wella in 2003 and Gillette in 2005.
•Investing in innovation and core P&G capabilities and strengths
to enable us to reach more of the world’s consumers with quality,
affordable products. This includes expanding our presence in markets
and reaching more consumers where we are underrepresented,
including lower-income and value-conscious consumers.
•Leveraging the Company’s organizational structure to drive clear
focus, accountability and improved go-to-market capability.
We have an organizational structure that works together to leverage
our knowledge and scale at the global level with a deep understanding
of the consumer and customer at the local level.
°The MDO organization develops go-to-market plans at the local
level, leveraging their understanding of the local consumers and
customers. The MDO is focused on winning the “first moment of
truth”—when a consumer stands in front of the shelf and chooses
a product from among many competitive offerings.
°The GBU organizations leverage their consumer understanding to
develop the overall strategy for our brands. They identify common
consumer needs, develop new products and build our brands
through effective marketing innovations. The GBU is focused on
winning the “second moment of truth”— when the consumer
uses the product and evaluates how well the product meets his
or her expectations.
°Global Business Services (GBS) operates as the “back office” for
the GBU and MDO organizations, providing cost-effective world-
class technology, processes and standard data tools to better
understand the business and better serve consumers and customers.
GBS personnel, or highly efficient and effective third-party partners,
provide these services.