The merging of Colgate and Palmolive

COMPANY BACKGROUND

Colgate-Palmolive Company

CP is an American diversified multinational corporation focused on the production, distribution and provision of household, health care and personal products, such as soaps, detergents, and oral hygiene products (including toothpaste and toothbrushes). Under its “Hill’s” brand, it is also a manufacturer of veterinary products.

History

In 1806, William Colgate, himself a soap and candle maker, opened up a starch, soap, and candle factory on Dutch Street in New York City under the name of “William Colgate & Company”. In the 1840s, the firm began selling individual bars in uniform weights. In 1857, William Colgate died and the company was reorganized as “Colgate & Company” under the management of Samuel Colgate, his son. In 1872, Colgate introduced Cashmere Bouquet, a perfumed soap. In 1873, the firm introduced its first toothpaste, aromatic toothpaste sold in jars. His company sold the first toothpaste in a tube, Colgate Ribbon Dental Cream, in 1896. By 1908 they initiated mass selling of toothpaste in tubes.

In Milwaukee, Wisconsin, the B.J. Johnson Company was making a soap entirely of palm and olive oil, the formula of which was developed by B.J. Johnson in 1898. The soap was popular enough to rename their company after it – “Palmolive”. At the turn of the century Palmolive, which contained both palm and olive oils, was the world’s best-selling soap. A Kansas based soap manufacturer known as the Peet Brothers merged with Palmolive to become Palmolive-Peet. In 1928, Palmolive-Peet bought the Colgate Company to create the Colgate-Palmolive-Peet Company. In 1953 “Peet” was dropped from the title, leaving only “Colgate-Palmolive Company”, the current name.

Colgate-Palmolive has long been in fierce competition with Procter & Gamble, the world’s largest soap and detergent maker. P&G introduced its Tide laundry detergent shortly after World War II, and thousands of consumers turned from Colgate’s soaps to the new product. Colgate lost its number one place in the toothpaste market when P&G started putting fluoride in its toothpaste. In the beginning of television, Colgate-Palmolive wished to compete with Procter & Gamble as a sponsor of soap operas. Although the company sponsored many shows in part, they were most famous for being the full sponsor of the serial The Doctors.

George Henry Lesch was president, CEO, and chairman of the board of Colgate-Palmolive in the 1960s and 1970s, and during that time transformed it into a modern company with major restructuring.

In 2006, Colgate-Palmolive announced the intended acquisition of Tom’s of Maine, a leading maker of natural toothpaste, for US $100M. Tom’s of Maine was founded by Tom Chappell in 1970.

Today, Colgate has numerous subsidiary organizations spanning 200 countries, but it is publicly listed in only two, the United States and India.

In June 2007, phony Colgate toothpaste imported from China was found to be contaminated with diethylene glycol, and several people in eastern U.S. reported experiencing headaches and pain after using the product. The tainted products can be identified by the claim to be manufactured in South Africa by Colgate-Palmolive South Africa LTD, they are 5oz/100ml tubes (a size which Colgate does not sell in the United States) and the tubes/packaging contains numerous misspellings on their labels. Colgate-Palmolive claims that they do not import their products from South Africa into the United States or Canada and that DEG is never and was never used in any of their products anywhere in the world. The counterfeit products were found in smaller “mom and pop” stores, dollar stores and discount stores in at least four states.

Colgate people around the world have built a reputation as a successful company with the highest ethical standards. Through living our values of Caring, Global Teamwork, and Continuous Improvement, and adhering to the highest principles of integrity, honor, and concern for the environment and others, we seek to:

Provide safe and quality products of value to consumers

Increase shareholder value

Offer opportunities for personal and professional growth to all Colgate people

Fulfill our corporate social responsibilities as a member of the global community

Factors affecting the Business:

Government Factors:

Government does not have much influence on the FMCG industry in terms of regulations. There are consumer protection laws but they are not implemented as they should be. There are not much regulations involved in this industry. Only the companies which are listed on the stock exchange have to follow the regulations under the Companies Ordinance 1984. So the new entrants

Political factors:

Political factors are influencing this industry because the recent and order conditions have affected the whole economy which in turn affected the industry. Many of the factories of the big companies were burnt after the assassination of Benazir.

Economic factors:

The overall economy of the country is showing a stable growth. Therefore this industry is also showing a growth of 10%. But the inflation is growing rapidly which is not a good sign for the new entrants. Change in the interest rate also affects the industry. Hence the new entrants are also threatened by the increasing interest rates.

Social trends:

The social trends are in favor of this industry. Mass awareness is created through media. So people are shifting from their traditional methods of washing clothes, skin care etc to the modern methods. This is a good sign for the new entrants. People have become more educated and health conscious. High population growth is another opportunity for the new entrants.

Technological change:

The technology can support this industry well. If the whole system can be automated from the import of raw material to the finished goods then it would save time and money. This is a good sign for the new entrants. But in this industry technology does not play a major role because the traditional formulae of soap or toothpaste are not that much complicated

INTRODUCTION

Effective management is the key to the establishment and growth of the business. The key to successful management is to examine the marketplace environment and create employment and profit opportunities that provide the potential growth and financial viability of the business. Despite the importance of management, this area is often misunderstood and poorly implemented, primarily because people focus on the output rather than the process of management.

Toward the end of the 1980s, business managers became absorbed in improving product quality, sometimes ignoring their role vis-a-vis personnel. The focus was on reducing costs and increasing output, while ignoring the long-term benefits of motivating personnel. This shortsighted view tended to increase profits in the short term, but created a dysfunctional long-term business environment.

Simultaneously with the increase in concern about quality, entrepreneurship attracted the attention of business. A sudden wave of successful entrepreneurs seemed to render earlier management concepts obsolete. The popular press focused on the new cult heroes Steve Jobs and Steve Wozniack (creators and developers of the Apple Computer) while ignoring the marketing and organizing talents of Mike Markula, the executive responsible for Apple’s business plan.* The story of two guys selling their Volkswagen bus to build the first Apple computer was more romantic than that of the organizational genius that enabled Apple to develop, market and ship its products while rapidly becoming a major corporation.

In large businesses, planning is essential for developing a firm’s potential. However, many small businesses do not recognize the need for long-range plans, because the small number of people involved in operating the business implies equal responsibility in the planning and decision-making processes. Nevertheless, the need for planning is as important in a small business as it is in a large one.

This publication focuses on the importance of good management practices. Specifically, it addresses the responsibilities of managing the external and internal environments. It can provide a basis for confronting the challenges of the 1990s.

3.0 Critical issue / problem for today business:

Every new day bring the challenge for any business person, because to stay alive in the market you need to fight efficiently and smartly, as the world moving; complexity in every aspect of life is increase though technology has improved along but as much we belong to technology we get more depended. Following are the hot buttons for today business, and every business men more or less facing and struggling.

Political instability and involvement:

Every government is eager to impose taxes to earn more and more profit, due to recent shock of recession most of the industries are move toward bankruptcy or liquidate just because of high taxes and less benefit given by the government. It is common these day small business or large organization owners to be unaware of current legal issues that can hit them because continuous changes in the business policies and implication by the governments put them in trouble. The problem is that legal trouble can cost them. It can even cost you your business. After 9/11 money laundering and other compliance issues are more dealt in the organization standard operating procedure.

Poverty and inequality of income:

Due to high inflation and high unemployment rate continuously hitting the poverty level to increase, and that all because of inequality of income, contrary as the inflation increase the cost of business will also increase that thing put the pressure on the business man to reduce the prices because consumer start searching for alternative.

Ethical issues in business:

Ethics and moral compulsion are something that we all come across at one time or another. Contractual agreement not to exhibit unethical behavior. Releasing products with defects should be informed to the customers.  Even in a professional setting, all persons should act in a manner that would uphold the good of society. Every businesses have their own code of ethics and the individuals within that business have adhere the compliance of the code conduct most of the organization investing lot of resource in order to maintain the ethic and code of conduct within the organization, even though regulatory bodies also penalized the organization if in case of non – compliance. Ethical behavior in business is consistent with the principles, norms, and standards of business practice that have been agreed upon by society.

Constantly Changing Economic Environment:

Dynamic economic environment is a night mare for the Contemporary business, because already exist giant in the market is a serious threat for them, because most of them have made cartel and create obstacle for the new business men to enter in the market or survival.

Economical changes like inflation , Balance of payment, unemployment and poverty is also hindrance for the growth of business, for the fighting against all these indicators, entrepreneur need specific skill and knowledge, because without that he / she cannot be able to run the business smoothly.

Risk Management:

Every organization is susceptible to low probability events that could have a potentially catastrophic effect. A small or new business is no exception although it is easy to ignore the probability of such events under the pressures of developing and maintaining a business. Identifying and quickly dealing with such unlikely events is primarily the responsibility of management. Also only management has the ability to assess the full potential impact of these events on the overall organization. Some of the potentially disastrous events that may affect your business are listed below.

Theft of property

Breach of laws

Computer crimes

Fraud

Weather related damage

Determine how vulnerable your business is to these and other such risks by assessing their probability and impact. Consider actions that you can take to lower the probability of their occurring, i.e. ways to control your risk. Review the checklist each year to ensure the future of your firm is not imperiled through neglect.

Developing and Mentoring Employees:

Managing the employees / labor is the critical issue for the business men in these days because as the dynamic environment is coming around, for competing with that we need to keep our staff in the phase of learning, and continuous training is required to make them up to date. Even though you may discover that certain events are affecting your business, be careful not to change the organizational structure of your firm without discussing it with your management team. Employees generally can accomplish goals despite organizational structures imposed by management. Because restructuring involves spending a lot of time learning new rules and implementing a new organizational structure is costly.

The actual problem comes when the employee / labor are unwilling to change and create hindrance in the way, so fighting with this problem is the main issue for the entrepreneurs.

5. Negotiating and Managing Critical Relationships with stake holders:

Developing / maintaining the relationship with all the stake holders is the important thing for the entrepreneurs because each and every one has its own importance, and without making good relation with them survival is difficult, for all the building relationship entrepreneurs need to have the negotiation and communication skills.

Every day we have noticed that lots of entrepreneurs were lost their businesses just because they are lack with these skills and for understanding the critical relation with the stakeholders we must need to understand the importance, if we neglect the customers, so we lose business, if we neglect the good supplier so we lose the quality, if we neglect the distributor so we lose the perfection is services, and finally if we neglect the Government so we have to ready for the sanctions and implication / charges / penalties / abandon of business

Managing global operation:

When organizations become global they often end up paying a heavy price in terms of managing complex managerial issues and challenges.

Host country languages

Host Country Norms and Customs.

Workforce management

Unfamiliar laws and regulations.

Unexpected Cost mix.

Globalization has affected most of country business tremendously. A number of Multi National Corporations are operating and functioning in most part of the world. It is important to spend some time in understanding how globalization makes it necessary and pertinent for a MNC to disperse and spread its scope and function of Operation. It would be more correct if try to understand the philosophy of MNC’s not operating in certain regions or certain particular countries. The western worlds call these the disadvantages of Globalization, if an organization decides to pack up its business and leave a host company. The common disadvantages which lead to a MNC forgoing globalization includes.

Handing over proprietary Technology to host countries.

Political risks.

Poor Employee (Managers and worker) skills.

Slow customer response time.

Effective communication between interfaces difficult

Competition with others Organization:

Businesses since the beginning of time have competed against each other. On the basis of competition, various types of market exist for nearly all lines of products and services. We already know that absolute monopoly and perfect competition type of markets are not that pervasive, yet businesses try to avoid perfect competition and strive to go for absolute monopoly so they can enjoy no competition and exploit the customer sentiments for buying. We can identify the following common and widespread ways in which organizations can compete against other organizations.

1. Price: In our day to day routine observations, we often see that a lower price would attract more customers provided the product or service fulfils its intended use. Lower price helps an organization to increase its customer base.

2. Quality: is an important dimension by which superior raw materials as well as high Skillman ship would ensure that product manufactured or service developed is offered to the customer with something extra. That something extra is nothing else but Quality is always offered free of cost, we will discuss this when we study in details Quality Management and Total Quality Management.

3. Product: Differentiation refers to special features that make the product or service look more suitable to the customers like an automobile manufacturer decides to provide GPS system to selected customer at an additional price etc.

4. Flexibility is the ability to respond to changes. It may refer to changes in target sales, product feature like adding GPS device to all automobiles

5. Time refers to the period required to provide a product or service to a customer from the moment the order is booked to the delivery, also time required to rectify a shortcoming or mistake

Common reasons why organization Fail:

We can identify certain familiar reasons why Organizations fail to achieve a competitive advantage and end up losing out to their competitors. These reasons are universal in nature and find the same footing in Pakistan as well as any other place in the world.

1. Too much emphasis on short-term financial performance. Quite often, cost cutting, profit maximizing at the cost of social responsibility or employee motivation is a failed strategy pursued by organizations, which just hastens their status to oblivion.

2. Failing to take advantage of strengths and opportunities. This is in reality failing to hold on to proven successful strategies or core competencies. Sometimes a change in leadership leads to change in strategy, where just for the sake of glory and high profits, organizations forget their core competence and opt for strategies and tactic which cause their downfall.

3. Failing to recognize competitive threats. This reason is the exact opposite of failure to make use of the organizations strengths. Quite often organizations decide to pursue status quo and ends up bringing no new product or service or even no innovation in its existing product or service line leading to lack of customer satisfaction, decline in profits and finally being declared a failure.

4. Neglecting operations strategy. This is definitely the most important reason of failure; organizations often end up employing non productive techniques which lead to inconsistent and failed operations.

5. Too much emphasis in product and service design and not enough on improvement. Differentiation in terms of service and product, American companies in 1980s did that they never introduced incremental refinements rather went for big changes and thus lost to Japanese competitors.

6. Neglecting investments in capital and human resources. A total disregard to use the best resource Capital and human resources in the long run make or break an organization.

4.0 Conclusion:

Successful management is founded on the mastery of a myriad of details and the success of the business is depended on the efficient management of all the resources and to make decision for best optimal purpose. While management schools teach the importance of focusing attention on major issues affecting the business, practical managers realize the major issues are the variety of small aspects that form the business. The small mistake leas to the business in to unrecoverable losses or bankruptcy, In an increasingly structured society, inattention to even one minor detail can result in significant disruption of the business or even its failure.