Proctor and Gamble 2007 Annual Report Download - page 35

The Procter & Gamble Company 33Management’s Discussion and Analysis
The businesses that previously comprised the Gillette GBU will now be
included within the Beauty and Household Care GBUs. As a result of
these moves, the Duracell and Braun business will no longer comprise
a separate reportable segment. The Braun business will be combined
and managed with the Blades and Razors business to form the Grooming
reportable segment within the Beauty GBU. The Grooming reportable
segment will also include all shave prep products currently reported
within the Beauty reportable segment. The Duracell business will be
moved to our Household Care GBU and will be reported as part of our
Fabric Care and Home Care reportable segment. Finally, our feminine
care business, which was part of our Beauty GBU and reportable
segment, will now be moved to our Health and Well-Being GBU and
will be reported as part of the Health Care reportable segment.
These changes were effective as of July 1, 2007. They will be reected
in our segment reporting beginning in scal year 2008, at which time
our historical segment reporting will also be restated to reect the
new structure. The GBU and segment discussion in MD&A and
accompanying statements and footnotes reect the organizational
structure that existed through June 30, 2007.
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Market Development Organization
Our MDO is responsible for developing go-to-market plans at the local
level. The MDO includes dedicated retail customer, trade channel and
country-specic 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 dene as the aggregate of
Central & Eastern Europe/Middle East/Africa, Latin America, ASEAN/
Australia/India and Greater China, and developed markets, which are
comprised of North America, Western Europe and Northeast Asia.
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.
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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 nancial targets through 2010 are:
• Organic sales growth of 4% to 6%. This is comprised of:
º 3% to 5% pre-Gillette organic sales target, plus
º 1% of growth acceleration through 2010 behind revenue
synergies associated with the Gillette acquisition.
Diluted net earnings per share (EPS) growth of 10% or better,
excluding the net impact of Gillette dilution.
Free cash ow productivity of 90% or greater (dened as the ratio
of operating cash ow 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.
Shift our portfolio mix to faster-growing businesses with higher
gross margins that are less asset-intensive.
Grow disproportionately in developing markets and with lower-
income consumers.
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To sustain consistent and reliable sales and earnings growth in line
with our nancial targets, we have identied four key enablers:
• Building a diversied and balanced portfolio consisting of
foundation businesses and higher growth businesses.
Foundation businesses include many of our established product
categories, such as baby care and family care. These businesses
provide a base for steady growth and strong operating cash ows.
We are focused on building leadership market share in 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, such as many of our beauty and health
care businesses. These higher growth 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.
º 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.