Developed Country and Colgate Essay

Submitted By huntzman
Words: 1986
Pages: 8

MEMO
TO: CEO, Colgate-Palmolive
FROM: 451126767
RE: Competitive Positioning and Strategic Options

Current Environment
Currently, Colgate-Palmolive (Colgate) is a leader in the oral care business, with 43% of its sales coming from that segment. Importantly, most of these sales (60%)1 come from emerging markets, which is above average. This is notable due to the fact that the major competition is largely consistent across geographies. The large consumer care companies, such as Proctor & Gamble, Johnson & Johnson, and Unilever all play in mostly the same categories, yet Colgate is a leader in most areas abroad, and has a strong presence in North America (Exhibit 1). These facts combined suggest that Colgate has a strong, defensible position versus the competition that can be replicated across markets.
Colgate’s current position is a result of several processes the company has developed to sustain its advantage and to build barriers to entry that would erode market share in emerging markets. First, Colgate has realized that oral care products, at a basic level, could be seen as a commodity. Therefore they have focused their marketing efforts on improving their brand equity and spent 10% of their revenues on advertising, with a good mix of digital versus traditional. However, this level of spending is merely “table stakes”, as the other competitors advertise at this level as well. What sets Colgate apart is its innovation, relationship building, and its emerging market presence.
First, Colgate is introducing new categories that do not cannibalize other existing categories, such as with the Colgate Wisp and Sensitive Pro-Relief toothpaste. By introducing new products and quickly getting them to market, consumers come to expect ever higher levels of quality and innovation, therefore keeping the Colgate brand and products top-of-mind. Second, Colgate’s selling efforts with dentists, while successful, also create a large barrier to entry, as new entrants would need to hire a sales force, present at conferences, etc. With Colgate’s large investment in this area, there is evidence that their market share is poised to grow, as 85% of dentists were recommending Colgate over existing brands, as one example. This is significant, as new consumers of oral care products will have their early experiences most likely be with Colgate, and therefore brand as a sustainable moat can be established.

Strategic Issue
Although these capabilities are important in their own right, what makes them even more powerful is that they are transportable across markets as templates for success. Indeed, Colgate has taken advantage of this aspect and has used it to tailor their marketing towards local market knowledge. Especially since Colgate has been in some emerging markets for decades, Colgate has built a strong infrastructure in key geographic areas, such as China and India. Where Colgate does not have a presence in an area, they use acquisitions to fill the gap (such as acquiring Kolynos in 1995 for its Latin American strategy). Colgate’s strong market shares in emerging economies are evidence that the company is well aligned internally to meet oral care needs in Brazil, India, China, and other such countries. However, Colgate is positioned well externally also. Emerging economies have a higher growth rate than developing in oral care (8% vs 2.1%) and product penetration is low (the average consumer in India and China, for example, brush less than once per day). Therefore, Colgate is positioned perfectly with its existing processes and capabilities to capture these large, untapped markets that are poised for significant growth. In effect, these economies are at the beginning of their oral care product lifecycle, with many firms competing for attention, while the market in North America and Europe is in more of a mature phase, with not as much opportunity for differentiation.
However, the key is to capture this forecasted growth, as competitors…