Colgate palmolive Entering the OTC drug market
The full report Companys mission statement: Colgate-Palmolive. ... Issue statement: The over-the-counter (OTC) drugs market is a rapidly growing high margin market. Will we enter this market? If we enter, can we use the Colgate brand name, developed in the oral-care products market, in the OTC healthcare market or should we create a new brand name? Analyzing case data: The OTC market is: Very large: $ 35 billion in sales Growing rapidly: 6 per cent annually grown Very profitable: 71% gross margin; 11% after tax profit Colgate (Year 2002): Sales: $ 9. ... 6 billion Colgate has a strong brand equity position with OTC consumers. Colgate believes: Brand equity = brand awareness + brand image Colgate is number 1 in brand awareness, number 2 in brand image and brand equity among OTC consumers in the USA. Considerations before entering the OTC market: New product introduction is risky: 4 years before break-even 7 years before recovering the development costs OTC firms must therefore be correct in their product development decisions or they risk losing a great deal of money. ... A firm must have substantial financial resources to enter the market. Entering firms face stiff competition: Very attractive market Many competitors Not a concentrated market: top 15 companies in Europe have only a 25% market share Established companies: Have strong sales forces and marketing organizations Are strong financially Are willing to take competitors to court if they perceive any violations of laws or regulations. ... Industry observers estimate that an OTC firm must have at least several hundred of million dollars in sales to cover fixed costs and to have the power to match big retailers. The OTC firms are growing larger and larger, and they are willing to fight aggressively for market share. Colgate believes that oral-care and OTC products are very similar. ... Colgate manages its business in 2 distinct product segments with different sub-segments and brand names: o Oral, Personal, Household Surface and Fabric Care: Oral care: Colgate Personal care: Palmolive, Mennen, Softsoap, Irish Spring, Protex, Afta, Skin bracer, Caprice, etc.