Colgate Palmolive

Colgate-Palmolive Company starts from a minor candle and manufacturer of soap.  Now, it is one of the most powerful consumer products giants in the world is the result of aggressive acquisition of other firms.  The four core segments are organized by the company which is oral care, personal care, home care and pet nutrition. In the market, there are such well-known brands as Colgate toothpaste, Irish Spring soap, Hill’s Prescription Diet pet food and so on. The company has operations which in more than 200 countries and generates about 70 percent of its revenue external the United States. In 1806, Colgate-Palmolive Company was established by 23 year old English migrant to America who is William Colgate, it focused on selling soap, candles, and starch from factory in New York City.  The firm expanded into other countries such as Australia, Germany in the early 1920. In 1937, the company moved into India and it has operations in most of South America in 1940. On the other hand, the first toothpaste in a collapsible tube is Colgate in 1896 and there has sold in glass jars since 1873. In 1992, Colgate created first factory in China to produce toothpaste for the domestic market, and by 1999 the Colgate became the top selling brand in China. Colgate-Palmolive company not only producing toothpaste and oral segment products, they also producing personal, health care and home care products such as soap, detergents and many more. . The Company has over 60 manufacturing and research facilities globally. The huge majority of Colgate products are manufactured in Colgate-owned facilities. In the United State, the Colgate operates approximately 60 properties which 14 are owned. Meanwhile in overseas, the Colgate operates around 280 properties of which 80 are owned in over 70 countries. The major overseas facilities are located in Australia, Brazil, China, Colombia, France, Guatemala, Italy, Mexico, Poland, South Africa, Thailand, Venezuela and elsewhere in the world. The Colgate-Palmolive company has around 37,700 full time employees in 2012. The Company has over 60 manufacturing and research facilities globally. The huge majority of Colgate products are manufactured in Colgate-owned facilities.

            The long run is a period of time in which all input used for production and under the control of the producer are variable. (AmosWEB LLC, 2013) When the firms inspecting the long run understand that they cannot change levels of production in order to attain equilibrium between demand and supply. Based on expected profit, they can either expand or reduce production capacity or enter or exit an industry which in the long run. In this case, Colgate Palmolive is a long run industry since the company has over 6o manufacturing in the planet.

Colgate-Palmolive Company is one of the large company that producing toothpaste in the world. There is some part of determinants which could influence the demand of the toothpaste. Firstly, income is one of the determinants that affect the demand of toothpaste.  The demand for toothpaste rises while income of consumer rises too and demand curve will shift to the right.

                                                                         Figure1.1

According to figure1.1, the demand curve shift to the right. Therefore, the consumers are able to purchase the product. In general, more income more demands of the product, so it can be considered as a normal good. A normal good is a good for which demand increases when income goes higher. Besides, another factor of increasing demand is consumer’s preferences. Consumer will looks for a product by following their needs to purchase a product with a function that satisfied their needs. For example, a customer purchasing a toothpaste then they will look for what function of the toothpaste they need and buy it. When a consumer satisfied the toothpaste and the toothpaste meets their requirement, it will leads to an increase of demand. Moreover, buyer’s expectation is also a way to increase the demand. Buyers are always seeking the good with the lowest possible price, if buyer expect the price would raise in future, they will inclined to buy more now. For example, Colgate conducting a promotion with lowered the price of toothpaste, buyer will buy more during the promotion date because of the price of toothpaste will rise back to original price when the promotion ended.

Furthermore, determinant of supply will affect the change in supply in Colgate-Palmolive Company such as number of sellers, product of related product, resources price and others. One of the important factors that would affects the change in supply which is number of seller because it will influence overall supply. When the number of seller who is willing and able to sell Colgate toothpaste therefore the company has greater amount of sellers, the quantity of the toothpaste will be greater. In other word, the number of sellers increased and supply is also increased so the supply curve is a rightward shift when supply rise.  Also, prices of related products might be influence supply of product. If the price of Aquafresh toothpaste goes up lead to quantity supply of Colgate toothpaste will goes up. The consumers are willing to buy a lower price product rather than buy a higher price product. Sometimes the price is more attracting the consumer than the quality. On the other hand, technology is also influence the supply of product. Technology is most of the important factor because improvement in technology enable more efficient of toothpaste. Therefore, the production cost will be reduce and increase the profit. As a result, increases in technology make it more attractive to produce so increases in technology while increase the quantity supplied of a product and the supply curve shifted rightward.

In economic, price elasticity of demand (PED) refers to dividing the percentage change of the quantity demanded by the percentage change of the price. ( Kimberly Amadeo, 2012)  The demand for Colgate is elastic since amount of other varieties of toothpaste which is close substitutes are available in the market. Colgate toothpaste has a greater number of close substitutes exists such as Crest, Aquafresh, Sensodyne , Oral-B and so on. Thus, more close substitutes will lead to change of the quantity demand of the Colgate toothpaste. Meanwhile, when the price of Colgate toothpaste increase in the market, consumer will switch over to the consumption for Sensodyne toothpaste therefore this will cause Colgates’s quantity demanded decrease and then rise in the demand for Sensodyne toothpaste. It is called positive cross elastic. Positive cross elastic which is these are commodity whose quantity demanded of one has a direct relationship with the price of the other. Also, Colgate toothpaste is normal goods and there is a positive income elasticity of demand. Income elasticity of demand defines as change in the quantity demand divide by change in income. As consumer’s income increased lead to an increased demand for Colgate toothpaste so that the income elasticity of demand is positive. Besides, it is a normal good because more of it is purchased as the consumer higher income. (Smriti Chand, 2013)

Oligopoly is a market structure which is a small amount of relatively large firms dominates an industry. (Amos web, 2013)An oligopolistic firm is a relatively large compared to the whole market so it has a considerable degree of the market control.  The dominant firms in an oligopolistic market have large industry, huge advertising budget and control over raw materials. Colgate Palmolive Company is known as an oligopoly market structure. Since, the company has many factories in foreign country and there are several competitors are available in the market such as Sensodyne, Oral-B, Crest and so on. Therefore, the company has to be careful because there has a few firms selling the similar toothpaste. For example, the toothpaste has same function and target market but there is different brand. If a firm that rise its price too much might lose some of its consumer to rivals.

In the conclusion, Colgate-Palmolive is a world-leading group with globally well-known brands such as Colgate Oral Care and Palmolive Body Care. The mission of Colgate-Palmolive is to offer Colgate with a significant competitive benefit by reducing total delivered cost, extending technology resources and developing superiority in purchasing, logistics and sourcing processes. They aiming for cost reduction across every category, thus a major agreement for preservatives used in household care and personal care products were awarded to a single supplier, delivering significant savings and leading to a unique research agreement. Besides, for a key toothpaste ingredient, the supplier base was reduced from 7 to 3, regional multi-year contracts with on-site manufacturing programs were put in place, record savings and total cost reductions were achieved over 5 years. I believe the Colgate-Palmolive will last longer still being a world-leading organization because there are over millions people trusting Colgate-Palmolive and using their products every day.

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