Colgate-Palmolive Company products including Toothpaste fall under consumer products market. Consumer products are products bought by the consumers for consumption. The Colgate-Palmolive Company offers different consumers products that are categories as households, health care, and personal items. The Colgate products include Colgate soaps, detergents, and toothpaste and toothbrushes. The Colgate Company line of product is of wide large of consumer products which include oral care, personal care, household care and health care services (Colgate Website, 2018). The consumer precuts for the oral care includes toothpaste, toothbrushes, toothpowder, teeth whitening product and mouthwash. The household products include dishwashing detergents. Personal care products produced by the Colgate Company body include soaps, and liquid hand washes detergents, and skin and hair care products. Also, Colgate Company provides health services which specialize in dental problems. The health care items and services include fluoride therapy, specialty in teeth cleaning, dental sensitivity treatment, mouth ulcer treatment services, and Gingivitis treatment (Colgate Website, 2018). Therefore, the Colgate Toothpaste is a consumer product of convenience.
Industry and Customer Analysis
Colgate-Palmolive has the world largest market share when it comes to oral care products. The company’s main product is toothpaste, for instance, in 2015 the company’s oral products contributed 47% of the total revenue (Colgate Website, 2018)). The oral care market has an intense competition with large and medium-size firms accounting for the market share. The company’s main competitors are Procter & Gamble Co and GlaxoSmithKline Pc. The Colgate toothpaste is leading in the market due to its high quality. In this industry, the companies compete regarding quality, pricing, and innovation. Thus, the company uses new products as a strategy to maintain demand in the market. The Colgate products have a competitive advantage over its peer’s products due to their products attributes. The quality of the Colgate products which confirmed through performance, safety, value, and consistency of the products have contributed to the products competitive advantage.
Comparative Advantages and International Trade Opportunities:
The Colgate-Palmolive Inc. is an American multinational manufacturing corporation headquartered in Park Avenue, New York. But the Company has plant overseas (South Africa) that handles most of the production. This helps the company to produce the Colgate toothpaste cheaper and faster than if they were manufactured in the United States. Therefore, the lower cost of production and faster production gives the Colgate Company advantage over its competitors.
Factors Affecting Demand, Supply and Prices for the Colgate Toothpaste
Availability of the alternative or Substitute products in the market:
the existence of the alternative products in the market creates competition for one another. The Colgate toothpaste has competition from Crest, Sensodyne, Arm & Hammer, and Close-Up toothpaste. Thus, substitute goods are two alternative goods used for the same purpose. The existence of substitute goods affects demand and supply of Colgate toothpaste since it presents consumers with alternative goods (Rios et al, 2013). Thus, an increase in the price of Colgate toothpaste will lead to a rise in demand for the other toothpaste.
In the graph below, the fall in Other Toothpaste prices (P1 to P2) leads to more demand for the product from Q1 to Q2. Thus, this causes the demand for the Colgate Toothpaste to decrease. Therefore, the substitute goods have a positive cross elasticity of demand.
P Other Toothpaste P Colgate Toothpaste
- D2 D1
- P1 S2 P1
- P2 P2
- Q1 Q2 Q2 Q1
Marketing and Advertising costs:
the Colgate Company spent a lot of cash on advertising and marketing for its product. The marketing strategy helps the common to attract more customers as well as maintain its existing market share. Advertising and marketing affect consumer tastes and preferences in a positive way thus causing the demand to increase. But also the advertising increases the company costs (Rios et al, 2013). Therefore, if the advertisement cost affects marginal costs, it shifts supply curve.
Market for Colgate Toothpaste Market for Colgate Toothpaste
- S1 D1
- S2 D
- P P
- Q Q
Quality of the product:
In Oral market competition is based on innovation, pricing, and quality. Thus the quality of toothpaste determines its sales. The Colgate Company offer high-quality toothpaste. Therefore, continues improvement of the toothpaste encourages consumers to buy the product hence increasing the demand.
Factors Affecting the Total Revenue of the Colgate Toothpaste
Price Elasticity of the Demand (PED):
PED describes how changes in price influence the demand for the product. Thus, for the goods with high elasticity changes in price quickly affect the demand for the product. The Colgate toothpaste marketing strategy is based on pricing strategy. Therefore, the price elasticity of the Colgate affects the total revenue of the product. Total revenue in business in the number of products sold times the price of the product. The PED affects the total revenue by determining how much the business will make due to changes in prices of the product (Rios et al, 2013). An increase in prices for the product could lead to price effect or quantity effect. The price effect is the impact of the increased sales revenue the business makes form the sale of each unit. Whereas, quantity effect is the consequence of decreased quantity sold due to lower demand. Thus, if the total positive price effect exceeds the negative impact of the quantity sold, their total revenue increases.
Factors that Influence Productivity in an Organization
Innovation: technological advancement is very crucial in influencing the industrial productivity. The Colgate Company uses innovation as a strategy to improves its product and maintain their clientele. The technological innovation helps in lowering the cost of production, improving packaging design and produce high-quality products.
Good management and quality of the employees:
good management helps the company to make better strategies. While company staffs determines the organization productivity. Thus, have qualified and skilled employees help in increasing productivity.
Measures of the Cost
Marginal cost (MC) is the additional cost incurred by the firm for producing an additional unit of the product.
In the short-run marginal cost (MC) first, decline and start increasing as more unit are produced, the curve intersect the Average total cost (ATC) and average variable cost (AVC) at their minimum levels. The AVC curves steep as MC but not as quickly as MC. The AFC curve declines as the more units are produced while the average total cost (ATC) curve goes up as MC increase due to a law of diminishing returns (Rios et al, 2013).
Opportunity cost: the opportunity cost involves using a scarce resource to produce one commodity rather than other. Therefore, it is the costs incurred for preceding one thing for another (Rios et al, 2013). The opportunity cost measures cost by evaluating the costs of the two commodities and foregoing the one with the most benefit.
Externalities and government policy and their effect on marginal cost and revenue
The government policy and externalities on the safety the oral products may have a positive or negative outcome for the product. The government requires the company to produce products that are in line with Consumer Safety Act and other safety policies with have direct impact on the product. These policies affect marginal revenue and marginal costs. For instance, due to safety requirement each product cost increase which eventually affects the costs.
Recommendation on how Colgate Company can Increase its profit and maintain its market share
There is a need for the company to increase its market share as well as profit. Therefore, the company should develop a pricing strategy to achieve these objectives. The pricing strategy will allow the company to set prices for its product at lower prices; thus, creating more demand. This will result in increased revenues and larger market share.
Colgate Website. (2018). “Colgate” Retrieved from https://www.colgate.com/en-us
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Rios, M. C., McConnell, C. R., & Brue, S. L. (2013). Economics: Principles, problems, and policies. McGraw-Hill.