Colgate Palmolive

Colgate Palmolive: Oral Care

Managerial Economics
by
Professor Dr. Nishat

Group members

Imtisal Khan (18500)

Zain Ali Khan (18489)

Muhamad Zohaib (18531)

Submission Date: November 19, 2019

 Colgate Palmolive

Contents

Introduction ................................................................................................................................4

PESTLE Analysis .......................................................................................................................5

Political and Legal Factors.......................................................................................................5

Economic Factors ....................................................................................................................6

Social and Cultural Factors ......................................................................................................7

Environmental Factors .............................................................................................................7

Technological Factors..............................................................................................................8

SWOT ANALYSIS .....................................................................................................................9

Strengths: ................................................................................................................................9

Weaknesses: ............................................................................................................................9

Opportunities: ........................................................................................................................ 10

Threats: ................................................................................................................................. 10

Market Structure ....................................................................................................................... 11

Market Shares........................................................................................................................ 13

Brand share in Pakistan: ........................................................................................................ 13

Brand share globally: ............................................................................................................. 14

Degree of Competition .............................................................................................................. 15

Local competitors .................................................................................................................. 15

International competitors ....................................................................................................... 16

Decision making process: .......................................................................................................... 17

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Need analysis: ....................................................................................................................... 17

Search for information: .......................................................................................................... 17

Evaluating alternatives:.......................................................................................................... 18

Purchase: ............................................................................................................................... 18

Post purchase behavior: ......................................................................................................... 19

Pricing: ..................................................................................................................................... 19

CSR: ......................................................................................................................................... 20
 Colgate Palmolive

Introduction

Colgate-Palmolive has most of the market share in the oral care products category.

Toothpaste being company’s core product, the company has enjoyed a contribution of 47%

from oral products in the total revenue in the year 2018. The oral care product market is

highly competitive, and yet the Colgate Palmolive has been succeeding progressively. Procter

& Gamble Co and GlaxoSmithKline Pc being company’s major competitors have been

striving to increase their market share. The Colgate toothpastes are leading in the market due

to its promising results and consumer pleasing quality. Quality, pricing, and innovation being

the core areas of competition in the industry; hence, the companies use innovative products as

a strategy to maintain and elevate demand in the market. Colgate products have a competitive

advantage over products for being impressive in quality. The quality of the Colgate products

that promise performance, safety, value, and consistency of the products have provided to the

products competitive advantage.

The oral care industry has evolved from providing cure, to primitive measures to strength and

now beauty. In a society where appearances matter a lot, people desire to be attractive and

impressive. The oral care industry provides them means and ideas through innovative

products and resolving problems to have what they desire. In pursuit of their desires

consumers make purchases that are definitive, reasonable and justified. Looking a broader

perspective, it is not wrong to state that these products today have become a necessity, not

regardless of the brand, yes but the functionality has gained in elastic demand in nature of

society. The substitutes have been obsolete or are used in negligible amounts. However, due

to strict competitive environment a company is unable to consider the need of having a

monopolistic premium price.

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PESTLE Analysis

PESTLE analysis (Political, Environmental, Social, Technological, Environmental and Legal)

is to describe a strategic framework to highlight the position of the Company or the product.

It is essential to understand that the growth of the company not only depends upon the

productivity of the company but the external factors affecting the production of the company

or the sales of the entire region.

Changes in the macro-environment can affect the company or the product directly. The

competitive landscape can impact the company’s growth hence will be impact the overall

profitability of the consumer goods industry. The PESTEL analysis of Colgate (Oral Care

Division) will provide great details about the challenges faced by Colgate Palmolive in the

real market other than strong competition in the industry. The Five factors affect the product

through many ways. For Instance the company may operate at its core, its productivity and

efficiency may be exceptional when comparing to the industry but the area they are operating

is highly sensitive in terms of Political conditions it would be a great failure in the market.

Political and Legal Factors

Before investing in any country or area it is essential to analyze its political condition.

Political factor’s plays a vital role in the future profitability of that company or brand line.

Colgate is operating in several countries globally and each has different circumstances, risks

and obstacles. The achievement is to successfully operate the dynamic personal product line

in the different political conditions and diversified conditions. Before penetrating in the

market Colgate must analyze following political factors.

Colgate Palmolive is working actively to maintain a strong link with the agencies who are

involved in the regulatory bodies, agencies such as Monopoly control Authorities, taxations,
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Custom securities and exchange commissions. The laws regarding the custom duties are

being closely observed. Moreover, the impact of government policies on the product is

controlled by supplying products to government agencies so that direct impact of sales could

be visible

Economic Factors

In order to forecast the economic conditions of the country, Colgate needs to identify and

estimate the country’s economic factors such as inflation growth rate and also industry’s

economic conditions such as Oral Care industry growth, the rate and frequency of consumer

spending on the product. These forecasting is not only particular to Oral Care sector but to

the whole organization. It helps create direction to the company growth.

However, the firm is affected by the overall economic conditions of the country, especially in

those regions where the economy is dependent upon the consumer behavior. Company who

has the maximum interactions with the consumer is affected the most because of the

fluctuation in the economy. Colgate Palmolive being the prime example, Pakistan is the agro-

based economy. Although the production of Colgate has no concern with the agricultural

condition but it is observed that there is an impact of Colgate’s sales level with the increase

of crops. In between the year 1991 -1992 the cotton crops sales went up and so sis the

economy. The Managers had to forecast their production level accordingly as it affected in

the economy.

The inflation rate of the country is also another factor when producing consumer related

goods, as it is important for the consumers to afford the product. The launch of less expensive

and economy pack detergents was the smart move from Colgate Palmolive. Similarly in the

Oral Care sector Colgate launched their twin pack, the combo of tooth brush and tooth paste.
 Colgate Palmolive

It was the perfect example of Colgate to provide their consumers with affordable products

while adding value to their customers.

Social and Cultural Factors

Social and cultural changes affect all the companies especially marketing firms. Consumer

related companies are largely affected by the change in the target population or preference of

the consumers. With the time the Consumers are shifting to new preferences that have also

affected Colgate. The shifting of Rural population to urban has lead Colgate to restructure its

marketing mix as Colgate has mainly focused Urban population for its consumption.

Moreover, Colgate has observed the occupational change in the social environment.

Therefore, Colgate emphasis more in the working class by blending its marketing setup, from

the small-owned businesses to qualified professionals. Similarly use of statistical data of the

population in their tooth paste advertising campaign was the smart move by the company. To

inform the population about the poor health condition of their children and target population

and then providing them with the affordable solution by promoting their product was a great

success for Colgate Oral care sector.

The marketing campaign of Colgate is also influenced by the lifestyle, beliefs and values of

the consumers. Colgate Palmolive as a company has noticed the change in gender roles which

is clearly reflected in their advertisement campaigns. The advertisements reflect the culture of

Pakistan often with more casual, family atmosphere, joint family system and also households

with two incomes.

Environmental Factors

The environmental standards can affect the organization profitability. It is important for the

companies whose production is within the country. It is important to ensure that their
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manufacturing of consumer goods is not affecting the overall environmental conditions of the

country.

Therefore, before entering in the market it is essential to look after the environmental factors

of the country. For Instance, change in climate and weather, laws against environment

pollution, Water and air pollution (especially in the personal care industry), Recycling of the

products (Eco-friendly products) and the by-products and Waste management in the

consumer goods sector.

Technological Factors

Technology and innovation helps the company growth and reduces its production cost by

increasing the efficiency rate. Colgate has mainly focused on providing their customers with

affordable products and this is only possible when the production is less costly. New

technological procedures are incorporated in the system to make the manufacturing

operations efficient and produce the product in the competitive prices.

Moreover the organizational shift to automation of the system in R&D, Supply chain

department and inventory keeping has made the overall growth of the company successful.

Adoption of the new Information Technology tools and software has made a very visible

change in the organization and manager’s decision making.

 Colgate Palmolive

SWOT ANALYSIS

SWOT analysis of Colgate Palmolive’s Oral Care sector.

Strengths:

 Colgate Palmolive has a strong marketing team which means the Oral Care sector by

default is working successfully in delivering the marketing campaigns within the

budget.

 The consistency in the performance is reflected in their annual Sales Report.

 Strong brand image and visible position in the market.

 Colgate has the wide geographical presence in Pakistan. The product visibility is

spread all over the country.

 Market leader in herbal toothpaste. The company has internationally recognized by its

47% of net sales in the oral care sector.

 Strong financial history.

 Extensive research and technical improvement.

 Well-established distributors.

 Strong Customer engagements

Weaknesses:

 Lack of Capital, Colgate Palmolive is sponsored by the local Group (Lakson) which

make their financial background and monetary funds comparatively weak than the

other huge Multi-national Companies like Lever Brothers and Procter & Gamble.

 High Reliability on Oral Care, specifically on Colgate GRF (Great Regular Flavor).

 More emphasize on urban population whereas rural and suburban population is being

neglected.
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 Promotion budget of Colgate is comparatively less than the competitors in the market.

Opportunities:

 Economic growth of the country will provide better opportunity for Colgate to grow

rapidly in the market.

 Growing demand of the consumer goods, especially in the personal care sector with

the awareness of self-grooming among the middle class.

 According to Pakistan dental association people are becoming health conscious which

means increase in the demand and therefore growth in the productivity.

 Opportunities for mergers and acquisition.

 Shift from artificial components to natural components has created opportunities for

Colgate to bring in the new innovation relating the consumer demand of organic

products and capture this segment.

 Expand its target population from urban to rural market.

Threats:

 Threats of new competitors entering in the market without restrictions.

 Local Competitors especially in the rural market.

 Legal and Regulatory risks in Pakistan.

 Imported toothpastes are also risk to Colgate, diversion towards popular brands has
been observed.
 Colgate Palmolive

Market Structure

The market structure for the oral healthcare industry falls under monopolistic competition. In

monopolistic competition there are a large number of firms in, which the majority is

relatively small, and the firms compete with each other through product differentiation which

may be done through product quality, advertisements, promotions, market segmentation or

price. The barrier to entry is also small which allows for a large number of firms to exist in

the market.

In our case, Colgate is a good example for monopolistic competition locally and

internationally as there a good number of other companies competing in this category who try

to make their product stand out so that customers prefer their product over others. Colgate

differentiates from other toothpastes and oral healthcare products with qualities such as teeth

whitening, plaque reduction, fighting gingivitis, reducing sensitivity, enamel protection,

cavity protection and tar protection. To target a different segmentation, it introduced natural

extract toothpastes for people who may not opt for regular products due to the artificial

ingredients included and also introduced Misvak extract for people in Pakistan who prefer

using the traditional remedy for good oral health. On the other hand, competing on price may

not be too significant as toothpaste comes under inelastic demand due to the necessity of the

product but at the same time Colgate cannot price their products too high due to the vast

amounts of substitutes available from local and international competitors. It is also relatively

easier to enter or exit this industry in Pakistan as toothpaste is not included in the list of items

that are under compulsory monitoring by the Pakistan standard and quality control authority

which gives manufacturers an easier road towards production and less red tape. Due to the

monopolistic nature, our maximum profit is obtained when we select the output for when the
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marginal cost equals marginal revenue. This is illustrated in Figure 1 which shows our long

run approach when considering monopolistic competition.

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Figure 1: Long Run Profit

Market Shares

Brand share in Pakistan:

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In Pakistan, Colgate dominates the market with a brand share of 37.6% which is far greater

than the shares possessed by other brands. The main products that help it dominate are its

toothpaste products and toothbrushes. It is the market leader due to its excellent customer

loyalty and trust. The innovative products and strong equity building campaigns helped it

retain its customer base. The brand also communicated consistently and effectively with

children and got approval and trust from mothers. Furthermore, Colgate’s bright smiles,

bright futures programme provided free oral health education to Pakistani school children.

Brand share globally:

Brand name 2018 (%)

Colgate 20

Oral-B 9.2

Crest 5.5

Sensodyne 5.1

Listerine 4.7

Signal 3.2

Darlie 2.1

Philips 2.1

Polident/Corega 1.8

Yunnan Baiyao 1.6

Aquafresh 1.5

Close-up 1.4
 Colgate Palmolive

Globally, Colgate is the market leader with a market share of 20% which is more than double

the share of the next competitor which is Oral-B. As discussed previously, Colgate’s

customer loyalty, trust, product quality and consistency keep it at the top. Colgate has

ensured to keep its products quality excellent worldwide and also made sure to effectively

market its products in the right context for its biggest markets which is the USA and Europe.

Degree of Competition

Local competitors

The most important local competitors for Colgate are Nexera, Doctor Toothpaste, Shield,

Medicam and the Misvak which is still a traditional oral health product used by Pakistanis.

The local competitors are not favored as such in the urban areas of Pakistan as there are far

more international products available in the market at an affordable price. When consumers

visit LMT’S and IMT’s in the major cities, they will mostly find international brands for

toothpastes and toothbrushes as the local competitors have a weak distribution network. The

market perception of the local brands is also weak due to the lack of advertising and weak

brand image. The social media stance of the local competitors is also weak which further

reduces their penetration into the market. In a monopolistic competition market such as this,

it is important for these firms to differentiate themselves otherwise global brands such as

Colgate will always be preferred. To make matters more difficult, products such as toothpaste

and toothbrushes need to be trusted strongly by consumers as it can affect their personal

health which is why consumers incline more towards established global brands. The Misvak

however, is still used in urban and more so in rural areas due to its traditional and religious

aspect. For Colgate, there isn’t much of a challenge to keep its market share high against

local competitors due to its strong brand image and diversity of products but, it does need to
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penetrate better into the rural areas where very cheap local products are utilized or the

Misvak.

International competitors

The most important international competitors for Colgate are Sensodyne, Close-up,

Pepsodent and Braun Oral-B. Unlike the local competitors, the international competitors

invest a decent amount of money in their marketing especially Close-up and Sensodyne. The

quality of products of these competitors is also far higher than the local competitors due to

which Colgate needs to be consistent with its products to ensure it dominates the market in

Pakistan. While Colgate is preferred by most people for its products, Sensodyne has managed

to capture a significant number of customers who are more interested in toothpaste which

focuses on sensitivity. As the awareness for sensitivity problems is increasing, people are

opting for brands which cater to this category in which Sensodyne is leading especially

because its branding and marketing towards this topic. On other hand, Close-up managed to

grab customers by promoting its product to attract customers who are more concerned with

good breath. Through these product differentiations, we can further see how the oral health

industry fits even better in a monopolistic competition structure.

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Decision making process:

The consumer decision-making process involves consumer identification needs, gathering

information, evaluating alternatives, and then making purchasing decisions. Consumer

behavior can be determined by economic and psychological factors and by environmental

factors such as social and cultural values.

Consumer decision-making behavior is complex, covering everything from problem

identification to post-purchase activities. Every consumer has different needs in their daily

lives, and these needs make different decisions. In addition to purchasing from a variety of

products based on consumer opinions of a particular product, decisions can be complex,

comparable, evaluated, and selected. This enables marketers to understand and implement the

underlying issues in the consumer decision-making process so that their products and services

differ from other products and services on the market.

Need analysis:

The first step in the process is to determine the needs of you or your customers. The customer

feels that something is missing and needs to be resolved before it can return to normal. If you

can determine when your population will meet these needs, then this is the ideal time to

advertise them. In our case the need is to keep the teeth healthy and clean.

Search for information:

This is the research phase of the process. From the old shopping to the new store, Google is

changing (obviously there are other search engines available). It not only collects information

about things, but also collects people's advice and the experience that may be gained from

using different products in the past.

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At this stage, the customer begins to consider risk. Customers can list a list of professionals to

help them make a decision. People usually don't want to regret making decisions, so it may

be worth spending more time.

In our case the consumers are already aware about the oral care and search for alternatives

based on price generally.

Evaluating alternatives:

This is the time when the problem begins. Is this really suitable for my product? Do I need

other products? If the answer is "No, not correct" or "Yes, I need other products", then the

second phase can be resumed. The transition from Phase 3 to Phase 2 may occur several

times before reaching Phase 4.

Once the customer has identified a product that meets their needs, they will start looking for

the best price. This may depend on price, quality or other factors that are important to them.

The customer read a lot of comments and compared the prices, and finally chose a review

that met most of the conditions.

In our case the alternatives are competitor’s brands.

Purchase:

Based on the knowledge collected, the customer now decides what to buy and where to buy

what they want.

At this point, the client both evaluates all the facts and arrives at a logical conclusion, either

based on emotional connections/experience, or succumbs to advertising/marketing activities,

or is likely to combine all of them.

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Post purchase behavior:

The review phase is a critical phase for both the company and the customer. Has the product

been committed to marketing/advertising activities? Does the product meet or exceed

expectations?

If the customer finds that the product meets or exceeds their commitments and expectations,

they are likely to become brand ambassadors, affecting other potential customers in the

second phase of the next customer journey, thereby increasing the chances of repurchasing

the product. This can also be said for negative comments, and if it is included in Phase 2, it

can prevent potential customers from using your product.

In our case this is mostly left unconsidered because the product does not require much

involvement and they keep on using the toothpaste they are already using.

Pricing:

Colgate Palmolive has developed a competitive pricing policy under its marketing mix

strategy. The price of Colgate Palmolive products is similar or slightly higher than that of

competitors. Colgate charges higher prices for special products for niche categories. Colgate

Palmolive aims to target all segments of society by offering products in a variety of price

ranges. Higher price ranges can be demonstrated by other components that provide

consumers with more benefits. Products with different SKUs are also available so that they

can meet the needs of a broader base. The size of the package is between 50 grams and 500

grams.
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CSR:

Bright Smiles, Bright Future oral health school plan since its inception; it has benefited 12.4

million children. Propagation understanding of oral health and oral education for children

health practice, the initiative emphasizes multiple levels importance of oral health through

education interactive meeting organized by Colgate professionals the program is designed for

children by using animated videos and household items to help children recover from a good

oral hygiene system.

For more than 40 years, Colgate Palmolive

has been committed to providing oral health

education to children around the world.

Colgate's leading program Bright Smiles,

Bright Futures, a multi-level program

designed to improve the importance of oral

health through education and prevention,

continues to fulfill this commitment.

The program's main focus is to benefit the children of the school through videos, storybooks,

songs, computer CDs and interactive activities - both for teachers in the classroom and for

parents to use at home. Since 1991, the program has benefited 500 million children in 80

countries.

Through partnerships between government, dental professionals, education professionals,

schools and communities, the “Bright Smiles, Bright Future” oral health program enables

thousands of children to enjoy vital oral health education and prevention every year.
 Colgate Palmolive

In Pakistan, “bright smiles, bright future” benefit thousands of underprivileged children.

Colgate Pakistan implemented a school initiative that works with the Pakistan Dental

Association (PDA) to raise awareness of oral health among school-age children in urban and

rural primary schools in Pakistan. To date, Colgate's “Bright Smile, Bright Future” program

has benefited 7 million schoolchildren in more than 2 million urban and rural schools.

As a part of this program, Colgate organized Global Art Contest (GAC). Colgate continues to

inspire creativity through the “My Bright Smile” Global Art Competition. The 19th World

Art competition was held and received nearly 123,000 entries out of 1,018 schools in 86

cities in Pakistan from urban cities to remote areas.

The top 12 entries selected by the jury from Pakistan were announced at a press conference

held in Karachi. Artworks were sent to these winners to compete globally in New York.

The program not only helps to develop

and recognize the talents of students,

but also gives them the opportunity to

present their work through exhibitions

in Karachi as well as international

exhibitions.

Submission by: AYAN BIN IRFAN

(Global Winner from Pakistan)

Colgate Palmolive