2

SUBMITTED BY:

HAJRA ASLAM (6332)SABIKA HASAN (6550)BEHZAD AMIR (6868)ROMASAH RAHIM (6396)ASAD SHAMIM (6261)NABEEL LATIF (6791)

ACKNOWLEGEMENT

“We owe our profound thanks and deepest gratitude to almighty Allah, most merciful, who blessed

us with determination, strength, ability and divine help to complete this piece of research work”.

This term report on Colgate submitted to Mr.Javaid Ahmed on April, 16th 2008 as a term project by the following group members:

Nabeel Latif 6791Behzad Amir Memon 6868Sabika Hasan 6550 Hajra Aslam 6332Asad Shamim 6261 Romasah Rahim 6396

We have received support on this report directly and indirectly from many people that we want to mention here.

We would like to thank the brand manager of Colgate Pakistan Mr. Ammar Ahmed along with his team, for entertaining us with a full fledge question and answer session, which provide us valuable information regarding Colgate thus enable us to prepare report on it, as required by the instructor. We are also thankful to them for answering our queries time by time, through email and phone calls.

We would like to thank our family members, parents & siblings for their love and support and above all for bearing us.

Finally and most importantly thanks and acknowledgement goes to our teacher Mr. Javaid Ahmed who guided and stimulated us to complete this report.

3

TABLE OF CONTENTS

COMPANY BACKGROUND & INFORMATION........................................................5HISTORY..........................................................................................................................5

COLGATE-PALMOLIVE'S MISSION STATEMENT...............................................................7MACRO-ENVIRONMENTAL ANALYSIS AND INDUSTRY ATTRACTIVENESS........................8

MACRO-ENVIRONMENTAL ANALYSIS................................................................9ANALYSIS OF THE INDUSTRY USING MICHAEL PORTER’S FIVE COMPETITIVE FORCES............................................................................................................................9

THREAT OF ENTRANTS.............................................................................................10BARGAINING POWER OF BUYERS.............................................................................11THREAT OF SUBSTITUTES.........................................................................................12BARGAINING POWER OF SUPPLIERS........................................................................13RIVALRY AMONG EXISTING COMPETITORS.............................................................14INDUTRY ATTRACTIVENESS SUMMARY:...................................................15

KEY DRIVING FORCES...........................................................................................16EXTERNAL FACTOR EVALUATION MATRIX (EFE)....................................................17

Company and Competitor Analysis...............................................................................19KEY SUCCESS ACTORS FOR COMPETITIVE SUCCESS................................20COMPETITORS PROFILE MATRIX................................................................................21

EVALUATION OF CPM..............................................................................................21IE MATRIX......................................................................................................................22

MARKET PENETRATION............................................................................................22PRODUCT DEVELOPMENT:........................................................................................23

Micro-Environmental Analysis and Internal Company Resources............................24INTERNAL AUDIT....................................................................................................25

INTERNAL FACTOR EVALUATION MATRIX (IFE)......................................................32EVALUATION OF IFE...........................................................................................33

STRATEGIC ANALYSIS......................................................................................................34& RECOMMENDATIONS....................................................................................................34

GENERIC STRATEGY..............................................................................................35COLGATE PALMOLIVE’S LOW-COST PROVIDER STARTEGY:............38

TOWS Matrix..............................................................................................................39THE STRATEGIC POSITION & ACTION EVALUATION (SPACE) MATRIX.................40GRAND STRATEGY MATRIX:........................................................................................43QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)........................................45

STRATEGIC IMPLEMENTATION.............................................................................46SIX THINGS REQUIRED TO EFFECTIVELY IMPLEMENTING A STRATEGY.................................................................................................................47STRUCTURE...............................................................................................................49BALANCE BUSINESS SCORECARD................................................................................52

BIBLIOGRAPHY:................................................................................................................53

4

COMPANY BACKGROUND & INFORMATION

COLGATE-PALMOLIVE COMPANY (NYSE: CL)

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

5

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 mis-spellings 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

Products:Throughout the world, people like you trust our family of brands to care for the ones they love. From toothbrushes and toothpastes to bar soap, household cleaners, every day our products improve the quality of life for consumers worldwide.

       

       

 ToothpastesSparkleTooth Brushes  

New Palmolive Naturals

Azadi Carbolic SoapProtex

 

Max Bar Azadi Dish Bar Max Scourers Max Liquid Max Antibacterial

 Brite TotalExpress PowerBonus

6

COLGATE-PALMOLIVE'S MISSION STATEMENT

Our three fundamental values—Caring, Global Teamwork and Continuous Improvement—are part of everything we do.

Caring

The Company cares about people: Colgate people, customers, shareholders and business partners. Colgate is committed to act with compassion, integrity and honesty in all situations, to listen with respect to others and to value differences. The Company is also committed to protect the global environment and to enhance the communities where Colgate people live and work.

Global Teamwork

All Colgate people are part of a global team, committed to working together across countries and throughout the world. Only by sharing ideas, technologies and talents can the Company achieve and sustain profitable growth.

Continuous Improvement

Colgate is committed to getting better every day in all it does, as individuals and as teams. By better understanding consumers' and customers' expectations and continuously working to innovate and improve products, services and processes, Colgate will "become the best."

.

7

PROPOSED MISSION STATEMENT

At Colgate we are committed to improve the quality of life around the globe through quality products while valuing the differences among our large customer base, shareholders, suppliers and employees

MACRO-ENVIRONMENTAL ANALYSIS AND INDUSTRY

ATTRACTIVENESS

8

MACRO-ENVIRONMENTAL ANALYSIS

ANALYSIS OF THE INDUSTRY USING MICHAEL PORTER’S FIVE COMPETITIVE FORCES

9

INDUSTRYCOMPETITO

RS

Rivalry AmongExisting Firms

SUBSTITUTES

LOW

MOD

HIGHBUYERS

HIGH

POTENTIAL

ENTRANTS

SUPPLIERS

THREAT OF ENTRANTS

Yes (+) No (-)1. Do large firms have a cost or performance advantage in your segment of the

industry?√

2. Are there any proprietary product differences in your industry? √3. Are there any established brand identities in your industry? √4. Do your customers incur any significant costs in switching suppliers? √5. Is a lot of capital needed to enter your industry? √6. Is serviceable used equipment expensive? √7. Does the newcomer to your industry face difficulty in accessing distribution

channels?√

8. Does experience help you to continuously lower costs? √9. Does the newcomer have any problems in obtaining the necessary skilled

people, materials or supplies?√

10. Does your product or service have any proprietary features that give you lower costs?

√

11. Are there any licenses, insurance or qualifications that are difficult to obtain?

√

12. Can the newcomer expect strong retaliation on entering the market? √INTERPRETATION:The no. of unfavorable components are high as compared to the favorable.The threat of new entrant is low or barriers to entry are low. New comers who enter the industry do not require a lot of capital, expertise and other resources. There are no product differences and also customers do not incur any cost of switching from one brand to another which means that competition is increasing within the same product category. Customers are not loyal to one brand.

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.

LOW MEDIUM HIGH

10

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.

BARGAINING POWER OF BUYERS

Yes (+) No (-)1. Are there a large number of buyers relative to the number of firms in the

business?√

2. Do you have a large number of customers, each with relatively small purchases?

√

3. Does the customer face any significant costs in switching suppliers? √4. Does the buyer need a lot of important information? √5. Is the buyer aware of the need for additional information? √6. Is there anything that prevents your customer from taking your function in-

house?√

7. Your customers are not highly sensitive to price. √8. Your product is unique to some degree or has accepted branding. √9. You provide incentives to the decision makers √.

INTERPERTATION

There are different categories of buyer; traders are the major ones who buy in bulk. Their bargaining power is high because they buy in bulk as with the case with NGO’s, Agha Khan, Metro, and Micro.The bargaining power of consumer is low as similar type of product is available in the market provided by the competitors with same prices. The buyers cannot force down the prices nor can they demand higher quantity or better product. They have to suffice what is being provided to them by the industry as there are no product differences provided by the suppliers.

LOW MEDIUM HIGH

11

Government Factors:

Government has laws that protect the consumer rights. There are no check and balance on the use of low quality raw materials. But this does not have much influence on the whole industry. Bargaining power of employees is affected by the government regulations if the Government imposes new laws on the price setting procedure of this industry.

Political factors

Political factors do influence the bargaining power of buyers as the sales on the whole goes down if the law and order situation is not stable in the country.

Economic factors

Economic factors do influence the bargaining power of buyers as inflation is the major factor that is affecting the consumers hard.

Social Trends

Since awareness has increased therefore buyers are more aware of the products they are purchasing and social trends have influenced the bargaining power of people.

Technological factors

Do not have a great influence on the bargaining power buyers.

Threat of SubstitutesYes (+) No (-)

1. Substitutes have performance limitations that do not completely offset their lowest price. Or, their performance is not justified by their higher price.

√

2. The customer will incur costs in switching to a substitute. √3. Your customer has no real substitute. √4. Your customer is not likely to substitute. √

INTERPRETATION:

Threat of substitutes is moderate to low because there are other substitutes like dentonic, miswak etc. The customer does not incur any cost of switching from one brand to another. Therefore threat of substitute is high. Threat of substitutes is moderate to low. There are not much substitutes available in the market.

LOW MEDIUM HIGH

12

Government Factors:

Category wise there are some substitutes. Government regulations do not affect the availability of substitutes until the Government allows some new imported electronic products to enter the market.

Political factors:

Political factors do not affect the availability of substitutes.

Economic factors

Economic factors do not affect the availability of substitutes. But since inflation is growing, so it is hard for the poor people to switch to more modern products like washing powder, tooth paste. They would rather prefer oil to clean their clothes and use miswak to brush their teeth.

Social trends

Social trends do affect the availability of substitutes. Because in our country where rural population is approximated 65%, people use traditional methods of washing clothes, brushing teeth

Technological change

Technological change is not that much rapid that it would influence the overall availability of substitutes.

BARGAINING POWER OF SUPPLIERS

Yes (+) No (-)1. My inputs are standard rather than unique or differentiated. √2. I can switch between suppliers quickly and cheaply. √3. My suppliers would find it difficult to enter my business or my customers

would find it difficult to perform my function in-house.√

4. I can substitute inputs readily. √5. I have many potential suppliers. √6. My business is important to my suppliers. √7. My cost of Purchases has no significant influence on my overall costs. √

INTERPRETATION:

Bargaining power of supplier is high because there are few suppliers in the industry. At the same time it is not easy to change the supplier as a lot of integration and collaboration is required between buyers and supplies. The buyers business is important to suppliers.

LOW MEDIUM HIGH

13

Government Factors:

Government regulations do affect the bargaining power of suppliers if any new tax is imposed or new import duty is in place.

Political factors:

Political factors do have affect on the bargaining power of employees because of the uncertain law and order conditions.

Economic factors

Economic factors do have an affect on the bargaining power of suppliers as inflation is rising fast. Suppliers demand that they would provide the necessary raw material at a higher price. Exchange rate fluctuations also affect the cost of raw material.

Political factors:

Social trends do have an affect on the bargaining power of suppliers

Technological factors

Technological factors does have an affect on the bargaining power of suppliers usually because the raw material used in this industry is usually the same and it would not help the suppliers to improve their quality by using technology

RIVALRY AMONG EXISTING COMPETITORS

Yes (+) No (-)1. The industry is growing rapidly. √2. The industry is not cyclical with intermittent overcapacity. √3. The fixed costs of the business are relatively low portion of total costs. √4. There are significant product differences and brand identities between the

competitors.√

5. The competitors are diversified rather than specialized. √6. It would not be hard to get out of this business because there are no

specialized skills and facilities or long-term contract commitments etc.√

7. My customers would incur significant costs in switching to a competitor. √8. My product is complex and requires a detailed understanding on the part of

my customer.√

9. My competitors are all of approximately the same size as I am. √

INTERPRETATION:Threat of competitors is high because the product is not unique as there are no product differences. Same products are available with all competitors like Unilever, Procter and Gamble, Shield, Oral B. Therefore rivalry is also increasing as demand in the economy has also increased

LOW MEDIUM HIGH

14

for the last 5 to years. Majority of the competitors are MNCs which means that they have the necessary resource and skill.

Government Factors:Government regulations do have an affect on the rivalry among the competitors.

Political factors:Political factors do not affect the rivalry among the competitors

Economic factorsEconomic factors do affect the rivalry among the competitors as all the players in the industry want to have cost leadership. The economic factors are favoring intense competition from the last five years. People have more money at their disposal. Also Pakistan is a consumption oriented society.

Social trends

Social trends have changed, buyer are more aware of their purchases. So the players in the industry are always trying hard to increase their market share.

Technological change

Technology is helping the companies to gain a competitive advantage over their rivals. Also research and development plays an important role in this.

INDUTRY ATTRACTIVENESS SUMMARY:

COMPONENTS IMPLICATIONS

Threat of new entrants low

Bargaining power of buyer low

Threat of substitutes moderate to low

Bargaining power of suppliers medium to high

Intensity of rivalry among competitors medium to high

15

KEY DRIVING FORCES

INDUSTRY GROWTH:

Now most of the people have knowledge about the different products and its advantages. The intense competition in industry and high demand enables the new entrants to compete in this market.

PRODUCT INNOVATION:

Innovation in product, as Colgate has just introduced Max fresh in which the coolant crystals are present which none of the competitors has adopted yet. There is also room in innovation in washing detergents.

CHANGING SOCIETAL CONCERNS, ATTITUDES AND LIFESTYLE:

Since social issues are really effecting the use of product just like the use of Miswak which is the Islamic mode of cleaning the teeth.

USE OF E-COMMERCE AND INTERNET:

Usage of online ordering and maintaining the stock level through e-commerce can be driving force in the industry. By using that they can provide products to customer which is value addition for them.

16

EXTERNAL FACTOR EVALUATION MATRIX (EFE)

KEY EXTERNAL FACTORSWEIGHT RATING

WEIGHTED SCORE

Opportunities      1 Exploring into new categories

like shampoo, hand wash , body wash, shower gel

0.14 4 0.48

2 Rural population switching from miswak to toothpaste

0.06 3 0.183 Gap in tooth brush market 0.08 4 0.244 Implementation of ERP(SAP) 0.14 4 0.565 People becoming hygiene and

beauty conscious0.1 3 0.4

6 No layoffs 0.07 4 0.28

Threats      1 Raw material and energy

prices are increasing0.12 1 0.12

2 Inflation in the country 0.07 1 0.073 Competitors re launching their

products0.1 1 0.1

4 Competitors increasing their marketing budgets

0.06 2 0.12

5 Unstable law and order conditions.

0.06 2 0.12

TOTAL 1   2.67

17

EVALUATION OF EFE

The weighted score of the EFE matrix comes out to be 2.67 which show that Colgate can take advantage of the profitable opportunities that the market is offering, to overcome the external threats.

The highest weights in the external opportunities are given to new product development and the implementation of ERP which means automated system for supply chain management. Colgate is not yet into a large variety of personal care products and since people are becoming more fashion and hygiene conscious these days Colgate can enter into a much profitable market of products categories like shampoo, face wash, body wash, liquid hand wash, shower gel etc. Its major rivals in the personal care category namely Unilever and Lux are already manufacturing these products but Colgate with its large capital base can enter these markets easily and can increase the length of their Personal Care product line and become more profitable.

The other major opportunity is that Colgate can fully automate their supply chain. Colgate is in fact planning to take advantage of this opportunity and is pursuing a strategy by the name of ERP (SAP) which will make whole supply chain automated. All local and foreign suppliers of Colgate will have their systems integrated with the Company’s MIS (Management Information System) where they can take orders, check inventory levels, bargain prices.

Awareness among the rural population has also increased over the past decade and some part of the population is shifting from miswak and home-made cleaning soaps to tooth pastes liquid and powdered soaps. There is also a large gap in the tooth brush market which means that Colgate Palmolive is far ahead in the tooth brush market as compared to its major rivals and can further increase this gap with more innovations.

The major threat to the company is the increasing prices of raw material and energy which is mainly due to the inflation in the country. The suppliers are constantly demanding price increases and the company has to negotiate prices with them on a regular basis. Moreover the energy and fuel prices are also rising, as a result of which Colgate has to bear high cost of operations. Being a low-cost producer, it is a major threat to the company.

Apart from this, the political situations are also causing major threats to the company. Post December 27, 2008 80% of Colgate factories in Kotri were burnt out which caused huge losses to the company.

18

Company and Competitor Analysis

19

KEY SUCCESS ACTORS FOR COMPETITIVE SUCCESS

Low cost production efficiency. CP has plants installed that take only 30 minutes for the plant to shift from the production of one product to the other.

High quality manufacturing of products with very few defects.

A strong network of wholesale distributors.

Gaining ample space on retailer shelves. (Examples Naheed, Aghas, Makro and other small shops.)

Attractive packaging and styling.

Good length of product lines.

Attractive commercials and advertising.

Good reputation in the industry along with favorable reputation with buyers.

20

Competitors Profile MatrixCRITICAL SUCCUSS FACTORS WEIGHT RATING

TAS RATING TAS RATING TAS

  Colgate Palmolive 

Shield Unilever

1 Market Share 0.15 4 0.6 3 0.45 4 0.62 Financial

Position0.1 3 0.3 2 0.2 4 0.4

3 Consumer Loyalty

0.06 2 0.12 2 0.12 3 0.184 Price

Competitiveness

0.12 3 0.36 3 0.36 3 0.36

5 Product Quality

0.18 4 0.72 3 0.54 4 0.726 Advertising 0.13 4 0.52 1 0.13 4 0.527 Sales and

Distribution0.11 2 0.22 2 0.22 3 0.33

8 Manufacturing 0.1 4 0.4 3 0.3 4 0.49 E-Commerce 0.05 1 0.05 1 0.05 3 0.15

TOTAL 1 3.79 2.37 3.66

EVALUATION OF CPM

As compared to Unilever which has strong e-commerce, Colgate Palmolive Pakistan lacks in this area. Not only they should introduce MIS system within the country to improve efficiency but they should do e-procurement specially with suppliers as they get their raw material from abroad and this can increase their efficiency and reduce time and cost.Colgate Palmolive Pakistan has less consumer loyalty as compared to unilever. They can strengthen this area by aggressive advertising and improving their sales and distribution so that the retailers are never out of stock, resulting into consumer shifting to other product.

Colgate’s sales and distribution network is not as strong as Unilever. Colgate should increase employee commitment and also do forward integration with the distributors so that in this way they reduce the time lacks in the product reaching to the point of sales.Unilever Both unilever and Colgate-Palmolive are market leaders in their product areas, however unilever has got strong customers loyalty because of the aggressive marketing as well as

21

13 2

field and promotion campaigns but Colgate has more customer loyalty in oral care because of their campaigns. Product quality and manufacturing are strong parts of both Unilever and Colgate. Unilever have more e-commerce usage as compared to Colgate

IE MATRIX

THE IFE TOTAL WEIGHTED SCORE

 Strong 3.0 to 4.0

Average 2.0 to 2.99

Weak 1.0 to 1.99

THE EFE TOTAL WEIGHTED SCORE

High 3.0 to 4.0    

 Medium 2.0 to 2.99

 Colgate Palmolive  

Low 1.0 to 1.99      

In the IE matrix, Colgate stands in the Vth Quadrant and can be managed best with hold and maintain strategies

This can be done by either Market penetration Product development

MARKET PENETRATION

Colgate can do market penetration by increasing its advertising, people always associate Colgate with tooth paste and have no awareness that it produces personal and surface care products as well. They should show their logo on all its products so that people know the producers and this will increase customer loyalty and also when people will come to know that Colgate is the producer then new customers will also buy the product.

They should also increase their promotion efforts by going to school and doing health awareness programs, also they should go to residential areas and make women aware of their surface care and fabric care products such as max, bonus and express etc

22

4

3

2

1

COLGATE PALMOLIVE

PRODUCT DEVELOPMENT:

Colgate can also do product development by introducing new features in their already existing brands. They can improve their tooth brush quality and features by introducing flexi tooth brushes for special oral care. Also they can introduce whitening features in their feature in their tooth paste; different colors of tooth paste can also be introduced to attract the kinds market. In their fabric care they can introduce in special features of protecting the color of the cloth while washing and also whitening enhancing surfs to give a good shine to while clothes.

23

Micro-Environmental Analysis and Internal Company Resources

24

INTERNAL AUDIT

1. CORE COMPETENCY

Resources Skills

CORE COMPETENCY

2.VALUE CHAIN MANAGEMENT: (PAGE 230 THOMPSON) or sir’s handout (preferable)

25

Brand recognition Large capital base High EPS Investment in R&D Cost effective manufacturing

plants Patent protection Good Management Team Enthusiasm to learn among

Employees

Ability to incorporate multiple features in one product. (For example, tooth paste with cooling crystals, whitening agent, plague control, cavity protection – all in one!)

Skills in forecasting economic indicators, that is supply, demand, change in prices etc)

Expertise in research and development that help explore new markets.

Global teamwork that facilitates sharing ideas across the globe.

Skills in conducting health awareness programs with the collaboration of doctors which aims at improving the quality of life around the globe.

Design expertise (attractive packaging, good advertising).

Merchandising skills.

Succeeding with consumers and customers by effectively innovating everywhere and strengthening leadership world wide.

CP has a professional and strong infrastructure. Every manager in various department has to report to the GM of his department and the GM then report to the director. M.D is the person who is the head of the colgate Palmolive. The firm processes are made in such a way that it has helped the company to reduce its cost. Employee commitement has always been there. The culture is adaptive and professional. CP has a strong relationship with its suppliers.

CP value their employees’ commitment. That’s why they don’t have any layoffs. Their employees are loyal to the company. They carry out training programs that further groom employees.CP also conducts management trainee programs in which they recruit fresh graduates and provide them training in almost all departments so as to make that individual well familiar with the organization.

CP has investments in technologies but they still need to automate their supply chain in order to become more cost effective.Apart from that they are also not utilizing E-commerce facilities to the optimum level which can give them a huge cost reduction.

CP has systems and procedures installed through which they contact their local and foreign suppliers who are all CP Approved. They negotiate prices and place orders through these systems.

2. VALUE CHAIN MANAGEMENT

Secondary Activities and Cost

Primary Activities and Cost

26

CP has efficient MIS systems that link their supplier’s raw material with the firm production processes.

CP has efficient plants installed that reduce manufacturing costs.Previously they had machines that used to take one day to switch from the manufacturing of one kind of product to the other. But currently the plants and machines that they have are much more cost effective and efficient. It takes only 30 minutes to switch from one product ma manufacturing to the other.

CP has accurate and responsive order processing procedures. The delivery of raw material to the manufacturers and the delivery of final products to the various departmental stores like Aghas, Makro, Naheed etc is made on time.

CP has a highly trained sales force. They carry out various awareness programs in which they visit different localities with their sales team along with doctors who make people and especially children ( incase of Oral care products ), aware of the importance of hygiene. In this way CP has always strive to improve the quality of life.There products are not priced very high. Products are priced in a way that generates sales volume. CP spends a lot on advertising and television commercials.

CP provides a help desk to its customers. They can write their comments and complaints directly to the colgate Palmolive. Colgate usually offers a free medical checkup for all at various schools, exhibitions and hospitals. CP is thus performing corporate socially responsibility

PRIMARY ACTIVITIES & COST

INBOUND LOGISTICS:

CP has efficient MIS systems that link their supplier’s raw material with the firm production processes.

OPERATIONS:

CP has efficient plants installed that reduce manufacturing costs.Previously they had machines that used to take one day to switch from the manufacturing of one kind of product to the other. But currently the plants and machines that they have are much more cost effective and efficient. It takes only 30 minutes to switch from one product ma manufacturing to the other.

DISTRIBUTION AND OUTBOUND LOGISTICS:

CP has accurate and responsive order processing procedures. The delivery of raw material to the manufacturers and the delivery of final products to the various departmental stores like Aghas, Makro, Naheed etc is made on time.

SALES AND MARKETING:

CP has a highly trained sales force. They carry out various awareness programs in which they visit different localities with their sales team along with doctors who make people and especially children ( incase of Oral care products ), aware of the importance of hygiene. In this way CP has always strive to improve the quality of life.There products are not priced very high. Products are priced in a way that generates sales volume. CP spends a lot on advertising and television commercials.

SERVICES:

CP provides a help desk to its customers. They can write their comments and complaints directly to the colgate Palmolive. Colgate usually offers a free medical checkup for all at various schools, exhibitions and hospitals. CP is thus performing corporate socially responsibility

27

SUPPORT ACTIVITIES AND COST

FIRM INFRASTRUCTURE:

CP has a professional and strong infrastructure. Every manager in various departments has to report to the GM of his department and the GM then report to the director. M.D is the person who is the head of the Colgate Palmolive. The firm processes are made in such a way that it has helped the company to reduce its cost. Employee commitment has always been there. The culture is adaptive and professional. CP has a strong relationship with its suppliers.

HUMAN RESOURCE MANAGEMENT:CP value their employees’ commitment. That’s why they don’t have any layoffs. Their employees are loyal to the company. They carry out training programs that further groom employees.CP also conducts management trainee programs in which they recruit fresh graduates and provide them training in almost all departments so as to make that individual well familiar with the organization.

TECHNOLOGICAL DEVELOPMENT:

CP has investments in technologies but they still need to automate their supply chain in order to become more cost effective.Apart from that they are also not utilizing E-commerce facilities to the optimum level which can give them a huge cost reduction.

PROCUREMENT:

CP has systems and procedures installed through which they contact their local and foreign suppliers who are all CP Approved. They negotiate prices and place orders through these systems.

28

3. STRATEGIC COST MANAGEMENT

China

Brazil

Singapore

Malaysia

Middle East (Dubai)

Karachi

Mumbai

Warehouse

Manufacturing Plant

(Kotri-Hyderabad) Customers

Direct Customers including Aga Khan, Macro….

Distributors(One is owned by C-P rest are on contract )

Other Foreign Importers

Local Suppliers

29

Strategic Cost Management is essential part of Internal Audit of any organization. This figure shows how Colgate-Palmolive raw material transfers from its foreign and local suppliers then to their manufacturing plant and then how they distribute them to end users. Total number of items used as raw material is 4000, out of which majority imported from abroad. This increases their transportation expenses and eventually increases overall cost. They can do backward integration with their suppliers and increase partnership locally as well as internationally which can also reduce cost of raw material as the price hike of raw material is increasing globally.

30

4. FINANCIAL RATIO TRENDS

COLGATE

Overall, Colgate-Palmolive's profitability depicted a commendable performance. Total net sales volume increased by around 18.5% over the last year, resulting in a consequent rise in the gross and net profits. The cost of sales also showed an increase, primarily due to an increase in raw material prices as a result of rising prices of petroleum based products.

Colgate-Palmolive has shown a positive liquidity trend over the years, enjoying a strong liquidity position over the years. The net cash flow stood at around 420 million during 2007. Its current ratio is 1.77.

Even though Colgate's short-term debts showed an increase due to an increase in the creditor's liabilities and taxation, the long-term liabilities portrayed a considerable decrease over the years, especially in the long-term loans and liabilities against assets subject to finance leases. Even though one can see a nominal increase in long-term debts of FY07, compared to equity it has declined.

EPS of Colgate is 15. Therefore CP should try to take measures to improve its overall financial position.

INDUSTRY

The overall industry sales has increased but with the increased cost of goods sold. This is due to the increase in the raw material prices.

Current ratio of the industry is 1.28

The overall industry does not carry heavy debts on their balance sheets but still there is debt for the new projects. Debt to asset ratio is around 35%

EPS of the whole industry is 46.

31

2006-2007

2005-2006

2004-2005

2003-2004

2002-2003

2001-2002

Gross profit margin(% 32 32 27 29 28 26

Post tax profit to sales 10 10 8 9 6 5

Post tax return on equity 35 38 32 37 31 27

Return on Investment37 40 30 35 27 24

Current Ratio ratio 2.1:1 2.1:1 1.9:1 2.0:1 1.8:1 1.9:1

Quick ratio ratio0.2:1 1.0:1 0.8:1 0.8:1 1.0:1 1.1:1

Earnings per share 39.56 32.63 19.82 18.77 11.45 7.92

32

05

10152025

3035

4045

2006-2007

2005-2006

2004-2005

2003-2004

2002-2003

2001-2002

Return on Investment(%)

Post tax profit to sales(%)

0

2

4

6

8

10

12

2006-2007

2005-2006

2004-2005

2003-2004

2002-2003

2001-2002

Post tax profit tosales(%)

33

Gross profit margin(%)

0

5

10

15

20

25

30

35

2006-2007

2005-2006

2004-2005

2003-2004

2002-2003

2001-2002

Gross profitmargin(%)

Earnings per share

05

1015202530354045

2006-2007

2005-2006

2004-2005

2003-2004

2002-2003

2001-2002

Earnings per share

34

1.1.1 INTERNAL FACTOR EVALUATION MATRIX (IFE)

KEY INTERNAL FACTORSWEIGHT RATING

WEIGHTED SCORE

Strengths      1 Market leader in surface care

with 90% market share0.15 4 0.6

2 Good Leadership 0.06 3 0.183 Employee commitment 0.12 4 0.48

4 Cooling crystal patent 0.1 4 0.4

5 Accurate forecast with respect to demand

0.07 3 0.21

6 High EPS 0.08 4 0.32

7 Strong advertisement and promotional campaign

0.08 4 0.32Weaknesses      1 IT not used optimally 0.13 1 0.132 No ecommerce 0.1 1 0.13 No proper use of forward

integration0.05 2 0.1

4 They are not exporting their products to other countries

0.06 2 0.12

TOTAL 1   2.96

35

EVALUATION OF IFE

The weighted score from the IFE comes out to be 2.96 which shows that the company has enormous strengthens to overcome its weaknesses.

The highest weightage is given to the biggest strength that Colgate has, which is, that it is the market leader in Surface care category with 90% market share. Besides that it has cooling crystal patent in its tooth pastes as no other brand has cooling crystal ingredients in its tooth pastes. This particular strength gives it a competitive advantage over its close rivals like Medicam and English toothpaste.

Another major strength of Colgate Palmolive is its good leadership that has been contributing to the company’s success. The strategic objectives of the company are clearly defined and communicated throughout the company. Employees commitment is also a major contributing factor, there are no layoffs and people are committed to working hard consistently. Moreover, with high profits they pay their employees good salaries too and also carry out training programs at different managerial levels. Despite the current economic threats Colgate has managed to keep its share price at an above average level in the industry. Currently its share is trading in the market at Rs. 850.

The major weakness of Colgate is that it is not utilizing IT Systems to the optimum level. In this fast moving world, with cut-throat competition it is a major weakness of a company which does not have proper MIS systems installed. It doesn’t have a separate IT department either. Besides that there are no e-commerce facilities available to customers who buy in bulk.

Another weakness is that Colgate Palmolive is not exporting its products to other countries. Colgate has subsidiaries in many countries but they are more profitable than CP because they export to other countries. If CP overcomes this weakness and start exporting to even in just a few countries it can earn high margins.

36

STRATEGIC ANALYSIS & RECOMMENDATIONS

37

GENERIC STRATEGY

“A low-cost leader is in the strongest position to win the business of price sensitive buyers, set the floor on market price, and still earns a profit.”

--Thompson-

PROS & Cons: When a Low-Cost Provider Strategy Works Best

Pros ConsPrice competition among rival sellers is especially vigorous:CP has successfully survived price wars and has remained profitable in the face of strong price competition from major players in the industry like Unilever, Lux, Shield, Oral B etc. It has grabbed the highest market share in Surface Care category by capturing 90% of the market.

CP should not get carried away with the aggressive price cuts which would result in lowering the profitability. For this purpose it should cut prices by less than the size of the cost advantage. Besides that CP is saved from this pitfall because its added gains in the unit sales are very large which have always resulted in big profits despite of the lower margins per unit sold.

The industry’s products are essentially standardizedCP products in all four categories namely Personal care, Oral Care, Surface Care and Fabric Care are very consistent with the other products in the chemical industry and this has set the stage for price competition. Therefore low-cost provider strategy suits this kind of a condition too so that the profits do not get squeezed.

In order to remain a cost leader in the industry it should strive to attain a cost advantage that is difficult for its rivals to copy. This seems to be the major con in CP’s Low-cost strategy because there are quite a few smart players in the Chemical industry.

There are few ways to achieve product differentiation that have value to buyersThe differences in brands don’t matter much to buyers in this industry. CP has therefore set its prices in such a way that attracts most of the shoppers.

Continuous downward trend of costs may mislead the buyers and they might start thinking that the company’s quality of products is going down too. With high quality of products and consistency in customer satisfaction, CP has overcome this pitfall of Low-cost Strategy as well.

38

Most buyers utilize the product in the same waySince products like soaps, tooth pates, tooth brushes, liquid washing powder, bars are used by all buyers in the same way, selling price, not features, becomes the dominant factor.

Buyers incur low switching costs in changing from one seller to anotherSwitching from Colgate to other rival brands like Unilever, Detol, Capri, Shield, Easy Grip, and Vim etc will not cost much to buyers. Therefore CP has positioned itself to use low price to induce its customers not to switch to rival brands.

Industry newcomers use introductory low prices to attract buyers and build a customer baseThe pricing power of Colgate as the low-cost provider along with other low-cost rivals in the industry has restrained new entrants from entering the market.

39

40

Overall Low Cost Leadership Strategy Broad Differentiation

Strategy

Focused Low Cost Strategy

Focused Differentiation

Strategy

Best Cost Provider Strategy

A broad Cross Section of

Buyers

A Narrow Buyer Segment (Market Niche)

Low Cost Differentiation

Mar

ket T

arge

t

Type of Competitive Advantage Pursued

Generic Strategy Followed By COLGATE PALMOLVE

1.1.2

COLGATE PALMOLIVE’S LOW-COST PROVIDER STARTEGY:

CP has a large and efficient distribution network. Its distribution channels are located all over Pakistan.

It caters to a broad customer base. It has developed itself in almost all the categories which are associated with customers on the daily basis.

Colgate pursues low cost strategy. Its plant is automated. Only one plant is used for the manufacturing of three different detergents like bonus, express, brite

The whole process is repeated for each of the detergent. By automating the plant, CP is able to save a lot of cost. CP value delivery

network does not have any delays in it which helps CP to save cost. CP targets all segment, it has products for the lower class, middle class and the

upper class. Its pricing is done accordingly. It has cost leadership in the detergent and the surface care category

CP forecasting is very accurate which helps them to reduce cost because if estimated are accurate then it helps the company to avail cost advantages

CP is allowed to deviate only 5% from its forecast both upwards and downwards CP has concentrated more on process efficiencies CP has access to large capital that is required to make significant investment. CP

never compromises on the development expenditure. It is always ready to improve its production processes.

Being a low cost producer it helps CP to better compete to its rivals. Being the low cost producer it has helped CP to insulate themselves from

powerful suppliers who nowadays demand increasing prices due to rising inflation.

Being he low cost producer, it has also helped to attract powerful buyers whom CP sells directly like MAKRO, DMART, IMITAZ, AGHAS, and NAHEED etc.

41

TOWS Matrix

Internal

Factors

External

Factors

STRENGTHS (S)

1. Market leader in surface care with 90% market share

2. Good Leadership3. Employee commitment4. Cooling crystal patent5. Accurate forecast with

respect to demand6. High EPS7. Strong advertisement and

promotional campaign

WEAKNESSES (W)

1.IT not used optimally2.No ecommerce3.No proper use of forward

integration4. They are not exporting their

products to other countries

OPPORTUNITIES (O)

1. Exploring into new categories like shampoo, hand wash , body wash, shower gel

2. Rural population switching from miswak to toothpaste

3. Gap in tooth brush market4. Implementation of ERP(SAP)5. People becoming hygiene and

beauty conscious6. Automated supply chain

SO STRATEGIES 1. An rural population is switching

to toothpaste, Colgate can forecast sales in that region and then meet the demand through efficient sales distribution and marketing (S3,S5,O3)

2. They can introduce new products in personal care area as people are becoming more beauty conscious, they are financially strong and also market leader in oral care so they have got an advantage(S1,S6,O2)

WO STRATEGIES1. SAP should be implemented to

make the best of IT opportunities(W1,O5)

THREATS(T)

1. Raw material and energy prices are increasing

2. Inflation in the country3. Competitors re launching their

products4. Competitors increasing their

marketing budgets5. Unstable law and order conditions

ST STRATEGIES

1. Revamp their value chain by doing forward integration with distributors(S1,T2)

2. explore new markets by taking leverage and compete with competitors when they relaunch products (S6,T3,T4)

WT STRATEGIES

1. Use ecommerce and introduce electronic procurement system and thus cutting costs and protecting themselves from inflation(W2,T2)

42

THE STRATEGIC POSITION & ACTION EVALUATION (SPACE) MATRIX

FINANCIAL STRENGTH: RATINGS

The company’s current ratio is 2.1:1 which 0.1 percentage points is 5.0over the generally required ratio of 2.

The company’s net income was Rs911m, 16.3% more than last year 5.0

The company’s revenue increased 18.5% to Rs7446mn 6.0

Debt to equity ratio is 7:93 6.0

The inventory turnover is 48days 4.0

5.2INDUSTRY STRENGTH:

The product awareness is increasing and they have the financial 5.0backing, and thus there is a growth potential

The company’s profits have increased 16.3% during a year proving 5.0 that there is profit potential.

They have a debt to equity ratio of 7:93 and EPS of 39.56 thus showing 5.0financial stability.

5.0

ENVIRONMENTAL STABILITY:

The country is facing political instability and infrastructure and - 4.0high inflation

IT and ecommerce facilities are not being used, thus affecting efficiency -6.0

Competitors are relaunching products and increasing their market budgets -2.0thus intense competition exists

People are too price sensitive and even a little bit of variation affects the demand -2.0

-3.5

43

COMPETITIVE ADVANTAGE:

They have 90% market share in surface care -1.0

They have got high product quality, having cooling crystal patent -2.0

They have got a large customer base through their innovative products -2.0and services -1.67

CONCLUSION

X-axes: IS + CA = 5+ (-1.67) = 3.33

Y-axes: FS +ES = 5.2+ (-3.5) = 1.7

DEFENSIVE COMPETITIVE

(3.33, 1.7)

CONSERVATIVE AGGRESSIVE

ISCA

44

FS

ES

EVALUATION OF SPACE MATRIX

This analysis shows that Colgate Palmolive lies in first quadrant, which leads the company towards aggressive strategies. This analysis is based on company’s strong financial ratios and since the industry is still in its growth stage there is potential for CP to use its internal strengths to take advantage of external opportunities like new product development, overcoming their weaknesses and avoiding threats by market penetration and product development. As their financial figures are very strong CP can also involve in backward, forward or horizontal integration in order to minimize competition by local and unbranded products and increase their market share and profit.

45

GRAND STRATEGY MATRIX:

Colgate Palmolive according to Grand Strategy Matrix lies in Quadrant 1 as they have strong competitive position in the industry due to the variety of product they offer to their customers and competitive advantage they bear due to good utilization of resources, brand name and good product quality as local competitors do not maintain any quality standards. On the other side there is rapid market growth in the industry as awareness of using branded and quality products is increasing among people.

Placement of CP in quadrant 1 shows that it has strong strategic position. They should concentrate on their current markets by new market development along with products development. They can also indulge in strategies leading to forward and backward integration in order to decrease their costs of raw material and having firm hold on entire chain.

46

Strong Competitive Position

WeakCompetitive Position

Rapid Market Growth

SlowMarket Growth

STRATEGY -1 (IMPLEMENTATION OF SAP)

Since the company is not using the IT fully so there is a gap which is not enabling Colgate from becoming a good company to a best company. CP should implement SAP system across the company. This means automating the system from the order placed to the supplier to the delivery given by the distributor to the retailer. Implementing SAP means that company should have the record of all the orders placed. When the distributor would make the delivery to the retailer it would automatically send two messages one to the company that this much sales has been done and the second message to the purchase department telling them how much more inventory is required. This would help the company to make more accurate forecasts. This would also help the company to know the customer demands.

Initially incorporated as National Detergents Limited, a 100% local Company in 1977, Colgate-Palmolive Company, USA, granted license to manufacture and market their products in Pakistan in 1985. In 1990 Colgate-Palmolive Company, joined as equity partner in the company and the name was changed to Colgate-Palmolive (Pakistan) Limited.

Colgate-Palmolive offers products in various categories including oral care, personal care, surface care and fabric care.

STRATEGY -2 (NEW PRODUCT DEVELOPMENT)

CP should cater the personnel can category .since the market is expanding demand is high and CP has large capital because it can opt for the shampoo and shower gel .In Pakistan , shower gel category has great potential because of increased awareness among masses . This category has not been utilized fully.

In shampoo, CP should introduce shampoo for shining hair in such a way that CP should offer low prices in comparison to its competitors like Sunsilk, Head and Shoulder (H&S), Pantene.

This strategy requires huge investments in area like R&D, concept testing, marketing etc. this strategy would take long time to show its benefits.

47

QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)

STRATEGY 1

STRATEGY 2

Weights AS TAS AS TAS

STRENGTHSMarket leader in surface care with 90% market share 0.15 - - - -

Good Leadership 0.06 - - - -Employee commitment 0.12 3 0.36 2 0.24Cooling crystal patent 0.1 - - - -Accurate forecast with respect to demand 0.07 4 0.28 2 0.14High EPS 0.08 3 0.24 2 0.16Strong advertisement and promotional campaign 0.08 2 0.16 3 0.24

WEAKNESSES IT not used optimally 0.13 4 0.52 2 0.26No ecommerce 0.1 3 0.3 2 0.26No proper use of forward integration 0.05 2 0.1 3 0.15

They are not exporting their products to other countries 0.06 - - - -

1OPPORTUNITIESExploring into new categories like shampoo, hand wash , body wash, shower gel

0.14 2 0.28 4 0.56

Rural population switching from miswak to toothpaste 0.06 - - - -Gap in tooth brush market 0.08 2 0.16 3 0.24Implementation of ERP(SAP) 0.14 4 0.56 2 0.28People becoming hygiene and beauty conscious 0.1 2 0.2 3 0.3No layoffs 0.07 - - -

THREATS(T)Raw material and energy prices are increasing 0.12 3 0.36 2 0.24Inflation in the country 0.07 3 0.21 2 0.14Competitors re launching their products 0.1 2 0.2 3 0.3Competitors increasing their marketing budgets 0.06 2 0.12 3 0.18

Unstable law and order conditions. 0.06 - - - -

1TOTAL 4.05 3.69

48

STRATEGIC IMPLEMENTATION

49

SIX THINGS REQUIRED TO EFFECTIVELY IMPLEMENTING A STRATEGYAccording to Porter, to implement a strategy effectively six things should be followed:

1. Create a formal plan:

Sales ModuleSales Module

Stock Details

Quantity item

Price negotiation, inventory reporting, ex stock details, payment terms

Finance Module

Credit terms, payment procedures,

Stock in & out effect

Inflow & outflow of raw materials

Procurement Module

50

Distributor

Inventory / Store

HR Module

2. Create a multifunctional team:

To effectively implement ERP, Colgate must first hire an independent resource firm.Acquire licensing for SAP Implementation.Establish an independent IT unit for the monitoring of ERP. This department will coordinate with all the other departments.

3. Communication of strategy: inside and outside:

All employees in the company should be made aware of the new automated system. Each employee must be provided a minimal insight of SAP but those employees who have to work on SAP the most should ofcourse be provided with proper training course of SAP. These include:

Factory Manager Manager accounts Warehouse Manager Distribution team Consumer insight department

Outside the company the strategy to implement ERP should be communicated properly to all the local and foreign suppliers of Colgate Palmolive.

4. Consistency over time:

As Information Technology is progressing day by day, new changes in ERP are expected after certain time periods. Therefore it would become very important for Colgate to cope up with the changes in the software. For this purpose it would need to update it employees by providing training whenever any change takes place in SAP.

5. Use proper measurements:

Other measures, not just financial measures would be required to test whether the system is working properly. These measures include:

Whether the system is accurately forecasting demand, sales, price changes Whether or not there are any deviations in the actual versus projected sales Effectiveness of the internal processes after the strategy implementation.

6. Test the strategy:

Ask employees and senior management in all departments whether they are satisfied with the new system of working. Talk to suppliers and distributors whether they want any more improvements in the new system of working.

51

STRUCTURE

MANAGING DRIECTOR

Director Finance

Director Marketing

Director Legal Issues

Director Human

Resources

General Manager

Manager Accounts

General Manager

Commercial

General Manager

Production

Finance(L/C,

Clearance, Bill Payment)

Indirect Material

Factory Manager

Focus Manager P.C

Focus Manager O.C.

Focus Manager F.C.

Focus Manager S.C.

Director Management

General Manager

Consumer Insights

Oral Care

Personal Care

Fabric Care

Surface Care

Brand Manager

Manager Human

Resources

DirectorIT

General Manager

IT

IT Team

Distributor

In order to successfully implement the strategy of incorporating ERP in the company, Colgate Palmolive needs to bring changes in the organization structure. The new structure should be SAP compatible. Previously, there was no IT department in Colgate. To implement SAP, Colgate first needs to open a separate IT department and hire trained personnel’s. Apart from this, the data which used to travel through different management levels to reach a their final destination and hence used to consume time and high costs as well, will be available to the departments within seconds.For example, the distributor, after the implementation of SAP, can directly contact the GM Commercial, Manager Accounts, Factory Manager. This will not only reduce time but will also save operational costs.

52

Culture

Hardware, licensing and its renewal fees

There is no IT department in Colgate , so for implementing SAP they need separate IT

Department to manage these activities and there should be team of atleast 10 trained IT experts

Project will cost more than 50 million rupees, in SAP implementation, training, hardware.

53

Resources

Placing atleast one IT expert in each department for support and trouble shooting

Colgate has an adaptive culture, it is a learning organization and employee welcome change.

Their will be some employees who will be rigid and may resist change and their job description will be affected due to change in culture as most of the things will get automated.

In the initial years of implementation, the profits of the company are expected to decline due to the heavy costs of installing ERP. For some employees it would be hard to see their company’s financial trend go down as they have never experienced such a downfall.

Employees with little potential to learn more can be empowered by technique called MBO.

Conduct an annual strategic audit in each department where all depart heads will be evaluated that how efficiently they are bringing change in departments.

Implementation of SAP will take atleast a period of one year to start functioning

54

EIGHT PILLARS OF STRATEGY IMPLEMENTATION

ALLOCATING RESOURCES:Colgate has to invest around 50mn for which they have to make a separate IT department in which 1 trained personnel have to be hired so that it can be implemented in an efficient way.

BUILDING CAPABLE ORGANIZAION:After the implementation of SAP, a capable organization would be established. It would help the company to coordinate all activities. CP can then expand into new markets and would develop innovative products.

EXERCISING STRATEGIC LEADERSHIP:SAP implementation will require an annual strategic audit to check whether the desired objectives have been achieved or not. This means a visionary leadership is required. Leadership should be exercised strategically in such a way that it helps the company to maintain its competitive advantage.

TYING REWARDS:Rewards in maintaining the best MIS, highest no of transactions, successful employee in training face should be given in terms of recognition, increased in salary and gift vouchers.

INSTALLING SUPPORT SYSTEM:It is important to maintain MIS with in different department so they can work in a best possible way

BENCHMARKING:In Pakistan very few organizations has implemented SAP. PSO and National Foods are some of them. Since PSO has very successfully implemented SAP so Colgate benchmarks them.

STRATEGIC SUPPORTIVE POLICIES:

They have to make strategies in which maintaining an MIS should be mandatory. There should be digital culture. They should have a centralize data base through which all department are interlinked and any transaction can be tracked down by any department. Every department should have access to only relevant information.

SHAPING CORPORATE CULTURE:Colgate should implement paperless. Digital culture where the records must be maintained through MIS and not manually .even communication should be done electronically.

BIBLIOGRAPHY:

COLGATE PALMOLIVE www.colgate.com.pk

BOOKSFred DavidThompson Strickland

HARVARD BUSINESS HANDOUTS

www.Kse.com.pk

55

56