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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