Colgate Case Study
Colgate is a consumer product company that is well-known and has its base in New York. Colgate had a strong presence in the international presence traditionally.it was operational in Latin America, Australia, France, Canada, and Germany. Previously Colgate had made detailed analysis of the international markets for demand. Colgate made a decision of buying a 50% partnership in the Hawley and Hazel group worth $50million in August 1985.the main reason for making this decision was the fact that Colgate wanted to gain a strong share in the Asian market .They wanted to achieve this without necessarily having to build their own production plant. Part of the agreement stipulated that Colgate possessed no management prerogative. This meant that Hawley and Hazel were the ones with the right to make any major decisions in the organization. This partnership turned out very lucrative for Colgate with annual sales of double digits millions.
There were several strategic issue involved in this decision first Colgate wanted to enter the market without having to build a plant there and hence they had to come up with a strategy on how they would achieve this. This led to the strategic decision of 50% ownership. However with this partnership Colgate surrendered all the management rights to its partners. This was a very poor strategic decision as it would affect Colgate later when it comes to making important decisions.
The only product of note for Hawley and Hazel was the Darkie toothpaste. The toothpaste featured a Blackman with a toothy smile as an advertisement. However this brought about a wave of dissatisfaction with the name and the logo from U.S. minorities and civil rights groups. This advertisement was thought to be unethical by those who were against it. Their problem was that this product darkie was racially offensive. However Colgate distanced themselves from any intentions of promoting racial stereotypes in the third world through this product. This ethical issue brought so much pressure to Colgate from back home especially due to the fact that Colgate lacked management prerogative.
This problem could have easily been avoided if Colgate had not given the entire management prerogative to Hawley and Hazel. If they could have some management rights then immediately this claims started they could have made a decision to rebrand and change the advertisement immediately .since they did not have these rights the problem escalated and was too deep for them to solve promptly. Initially Colgate had no intention of making Hawley and Hazel change their product .the management at Colgate stated that oversees products should not have any effects on the company’s image locally. The corrective action to this situation would have been effective if Colgate would have shown concern and interest in the issue immediately it began. Hawley and Hazel termed this issue as a U.S. issue and that it was not affecting them in any way. Further more the Asian market did not show any offense or dissatisfaction in the product. This issue would have been corrected if Colgate would have convinced Hawley and Hazel that this problem affects both of them equally. Colgate would have taken the necessary steps that would have redeemed its name before the situation got worse.
Colgate and Hawley and Hazel can change the toothpaste’s advertising without necessarily sacrificing the consumer brand loyalty. They had to make a lot of changes when it comes to the marketing of the product. They needed to develop an advertisement that would not make the product appear different than it was before while at the same time removes the racism implications. The changes that they would make in the product needed not to be too much such that the loyal customers would forget it and see it as a new brand in the market. The name and the logo should not be too different such that the customers would not be able to recognize it .they should also ensure that the new name and logo does not in any way imply any form of racial stereotyping. If all this is done then the customers will sill identify with the product while those who found the advertisement offensive would have a different view of the product since the racial aspect will have been removed.
Colgate and Hawley and Hazel have a huge task in regaining the market share they lost they should come out and assure their customers that they are not advocating racial stereotypes. They should make sure that their customers are well aware that it was not their intention to portray the advertisement as being racial .a worldwide apology to the groups that found the advertisements offensive is also a good step. This is because the apology will bring back the customers who had thought otherwise about the companies and know that what they perceived from the advertisement was not their intention.
The ‘no management rights ‘clause was not right for Colgate. This is because it meant that Colgate did not have a say in any important decision made within the partnership. This was quite evident when this problem came up since Colgate put a lot of effort in convincing Hawley and Hazel to make the changes that Colgate saw were very important whereas they did not see them as being important. If they had management rights then the decision to make changes on the advertisement of the product would have been made as soon as the problem came up instead of waiting for too long.
Ethical standards need to be upheld in any organization.to uphold the ethical standards, Colgate could have ensured that they were getting involved with organizations that are ethical .they could have thoroughly carried out analysis of the product to ensure that they were all ethically acceptable. Not accepting the no management rights clause would have made it easy for Colgate to ensure that the operations of the organization were ethical.
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