Task 2: Examples of how Colgate can strategically apply organizational capabilities and resources
Colgate’s organizational capabilities and resources for new plastics
Colgate has been in operations for a long time. The advantage of its size and experience in its industry include the fact that it has gained a lot of capabilities and resources that are used strategically to provide competitive advantage in its industry and market. Some of the main organizational capabilities for Colgate include talent, speed, brand identity, accountability, leadership, customer connectivity, innovation, and efficiency.
VRIO Analysis Colgate
Value Rarity Imitability Organization
Colgate has a diverse product line supported by highly valuable financial resources that help in investments The distribution networks and the financial resources of the company are very rare The company focuses more than 70% on its main product (toothpaste) making it very hard for other firms to imitate Reinforces differentiation factor through targeted advertising to supplement consumer loyalty
Consumer insights drives innovation and a team of highly specialized employees Endorsements from industry experts such as doctors and dentists are also rare Very high advertising expenditure that makes imitation very difficult Reinvestments are internally funded without tapping into parent company’s resources
Very low production costs driven by the company’s large R&D Its vast research and development is very rare Trust with the consumer base for the company’s product is very hard to imitate Very strong global market presence due to years of existence
Advantages (S) and Disadvantages (W) of Colgate
Resource/Capabilities Valuable Rare Imitable Organization Competitive Advantage
Financial resources yes yes yes yes Sustainable
Distribution Networks yes yes yes yes Strong
Positive Market reputation yes yes no yes Long term
Employees yes no no yes Unused
Cost Structure yes yes no yes Disadvantage
Research and Development yes no no yes Parity
From the VRIO analysis above, the financial resource and the distribution network of the company are the main sources of sustained competitive advantage and its major strength. However, the cost structure of the company, especially through its R&D structure, is a source of weakness and a competitive disadvantage.
Application of Capabilities and Resources
Financial resources can be used to fund the new plastic campaign
Financial resources will create optimization of the performance in the competitive business environment, which requires that an organization understands the dynamics of change, whether external or internal (Martelo, Barroso, & Cepeda, 2013). Optimization means creating efficiency and innovation in the internal firm environment.
Financial resources will help to reinforce new plastic-related innovation
Innovation is a key resource in the sense that it not only generates competitive advantage, but also overturns that of other rival firms.
Financial capabilities will overturn the strength of rival organizations in creating plastic alternatives
Colgate is also able to neutralize threats and exploit opportunities in the future or current business environment while utilizing its strengths and minimizing its weaknesses. Due to its size and period of operations, Colgate has the ability to buy and build capabilities and resources. These advantages also enable it to sustain competitive advantage.
Financial resources can be used to create competitive advantage through vigorous advertising of new plastic initiatives
Colgate can use its unique resources to distinguish itself from the competitors and become a source of sustainable superior performance and competitive advantage. Colgate would achieve this competitive advantage when the resources or competences are valuable, rare, are inimitable, and non-substitutable. Colgate must also be in a position to organize its resources well to attain superior performance.
Its distribution network will be used to reach millions of users to get ahead of the competition
Colgate can use its core competences to integrate its major resources to provide quality services, processes and products. For example, the organization culture and the interfirm social relationships enable innovation in the organization since they provide tacit knowledge. Examples for Colgate include strengths and competences that connect the company to customers facilitating an opportunity to perform better such as market access, brand management, technical customer support, integrity, quality and knowledge management system, innovation management, customer value, and functionality.
Problems and Issues Colgate may have with their current capabilities and resources and suggestions to overcome them
Colgate has several strategic resources and capabilities that have evolved from decades of improvements and innovations. The value added products, many aspects of creating user and buying experience, price advantages, an innovation culture, and superior products are just some of the valuable, rare, inimitable, and non-substitutable resources and capabilities the company has gained over the last years of operations.
However, some emergent problems and issues with the current capabilities and resources include new market entrants with the knowledge and capabilities that the firm has had years to perfect. Newer dynamics in the toothpaste and related sectors have also led to a need for the organization to constantly keep innovating (Amui et al., 2017). The changing external environment has also created a situation where the company has had to constantly keep changing its products and market strategies, meaning that it has constantly faced challenges in relation to learning and growth. The overall effect of these problems includes the emerging issue of a very uncertain environment. While opportunities may arise from these issues, the challenges cannot be underestimated. Creating strategies to suit a constantly changing external environment drains the resources and capability of the company. It increases the cost of products due to last minute changes to aspects such as design, packaging, and other value addition approaches.
To overcome the issues mentioned above, Colgate must look at the shifting consumer sentiments to evaluate the likely direction for the organization in near future strategies. It is recommended that the company simplifies, diversifies, considers, and avoids aggressive strategies. The external uncertainties do not have a best-practice strategy. Rather, it would be beneficial for the organization to simplify its approach through narrowing down of the strategic initiatives. For example, the issue of plastics might need the company to consider what has worked in the past while abandoning unproven and risky products. Additionally, diversification allows a firm to reduce and spread risk. For example, it is suggested that Colgate expands into a new area that includes new products that accompany the main products and through pursuing newer customer segments. This would enable the firm to leverage its resources and capabilities to ensure that if market dynamics change for one area, other areas are covered. Lastly, it is important to reduce aggressive strategies. For example, Colgate could focus on reducing new products in the market instead of aggressively expanding its operations. This would ensure that growth is controlled and the uncertainties in the market addressed.
Amui, L. B. L., Jabbour, C. J. C., de Sousa Jabbour, A. B. L., & Kannan, D. (2017). Sustainability as a dynamic organizational capability: a systematic review and a future agenda toward a sustainable transition. Journal of Cleaner Production, 142, 308-322.
Martelo, S., Barroso, C., & Cepeda, G. (2013). The use of organizational capabilities to increase customer value. Journal of Business Research, 66(10), 2042-2050.