According to Procter and Gamble Company annual report of the year 2013, a variety of raw materials used in product manufacturing is exposed to price fluctuations. This is attributed to the climatic conditions, supply conditions, and political and economic changes, among other fluctuating factors. The overheads are prone to modifications because of the variations in prices of goods, inputs in the form of raw materials, wages, depreciation and appreciation of the currency, and interest rates which determine the availability of credit (Todaro & Smith, 2006).
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Therefore, a company must ensure its ability to control the fluctuations through strategic pricing actions, coming up with projects that save on costs, making proper sourcing decisions, hedging decisions, and improving the productivity that is consistent with the objective of control over fluctuations in order to be successful in this industry (Farnham, 2005). Credit and currency exposure is important to countries, such as Venezuela, Argentina, China, India, and Egypt, known for exercising currency controls (Bateman & Snell, 2011). It is vital for a business to sustain the necessary production and supply arrangements to ensure the successful management of disruptions. Consequently, there will be a need to execute, realize, and maintain plans during cost improvement to include outsourcing of projects as well as identifying, training, and ensuring that employees are held. The company announced its efficiency regarding the minimization of costs and production in research development areas and marketing.
Evidence for Future Options
To handle areas prone to frequent cost fluctuations of key inputs, the company has decided to use future options (Bateman & Snell, 2011). The options are the limited basis with maturities ranging from less than one year to five years mature swap contracts. Most costs of sold products are subject to a given range of variable in nature. The chief sources of variation in gross margin are the cost of raw materials, the results of pricing geographical mix, and the product. In this case, the costs are the major variants about marketing while the overheads take minor portions.
In the year 2012, Procter and Gamble Company introduced a plan to help them in production and cost minimization that would reduce the cost of overall production and supply process. The plan is deliberated to increase the rate of cost reductions by making an efficient decision in the management and manufacturing as well as other strategic processes to identify the way forward.
The company also has a post-employment sponsorship program, which includes cover pension, defined contribution and benefit plans, and post-employment benefit (OPEB) plans. The latter consists of medical and life insurance for retirees to a large extent. For financial reporting purposes, OPEB will require projections on the accrued benefit obligations, including variables such as mark down rates and the anticipated increase in salaries. Also, it will need employee-related factors such as earnings, retirement age, deaths, anticipated return on assets, and trend rates of healthcare cost (Bateman & Snell, 2011). These, among other hypotheses, influence the annual expenses while the obligations identified in the underlying plans’ assumptions are postponed.
In conclusion, the strategies initiated by the company, including the future long plans and the expected tactics are potentially viable. Probably, the success of the company will be reliant on the strategies.
Bateman, T. S., & Snell, S. (2011). Management: building competitive advantage (3rd ed.). Chicago: Irwin.
Farnham, P. G. (2005). Economics for Managers. Upper Saddle River, NJ: Pearson Prentice Hall.
Todaro, M. P., & Smith, S. C. (2006). Economic development (9th ed.). Boston: Pearson Addison Wesley.