PROCTER & GAMBLE: In just 11 years, this innovative multinational bas shaken up the local market, and it's only getting started

Thailand's economic crisis has provided an impetus to improve and expand operations for a company voted as the the world's most admired in its industry in a survey of corporate chiefs by Fortune magazine last year.

‘So long as Thailand continues with its excellent track record of investment-friendly, exprt-oriented policies, and shuns policies that hinder the ability of market mechanisms to work efficiently and tranparently, Thailand will always be an important country in Asean as a potential base for future Procter & Gamble investments’
RAVI CHATURVEDI
Managing director

Procter & Gamble - maker of household names such as Pantene, Head & Shoulders, Oil
of Olay, Vicks and Pringles is investing more than one billion baht this year, of all years, to expand its capacity in Thailand.

"This year we committed to invest one billion baht, and we are seeing that through, despite the current economic situation," said Ravi Chatuivedi, managing director of Procter & Gamble (Thailand) Ltd.

The figure represents an increase of nearly 50% in its total investment since the company began operations in Thailand 1 1 years ago. Since it entered the local market in 1987, it has invested 2.2 billion baht, and has increased its turnover 28-fold: from just 200 million baht in 1987 to 5.7 billion last year. Consequently, Mr Chaturvedi sees considerable room for expansion.

" I will say this: So long as Thailand continues with its excellent track record of investment-friendly, export-oriented policies, and shuns policies that hinder the ability of market mechanisms to work efficiently and transparently, Thailand will always be an important country in Ascan as a potential base for future Procter & Gamble investments," he declared.

Procter & Gamble established itself in Thailand when it acquired the worldwide operations of Richardson-Vicks and took over the existing operations of Richardson-Vicks in Thailand. Since then, growth has been dramatic.

From 37 staff in 1987, it has grown to employ 860 last year at its Bangkok office, distribution centre and manufacturing plant. The company was selling its products through importers before it established its local presence.

"Thailand is important for us," Mr Chaturvedi said. "Thailand is a market of some 60 million people - this holds a tremendous potential.

"If that wasn't the case, we simply would not be, investing in. any on-the-ground operations and large manufacturing sites."

There is much more that Procter & Gamble can do in this relatively new market. Worldwide, it markets some 300 products, but only nine are available locally: Pantene Pro-V, Rejoice, Head & Shoulders, Pampers, Whisper, Oil of Olay, Safeguard, Vicks and Pringles.

With a presence in more than 140 countries, Procter & Gamble serves a potential consumer market of five billion, and employs around 103,000 people. Turnover last year was $3 5 billion and net profit more than $3 billion.

Procter & Gamble is now among the leading brands in Thailand's 12-billion-baht shampoo industry, and the 2.5-billion-baht sanitary napkin industry. It also leads the four-billion-baht skin-care market with about 3 6 % of sales.

There are other made-in-Thailand success stories. Pantene Pro-V and Rejoice Rich shampoo, for example, were initiated locally, and Thailand was the first country in the world where the products were launched.

Pampers Comfort diapers were designed and manufactured in Thailand, and now the product is exported to other parts of the world.

Like all consumer-goods giants, the company takes an active interest in research. It views Thailand as one of the world's most competitive markets: if a P&G product can pass the tough Thai consumer test, there's a good chance that it will do well in other countries. Consequently, Procter & Gamble has made efforts to make Thailand its launching pad for a number of products.

The company is also known as a global innovator on the management and corporate side. In 1887, for example, it became one of the first companies to introduce a profit-sharing plan for its workers. In the 1890s, it set up one of the first corporate research laboratories.

In the 1930s, Procter & Gamble introduced a marketing revolution when it gave teams within the company responsibility for promoting and managing particular brands.

As well, it pioneered the Efficient Consumer Response (ECR) system in the United States. ECR encourages manufacturers, suppliers and distributors to work more closely together to eliminate production and supply bottlenecks, thus creating better value for consumers. P&G has taken a leading role in Thailand, where it is among 20 large companies cooperating on ECR standards and systems.

In Thailand alone, ECR is expected to save tens of billions of baht for the entire industry. It can help consumers by optimising the use of store space, minimising the time and cost of product replenishment, and maximise the efficiency of trade and consumer promotions.

With the Thai economy in the doldrums at the moment, most companies are focusing on management restructuring and cost-cutting in order to survive, but Procter & Gamble is sticking to its core beliefs, according to Mr Chaturvedi.

The idea is to keep the company at a healthy distance from the recession by focusing on four fundamental principles: a) do more of what works; b) ruthlessly drive out waste; c) continue to recruit, train and support people for the long term; d) ensure the most productive use of assets, especially people.

Not many companies have the courage to say that they wouldn't lay off people, but instead place more emphasis on training them to raise productivity levels. But Mr Chaturvedi is adamant that his company's programme - at least seven days a year of training for every employee - will be maintained as it is the key to success.

"Every member of the staff will have an individually-tailored annual development plan, and each staff member will work with his or her supervisors to map out a personal development plan. We have earmarked more than 27 million baht during this fiscal year for training," he said.

Mr Chaturvedi also says there is no company in the world as diverse in its management as Procter & Gamble. There is no policy to keep expatriates in top management when local people can be encouraged to gain the knowledge they need to rise to the top.

"Lots of companies say they want global thinkers, but Procter & Gamble backs that up with action," he said, quoting from Fortune.

With the recession biting, Procter & Gamble is experiencing problems with declining sales volume, but some solutions are at hand. Mr Chaturvedi said the company was using the parent company's credit record to help local distributors, "not only to obtain financing but also to obtain it at preferential interest rates from financial institutions".

All 15 of the company's key regional distributors had benefited from the programme, and it could be extended to suppliers as well, he said.

On the social contribution side, Procter & Gamble (Thailand) sponsors scholarships at universities and schools. It also promotes cleaner air by donating a percentage of sales revenue to the authorities to control pollution in Bangkok and other cities. Several charitable and non-governmental organisations have also obtained support from the company.

Mr Chaturvedi said Thailand would continue to go through a difficult phase next year and may see some light only at the end of 1999 or the start of 2000. With situations worsening in other countries, he is more careful than some executives when it comes to warning about the need to watch external factors closely for their impact on Thailand.

But as far as Procter & Gamble is concerned, it has gained an advantage by taking precautionary measures ahead of time, rather than simply reacting to bad times once they arrive, he said.

Procter & Gamble Manufacturing (Thailand) Ltd
Established: 1987
Major shareholders: Procter & Gamble
Main businesses: Manufacturng and distribution of customer products
Number of employees: 880
Assets at end-1997: 5.7 billion baht

Worldwide
Headquarters: Cincinnati, Ohio, USA
Number of countries: 140
Number of employees: 110,000
1997 gross revenue: US$37,154 million
1997 net profit: $3,780 million