Colgate Essay

7542 Words Sep 29th, 2012 31 Pages
Five Forces Model
In any given industry, when a firm is being analyzed the analyst must first review the potential profits of each of the industries in which their particular firm is competing within. Due to the fact that the diversity of each industry will change in a somewhat predictable manner over a period of time when a certain event may happen in the economy the analyst need a way to predict what the outcomes are going to be.
There is a model that we refer to do just this, it is known as the “Five Forces Model” and it shows the influence of industry structure on profitability.

The model is made up of two main components:
The first one is the degree of actual and potential competition, which consists of the rivalry among
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This makes the rivalry among existing firms very high. The products in this industry are all relatively the same, with the exception of flavors or scents, and this makes everything very competitive. One firm can not necessarily charge a significant amount more for their product that is very similar to others so they are forced to use other factors like brand image. Firms constantly have to use their research and development teams to not only come up with new and improved products but to also come up with ways to lower their costs.

Concentration and Balance of Competitors
Market Share
Colgate-Palmolive- 38.17B
Clorox- 8.23B
Church & Dwight- 3.61B
Proctor & Gamble- 201.99B
Total- 252 Billion
This chart shows how competitive this industry is and how unbalanced the market share is. There is a very high concentration in this industry, there are a select few main firms including Colgate-Palmolive, J&J, Clorox, Church & Dwight Co., and
P&G; with Proctor & Gamble holding the largest amount of shares in the industry. With their being the dominant firm they can to an extent set some of the rules of competition, and the other firms will need to adjust their prices to compete with P&G’s if they want to survive. For instance, the personal products industry generates approximately $290 billion a year with Proctor & Gamble earning about $210 billion of
that

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