Full version Procter &Amp; Gamble Rely Tampons Case Study

Procter &Amp; Gamble Rely Tampons Case Study

This print version free essay Procter &Amp; Gamble Rely Tampons Case Study.

Category: Business

Autor: reviewessays 03 December 2010

Words: 2227 | Pages: 9

Abstract

The purpose of this research paper is that to present the difficulties Procter & Gamble faced in the early 1980Ў¦s due to a correlation between the companyЎ¦s Rely tampon and the disease Toxic Shock Syndrome (TSS). Also, how the company handled the findings before and after new laws were passed by Congress giving the Food and Drug Administration (FDA) the authority to regulate medical devices, which included tampons. Thereafter, I will analyze the ethical issues relevant to this case within a SWOT analysis.

Introduction

Corporate Social Responsibility (CSR) is about how companies manage their business processes to produce a positive impact on society. Companies introduce new products in markets, usually after testing concludes that the product is safe for use or consumption. It is nearly impossible for a company to truly know all of the potential risks a brand new product may have, even after thorough testing. However, once a company receives reports that its product may be causing harm to consumers, it is their responsibility to conduct more research and tests to rule-out any possible truth in the reports. This is what a socially responsible company would do, one who is preoccupied not only with their bottom-line, but one that is also worried about its customers.

After Procter & Gamble introduced its Rely tampon in the market in the 1970Ў¦s, the company began receiving reports as early as 1975 that the product was causing a rare but possibly deadly disease, TSS (Toxic Shock Syndrome). This product was not made with cotton as the competitorsЎ¦ tampons. The Rely tampon was made with synthetics, like carboxymethylcellulose and polyester in order to be the first extended wear and most absorbent tampon in the market.

I will first discuss these reports and what the companyЎ¦s initial response was. Next, I will elaborate on the case and the companyЎ¦s course of action following the passing of new laws and further research conducted by the Center for Disease Control (CDC), the illnesses and the women affected by these decisions. Following, I will conduct a SWOT Analysis of the company in which I will include relevant ethic theories pertaining to the case. Finally, I will conclude and provide recommendations based on my findings.

Company History

William Procter, who emigrated from England, and James Gamble, who emigrated from Ireland, met when they married sisters. Procter was a candle maker and Gamble was a soap maker. Their father-in-law insisted that they become business partners and in 1837 Procter & Gamble was born. Throughout Procter & GambleЎ¦s history and development, the company has grown to be divided into five business segments: healthcare, beauty care, baby and family care, snacks and beverages and fabric and home care. The companyЎ¦s headquarters are located in Cincinnati, Ohio and employs around 110,000 people in nearly 80 countries and markets over 300 products worldwide with a net income of $5.66 billion.

Company Background

Procter & GambleЎ¦s major competitors begun marketing tampons as early as the 1930Ў¦s. In 1972 a ban to advertise sanitary products on television was lifted. Seeing this and the preference of women to use tampons, thus becoming a highly competitive market, P&G decides to enter this market in the early 1970Ў¦s. Enters the Rely tampon. By 1980, this tampon had acquired 20% of the market. In January 1980, twelve (12) cases of TSS were reported to the federal Centers for Disease Control (CDC). TSS begins suddenly, its symptoms are vomiting, high fever, rapid drop in blood pressure, diarrhea, headache, sore throat and muscle aches. After 24 hours a rash appears which is sunburn like. On days 3 and 4 of the disease, broken blood vessels appear in the skin, along with confusion, fatigue and weakness and weak and rapid pulse. The disease can cause kidney dysfunction, liver failure, can be deadly and needs immediate treatment (Klein, 2004). TSS was first identified in medical literature in 1978 and 90% of the cases were found in women who used tampons.

The Rely brand tampon was an extended wear tampon so absorbent it could hold twenty (20) times its weight in liquid, allowing the wearer to use one tampon continuously for the entire duration of her menstrual period. The Rely tampon was made of a mixture of carboxymethylcellulose (a wood pulp derivative) and polyurethane (a plastic). PolyurethaneЎ¦s uses are varied but it may be used to make sofa stuffing and insulation. However, in tests it shows that it is a cancer-causing agent or carcinogen and a tumor producer.

First TSS Reports

A small bi-weekly newspaper from New York, The Rochester Patriot Newspaper, appears to be the first to establish the issues with the Rely tampon in 1975 and 1976. The articles explain that Rochester and Fort Wayne, Indiana were the two cities chosen by Procter & Gamble as test markets for the new kind of tampon and the materials used to make this extended wear tampon.

After the second article that The Rochester Patriot published in 1976, P&G said it would remove the polyurethane from the tampon not because it was unsafe, rather due to construction problems. It seemed that the tampon would break apart during use, cause vaginal itching, burning and pain when removing the tampon. A source with inside company information said that P&G was changing the tampon due to the negative publicity the tampon was receiving in Rochester. However, seven months later, studies still found this agent in the tampons (Rochester Patriot, 1975-76).

The End of the Rely Tampon

Procter & Gamble began distributing the tampon in test markets in 1975 and introduced the product to the general consumer in 1979 by mailing 60 million free samples to women nationwide. At the onset of TSS, the disease was not linked to tampon use. In January, 1980, 12 cases of TSS were reported to the CDC. These cases were similar in that the patients were all women who had used tampons. The CDC continued receiving additional reports that associated the disease with tampon usage. In May of that same year, the CDC notified tampon manufacturers of the potential risks posed by their products. In September, 1980 the CDC concluded another study, this studyЎ¦s findings were that 71% of the women included in the study ad used P&GЎ¦s Rely tampon. P&G defended its product. However, the FDA gave P&G one week to analyze the CDCЎ¦s findings and respond to the study. P&G group of science experts were not able to positively refute this latest study, consequently, within the week, P&G Ў§voluntarilyЎЁ began recalling and buying back any unused product, signed a consent decree with the FDA, and agreed to finance and direct an educational program about the disease. The Rely recall is said to be Ў§among the biggest in US historyЎЁ (Horstman, 2000), Ў§voluntarilyЎЁ recalling Rely cost P&G $75 million.

In the end, the product was blamed for 55 deaths and 1,066 non-death related to the TSS disease. Hundreds of lawsuits were filed against P&G, the largest compensatory award was for $300,000 and out-of-court settlements have averaged between $12,000 and $15,000 per case. Total awards sought were estimated to be around 4 billion dollars. Considering the Ў§voluntaryЎЁ recall of the product, P&G was not held liable for punitive damages due to the companyЎ¦s social responsibility.

SWOT Analysis

Strengths

P&G is the global leader in all its business segments (health care, beauty care, baby and family care, fabric and home care and beverages and snacks). This may be the single largest strength the company possesses.

„h Many product lines and brand name reputation, marketing over 300 products worldwide.

„h Broad market coverage, marketing its products in 160 countries with manufacturing capacities in 40 countries.

„h P&G sales increased 10% for the past 3 years and with key strategies for continued growth, their goal is to maintain a 4% to 6% sales growth yearly. In 2004 sales exceeded $50 billion, up 19% and earnings were up 25%.

„h The company has been ranked first by retailers as having the clearest strategy, brands most important to retailers, most innovative company, most helpful consumer information, best supply chain management and best category management and consumer marketing at retail.

„h The company also possesses a huge buying power, giving it a significant competitive advantage against smaller competitors. This buying power also allows them successful brand creation and the marketing and advertising of these new brands. Over the past eight (8) years, P&G has introduced number one or number two non-food products in the United States each year. The company has sixteen (16) brands that produce a billion dollars or more in sales per year and ten (10) brands that produce over $500 million a year.

It is viewed that the way in which P&G conducted the Rely tampon recall was Ў§socially responsibleЎЁ, it showed a company that cared for the well-being of its consumers, they were viewed as straight-forward when they conducted a massive advertising campaign urging women not to use the Rely tampons. It is possible that with the handling of the recall, the company came out stronger because it was seen as a caring act to voluntarily recall a defective product.

Weaknesses

P&G weaknesses are few, the single most is where the majority of its sales come from, which is Wal-Mart. If Wal-Mart has a slow down in their sales or financial troubles, then P&G would also be in trouble.

„h Procter & GambleЎ¦s single largest customer is Wal-Mart, which accounted for nearly 17% of sales in 2004. P&GЎ¦s top ten customers account for 33% of its sales and if only one of these companies face financial hardship or suffer substantial sales to decrease, this could affect revenues for the company.

„h Only 35% of P&GЎ¦s sales are in developing and emerging countries and it is estimated that its market share is below 20% compared to top competitors.

„h The company grows where it is already overexposed in highly developed markets with mature product lines; therefore, it doesnЎ¦t tap the emerging and developing countriesЎ¦ growth.

It was feared that the negative publicity received would weaken P&G, not only for the injuries caused, but also because consumers could have generalized that all of the company products were unsafe. However, the company was viewed as having recalled the product Ў§freelyЎЁ, not having an adverse effect on the company.

Opportunities

Procter & Gamble has several growth opportunities , mainly in the global marketplace.

„h One of Procter & GambleЎ¦s key opportunities is marketing products to lower-income consumers.

„h Accelerate growth in developing countries in which it has plenty of room to grow since these markets represent 20% of P&GЎ¦s business.

„h Another enormous opportunity P&G has is with the purchase of The Gillette Company in 2005. The purchase of $57 billion in stock will be P&GЎ¦s most important acquisition in its history.

„h Reduce rivalry among competitors by making their product of higher quality, especially in the health care and beauty care segments. These product lines also have higher margins.

The opportunities that this case brought P&G was to grow within the community, by being perceived as a company that truly cares about the community and the consumers, and not of how costly the recall would be, they were perceived as a trustworthy, loyal company.

Threats

The companyЎ¦s threats are several especially because of globalization.

„h Procter & Gamble operates in a highly competitive market with its biggest competitors being giants Johnson & Johnson and Kimberly-Clark. These companies bring P&G price competition in almost every category of their business.

„h Another threat the company faces is by becoming complacent with the companyЎ¦s growth and innovation. Branded competition, as well as retail brands present a constant challenge to lead innovation and offer superior value at competitive prices.

„h Hurry a product that is in the testing and researching staged in order to be the first to launch it in the market, thus having the upper-hand.

„h Increase in prices of raw materials due to unforeseen and unpredictable factors such as weather, politics and economy.

P&G was faced with the threat that consumers would link the Rely tampon to all their other products based on the name and the illnesses and deaths surrounding the case. Nevertheless, it appeared that P&G handled the fiasco with care in turn creating a strength.

Conclusions

It would appear that Procter & Gamble did not act ethically with regards to the Rely tampon. They introduced the product in a test market and though it was in a test market, they were looking at only the actual figures of the product, how much it would expand their bottom line. Somehow, the 1975 test market results were not widely known, nor widely publisiced. This is how with the actual country-wide launch of the product in 1979 it was such an immediate success. How many women used tampons that were not as absorbant and had Ў§accidentsЎЁ? This product was excellent since a woman could insert the product and not worry potentially for 4-5 days about her menstruation or any accidents.

References:

www.pg.com/translations/history_pdf/english_history.pdf

http://finance.yahoo.com/q/pr?s=PG

http://www.hoovers.com/gillette/--ID__10655--/free-co-factsheet.xhtml

http://sev.prnewswire.com/retail/20041209/CLTH02809122004-1.html

http://www.pg.com/content/pdf/04_news/agl_2004_shareholders_speech.pdf

http://www.mum.org./relyart7.htm

http://www.citizen.org/congress/civjus/tort/articles.cfm?ID=802

Armand, Lione, Kapecki, Jon. 1975. Ў§Testing Tampons in Rochester: just what can you Rely on?ЎЁ Jul23-Aug5. Rochester Patriot. Vol.3, No.14

Meadows, Michelle. 2000. Ў§Tampon Safety, TSS Now Rare, but Women Still Should Take CareЎЁ. March-April. FDA Consumer Magazine. http://www.fda.gov/fdac/features/2000/200_tss.html

Klein, Joel MD. 2004. Ў§Toxic Shock SyndromeЎЁ. Nemours Foundation. January, 2004. http://kidshealth.org/PageManager.jsp?dn=KidsHealth&lic=1&ps=207&cat_id=20015&article_set=20277

Foote, Susan B. 1984. Ў§Corporate responsibility in a changing legal environmentЎЁ. California Management Review. Spring. V.26, p. 217-228.

Hostman, Barry M. 2000. Ў§ Author Found a Web of Paranoia, SecrecyЎЁ 01March. The Cincinnati Post.