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Case Analysis: Brighter Smiles for the Masses Colgate vs. P&G
Submitted by:
PGP/14/260 NITESH KUMAR GUPTA PGP/14/290 RAHUL MITTAL PGP/14/280 MAHTAAB KAJLA PGP/14/313 VINNY ARYA
Group V
PGP/14/287 PRACHI CHAWLA PGP/14/315 VISHAD DUBEY
Case facts
August 2002, P&G introduced Crest Whitestrips; an over the counter teeth whitener P&G claims that the new product is 10 times more effective as the leading toothpaste, Colgate Tartar Control whitening By 2002, P&G controlled 80% of the at-home tooth-whitening market Sept 2002, Colgate bounces back by introducing Simply White; a more convenient and cheaper product in the same segment One month after introduction, Simply White captures half the market with Crest WhiteStrips losing 50% market share Even though consumers think otherwise, P&G engineers have reasons to believe that Simply White is not as effective as Crest WhiteStrips
Strategic Management
Group V
Strengths/Weakness P&G(Company)
Strengths
Has the capacity to enter into new untapped markets and generate the revenues by constantly making innovative products. Eg Crest Whitestrips Strong Brand recognition: worlds largest consumer products company and significant amount of visibility in oral care segment R&D backed by sound finances; $130mn was spent on R&D and initial marketing of Whitestrips From Income statement: Decreasing cost of goods sold, Increase in Net Sales from 2000 to 2002, Increase in profits
Weakness
Although there was growth in health care segment which included oral-care sector, given the high investment on R&D the segments contribution to net earnings was less in proportion to other segments(12% of sales) Low operating margin (17%)
Strategic Management
Group V
Weakness
It does not have the financial muscle as P&G has
Strategic Management
Group V
Strengths/Weakness P&G(Whitestrips)
Strengths Weakness
Technology was patented; thus they had competitive advantage. Better product than Colgates product; the changes in b* value attained by using White strips were at least 5 times as large as Simply White 10 times better product than Rembrandts whitening toothpaste
Strategic Management
Group V
Low Price($15) as compared to competitors price i.e. Whitestrips ($40) High level of consumer satisfaction
Contribution margin was pretty high = 45% Easy to use than Whitestrips, as consumers can even use brush for applying gel
Strategic Management
Group V
Strategic Management
Group V
Colgates Reaction
Oral care contributed to one third of Colgates overall sales Toothpaste was the companys strongest product With the introduction of Crest WhiteStrips, P&G directly attacked the Toothpaste product line of Colgate
Strategic Management
Group V
Cost Analysis
At-home tooth-whitening market worth in 2002 : $460 Mn Corresponding sales in last 2 months: 460*2/12 = $76.67 Mn Assuming 37% market share of P&G in the last 2 months of 2002 Sales: 37% of $76.67 Mn = $28.37 Mn Prospective sales, had SimplyWhite not been introduced: 80% of $76.67 Mn = $61.33 Mn Loss in sales = $61.33 Mn - $28.37 = $32.96 Mn Contribution Margin = $40 - $8 (variable cost) = $32 Loss in Contribution Margin during these two months $32.96*32/40 = $26.37 Mn
Strategic Management
Group V
Should be a good option since its confidential in nature and the proceedings can go ahead without the normal getting to know about it this can turn out to be counterproductive since the b* value test that it relied on was not universally accepted If the final decision goes in the favor of Colgate, it can really play into their hands which they can further leverage to attach Crest WhiteStrips
Does not seem like a very favorable option since the problem is not with the Brand visibility
Strategic Management
Group V
Strategic Management
Group V
McBrides Options
McBride should now focus on carrying the success of this product to new markets which are expanding like Europe, Asia Pacific etc. Fight back from P&G is expected pretty soon to save its Billion dollar brand McBride should try to improve the product probably by enhancing the whitening capabilities He should also be careful about publishing controversial advertisements so as to not give P&G any chance to challenge them in NAD Differentiating the two products Simply White and Simply White Night might help it to enhance the sales of the newly introduced brand
Strategic Management
Group V
Q&A
Strategic Management
Group V