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INTERNAL BUSINESS ENVIRONMENT

REPORT
ON

COLGATE-PALMOLIVE
Submitted to: Professor K G Sahadevan
By: Vishal Kumar Gupta( PGP32181 section D)

I, Vishal Kumar Gupta do hereby declare that the report is my individual effort and that no part
of the report is copied from published/unpublished sources without proper citation.
Executive summary

The report deals with the internal analysis of the firm Colgate-Palmolive. It is one of the firm
listed fortune 500 and is ranked **** in the list. The firm is valued approximately $17.5
billion. It operates globally in more than 500 nations with market share of 55%. This report
analyses Colgate-Palmolive with respect to the factors that leads to this high market-share.
Factors leading to its competitive advantage has been discussed in brief. From its core
values to its organisation structure is vital for the firm to integrate all its functions in the
direction of not only growth but to sustain the same for long term.
Not all factors are in the favour of Colgate-Palmolive. The weaknesses and strategies
deployed by the firm is also described in this report. Performance is also gauged through its
financials. Code of conduct that ensures behaviour of its peoples are in accordance with the
strategy is briefly discussed.
Corporate governance plays key role in implementation of the long term goals. Decision
making should be in the favour of shareholders in the short as well as long term. The board
configuration of Colgate-Palmolive ensures benefit for the stakeholders with directors and
independent directors from diverse fields and experience. The committees comprised of
board members are responsible for audit and guiding implementation of strategic decisions
of the company.
With wide range of products in four categories oral, personal, home care and pet nutrition,
Colgate continuously needs to focus on innovation through its research and development.
The reports presents detail about the infrastructure and facilities that Colgate-Palmolive
utilizes.
Contents
Executive summary ................................................................................................................................. 2
1. Introduction .................................................................................................................................... 4
1.1. Financials (as reported on site for 2015) ................................................................................ 4
2. Mission statement .......................................................................................................................... 5
3. Vision Statement ............................................................................................................................. 5
4. Competitive Advantage .................................................................................................................. 5
4.1. Strengths and Weaknesses ..................................................................................................... 5
5. Core Values ..................................................................................................................................... 6
Caring .......................................................................................................................................... 6
Global Teamwork: ....................................................................................................................... 6
Continuous improvement: .......................................................................................................... 6
5.1. Managing with Respect........................................................................................................... 6
5.2. Global Diversity ....................................................................................................................... 6
6. Code of Conduct.............................................................................................................................. 6
6.1. Confidentiality ......................................................................................................................... 7
7. Corporate Governance.................................................................................................................... 7
7.1. Board of directors ................................................................................................................... 8
7.2. Executive team ........................................................................................................................ 8
7.3. Board Committees .................................................................................................................. 8
8. Infrastructure and facilities ............................................................................................................. 9
1. Introduction
Colgate-Palmolive is company operating hugely in over 80 countries serving more than 200
nations with well-known brands. Company is valued worth $17.5. Colgate has a portfolio of
products in the segment oral care, personal care, pet nutrition and home care. In India,
Colgate enjoys a market share of over 55% in oral care segment. The toothpaste market is
worth $1.3 billion in India. Colgate is responsible for 46% global sales in oral care, 21% in
personal care segment, 20% in home care and 13% in pet nutrition.
Colgate-Palmolive stacks are listed and traded on New York Stock Exchange represented by
CL.
Colgate-Palmolive operates through six divisions across the globe. It has been
headquartered in New York City. The six divisions are:
1. North America
2. Latin America
3. Europe
4. Africa/Eurasia
5. Asia/South pacific
6. Hills Pet Nutrition
Colgate products are manufactured in-house with more than 50 research and
manufacturing facilities in its name across the six divisions.

1.1. Financials (as reported on site for 2015)


Figures in million dollars except the percentage and per share amounts

2015 change
WORLDWIDE SALES $16,034 -7.0%
ORGANIC SALES GROWTH - +5.0%
GROSS PROFIT MARGIN 58.6% +10 basis points
OPERATING PROFIT $2,789 -22%
OPERATING PROFIT 17.4% -320 basis points
MARGIN
NET INCOME $1,384 -37%
DILUTED EARNING PER $1.52 -36%
SHARE
DIVIDEDS PER SHARE $1.5 +6%
OPERATING CASH FLOW $2,949 -11%
YEAR END STOCK PRICE $66.62 -4.0%
2. Mission statement
To become a fast growing consumer goods industry by developing and delivering innovative
new products to consumers and marketing them more efficiently

3. Vision Statement
To become the best truly global products company

4. Competitive Advantage
Huge number of brands under the giant umbrella of Colgate and the differentiation created
by the product developer and marketers strives to make Colgate a competitive firm.
Properly segmenting all of its products and communicating its differentiating factors has
worked in positive sense for the company against the competitors. Colgates distribution
network is huge worldwide in both rural and urban zones. Distribution network and logistics
is major cost for FMCG products and hence efficient and immense network of Colgate act
competitive advantage for the company. It competes in a highly competitive market and
product availability becomes a crucial deciding factor for the winner. With such a wide
range of products, Colgate as a company occupies most of the shelf space and hence
visibility of brand is high causing extensive promotion.

4.1. Strengths and Weaknesses


Innovation for Growth: Colgate keeps innovating in its product development part to
push its growth. With the help of fantastic research infrastructure, market research
data and consumer insights, company comes up with products with which
consumers can associate themselves with.
Focus on emerging markets: Colgate has always tried to tap the emerging markets
and build a strong base of loyal customers. Product availability in the remotest of the
regions is prime target and business strategy for the company. Digital technology is
greatly deployed to map the areas where its products are not distributed. Colgate
proudly enjoys a market share of 60% in the rural areas. It frequently runs
engagement programs not only for its customers but also for the Dental care
professionals and NGOs.
Commoditised brand name: In past Colgate has been a huge success. The success
has led to recognise the product toothpaste with name Colgate only. People in India
at some parts use Colgate and toothpaste interchangeably. Other drawback of
commoditising is that it brings difficulty in charging premium and launching premium
product under same name.
Saturated market: Colgate competes in the Oral and personal care segment where
there are already huge number of big players. With huge competing and saturation,
chance of growth becomes low and company need to diversify its portfolio into
other segments.

5. Core Values
Caring, Global Teamwork and continuous improvement are considered to be 3 core
fundamental values for Colgate-Palmolive. These values and principles are tried to be
integrated into every aspect of its field of operations.

Caring
Colgate takes decision keeping in mind all of its stakeholders such as its employees,
investors, equity holders and business partners. Colgate puts itself high on ethics and
integrity. Colgate is also keen to protect environment and enhance living conditions where
its employees live and work being compliant in the legal aspect.

Global Teamwork:
Focussing on team building, Colgate-Palmolive considers all its employees worldwide to be a
part of global team. It believes that diverse ideas developed and shared from across the
world is necessary for sustainable growth.

Continuous improvement:
Colgate is customers centric. It tries to understand customer needs and focuses on
continuous innovation to serve well.

5.1. Managing with Respect


By considering its people as a part of global team, Colgate follows open door policy and
employees are given independence to suggest changes and contribute to the growth of its
business. It also promotes contribution of work towards others.

5.2. Global Diversity


Colgate maintains diversity in its workforce and other stakeholders in terms of race,
nationality, culture and gender. It very well understands the differences and values it. It
identifies those difference in several aspects like personal experience, religion and sexual
orientation. Diversity begets novel ideas that can potentially add value to business. It has an
employee base of over 30,000 from across the globe. Colgate is committed to work towards
enhancing communities through its educational and cultural programs.

6. Code of Conduct
Colgate defines set of rules and regulations to maintain relationship with its people, with
company, Board of Directors, outside business entities, community, environment and
customers. Emphasising ethics, Colgate has a set of questions for its ethical decision making.
The questions conform about the legality of act and its ethical standards.

6.1. Confidentiality
Company believes in protection of information related to trade and business. It values its
intellectual asset and maintains confidentiality with respect to it. The secrets protected are
sensitive information related to its business practice. It is important to protect those
information in order to sustain competitive advantage. Below are the list of few information
that are considered confidential.

Product development plan


Intellectual property
Legal documents and opinions
Digital information pertaining to its manufacturing process
People list, customer and suppliers list
Market research information
These information cannot be patented but at the same time needs to be secured and
cannot be publicly disclosed. One is not even allowed to disclose such information to other
Colgate people unless there is a need to know declared. Third party can also not be
involved in the review of information unless the agreement is in place with proper security
verification done prior. Posting any such information on social media or public site is
prohibited. Even if its employees leave the organisation, they are bound to follow this policy
and protect its information. Global Legal Organisation is to be contacted in case of
ambiguity regarding any information.

7. Corporate Governance
Colgate believes that governance is not only responsibility of Board of Directors but is also
committed by its executive body and other employees. Good corporate governance
supports the execution of long term business plans. Colgates strategic decisions regarding
products, brands, development of employees and performance management has resulted in
huge success. Companys board plays eminent role in planning and guiding to implement
the business strategies.
Board of directors have always lead for good corporate governance. The practice for the
same is constantly reviewed to make sure that shareholders get benefitted by it.
7.1. Board of directors
The board of 11 members consists of eminent personalities guiding pathways to success for
Colgate. Below is brief about its members and their profile.

Ian Cook: With over 40 years spent in the organisation, Cook serves the board as
Chairman. In past, he also served as COO with responsibility for 5 continents. Also
promoted to CEO before being selected as board member.
Charles A. Bancroft: He is CFO for Bristol Myers Squibb Company and is member of
board since 2016. He carries experience of several leadership roles in global
pharmaceutical businesses.
John P Bilbrey: He is CEO of Hershey Company and has worked for P&G for 22 years.
He is serving as director for Colgate since 2015.
John T Cahill: Former CEO and present Vice chairman for Kraft Heinz Company. He
was elected as board member since past 12 years.
Helene D Gayle: Serving since 2010, she is CEO of McKinsey social initiative.
Ellen M Hancock: Former President of Jazz Technologies Inc. serving as director of
Colgate since 1988.
C Martin Harris: Associate Vice President of the Health Enterprise and Chief Business
Officer - The University of Texas at Austin Dell Medical School.
Richard J Kogan: Former President and Chief Executive Officer of Schering-Plough
Corporation and elected board member since 1996.
Lorrie M Norrington: Operating partner of Lead Edge Capital LLC and director of
Colgate since 2015.
Michael B Polk: CEO of Newell Brands. He is director since 2014
Stephen I Sadove: Fouding partner for JW Levin Management Partners LLC and
elected director since 2007.

7.2. Executive team


The global executive team is comprised of 144 members handling global operations of
Colgate-Palmolive in parts. It is headed by CEO cum Chairman Ian Cook. Other positions at
the same level are Vice Chairman, CFO, Chief Legal Officer, COO for North
America/Europe/Global sustainability and COO for Global innovation growth/pet nutrition.

7.3. Board Committees


There are 4 board committees comprised of only board members in different combination.
Here below is the list of members and committee.
1. Audit committee: This committee help the board of directed in overseeing the
matters regarding correctness of financial reporting, credentials of independent
accountant and their qualification. It also reviews the performance of internal
audit and independent accountants and process of risk management. Legal
compliance is ensure through this committee. The audit report is made in
accordance with the rules by Securities and Exchange Commission and is
included in the proxy statement. The committee is comprised of 5 elected board
members.
2. Finance Committee: This is a 4 member committee responsible for guiding and
overseeing financial plans and policies.

3. Nominating and corporate governance committee: This committee suggests


other qualified personalities in accordance with the charter to become board
member. They also monitor the governance guidelines from time to time. They
also evaluate the parameters to judge performance of independent directors.
Hence, the compensation and benefits of independent directors are decided by
the same committee. It is comprised of 4 members.
4. Personnel and organisation committee: It looks after the personnel, executives
compensation and other organisational issues of the company. The committee is
responsible for compensation report of executives for inclusion into proxy
statement. It is comprised of 5 Board members.

8. Infrastructure and facilities


Colgate owns 14 properties whereas it operates in around 60 properties inside US.
Manufacturing and warehouse infrastructure are utilised mainly for its oral, home-care and
personal care segment. The pet nutrition segment has facilities in 4 different states in US.
The research centre for oral, home-care and personal care is based at New Jersey and that
for pet nutrition is based at Kansas.
Focussing overseas, It operates in over 280 facilities and owns merely 80 of them in over 70
countries. Majority of the facilities are based at countries like Australia, India, china, Poland,
South Africa, etc. It has phased out few of its old infrastructure and has built newer modern
facilities in US, Mexico and Poland.
9. References
Colgate annual report 2010
http://files.shareholder.com/downloads/CL/0x0x452609/628361a7-bc3e-4bef-a777-
5ee6e3756767/501366_Web_Ready.pdf
Colgate annual report 2015
http://www.colgate.com/us/en/annual-reports/2015/common/pdf/Colgate-
Palmolive_2015-Annual-Report.pdf
Colgate-Palmolive Wikipedia
https://en.wikipedia.org/wiki/Colgate-Palmolive
Colgate-Palmolive Website
http://www.colgate.co.in/app/Colgate/IN/CompanyHomePage.cvsp
Marketing91
http://www.marketing91.com/marketing-strategy-of-colgate/
Forbes
https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/companies/ho
me-depot/&refURL=https://en.wikipedia.org/&referrer=https://en.wikipedia.org/