Submitted by

Alishba khan (006)

Areeba Shahid (009)
Khadija Mehmood (032)
Laiba Arzoo (034)
Submitted to
Mam Ayesha
Company
Proctor and gamble
Final project of managerial economics
 Proctor and gamble
Executive Summary
This report is a thorough review of Procter & Gamble (P&G), one of the top consumer goods
companies in the entire world. P&G was founded in 1837 and has transformed into one of the
biggest competitors in the consumer goods field with a diverse brand portfolio including five
core product categories - Beauty, Grooming, Health Care, Fabric & Home Care, and Baby,
Feminine & Family Care. The company operates in over 70 countries and sells in over 180. P&G
also has a strong culture of corporate social responsibility, innovation, consumer knowledge, and
sustainability. The P&G report is focused on P&G's advanced demand forecasting techniques,
which include both statistical models and AI-based analysis as well as historical sales analysis.
The report also illustrates the way products are tailored to regional customization and how the
forecasts changed depending on consumer needs in different global markets. The production and
operations strategy is centered around eliminating waste, optimizing capacity, advanced
technology, and promoting sustainability. Lean manufacturing, Just-In-Time models, and
automation techniques were reported as meeting shifting needs with a dynamic market
landscape. Finally, the report outlined P&G's commitment to corporate social responsibility from
its existing sustainability goals “Ambition 2030”, along with P&G's favorable market position in
the fast-paced consumer goods (FMCG) sector. Forecasting, production that adapts, and a focus
on the consumer that drives it all, P&G is an update to date, resilient, and innovative corporation.

Introduction

Procter & Gamble (P&G) stands as a global leader in the consumer goods industry, renowned for
its deep-rooted heritage, innovative product portfolio, and global market presence.
Headquartered in Cincinnati, Ohio, USA, P&G was founded in 1837 by William Procter, a
candle maker, and James Gamble, a soap maker. What began as a small partnership during the
industrial era has grown into one of the most influential and recognizable multinational
corporations in the world.

Today, P&G operates in over 70 countries and markets its products in more than 180 countries,
demonstrating its expansive global footprint. With a workforce of thousands and an integrated
supply chain, P&G delivers trusted brands that serve nearly every household need, from personal
hygiene to home cleaning and baby care.

Flagship Brands and Core Business Segments

P&G’s strength lies in its broad and strategically segmented brand portfolio, organized into five
core business areas:

1. Beauty – Includes well-known brands like Olay, Pantene, and Head & Shoulders,
offering skin and hair care solutions tailored to diverse consumer preferences.
2. Grooming – With Gillette and Venus, this segment leads in men’s and women’s
grooming products.
 3. Health Care – Anchored by Oral-B, Crest, and Vicks, it supports consumer oral health
and wellness.
4. Fabric & Home Care – Featuring Tide, Ariel, Downy, and Febreze, this is one of
P&G’s largest segments, addressing cleaning and scent enhancement for homes and
clothing.
5. Baby, Feminine & Family Care – This segment includes Pampers, Always, and
Charmin, providing essential hygiene and care products for families.
Each brand is backed by rigorous consumer research and development, ensuring it meets
the evolving demands of global consumers.

Commitment to Innovation and Consumer Understanding

One of P&G’s defining characteristics is its relentless focus on innovation. The company invests
significantly in Research & Development (R&D)—more than $1.9 billion annually—to stay
ahead of market trends and develop products that improve lives. P&G leverages advanced
analytics, AI, and digital tools to understand consumer behavior in real-time, which informs
product design, packaging, and marketing strategies. Moreover, P&G emphasizes a consumer-
centric approach, ensuring that its offerings are culturally relevant, affordable, and accessible
across different regions and income groups. This deep understanding of the consumer experience
is a key driver of the company’s sustained market leadership.

Sustainability and Corporate Responsibility

P&G is equally committed to sustainability and ethical business practices. Its "Ambition 2030"
plan outlines clear goals for reducing carbon emissions, plastic waste, and water usage, while
simultaneously improving livelihoods in underserved communities. The company is transitioning
to recyclable packaging, investing in renewable energy, and supporting inclusive supply chain
practices.

Furthermore, P&G plays an active role in corporate social responsibility (CSR) through
initiatives like disaster relief support, menstrual hygiene education, and gender equality
campaigns. This holistic approach enhances its brand value and aligns with modern consumer
values.

Market Position and Global Influence

With a market capitalization exceeding $300 billion, P&G ranks among the top companies in the
global fast-moving consumer goods (FMCG) sector. It consistently appears in the Fortune 500
and maintains strong ratings from financial institutions for its stability, growth, and dividend
performance.
Despite evolving economic conditions, increasing competition, and geopolitical uncertainties,
P&G continues to thrive by adapting to global macroeconomic factors, embracing digital
transformation, and prioritizing consumer trust. Its ability to navigate complexity while
delivering essential daily-use products makes it a benchmark for resilience and excellence in the
corporate world.

Section 1: Demand Forecasting at P&G

 1.1 Forecasting Methods
Statistical Models, AI-Based Analytics, and Historical Sales Data
P&G’s demand forecasting is a highly sophisticated process that blends advanced analytics with real-
world business intelligence. At its core, the company uses:

 Statistical Models: Traditional statistical methods, such as time-series analysis and regression
models, help identify patterns in historical sales data. These models are regularly updated to
reflect new trends and seasonality.

 AI and Machine Learning: P&G has invested heavily in AI-driven tools. For example, they
use platforms like KNIME for predictive analytics, allowing them to analyze vast amounts of data
from different sources and predict future demand with greater accuracy. Machine learning models
can detect subtle patterns that humans might miss, such as the impact of weather changes on
detergent sales or the effect of social media trends on beauty product demand.

 Historical Sales Data: Decades of sales records are analyzed to spot recurring trends, such as
increased demand for cold medicine during flu season or higher sales of sunscreen in summer
months. This data is continuously fed into P&G’s forecasting systems to refine predictions.

Market Research Techniques and Consumer Behavior Analysis

To complement data-driven methods, P&G conducts extensive market research:

 Surveys and Focus Groups: P&G regularly surveys consumers and organizes focus groups to
gather direct feedback on product preferences, packaging, and pricing. This qualitative data helps
the company understand why certain products are popular and how to improve existing ones.

 Social Media Listening: Tools like Brand watch monitor social media platforms for trends,
hashtags, and consumer sentiment. For example, if a new beauty trend emerges on TikTok, P&G
can quickly adapt its product development and marketing strategies.

 Collaborations with Data Providers: Partnerships with companies like Nielsen and IRI
provide P&G with data on competitor pricing, shelf space, and market share across different
regions. This helps P&G benchmark its performance and adjust strategies accordingly.

 Consumer Behavior Analysis: P&G uses advanced analytics to bridge the gap between what
consumers say they want and what they actually buy. For instance, focus groups might indicate a
preference for eco-friendly packaging, but actual sales data might show that price is a bigger
driver. P&G’s systems reconcile these insights to guide product development and marketing.
 Surveys and Social Media
Focus Groups Listening

Collaborations Consumer
with Data Behavior
Providers Analysis

 1.2 Regional Demand Variations

Consumer Preferences Across North America, Europe, and Asia
P&G tailors its products to meet the unique needs of consumers in different regions:

 North America: This region is P&G’s largest market, accounting for over half of its net sales.
Consumers here prefer convenience and innovation, such as multi-packs, subscription services,
and premium products. For example, Tide Pods and Gillette razors are especially popular due to
their ease of use and advanced features.

 Europe: European consumers are more environmentally conscious and value sustainability.
P&G adapts by offering products with biodegradable packaging and formulas that work well with
hard water, which is common in many European countries. Gillette and Head & Shoulders are
market leaders here.

 Asia: Asian markets are highly diverse, with strong demand for innovative beauty and hygiene
products. P&G operates R&D centers in India, China, and Japan to develop products tailored to
local preferences, such as fragrance-free diapers in Japan or skin-whitening creams in Southeast
Asia.
Demand Elasticity and Adaptation to Local Needs
 Demand Elasticity: In price-sensitive markets, P&G adjusts its pricing strategies. For example,
in Latin America and parts of Asia, the company offers smaller, more affordable product sizes to
make its products accessible to a broader range of consumers.

 Local Adaptation: P&G’s product formulations, packaging, and marketing messages are
customized for each region. For instance, laundry detergents are formulated to work in different
water conditions, and marketing campaigns are tailored to reflect local cultural values and
lifestyles.

Section 2: Production and Operations Strategy

 2.1 Production Planning
Capacity Decisions and Technology Adoption in Manufacturing
P&G’s production planning is designed to maximize efficiency and flexibility:

 Capacity Planning: The company carefully analyzes demand forecasts to determine how much
of each product to produce and in which facilities. This involves balancing the need to meet
customer demand with the cost of maintaining excess capacity.

 Technology Adoption: P&G invests in advanced manufacturing technologies, such as

robotics, IoT sensors, and digital twins. These tools help automate production lines, monitor
equipment performance, and simulate different production scenarios to optimize output.
  Lean Production Practices: P&G employs lean manufacturing principles to minimize waste
and improve efficiency. This includes continuous improvement programs, where employees are
encouraged to suggest ways to streamline processes and reduce costs.

 Just-In-Time (JIT) Models: JIT production means that P&G manufactures products only as
they are needed, reducing inventory costs and waste. For example, Tide Pods are produced in
response to real-time demand signals, ensuring that warehouses are not overstocked

2.2 Global Supply Chain and Outsourcing

Sourcing of Raw Materials Globally
P&G sources raw materials from suppliers around the world to ensure quality, sustainability, and cost
efficiency:

 Global Supplier Network: The company works with thousands of suppliers, carefully
selecting those that meet its standards for quality, environmental responsibility, and ethical
practices. For example, P&G sources 75% of its palm oil from certified sustainable sources.

 Risk Management: By sourcing materials from multiple regions, P&G reduces its exposure to
disruptions caused by natural disasters, political instability, or trade disputes.

Outsourcing vs In-House Production Decisions

P&G makes strategic decisions about which activities to keep in-house and which to outsource:

 In-House Production: Core products, such as Gillette razors and Tide detergent, are
manufactured in P&G’s own facilities to protect intellectual property and maintain quality
control.

 Outsourcing: Non-core activities, such as IT services and certain logistics functions, are
outsourced to specialized providers. This allows P&G to focus on its core competencies and
reduce costs.

Supply Chain Resilience and Risk Management

P&G’s supply chain is designed to be resilient and adaptable:

 Multi-Regional Sourcing: By sourcing materials and manufacturing products in different

regions, P&G can quickly shift production in response to disruptions.

 Inventory Buffers: The company maintains strategic inventory buffers of high-demand

products to ensure continuity of supply during emergencies, such as natural disasters or
pandemics.

 Real-Time Data Integration: P&G uses advanced demand sensing solutions, such as Terra
Technology’s Multi-Enterprise Demand Sensing (MDS), to monitor real-time demand signals
from retailers and adjust production and inventory levels accordingly. This has reduced forecast
error by over 50% in some categories and lowered inventory costs without compromising service
levels.
  Scenario Planning: P&G uses digital twin technology to simulate different supply chain
scenarios, such as the impact of a trade war or a sudden spike in demand, allowing the company
to prepare contingency plans in advance

Summary Table for Quick Reference

Topic Key Details

Forecasting Methods Statistical models, AI/ML, historical data, market research, social
media listening
Regional Preferences North America: convenience/innovation; Europe: sustainability; Asia:
beauty/hygiene focus
Production Planning Capacity analysis, tech adoption, lean/JIT, automation
Supply Chain/Outsourcing Global sourcing, in-house for core products, outsourcing non-core,
multi-regional resilience
Risk Management
Inventory buffers, real-time data, scenario planning, digital twins

This level of detail reflects P&G’s commitment to leveraging technology, data, and global best practices
to stay ahead in the competitive consumer goods industry.

Cost Structure and Efficiency at Procter & Gamble (P&G)

3.1 Cost Identification: Fixed vs Variable Costs in Operations

Procter & Gamble’s cost structure can be broadly divided into fixed costs and variable costs,
which vary depending on the nature of the product category and operational activities.

Fixed Costs:
Fixed costs are expenses that remain constant regardless of production volume. For P&G, these
include:

 Rent and facility expenses for manufacturing plants and offices.

 Salaries of permanent staff and management.
 Depreciation of equipment and machinery.
 Insurance and property taxes.
 Investments in advanced manufacturing technologies and sustainability initiatives
(such as waste reduction and energy conservation) also contribute to fixed costs, as these
are largely independent of production volume in the short term.

These fixed costs are essential to keep operations running and do not fluctuate with the number
of units produced. However, as production volume increases, fixed costs are spread over more
units, effectively reducing the fixed cost per unit.
Variable Costs:

Variable costs fluctuate directly with production volume. For P&G, these typically include:

 Raw materials such as chemicals and ingredients used in detergents and beauty
products.
 Direct labor costs associated with production lines.
 Utilities consumed during manufacturing.
 Packaging materials.
 Logistics and freight costs, which have been significant given recent commodity price
increases.
 Sales commissions and other costs linked to volume of sales.

Variable costs per unit tend to remain constant, but total variable costs increase or decrease
proportionally with production volume.

Examples from Product Categories;

P&G’s diverse product portfolio spans several categories, each with distinct cost structures:

Product
Fixed Cost Characteristics Variable Cost Characteristics
Category

High investment in manufacturing Raw materials like surfactants, enzymes,

Detergents
plants and equipment; stable and packaging; costs vary with
(Fabric & Home
overhead costs for large-scale production volume. Logistics costs
Care)
production facilities. significant due to bulk distribution.

Fixed costs include R&D, Ingredients (e.g., chemicals, fragrances),

Beauty Products marketing, and premium packaging, and direct labor vary with
(Skin & manufacturing facilities; higher production volume; product
Personal Care) fixed marketing spend to maintain reformulation costs can also impact
brand image. variable costs.

Fixed costs include specialized

Variable costs include raw materials
Baby, Feminine production lines and regulatory
(e.g., fabrics for diapers), packaging, and
& Family Care compliance; ongoing marketing
distribution.
investments.

For example, the Fabric & Home Care segment (including detergents like Tide) relies on a cost
structure where raw materials and packaging are significant variable costs, while manufacturing
facilities and supply chain infrastructure represent fixed costs.
In contrast, Beauty products such as those under the Olay brand incur higher fixed marketing
and R&D costs to maintain premium positioning, alongside variable costs tied to raw materials
and packaging.

Cost Management and Efficiency Initiatives:

P&G actively manages its cost structure through:

 Supply chain optimization: Leveraging global sourcing, negotiating supplier contracts,

and just-in-time inventory to reduce both fixed and variable costs.
 Manufacturing efficiency: Investing in automation, digital capabilities, and AI to reduce
production costs and improve throughput.
 Sustainability efforts: Reducing waste and energy use to lower fixed overheads and
variable inputs.
 Price increases and product reformulation: To offset rising commodity and logistics
costs, particularly impacting variable costs.

3.2 Cost Optimization Strategies at Procter & Gamble:

Use of Economies of Scale:

 P&G leverages its massive global scale to reduce unit costs across manufacturing,
procurement, and distribution. By producing at high volumes and operating across
numerous product lines, the company achieves significant cost benefits. For example,
P&G’s annual sales are roughly 10 times higher than close competitors like Clorox,
allowing it to negotiate better terms with suppliers and optimize logistics.
 The company’s broad product portfolio (over 2,000 products) enables economies of
scope, as P&G can distribute multiple products through the same channels, further
lowering costs.
 These scale advantages also enhance P&G’s bargaining power with major retailers and
suppliers, supporting better pricing and shelf placement.

Investment in Automation and Digital Tools:

 P&G is investing heavily in automation, artificial intelligence (AI), and digital

transformation to drive productivity and reduce operational costs. Automation
technologies are deployed across manufacturing, supply chain, and even marketing
functions
 Examples include:
o Real-time, touch less quality control using sensors and cameras, reducing waste
and manual labor.
o Automated production lines, such as night shifts at Gillette factories running
without human supervision, boosting productivity and lowering labor costs
Integration of IOT (Internet of Things) and advanced analytics to monitor
production, optimize energy and water use, and prevent equipment failures
 These digital initiatives have already delivered substantial savings. P&G estimates about
$1.5 billion in annual cost of goods savings from supply chain productivity measures,
 with an additional $500 million in annual savings from broader digital and automation
investments.
 The company is also digitizing R&D and marketing, using data and algorithms to speed
up innovation cycles and optimize media spending.

Strategic Supplier Relationships:

 P&G’s supplier relationship management (SRM) program is a model for collaborative

success. The company identifies and nurtures strategic partnerships, streamlines its
supplier base, and promotes joint innovation.
 By fostering trust, transparency, and open communication, P&G and its suppliers work
together to address challenges, share information, and drive mutual benefits.
 The company encourages suppliers to contribute new ideas and continuously improve,
which leads to cost savings, efficiency gains, and faster time-to-market for innovations.
 Strategic sourcing and long-term contracts help P&G secure favorable terms, mitigate
raw material price volatility, and ensure supply chain resilience.

These integrated strategies enable P&G to maintain its competitive edge, absorb inflationary.

4.1 Optimization Models: Marginal Analysis and Break-Even Analysis in

Decision-Making

Marginal Analysis in Decision-Making:

Marginal analysis is a core optimization model that examines the incremental (marginal) costs
and benefits of a specific business decision, such as producing one more unit or adjusting a
product’s price. The fundamental rule is that a company should continue to increase output or
make changes as long as the marginal benefit (revenue) from the change exceeds the marginal
cost incurred.

 Profit Maximization: The optimal production level is where marginal cost (MC) equals
marginal revenue (MR). Producing beyond this point reduces profits, as the cost of
making an extra unit exceeds the revenue it generates.
 Opportunity Cost: Marginal analysis also incorporates opportunity cost, helping
managers choose between alternative investments or production options by evaluating the
additional benefit of one action over another.
 Practical Example: If P&G is considering increasing production of a new detergent,
marginal analysis would compare the extra cost of producing and marketing each
additional unit with the expected additional revenue from sales. If the marginal revenue
exceeds marginal cost, expansion is justified.

Break-Even Analysis in Product Launches and Pricing:

Break-even analysis determines the sales volume or revenue needed to cover all fixed and
variable costs, identifying the point at which a product or project becomes profitable. This is
especially relevant for product launches and pricing decisions.
  Formula:

Break-even point (units) = Fixed Costs

The denominator, known as the contribution margin, is the amount each unit contributes toward
covering fixed costs.

 Application in Product Launches: Before launching a new product, P&G would use
break-even analysis to determine how many units must be sold at a given price to cover
development, manufacturing, and marketing costs. This informs whether the launch is
financially viable and helps set realistic sales targets.

 Application in Pricing: Break-even analysis helps set minimum pricing strategies. For
example, if P&G considers lowering the price of a beauty product to gain market share,
break-even analysis shows how many more units must be sold to maintain profitability
and avoid losses.

Summary Table: Marginal Analysis vs Break-Even Analysis

Model Focus Key Decision Point Example Application at P&G

Marginal Incremental MC = MR (profit Should we produce one more unit of

Analysis costs/benefits maximization) Tide?

Break-Even Total costs vs. total Revenue = Total Costs How many units of Olay must be sold to
Analysis revenue (BEP) cover launch costs?

4.2 Pricing and Resource Allocation at Procter & Gamble

Dynamic Pricing in Competitive Markets:

Procter & Gamble (P&G) employs a sophisticated dynamic pricing strategy that adapts to market
conditions, consumer behavior, and competitive actions:

 Value and Market-Oriented Pricing: P&G uses a market-based approach, setting

prices based on product quality, brand value, production costs, and competitor pricing.
This includes competitive pricing for mass-market products like Tide detergents,
premium pricing for high-end brands such as Olay, and penetrating pricing to gain market
share in new segments.
 Segmented Pricing: P&G offers different prices to distinct consumer segments
depending on demand elasticity, allowing more precise revenue maximization3.
 Response to Inflation and Cost Pressures: In recent years, P&G has implemented
strategic price increases to offset rising raw material and logistics costs. For example,
price hikes of 10%+ year-over-year have helped improve gross margins by over 150 basis
points, although these increases have sometimes led to volume declines in sensitive
categories like health and beauty in Europe.
  Use of AI and Real-Time Data: P&G leverages artificial intelligence to monitor
competitor prices and market trends in real-time, enabling rapid, data-driven price
adjustments. AI tools simulate market scenarios and optimize pricing dynamically to
balance profitability and competitiveness.

This dynamic pricing approach helps P&G maintain profitability while responding flexibly to
consumer price sensitivity and competitive pressures.

Allocation of Marketing Budgets and Production Resources:

 Marketing Budget Allocation: P&G strategically allocates marketing spend to

maximize market penetration and brand loyalty. The company has shifted from heavy
reliance on coupons and deals to increased advertising investment, focusing on brand
building and sustained consumer engagement.
 Resource Allocation Across Product Lines: Production resources are allocated
based on product profitability, market demand, and strategic priorities. High-margin
premium brands may receive more investment in innovation and marketing, while
mass-market products focus on efficient large-scale manufacturing and supply chain
optimization.
 Balancing Price and Volume: P&G carefully balances pricing and production
volumes to avoid excessive volume declines from price hikes. For example, price
increases in fabric and home care raised average prices by 13% but resulted in a 5%
sales volume drop, highlighting the need for calibrated resource allocation and pricing
strategies
 Supply Chain and Manufacturing Efficiency: Investments in automation and
digital tools improve production efficiency, enabling flexible scaling of output to
meet demand without excessive cost increases.

Summary Table: Pricing and Resource Allocation at P&G

Aspect Key Features & Actions Impact & Benefits

Market-based, segmented pricing, AI- Maximizes revenue, adapts to

Dynamic Pricing
driven real-time adjustments inflation and competition

Marketing Budget Shift from promotions to brand Increases brand loyalty and market
Allocation advertising, focus on penetration share

Production Resource Prioritize high-margin products, optimize Balances volume and profitability,
Allocation scale and efficiency controls costs

Real-time competitor price tracking, Enables agile pricing and

AI & Digital Tools
scenario simulation promotional decisions
P&G’s integrated approach to dynamic pricing and resource allocation allows it to sustain
profitability in competitive and inflationary environments while maintaining strong brand equity
and market presence.

Section 5: Adaptation to Economic Conditions in Procter & Gamble

1. Impact of Inflation

Inflation means the prices of goods and services go up. This affects the cost of raw
materials, packaging, and transportation. P&G adapts by:

 Raising product prices gradually to protect profits without upsetting customers.

 Cost efficiency can be improved through technology and process improvements
to absorb some of the rising costs.

 Gradual Price Increases (Not Sudden Hikes

 Product Re-Packaging / Shrinkflation
 Improved Efficiency and Cost-Saving Innovations
 Value-Added Offers
 Targeted Pricing by Region or Brand Tier

Example: When inflation hit packaging costs in 2022, P&G switched to lighter, cheaper
packaging and adjusted prices in phases.
Comparison of US Inflation Rate vs. P&G’s Pricing Strategy (2020–2024)

Year US Inflation Rate (%) P&G’s Price Increase (%)

2020 1.4 1.5
2021 4.7 3.2
2022 8.0 6.0
2023 6.5 10.0
2024 3.8 6.0

Managing Interest Rate Changes

  Interest rates affect how expensive borrowing money for investments or operations is.
P&G responds by:
 Delaying large borrowings when interest rates are high.
 Focusing more on internal funding or cost-saving projects.
 Investing only in high-return projects during expensive borrowing periods.

Example: P&G uses financial forecasting tools to estimate how interest changes might impact
future project costs.

Case study
P&G and Bankers Trust – Interest Rate Risk Management

In the early 1990s, P&G entered into complex interest rate swap agreements with Bankers Trust
to hedge against potential interest rate fluctuations. These swaps were intended to manage the
company's exposure to interest rate volatility. However, the instruments were highly leveraged
and complex, leading to significant financial losses when interest rates moved unfavorably. P&G
incurred a loss of approximately $157 million and subsequently filed a lawsuit against Bankers
Trust, alleging misrepresentation of the risks involved. The case was settled out of court in 1996.

P&G's Effective Interest Rate on Debt (%)

Fiscal Year Ending Effective Interest Rate (%)

June 2020 2.84%
June 2021 2.69%
June 2022 2.74%
June 2023 2.71%
June 2024 2.69%
March 2025 (Q3) 2.52%
 P&G's Effective Interest Rate on Debt (%)
2.90%
2.84%

2.80%
2.74%
2.71%
2.70% 2.69% 2.69%

2.60%

2.52%
2.50%

2.40%

2.30%
Jun-20 Jun-21 Jun-22 Jun-23 Jun-24 March 2025 (Q3)

Handling Currency Fluctuations (Exchange Rates)

 P&G sells products in many countries, so changes in currency values can impact profits.
 When the US dollar gets stronger, P&G earns less from international sales.
 P&G manages this by:
 Hedging currency risks—using financial contracts to reduce losses from
exchange rate changes.
 Producing goods locally in major markets to reduce exposure to currency
differences.

🇳🇬 Case Study: P&G's Withdrawal from Nigeria Due to Exchange Rate Challenges

In December 2023, P&G announced the cessation of its in-country production operations in
Nigeria, opting instead to import products into the West African nation. This strategic shift was
primarily attributed to macroeconomic challenges, notably the significant depreciation of the
Nigerian naira and a persistent shortage of foreign exchange.

Key Factors Influencing P&G's Decision:

 Currency Devaluation: The naira experienced a sharp decline against the U.S. dollar,
escalating the cost of importing raw materials and repatriating profits.
 Foreign Exchange Shortages: Multinational companies, including P&G, faced
difficulties in accessing U.S. dollars, hindering their ability to pay suppliers and manage
financial obligations.
  Inflationary Pressures: Nigeria's inflation rate soared to 31.7% in February 2024,
diminishing consumer purchasing power and affecting product affordability. P&G's Chief
Financial Officer, Andre Schulten, remarked on the challenges, stating:

“When you think about places like Nigeria... Creating value is very difficult for us as a U.S.
dollar-denominated company. The company anticipated restructuring costs ranging from $1
billion to $1.5 billion, encompassing foreign currency translation losses associated with the
substantial liquidation of operations in affected markets.

Response to Trade Policies and Regulations

 Global trade laws, import taxes (tariffs), and regulations affect how and where P&G does
business.
 P&G adapts by:
 Changing supply routes or sourcing materials from countries with favorable
trade terms.
 Adjusting product ingredients to meet local laws and standards.
 Building relationships with local governments to stay ahead of new rules.

Case study
Navigating U.S.-China Tariffs

In 2025, P&G faced increased input costs resulting from ongoing U.S.-China trade tensions,
including a 145% tariff on certain imports. Despite producing about 90% of its U.S. market
products domestically, P&G relied on China for specific raw materials and packaging. The tariffs
significantly impacted P&G's cost structure, potentially increasing annual costs by $1 billion to
$1.5 billion. In response, P&G announced plans to raise prices on select products to offset these
increased costs. Additionally, the company lowered its annual net sales and earnings forecasts
due to rising costs and reduced consumer spending amid economic uncertainty.
Economic Rationale and Demand Potential

Sub-Saharan Africa presents a compelling opportunity for P&G’s growth due to its rapidly
expanding population, urbanization, and growing middle class. With over 1.1 billion people, and
youth making up 60% of the population, the region shows increasing demand for hygiene
products, baby care, and personal grooming solutions. According to the World Bank, the region
is expected to experience economic growth rates of 3–4% annually, fueling consumer
spending.

Why now?

 Rising disposable incomes are driving demand for branded consumer goods.
 Limited competition from global FMCG giants leaves a gap for quality and affordable
products.
 Strong demand in countries like Kenya, Ghana, and Rwanda for healthcare and baby
products aligns with P&G’s core strengths.

Factor Local Production Imports from Other Regions

High (plants, logistics, regulatory
Initial Investment Low (uses existing global infrastructure)
setup)
Lower (local labor, reduced Higher (tariffs, exchange rate risk,
Operating Costs
shipping duties) transport)
Slower (dependent on international
Speed to Market Fast (local supply chain)
logistics)
Economic Exposed to exchange rate risks (e.g.,
Hedge against currency fluctuations
Volatility Naira, Cedi)
Strong (presence as a local Weaker (perceived as external and
Brand Trust
employer) expensive)

Recommendation

Proposal: Using AI-Powered Insights to Implement Dynamic Pricing.

To improve decision making around pricing strategy, Procter & Gamble (P&G) should
implement a dynamic pricing system that use real-time AI analytics and machine learning
models. Through dynamic pricing, P&G can adjust prices to specific markets based on real-time
adjustments in consumer demand, competitive pricing changes, regional economic signals (e.g.,
inflation, exchange rates), and stage of the product lifecycle.

Justification and Evidence

Consumer spending behavior is rapidly changing.

According to Nielsen IQ, over 70% of consumers globally are altering their spending habits in
response to economic pressures.
Static pricing models are unable to adapt to short-term influences on consumer demand and take
too long respond to cost increases. The result is P&G losing either potential revenue or P&G
losing customers due to inefficient pricing models.

Proven Industry-wide Models

Other firms familiar with dynamic pricing, such as Amazon.com and Unilever, utilize dynamic
pricing to optimize their pricing margins without sacrificing customer loyalty.

McKinsey does a good job of providing some quantifiable information on recent trends in
pricing strategy. They claim that firms use advanced pricing tools, a form of dynamic pricing,
can increase margin realization between 2% and 7%.

P&G's Current and Future Capabilities

P&G is already using AI in the product innovation process and optimizing their supply chain. To
develop AI pricing models and systems would capitalize on PGs current capabilities and enhance
their existing systems instead of starting from scratch.

Inflation and Cost Increases from Suppliers

The recent inflation and spikes in costs, such as raw materials and packaging costs, indicate that
a dynamic pricing system may be a good idea anyway.

Conclusion

Procter & Gamble has been able to satisfy shareholder requirements for financial returns while
diversifying itself into a consumer production company that is solidly and responsibly
recognized as a corporate citizen. By walking the fine line between tradition and innovation,
global and local, aspiring for economically sound results while ultimately acting as a responsible
best practice example of ethics, P&G has utilized a unique corporate DNA that leverages their
understanding of consumer behavioral economics and accurately forecasting products and
marketplace expectations.

With continued investments in technology and sustainability, as well as new commitments to its
people and workforce to develop human equity, P&G continues to innovate for competition,
while continuing to positively affect people and the environment. As the economy continues to
significantly change its shape and options, P&G continues to be an example of success that
reinforces agility, innovation, and flexibility when needed, while validating that profitability can
be proceeded with responsible governance and purpose.

Reference
https://emerj.com/artificial-intelligence-at-procter-gamble/
https://www.linkedin.com/pulse/10-key-supply-chain-trends-watch-forecasting-demand-richard-
2a2wc
https://www.reuters.com/business/procter-gamble-lowers-annual-forecasts-trade-war-hits-
consumer-demand-2025-04-24/
https://www.sdcexec.com/sourcing-procurement/project-management-software/article/
10289777/procter-gamble-planning-to-succeed-at-procter-gamble
https://consumergoods.com/procter-gamble-uses-demand-sensing-solution

https://business.columbia.edu/sites/default/files-efs/pubfiles/962/962.pdf

https://www.cnbc.com/2024/04/18/procter-gambles-strategic-pricing-shift-should-accelerate-business-
growth-this-year.html

https://taylorwells.com.au/pg-strategy/

https://panmore.com/procter-gamble-marketing-mix-4ps-analysis

https://www.wsj.com/articles/procter-gamble-reports-slightly-higher-sales-drop-in-prices-1533040191

https://www.hardingloevner.com/out-of-our-minds/what-pgs-pricing-decisions-tell-us-about-inflation/

https://www.ft.com/content/a4f91e34-bd11-408d-989c-e56ecd3b0fc7
https://www.reuters.com/business/procter-gamble-lowers-annual-forecasts-trade-war-hits-
consumer-demand-2025-04-24/
https://www.hardingloevner.com/out-of-our-minds/what-pgs-pricing-decisions-tell-us-about-
inflation/
https://s1.q4cdn.com/695946674/files/doc_financials/2023/ar/2023_annual_report.pdf
https://s1.q4cdn.com/695946674/files/doc_financials/2023/ar/2023_annual_report.pdf