Why do you think this strategy became less viable in the 1990s? Here is my answe

Question

Why do you think this strategy became less viable in the 1990s?

Here is my answer

By the 1990s, the international strategy that Procter & Gamble pursued became less viable because the company’s growth of profit was declining. The problem vested in the fact that administrative, manufacturing, and marketing facilities were extensively duplicated by Procter & Gamble, thereby driving up its costs. In addition, barriers to cross-border trade were decreasing at a rapid pace worldwide and fragmented national markets were merging into larger regional or global markets. Also, the global retailers through which Procter & Gamble distributed its products in the past were growing larger and more global and were demanding price discounts from Procter & Gamble.

Those 4 reasons that I highlighted. I know that they played a significant role in causing the international strategy of Procter & Gamble to become less viable, causing the company's growth of profit to decline. I would like to know how each of those 4 reasons played that role. Explain it to me so I can understand it more clearly. If you can provide detailed explanations for each one, I would appreciate it because it is very important for me. Thanks.

Explanation / Answer

First point explanation - As you know that cost and profit are related to each other so when your cost goes up your profit will definitely come down. Generally companies invest aggressively in administrative, manufacturing, and marketing facilities for sales growth but if sales growth does not materialize then your cost will shoot but profit will come down. In good days firms overinvest in this facility by opening big plants and hiring more people and bring the efficiency down. Reason 1 point to the same.

Point 2 – 90s is the era of globalization. Earlier each country used to protect industries of its own country by restricting import from foreign nation through law and high taxes(Import duties).In this kind of scenario there was less competition for P&G in its home market (North America)but once Nations started signing free trade agreement then many other companies were able to sell their product in current market of P&G. Normally new entrant follow price discount strategy to gain new customer thus it should have put pressure on P&G to reduce its own prices for keeping the market share intact.To protect market share companies also invest in marketing ,distribution etc so price down but cost up..sounds like a challenging scenario when any body can come and compete with you.Infact this is a reason that free trade gains so much traction after 90s as it forced companies to reduce prices while service quality was increased. It is indeed a great situation if you are a consumer.

Point 3 –Globalization forced companies to become more efficient if they wanted to survive. Before globalization there used to be many local firms in consumer product segment.Being a big player it as easy for P&G to compete with them, but now local firm were merging as per their synergy to gain economy of scale as this was one proven way of cost control while you can offer the same product or service a low price.So competition was increasing from outside as well as from inside.

Point 4 –this point is self explanatory.Imagine walmart. the bigger it grows higher the discount.Producer drive big part of their sale through these big retailer so bargaining power is with retailer.So when a retailer ask you to discount then if definitely affect your top line(Revenue)

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