Proctor and Gamble 2006 Annual Report Download - page 8

The Procter &Gamble Company and Subsidiaries
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P&G’s global scale creates advantage for global business
units and for local market development organizations.
P&G has scale advantages on three levels: company, category
and country. At the total-company level, P&Gisabletoleverage
global scale to drive out costs consumers and customers should
not have to pay for. In addition, P&G’s company scale enables
interconnectivity
— internally, between diverse businesses with
complementary technologies, and externally, by attracting the best
suppliers and innovation partners in the world. At the category
level, P&G is able to leverage its category leadership to develop
the technologies, capability and knowledge critical to winning in
a particular business. At the country level, P&G’s breadth of
businesses enables us to learn about more aspects of more
consumers’ lives and, as a result, to identify a much broader range
of innovation possibilities—and P&G’s brand lineup and customer
business development capabilities enable us to develop highly
collaborative partnerships with retailers of all sizes. The ability to
transfer knowledge across all three levels
— total company, cat-
egory, and country
— creates the greatest and most sustainable
competitive advantage.
We will continue to build these strengths and leverage them for
sustainable growth in the second half of the decade.
UNIQUE ORGANIZATIONAL STRUCTURE
We get the full value of the Company’s strengths with a unique
organizational structure and supporting work systems. P&Gis
the only consumer products company with global business unit
profit centers, a global Market Development Organization, and
global shared business services, all supported by innovative
corporate functions.
We are essentially running a number of highly focused companies
that share common go-to-market operations and business
services. We’ve made it possible for each business unit to focus
on its individual consumers, customers and competitors while
capturing all the capability, knowledge and scale of a $70 billion
global company. In addition, we have created the capability to
collaborate, learn quickly from one another, and reapply
successes across P&G businesses.
The primary benefit of allowing business units to focus singularly
on consumers, customers and competitors in their individual
categories is evident in the growth of P&G’s Skin Care, Oral Care,
Feminine Care, and Home Care businesses. These four businesses
have delivered 11% average sales growth over the past six years,
adding nearly $1 billion per year in sales since the beginning of
the decade. In the old structure, and with past strategies, these
businesses were not a priority. They did not get full attention
from business leaders who had to keep core businesses growing
while also supporting all the go-to-market and business services
activities that were vertically integrated within the business units.
Confidence in Sustainable Growth
I’m proud of what P&G people have achieved. Fiscal 2006 was
not an easy year. We had to cope with natural disasters, offset
the largest commodity and energy hikes since the 1970s, and
respond to intense competitive pressure. We had to integrate
Gillette. We had to exceed our own strong performance in the
prior year. And, of course, we had to delight consumers and jointly
create value with retail customers in every part of our business.
Despite these challenges, we delivered a strong year and
completed a half-decade of consistent, sustainable growth.
We will not let up.
• Our strategies will focus resources against growth
opportunities where we have the greatest potential to
grow and to create shareholder value.
• Our core strengths will enable us to innovate and to bring
innovation to market faster, more effectively and more
efficiently than competition.
• Our organization structure will enable us to execute
strategies with disciplined excellence.
We remain focused on a bright future. P&G’s strategies, strengths
and structure create the capability to lead innovation and to
continually increase productivity
— the keys to capturing the
opportunities for growth that exist in all of P&G’s businesses.
A.G. Lafley
Chairman of the Board, August 8, 2006
President and Chief Executive
In the much more agile, flexible and responsive current structure,
these limitations have been stripped away and businesses such as
Skin Care and Home Care have become strong global businesses in
their own right, with the resources and focus necessary to grow.
Their growth potential has been unleashed, and these businesses
have emerged as disproportionate growth drivers
— even as core
businesses such as Fabric Care, Baby Care and Hair Care have
continued to grow ahead of their categories simultaneously.
Organizational structure can be a liability, particularly for large,
diversified multinational companies. By linking structure so
tightly with strategies and strengths, we have made organization
design and supporting business systems critical enablers of
sustainable growth.