Strategic Marketing for Colgate-Palmolive - Case Study Example

Strategic Marketing for Colgate-Palmolive Mission, objectives and strategic hierarchy Colgate-Palmolive Company is a personal care product based in the US. Its main competitors are Procter and Gamble, Avon Products and Unilever. The mission of the company to provide products that meets customers’ specifications and expectations within a specified time and place. The key objectives are to establish a market for personal care products that will thrill and interest users. It also evaluates the significance of new markets and retain existing markets. The company also assesses the need for create and dominant products through innovation and re-engineering. The company also seeks to solidify certain markets through segmentation and profiling to enable proper market analysis (Boyd & Walker, 1990). To enhance an all time product that delights and satisfies customers of all ages, gender and geographical dispositions. The company has consistently studied the external and internal environments to unravel its ability to diversify and enter a foreign market. The company establishes internal strategies such as employees, systems or production processes, organizational structure and culture, materials and financial prowess as key. The external strategies involve the company’s relationship with customers, competitors, suppliers, social environment, political cooperation, legal associations and environmental concerns (Boyd & Walker, 1990). These strategies are significant for the company to know how to maximize its internal resources while learning on how to handle the turbulent external forces. Mission helps the company to chart the best appropriate organizational direction while objectives guide the company in achieving its goals. Porters’ five forces and strategic fit analysis Colgate-Palmolive fits into the personal care product industry which implies a mass market. The famous toothpaste company faces high rivalry among existing firms but low threat of new entrants. The threat of substitute products is moderate (Walker, & Ruekert, 1987). Bargaining power of buyers is also moderate. However, the bargaining power of suppliers is quite low. The growth in this industry steadily increases annually with great price wars. Company’s survival is linked to ridding any unnecessary expense. The personal care product company face high amount of concentration since people are willing to pay for some specific goods with quality specialty. The products have relatively low switching cost since they are of similar quality and price. The ratio of fixed to variable costs over the past five years averages 0.75 which is lower than the industry average of 0.79. The company is not on excess capacity but acceptable capacity. Exit barriers are not prevalent since the equipment used is highly specialized hence difficult to sell or remove. Threat of new entrants is experienced from the higher degree of concentration making it difficult for new entrants (Miles & Snow, 1978). Colgate-Palmolive has huge competitive advantage due to experience and size. The barriers are mainly legal issues, distribution access and economies of scale. The products are research intensive with patented products difficult for newcomers to copy. Threat of new substitutes is necessitated by customers’ willingness to switch to another similar product offered by the competitor. Competitors however face a difficulty in closing in on performance and relative price. Colgate-Palmolive is a globally recognized brand name and does not face greater threat from substitutes. Customers are willing to pay premium prices for the brand. Buyers’ willingness to switch is very low since the company has established good relations with its suppliers who are partial to their products. Buyers are unlikely to switch to least known brands. The bargaining power of buyers is based on relationship between the buyer and firm. The company has more power meaning they have control over prices and costs. The cost of customers switching from Colgate-Palmolive is low though they can with close competitors. Differentiation is very low since the company has specialized in health and well-being products as compared to Procter and Gamble which has specialty in household care, beauty, well being and health products. Colgate-Palmolive is fairly differentiated hence less price sensitive. Bargaining power of suppliers is key (Miller & Washington, 2009). Supplier selection is on competitive basis on service, quality, technology and price. With few companies in personal care, the company has sustainability guidelines followed by suppliers like child labor, forced labor, human rights and legal compliance. Suppliers provide for quality but least controls the prices. The company least takes on a defender and prospector strategies because it is not scared of new competitors and scarcely experiments on potential responses to new environmental trends. The company is likely attempting an analyzer strategy in maintaining current businesses and innovativeness. Efficient production is targeted with tight financial and accounting controls. The company least reacts to specific environments and threats since they forecast change and prepare to it in advance. Micro and Macro level analysis Colgate-Palmolive boasts of about 200 years in existence hence will placed and popular in the market. The company boasts of growing revenues with a net income of $2.5 billion in 2012. Its total assets went up to $13 billion (2012) from $10 billion in 2011. The operating income is also high at $3.9 billion while the revenue stood at $17billion in 2012. The company has about 38,000 employees who are actively involved in company operations. The employees are attracted by the favorable compensation and the work environment. The company hires strictly on merit, job skills and experience. Promotions and training has helped the company retain a strong intellectual capital which has seen it edge competitors. The company allows employees to discuss on quality and efficiency issues hence providing an avenue for creativity and innovation. The company has subscribed on diversity and inclusiveness among the workforce hence meeting some of the international labour conventions. Its products are highly differentiated from soaps, detergents, oral hygiene products and veterinary products. These products appear in different brands and are organized according to the market segments, quality and prices (Berkowitz, 2006). The company is a global leader in personal care products owing to a realistic functional structure of management. Communication is effective and complaints address lines are functional. The employees and customer concerns are addressed within a short time period with office of Ombudsman created to address difficult complaints. Customer service is a strategic function within the marketing department and is robust facilities. The board of directors is led by Ian M Cook who is the chair, president and CEO. The systems are automated and efficient given the level of production efficiency is at 87%. Employees are not easily laid and they know the company culture of work and reward through promotion and attractive remuneration. On the external environment, the economic recession of 2008-09 led to the company’s decision of laying off more 2300 workers. Fortunately, the company is slowly recovering and starting to employ more work force. The company has had major tussles with Procter and Gamble which is a close competitor in the oral hygiene product. It has several buy outs and acquisitions since 2005. The company has invested in community initiatives especially in New York where is has gained a university called Colgate University. It has sponsored women leagues on non-profit basis “Colgate Women’s Games”. The company has also supported the “Starlight Children Foundation” to assists fatally ill children and their families. It also has an ethical record for “People for Ethical Treatment of Animals” which is a mandatory requirement by the government to test animals. The company was able to retain use of triclosan in toothpaste range since it found no ground on health and environmental damage. The company consumes palm oil from Thailand, Indonesia and Malaysia. Cultivation of palm oil plant degrades environment, deforestation is high and poses critical danger to rare species of plants. The company succeeded another which used to release hazardous waste to the environment. It agreed to pay for clean up for hazardous waste contaminating the groundwater in Piscataway, New Jersey. The 2012 Human Rights Campaign reported Colgate Palmolive as one of the 100 Best Companies for working mothers in the year 2004. It also supports diversity in the workplace. The company outsources advertising and promotions to suit the oral hygiene clientele. Marketing mix Marketing research basically encompasses features and benefits of the product, price sensitivity to customers, effectiveness of distribution channels and advertising and promotions initiatives (Maxine, & Mappen, 2004). This is actually the marketing mix that every company must learn to balance. The products of the company are essentially personal care and thus highly valued and on high demand. The products are also health products for tooth cleaning and freshness. The product has over time been reinvigorated to contained minerals that help in strengthening the function of teeth. It can be produced in large quantities through automation. The toothpaste is squeezed into the brush and used alongside with water while gargling and brushing along and across the teeth sets. This product kills bacteria settling between the teeth and removes any held particles. It is portable and easily stored in toilet racks and wall units. The product is on high demand since people have regarded it as an inelastic commodity required on daily use. Customers are not price sensitive hence ready to pay for premium prices for any prices provided they are buying the Colgate brand. Pricing is based perception of the customers and also does occasional price cuts to bring on board new customers. Factory prices are lower and transits on a lower scale due to lower shipping costs (Birchall, 2009). The consumers in foreign destinations still find the prices favorable. The distribution channel effective and based on business to business model. Most of the buyers are stores, supermarkets and distributor outlets. The turnaround time for distribution is quite low meaning that the products reach customers within a shorter timeframe from the date of manufacture. The product is currently being promoted through social media and traditional advertising means such as TV and radio. The promotion aspect is enhanced when the Company sponsors models and TV personalities who are famous to attract the generation Y and X who are popular viewers to these channels. They are also technology savvy and prefer partying and outings (Schlacter, 2009). They often appear smart and tidy as they like dating and looking attractive to the members of the opposite sex. The advertisement captures the mind of this generation to a greater extends as compared to oldies in their sixties and seventies. By undertaking a marketing mix, the company is destined to make a full cycle of product success. Segmentation, targeting, differentiation and positioning strategies for the Colgate-Palmolive The importance of market segmentation is to capture the array of customers who are sensitive to price and to some extent quality. These segments capture the bargaining power of the business class, middle class and the lower segment who rarely buy the product (José, 2005). The company aims to reach a mass market by taking undifferentiated approach. This holds the premise that the customer needs are similar and homogenous. These global brands also have to be adopted to meet local customs and tastes. The personal care market is differentiated to meet the needs of segments or submarkets. The company can focus its resources on serving and understanding a single segment (Spellings, 2009). The needs of a target markets have to be studied. These include; age, income, size, gender, religion and geographical space, culture and other affiliations. The market is defined along these characteristics. The strategy can be adjusting prices, adding new features, selling in stores instead of direct distribution. Segmenting these markets isolates personal features and differentiating more than one segment. Segmentation highly depends on demographic variables (Barringer & Duane, 2010). On the other hand, differentiation and positioning allows competitive offerings and possession of the features the target market desires. This involves creation and maintenance of certain perception of the product in the mind of the customer. They always have a mental image of the tooth paste brand. By differentiating, the product appears real and attains psychological qualities. The brand is the major tool of differentiation. Others used by Colgate-Palmolive include customer support services, product descriptors and image (Boyd & Walker, 1990). Positioning strategies used are; moving to a new position, repositioning the competition and strengthening the current position. Strengthening the current position will involve constant monitoring of customers needs and wants. Investing on time, talent, money, and to after-sale services is essential (Walker et al, 2011). It also means raising the bar of customer expectations and scaling to new heights. When sales will have declined it is good to move to a new position since customers may have at some point got dissatisfied with the product. A new position is a welcome since strengthening the current position causes a downturn in performance. References Barringer, B. R. & Duane I. (2010). Entrepreneurship: Successfully Launching New Ventures, 3rd ed. Upper Saddle River, NJ: Prentice Hall. Berkowitz E. N. (2006). The Essentials of Health Care Marketing, 2nd ed. Sudbury, MA: Jones & Bartlett Publishers. 13. Birchall, J. (2009). Out to Launch in a Downturn. Financial Times. New York. Boyd, H. & Walker, O. (1990). Marketing Management, A Strategic Approach, Boston, Irwin  José M. M. (2005). Market Segmentation Strategies. How to Maximize Opportunities on the Potential Market. Mexico. Maxine N. L., & Mappen, M.(2004). Colgate-Palmolive Company History: Creating Bright Smiles for 200 Years.  Rutgers University.  Miller R. K. & Washington, K. (2009). The 2009 Entertainment, Media & Advertising Market Research Handbook. 10th ed. Loganville, GA: Richard K. Miller & Associates, 157–66. Miles, R.E. & Snow, C. (1978). Organizational Strategy, Structure and Process, New York, McGraw Hill. Schlacter, B. (2009). Generation Y Lacking Savings. Fort Worth Star-Telegram. Boston. Spellings R. (2009). Mass Marketing Is Dead. Make Way for Personal Marketing. The Direct Marketing Voice. England. Walker et al, (2011). Marketing strategy: A decision focused approach (2nd ed). London. Allan and Wayne Walker, O. & Ruekert, R. (1987). Marketing’s role in the implementation of business strategies, Journal of Marketing. Longhorn. Read More