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Procter

& Gamble v/s


Colgate 2003
An Exercise in Competitive Dynamics

(From Colgates perspective)


Presented By:
Group A-08
Industry Future Projections
Characteristic Entry Barrier
Minimal Customer switching costs Low
High Capital Requirements High
Increasing Demand Low
Easy Distribution channel access Low
Patented Products High

Low entry barriers New entrants will be there


P&G will resort to aggressive promotion
Market will grow
Natural Segmentation on the basis of price
P&G might come up with a gel at a cheaper or similar price
Target segment

Our segment comprises price-sensitive people who are


conscious about their teeth and dental hygiene.
We target to provide value through our quality product
oering at a relatively less price.
The main competitor, P&G, is active in the premium
segment.
Their main competitor based on price is Rembrandt.
Competitor
Both P&G Crest Whitestrips and Colgate Simply White Night target the
urban consumers who are well aware of the oral care segment.

The motivation for P&G consumers would be higher than that of Colgate
consumers, as they would have to pay $44.

Investment and Recovery by P&G:

Initial Marketing $90 million


Media Campaign $33.6 million
Year 1 Net income 45% * $200 million $90 million
Year 2 Net Income 45% * 40% * 300 million $54 million
Strategy
Arena

Focus will be on Product Improvement


No new product will be launched
Focus on women and working professionals

Vehicle

Internal Developments R&D to improve products

Dierentiator

Price
Convenience
Staging & Sequencing
Promotions

Pharmacies

Launch in Mass Retail Channel

R&D - Stage 1

Launch New & Promotions

Pharmacies

Mass Retail

R&D - Stage 2

Launch New & Promotions

Pharmacies

Mass Retail

0 0.5 1 1.5 2 2.5 3 3.5


Years
Economic Logic
2001 2002 2003 2004 2005 2006
Market size 300.00 356.70 424.12 504.27 600.00
Share 30% 33% 36% 40% 44%
Sales 90.00 117.71 153.95 201.36 263.54
Prot 40.50 52.97 69.28 90.61 118.59
R&D cost (20.00) (9.00) (11.77) (15.40) (20.14) (26.35)
Investment (R&D + marketing) (60.00) (40.00) (40.00) (40.00) (40.00)
Net cash ow (20.00) (28.50) 1.20 13.88 30.47 52.24
IRR 20.59%
NPV (15% discount rate) 8.65

* All gures are in million USD


Table 1

We would continue with our own product, but would do


R&D for the next few years.
Our dierentiators are low price and the dual use of the
product packaging. It would continue.
We have enough resources, since we are already the
market leader. We would spend $10m in 2003, and
would grow by 10% every year. The IRR is 20.5%.
Possible Threats

P&G poses a threat to us. They might come up with a


gel and price it at around $15.
Competitors have started coming up with products with
intellectual property protected ingredients. This would
increase the entry barriers.
Buyers would have less power as most products have
dierent oerings.
Thank you.