real-world’ strategic report in business operating major

Colgate-Palmolive

Colgate –Palmolive is a consumer goods American multinational company headquartered on Park Avenue in Manhattan, New York. The company is involved in the production and marketing of consumer products focused on Oral Care, Personal Care, Home Care and Pet Nutrition in the United States and more 200 other countries. In 2015, the company’s sales totaled $16 billion half of which were from outside the United States. The company was founded in 1806 by William Colgate, an immigrant soap and candle maker in New York, Colgate under the name “William Colgate & Company”. Its first products were starch, soap, and candles. After 211 years of operating, Colgate has diversified its product line and distribution worldwide. Today, it operates in more than two hundred through its numerous subsidiaries.

Following the sale of its underperforming brands to Phoenix brands in a strategic moved aimed at focusing on higher margin products, the company’s focus is on the oral care, home care, personal care and pet nutrition products. The company’s most recognizable brands include Colgate, Palmolive, Axion, Ajax and Speed Sticki.

Colgate-Palmolive has been long embroiled in competition with Procter & Gamble which is the world’s largest soap and detergent maker. The two companies manufacture and market similar productsii.

However, Colgate-Palmolive remains the market leader in oral care. The company dominates the global toothpaste and manual toothbrush markets with a share market of between thirty five percent and forty five percent respectively as of 2015. In this segment, the company’s bands compete with Procter & Gamble’s Crest, Church & Dwight’s ARM &HAMMER and GlaxoSmithKline’s Sensodyne.

The most important force that most critically affect the industry’s average profit potential is rrivalry. Palmolive faces a lot of rivalry from both international consumer goods companies and local competitors in the markets that it operates. First of all, there are many competitors in the fast moving consumer products segment. This range from the big multinational corporations to local competitors in the various markets such as in emerging economies.

Some of the big multinationals that compete in this market segment include Procter & Gamble, Unilever, Clorox, Kimberley-Clark and L’Oréal. Procter & Gamble remains the biggest competitor in the industry and has the broadest and biggest portfolio of products in the household and personal care market segment.

Moreover, the major competitors in this industry possess operations of virtually similar sizes as well as products that are almost undifferentiated. As a result, they are easily substitutable making the threat from substitutes to be very high. This results in the firms competing fiercely on price and in competitive pricing. High competition on price can also erode the margins in the industry requiring the company to sell high volumes in order to remain profitable.

Another force that has a significant impact on the industry is the bargaining power of the buyer. The market for fast moving consumer goods is highly educated regarding the products. Consumers are also aware of the various alternatives that exist and have high expectations to get value for their money.

One of the key environmental changes likely to influence the consumer goods industry is the rise of the emerging markets as a major source of growthiii. Emerging markets across the globe present strong growth opportunities for consumer goods marketers including Colgate Palmolive. As consumers in wealthier emerging markets such as Russia, India and China become increasingly sophisticated, there is need for consumer goods companies to expand their reach to serve this segment.

Colgate Palmolive has leveraged on this consumer segment and has a strong international brand presence. As a result, the company is highly exposed to the emerging markets relative to its competitors. This is beneficial to the company given the growth opportunities inherent in emerging economies as compared to the developed markets where growth has fairly stagnated. Consequently, the company is exposed to more profit opportunities. Indeed, about half of the company’s sales came from the rapidly growing emerging markets.

Technological trends and especially the rise of ecommerce and social media are another trend that is likely to influence the consumer goods industry. In the past, size gave fast moving consumer product manufacturers an astounding advantage. Centralized decision making and consolidation of operations as well as economies of scale helped the big multinationals expand their margins. With their huge financial base, they could outspend the smaller companies on advertising and see their sales rise. They were also able to pay for prominent placement on the retail stores.

However, the rise of digital media, buoyed by social networking and mobile has led to customers learning about products on the social networks and from online reviews. Small firms can also outsource production and advertise their products online. With ecommerce, distribution is also getting easier. Newer brands buoyed by success from online sales can easily move into big stores. This trend could provide a big opening for smaller brands to steal market share from established brands like Colgate-Palmolive and its big competitors such as Procter & Gamble and Unileveriv

i Hellman, J. (2016, May 09). Colgate Palmolive Company: A Quick SWOT Analysis. Retrieved from Value Line: http://www.valueline.com/Stocks/Highlights/Colgate_Palmolive_Company_A_Quick_SWOT_Analysis.aspx

ii Whitfield, P. (2013, October 16). Colgate Vs. Procter & Gamble: Who Wins Classic Match? Retrieved from Investors Business Daily: http://www.investors.com/research0the-income-investor/which-is-better-colgate-or-procter-gamble/

iii Brennan, J., Kelly, G., & Martinez, A. (2013, December). Tough Choices for consumer-goods companies. Retrieved from McKinsey: www.mckinsey.com/industries/consumer-packaged-goods/our-sights/tough-choices-for-consumer-goods-companies

iv The Economist. (2016, July 9). Invasion of the bottle snatchers. Retrieved from The Economist: https://www.economist.com/news/business/21701798-smaller-rivals-are-assaulting-worlds-biggest-brands-invasion-bottle-snatchers