In a dynamic business environment, companies enter industries whenever they see growth or profit potential or exit when they see a decline. As such, companies have to consistently practice an internal and external check or analysis on the company to see where they stand in the industry they operate in. The Boston-Consulting Group’s Growth model, among all other models provides one of the best guides to analyzing a company’s marketing performance and its potentials.
The model analyses the individual product portfolios of a particular company on its market shares and its potential to grow in the market. It divides the product lines into four categories; stars, cash cows, question marks and dogs, categories in which indicates the effectiveness of the individual marketing mix for each product lines. It helps a company to understand the performance and act on it; to invest, to hold, to harvest or to divest.
To further demonstrate the phenomena, the theory will be applied on the oral care industry in Malaysia; toothpaste, toothbrush, mouthwash and any other products related to oral hygiene. The companies operating in this particular industry are Colgate-Palmolive, Oral B, Southern Lion and Sensodyne. In-depth analysis will be done using Colgate-Palmolive as the chosen company.
The American company Colgate-Palmolive started in 1806 by William Colgate. The company was firstly a company producing soaps and candles, but produced its first toothpaste in 1873. Colgate has expanded its market share and is currently operating in 200 countries worldwide (www.colgate.com). Colgate operates in two segments, Oral, Personal, and Home Care; and Pet Nutrition.
The Oral segment offers toothpaste, toothbrushes, mouth rinses, dental floss, and pharmaceutical products for dentists and other oral health professionals. The company sells its products to wholesale and retail distributors. Colgate currently employs 34,700 (2008) employees (www.smartbrief.com) of which 1,200 are working in the manufacturing and production site in Malaysia (www.jobstreet.com) which is a private limited company.
Colgate’s vision statement consists of three fundamental values which are; Caring, Global Teamwork and Continuous Improvement (www.colgate.com). Colgate-Palmolive has operations in more than 200 countries and generates about 70 percent of its revenue outside the United States (http://www.fundinguniverse.com). The company recorded sales of $15 billion at the end of 2008.
2.2 The Oral Care industry
Buyer’s powers in this industry are relatively high as the products are highly undifferentiated and buyers such as hypermarkets buy in huge bulks accounting for a very high percentage of sales. However, the power has been reduced ever since oral care companies begin to be different and create brand image causing switching cost for buyers to be high. Suppliers’ power seem to be on the moderate side as there are plenty of suppliers providing the same resources, but quality is very vital to the manufacturer.
As a capital and labor intensive manufacturing process, barriers to entry are high because new entrants require very high capital investment, and at the same time, existing companies have already gained economies of scale. They are also very near the peak if not at the peak of the learning curve with strong access to distributions channels around Malaysians hypermarkets and supermarkets.
Substitutes for this industry are other oral care related products such as chewing gums, mint candies for fresh breath and clean teeth. The ones to fulfill the same psychological needs for self confidence and cleanliness would be perfume and other personal care products as well as products which compete for the same buying power.
The nature of competition stands tough in this industry as companies invest highly...