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H. R. Strategy of Colgate-Palmolive

Essay by   •  June 10, 2012  •  Case Study  •  9,251 Words (38 Pages)  •  3,113 Views

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ABSTRACT

Colgate-Palmolive Company is a $15.6 billion global company serving people in more than 200 countries and territories with consumer products that make lives healthier and more enjoyable. The Company focuses on strong global brands in its core businesses - Oral Care, Personal Care, Home Care and Pet Nutrition. The company's oral care and personal care products are marketed under brands such as, Colgate Toothpaste, Speed Stick and Lady Speed Stick Floral Splash. The home care division includes brand names such as Palmolive and AJAX.

Colgate follows a tightly defined strategy to grow market shares for key products, such as toothpaste, toothbrushes, bar and liquid soaps, deodorants/antiperspirants, dishwashing detergents, household cleaners, fabric conditioners and specialty pet food. In this paper, I will analyze the business strategy of the Colgate-Palmolive Company and how it is aligned with the Human Resource Strategy.

EARLY COLGATE-PALMOLIVE ORGANIZATION

HISTORY

In 1806, when the company was founded by 23-year-old William Colgate, it concentrated exclusively on selling starch, soap, and candles from its New York City-based factory and shop. Upon entering his second year of business, Colgate became partners with Francis Smith, and the company became Smith and Colgate, a name it kept until 1812 when Colgate purchased Smith's share of the company and offered a partnership to his brother, Bowles Colgate. Now called William Colgate and Company, the firm expanded its manufacturing operations to a Jersey City, New Jersey, factory in 1820; this factory produced Colgate's two major products, Windsor toilet soaps and Pearl starch. (St. James Press, 2005)

Upon its founder's death in 1857, the firm changed its name to Colgate & Company and was run by President Samuel Colgate until his death 40 years later. During his tenure several new products were developed, including perfumes, essences, and perfumed soap. The manufacture of starch was discontinued in 1866 after a fire destroyed the factory.

In 1873 Colgate began selling toothpaste in a jar, followed 23 years later by the introduction of Colgate Ribbon Dental Cream, in the now familiar collapsible tube. By 1906 the company was also producing several varieties of laundry soap, toilet paper, and perfumes. Colgate & Company shifted its headquarters to Jersey City in 1910. On October 25, 1929, management signed an agreement to merge the company with Kraft Phoenix Cheese Corporation (forerunner of Kraft Foods) and Hershey Chocolate Company. The three companies would continue to operate independently, but they would become subsidiaries of a holding company slated to be called International Quality Products Corporation. Just four days after the deal was signed, however, the stock market crashed, forcing the huge amalgamation to be scuttled. In the wake of the crash, the Colgate family regained control of Colgate-Palmolive-Peet and installed Bayard Colgate as president in 1933. (St. James Press, 2005)

INTERNATIONAL EXPANSION

Colgate & Company has been a pioneer in establishing international operations, creating a Canadian subsidiary in 1913 and one in France in 1920. In the early 1920s the firm expanded into Australia, the United Kingdom, Germany, and Mexico. Colgate or its successor firm next created subsidiaries in the Philippines, Brazil, Argentina, and South Africa in the late 1920s. In 1937 the company moved into India and by the end of the 1940s had operations in most of South America. By 1939 Colgate-Palmolive sales hit $100 million. (St. James Press, 2005)

In the 1940s and 1950s the company also built upon its strategy of growth by acquisition, buying up a number of smaller consumer product companies. Organic growth remained on the agenda as well, and in 1947 the company introduced two of its best-known products, Fab detergent and Ajax cleanser. These acquisitions and new products, however, did little to close the gap between Colgate and its arch-rival, the Procter & Gamble Company, a firm that had been formed in the 1830s and had by now assumed a commanding lead over Colgate in selling detergent products in the United States. Meanwhile, the firm adopted its present name in 1953 and moved its offices for domestic and international operations to New York City in 1956. (St. James Press, 2005)

EARLY ORGANIZATIONAL CHANGE

In 1983 Reuben Mark became President. Mark built upon his predecessor's restructuring efforts in an attempt to increase profits and shareholder value. Between 1984 and 1986 several inefficient plants were closed, hundreds of employees laid off, and noncore businesses sold. In an attempt to refocus the company's marketing and profitability, Mark developed a set of corporate initiatives intended to address business areas ranging from production-cost reduction to new product development, with a heavy emphasis on motivating employees and involving them in company decision-making. In response to the implementation of these ideas, the company's U.S. toothpaste business enjoyed a boost with first-to-the-market introductions of gel toothpaste and a pump-type dispenser bearing the Colgate brand name. Similar U.S. market share gains were earned by new and improved versions of its Palmolive and Dynamo detergents and Ajax cleaner. Palmolive automatic dishwashing liquid debuted in 1986. With the company's turnaround firmly underway, business units managed by key executives were formed to develop plans for the company's major product categories. The purpose of each plan was to identify how products under development could be best introduced in domestic and international markets. By the end of the third quarter of 1989 Colgate's international operations performed strongly while the profitability of its U.S. operations rose, due mostly to manufacturing-cost economies and greater control over promotional and sales expenses. (St. James Press, 2005)

In September 1995 Colgate announced another major restructuring of its operations to close or reconfigure 24 additional factories and cut 3,000 more employees (more than 8 percent of the workforce). Mark said the action was necessary to finance new growth initiatives; Colgate took a $369 million charge as a result. The 1995 figures were also affected by a deepening recession in Mexico, which had accounted for 11 percent of sales and 20 percent of profits in 1994. Under Mark's continued leadership, Colgate-Palmolive maintained its momentum into the early 2000s. By keeping

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