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

0.5

1.5
2
Years

2.5

3.5

Economic Logic
2001

2002

2003

2004

2005

2006

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

(9.00)

(11.77)

(15.40)

(20.14)

(26.35)

(60.00)

(40.00)

(40.00)

(40.00)

(40.00)

(28.50)

1.20

13.88

30.47

52.24

Market size

R&D cost

(20.00)

Investment (R&D + marketing)

Net cash ow

(20.00)

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.