economic analysis on colgate

2493 Words Dec 12th, 2013 10 Pages
EXECUTIVE SUMMARY
The objective of this report is to analyse the main economic factors on Colgate-Palmolive Company. Upon analysing the business’ operating market, demand and supply, the report focus on the company’s main sector, which is a wide range of toothpaste products. By gathering information in a logic structure, the report states the previous and current impact of external factors and the way in which internal factors take place in the company. Using several figures from reliable sources, the report aims to give an apparent economic picture and draw a future scenario of Colgate.

INTRODUCTION
History and Overview
Colgate-Palmolive Company is one of the world’s largest multi-national companies specialised in consumer
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In order to maximize profits or minimize losses, the company should produce the output where marginal cost crosses marginal revenue. In figure (a), at output q*, the price of product is higher than its total cost, therefore total profits are equal to the difference amount between cost and price, multiply by the amount of output. Similarly, in figure (b), total losses are calculated in the same manner. Losses appear because the product incurs greater cost than its selling price.
The demand for Colgate toothpastes is a downward sloping curve since the company operates in a monopolistic market. When the price increases, some but not all customers will leave. They tend to look for other products with nearly the same effect that fit their need. Customers who do not leave are those who feel satisfied with the quality of Colgate and want to be loyal to the brand. Therefore, the demand curve is elastic.
In the long run, when firms in the market are making profits, new firms entering the industry will shift the demand curve of the current business to the left, and vice versa. As a result, the business will be making no economic profits or losses.
With the aim of differentiation, products in the toothpaste market are close substitutes to each other. Although they all look alike at first or some people may think that using whichever is fine, firms are still busy developing their
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