Colgate Palmolive in Mexico Harvard Case Solution & Analysis

Introduction

Colgate Palmolive is an American based company. It has operations in more than 100 countries; the major countries in which it produces are Australia, Brazil, Canada, Colombia, France, Germany, Italy, Mexico and the United Kingdom.Colgate’s operations were organized into seven divisions other than the parent company in America however;Mexico and France divisions were free-standing.

Its major products are of personal care, which include cleaners, detergents and dental care. Colgate Palmolive is the major shareholder in the market of the above mentioned products in competition with Proctor and Gamble. The company in Mexico is a subsidiary of Colgate Palmolive America and a major producer of its products with handsome revenue.

 Mexico is facing economic problems due to which there have been fluctuations in the smooth working of the company to achieve its goals. Mexico is facing economic problems such as hyperinflation, devaluation of currency and rising interest rate.

Due to the factors pointed out there are other factors also, which are affecting the economy such as unemployment and political instability. A company is usually affected by the economic stability of the country; if a country’s economy is ins table, then the companies working in that country are also ins table.

Most of the countries take safety measures for their industries and provide them a chance to export their products in the market outside their country. Exports are a very important aspect of any country. Every country cannot produce all products there fore they have to import the products from other countries as well and vice versa.

Issues with the economy and concerns of Colgate Palmolive

A market is a place where potential buyers and sellers meet and offer price and products respectively. When a buyer or seller is in pressure, then the prices of products and the supply of products may get affected due to uncertainty in the market. Uncertainty can occur due to many reasons such as inflation, interest rates, currency devaluation, exchange rate differential and liberation. Colgate Palmolive was affected due to the above factors in the case. The factors in which Colgate Palmolive got affected and their concerns are discussed below:

1.     Issue:

When the economy was in a stable position, Colgate Palmolive was earning handsome profits however,when the economy came under the effect of inflation, then the economy started to sink due to which the cost of products increased causing the inflation to rise. When inflation starts increasing rapidly,it is known as hyperinflation and the prices of products start to increase as well.

The economy came under hyperinflation, which caused Colgate Palmolive to lose its revenues due to the rising prices. Unanticipated hyperinflation is dangerous for an economy, as the economy has no knowledge of such inflation. There are no precautionary measures that one can take of such an event, however in order to survive in such a situation, it is possible if a company follows the basic principles of economics.

Mitigating strategies for unanticipated hyperinflation

When an economy is facing unanticipated hyperinflation, then it can follow some basic principles of economics and in this case Colgate Palmolive can make some decisions regarding their working in Mexico. When Colgate Palmolive gets affected by hyperinflation, then this will increase the cost of producing the products. Inflation is ageneral rise in price of commodities and when the prices increase rapidly then hyperinflation is caused.

Colgate Palmolive should look for the feasibility of their organizational structure. If the structure of their organization is not feasible to decrease the prices of their products, then it will be difficult for the organization to survive in the phase of hyperinflation. Colgate Palmolive should attract the customers with different marketing strategies and should be focusing on the products which produce most of their revenues.

However, inflation will affect the revenues of the organization because in such hyperinflation, people get unemployed or have less disposable income to pay or they are unable to buy the product. In an event of hyperinflation, it is important to focus on the products, which earn the best.

Low earning operations should be shut down to ignore excess cost on the organization. Redundancy may be required according to the circumstances and the feasibility of the decision.Colgate Palmolive in Mexico Case Solution

2.     Issue:

When an economy is losing its value of money, then it can be concluded that the economy is losing confidence in the currency of the country. Inflation is a major cause of rising interest and devaluation of the currency of an economy.Colgate Palmolive is facing rising interest in the economy due to rising inflation rates in the economy. It can cause Colgate Palmolive to increase the interest payments on debts taken by the company.............................

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