Proctol & Gamble was selling over 300 different products in 160 countries by the 1960s. For years, they would be able to grow as a company and deliver siezable profit with their popular brand name products by having manufacturing plants in each country that sold their products. These countries would be able to market specifically to the locals, catering to the taste preferences and changing their marketing message to suit their target. The problem started when the cost of manufacturing, packaging and marketing rose too high. This problem became too much for the company in the 1980s.
In the 90s, the company’s growth was very sluggish even though the distribution and reach of the company improved. The distributors of the products manufactured by P&G were demanding discounts. The brands that they created were being sold in large-chain supermarkets and deparment stores. Nevertheless, the profit was still tight because of the steep cost of manufacturing. Each region which distributed products made by P&G required their own manufacturing facility. The strategy that they once used was no longer realistic because of the cost associated with distribution and marketing.
Later on, P&G decided to lessen their manufacturing costs by centralizing the production and closing down a number of their factories. They laid-off a lot of their employees in order to reduce the cost of creating the products. The benefit of this strategy is that they would be able to lessen the cost of labor and manufacturing. They will be able to have more control over branding, marketing and distribution with less warehouses. This means that the company will become more focused. One of the main risks for this would be that their marketing will be general, and regional marketing efforts will no longer be running. Targeting locals will no longer be part of their strategy, meaning that they might lose the interest of large groups at a time. Although their annual cost savings will rise, the markets that they lose because of this reorganization might take away some of the profit that they are making.
Strategy Of International Business. Chapter 17. New York: McGraw Hill Companies, 2000.