Intercultural Management

Colgate’s distateful toothpaste

Table of contents

Introduction 3 Colgate’s distateful toothpaste 4 Overview of the company 4 Strategic and ethical issues 5 The recommendation 6 The toothpaste advertising 7 Negotiation in China/ Taiwan 9 Hofstede’s analysis 9 Asian countries 9 Taiwan 9 China 10 Hofstede’s scores 10 Power Distance Index 10 Individualism 10 Masculinity 10 Uncertainty Avoidance Index 10 Long-Term Orientation 11 Communication strategies 11 Negotiation strategies 11 Few tips 12 Conclusion 13 Bibliography 14

Introduction

« I consider ethics, as well as religion, as supplements to law in the government of man. “
Thomas Jefferson
Colgate-Palmolive Company is an American diversified multinational corporation focused on the production, distribution and provision of household, health care and personal products, such as soaps, detergents, and oral hygiene products (including toothpaste and toothbrushes).
In 1985, they build a partnership with Hawley and Hazel, a Taiwanese company specialized in healthcare such as Colgate. One of their best product was the Darkie, a toothpaste, with a Black man with ultra white teeth as image. This product was the core of one of the most disaster for the brand Colgate.
In order to understand how this product hit significantly the brand image of Colgate, we will first try to analyze what was the major strategic and ethical issues that Colgate had to face with its partnership with Hawley and Hazel, then how Colgate should have managed this situation, and finally what are the main issues when you are doing business with Asian people, especially with Taiwanese and Chinese.

Colgate’s distateful toothpaste

Overview of the company
Colgate-Palmolive Company is an American diversified multinational corporation focused on the production, distribution and provision of household, health care and personal products, such as soaps, detergents, and oral hygiene products (including toothpaste and toothbrushes). Under its "Hill's" brand, it is also a manufacturer of veterinary products.
In 1806, William Colgate, himself a soap and candle maker, opened up a starch, soap and candle factory on Dutch Street in New York City under the name of "William Colgate & Company". In the 1840s, the firm began selling individual cakes of soap in uniform weights. In 1857, William Colgate died and the company was reorganized as "Colgate & Company" under the management of Samuel Colgate, his son. In 1872, Colgate introduced Cashmere Bouquet, a perfumed soap. In 1873, the firm introduced its first toothpaste, an aromatic toothpaste sold in jars. His company sold the first toothpaste in a tube, Colgate Ribbon Dental Cream, in 1896. In 1896, Colgate hired Martin Ittner and under his direction founded one of the first applied research labs. By 1908 they initiated mass selling of toothpaste in tubes. His other son, James Boorman Colgate, was a primary trustee of Colgate University (formerly Madison University).
In Milwaukee, Wisconsin, the "B.J. Johnson Company" was making a soap entirely of palm and olive oil, the formula of which was developed by B.J. Johnson in 1898. The soap was popular enough to rename their company after it - "Palmolive". At the turn of the century Palmolive, which contained both palm and olive oils, was the world's best-selling soap, and extensive advertising included The Palmolive Hour, a weekly radio concert program which began in 1927 and Palmolive Beauty Box Theater which ran from 1934 to 1937. A Kansas-based soap manufacturer known as the "Peet Brothers" merged with Palmolive to become Palmolive-Peet. In 1928, Palmolive-Peet bought the Colgate Company to create the Colgate-Palmolive-Peet Company. In 1953 "Peet" was dropped from the title, leaving only "Colgate-Palmolive Company", the current name.
Colgate-Palmolive has long been in fierce competition with Procter & Gamble, the world's largest soap and detergent maker. P&G introduced its Tide laundry detergent shortly after World War II, and thousands of consumers turned from Colgate's soaps to the new product. Colgate lost its number one place in the toothpaste market when P&G started putting fluoride in its toothpaste. In the beginning of television, "Colgate-Palmolive" wished to compete with Procter & Gamble as a sponsor of soap operas. Although the company sponsored many shows in part, they fully sponsored the serial The Doctors.
George Henry Lesch was president, CEO, and chairman of the board of Colgate-Palmolive in the 1960s and 1970s, during that time transformed it into a modern company with major restructuring.
In 2005, Colgate sold the under-performing brands Fab, Dynamo, Arctic Power, ABC, Cold Power and Fresh Start, as well as the license of the Ajax brand for laundry detergents in the U.S., Canada and Puerto Rico, to Phoenix Brands, LLC as part of their plan to focus on their higher margin oral, personal, and pet care products.
In 2006, Colgate-Palmolive announced the intended acquisition of Tom's of Maine, a leading maker of natural toothpaste, for US $100 million. Tom's of Maine was founded by Tom Chappell in 1970.
Today, Colgate has numerous subsidiary organizations across 200 countries, but it is publicly listed in only two, the United States and India.
In June 2007, counterfeit Colgate toothpaste imported from China was found to be contaminated with diethylene glycol, and several people in eastern U.S. reported experiencing headaches and pain after using the product. The tainted products can be identified by the claim to be manufactured in South Africa by Colgate-Palmolive South Africa LTD, they are 5oz/100ml tubes (a size which Colgate does not sell in the United States) and the tubes/packaging contain numerous misspellings on their labels. Colgate-Palmolive claims that they do not import their products from South Africa into the United States or Canada and that DEG is never and was never used in any of their products anywhere in the world. The counterfeit products were found in smaller "mom and pop" stores, dollar stores and discount stores in at least four states.

Strategic and ethical issues
In 1985, when Colgate decided to make its business partnership with Hawley & Hazel, with around 50% of participation for $50 million but without the right to be involved or to be part of any strategic management decision, Colgate had to face several majors strategic and ethical issues.
The major strategic issue that Colgate had to face with its partnership with Hawley and Hazel was that the company couldn’t be part of any decision with Hawley and Hazel concerning the strategy, the policy and the management structure. In the first time, it seemed to be a very clever choice, Colgate let its partner handle and manage the Asian market of healthcare.
It was obvious that Hawley and Hazel, with their powerful product, are better and more efficient that Colgate could be in the Asian market, they know the market, the several cultures of the Asian continent, their customers, what is good for them, wrong for them. Colgate couldn’t be such efficient, they should have conducted several marketing study during several years in order to get through all the cultures and strategic issues that breaking into the Asian market would surely have imposed.
It is also obvious that the fact that Colgate has no stranglehold in the making decision process in Hawley and Hazel could lead to several crisis and impose to Colgate to negociate with Hawley and Hazel instead of just “point the decision”.
The other major issue that Colgate had to face was ethical.
As we know, ethic is the general study of behavior, moral and conduct from one country. It appears that between several country and cultures, the norm and the moral change highly. One thing could be ethical from one culture perspective could be unethical to another culture perspective. Ethics is all about choice and making choici. It reflects behavior of person in terms of what kind of he and she is? The Greek philosopher Socrates claimed that "the unexamined life is not worth living" and this declaration reflects the spirit of ethics of life. And so the business ethics means actual tradition attitudes, values, and rules that run in the business world. Ethics is strongly associated with progress of organization, . It gives good name and reputation to company.
With this case, we surely observe that the leading product of Hawley and Hazel is the ethical issue that Colgate had to face, to get over it. In Asian country, it seems that a Dark-skinned Human being with ultra white teeth is the best image for a toothpaste product. On the contrary, this image could barely be accepted in America for obvious reasons (the slavery, the American Civil War, the Segregation, Martin Luther King, the Civil Act, etc…).
What Colgate should have done was to be aware of these issues, in order to avoid the future problems that these issues brought. Gave up on the managerial right because of the powerful product of Hawley and Hazel appeared well think in the first, but I was a complete disaster when the American found this, Colgate become a non social responsible company.

The recommendation
Become a non social responsible company could be the worst disaster for a company, the company could lose the loyalty of their customers, its brand equity could be heavily hurt as its brand image.
According to this case study, it seems that managerial rights are the key factor here in order to allow Colgate to handle these situation. Colgate is really aware that for a great brand name company, reputation and loyalty of the customers are more important than business. . It is easy to offer product but quite tough to gain customer loyalty. Company has to have awareness for their customer.
As I said before, in a first time Colgate should not accept the first partnership agreement, giving up their management right. But in order to order the situation, with the product of Hawley and Hazel “Darkie”, the first steps to do is obvious to change the advertising name of this product. And this very quickly. There is several things to do about the advertising name and the image of the product. The name Darkie is way too much outrageous and offensive for most of the American people.
Unfortunately, by giving up the management right, Colgate have put itself in a delicate and inconvenient situation. They should put pressure on their partner Hawley and Hazel in order to force them to take action rather than looking at the situation and doing nothing. Watching out the situation and saying that the company have no managerial right is not the expected feedback from a brand name company like Colgate.
One of the solution could be Colgate doing advertising mentioning logo is non offensive, and especially communicate on the fact that is a non-offensive image in Asian. It could be also benefic to show specific concern for the Black community in the United States of America.
Promoting an ethical code about discrimination, racial issues, ethics and social responsibilities could also be a benefic action and behavior from Colgate. This may be perfect way to come out from the situation with good image. Here no need of managerial rights needed. Colgate had to come with this kind of policy. To promote black people for their human rights, development, would be one of the best action that Colgate could do to regain the loyalty of its customers.

The toothpaste advertising
It seems obvious that the best action that Colgate could have made in order to put all the thing in the right order is to change the advertising name of “Darkie”, way too much offensive in the American perspective. But doing this and not consider all the Asian customers’ loyalty about this product could be also a wrong business decision.
According to Hawley and Hazel and all the testimony from the Asian customers, the name and the image of the product are very well perceived, actually the customers are very attract to this name and this image, the Black man with the white teeth and the name “Darkie”.
So, if Colgate want to change the name of the product, there is a risk of losing the loyalty of the customers to the product.

It is certainly for this that Colgate did not seem to be hurry by changing the name of the most appreciated product in the healthcare sector.
But this is also an effect of having no managerial rights in Hawley and Hazel. Colgate could have stopped the dispute from the beginning through taking action such as changing advertisement and logo of “Darkie”, taking away itself from this controversial products, giving attention to case at the beginning. Having no managerial power was one of the worst parts of this issue, one of the worst mistake that Colgate made.
Looking backward, having the management rights were the most decisive way to handle this situation. To give up on the management right in order to break into a new market, to gain business and earn money seems to be good strategy. But as dispute and a major issue came in the picture. This cost a lot to Colgate in terms of loosing brand image, brand equity and customer loyalty. This is high cost compare to have and break into a new market, even if it is such a great opportunity like the Asian market.

Negotiation in China/ Taiwan
Through this case, it appears that Colgate could have been more efficient and could have avoid risk and these issues if they knew about the Chinese and Taiwanese culture, their way to communicate and negotiate.
In order to understand how the Asian, and especially the Chinese and Taiwanese perceived business, life, negotiation and communication, we will study them through a light analysis with the help of Geert Hofstede and we will explain how to negotiate with them in business environment. Hofstede’s analysis
Asian countries

Taiwan

China

Hofstede’s scores

Power Distance Index
As many Asian countries, Taiwan cultivate a high power distance, meaning a great and high value of the hierarchy with a great respect for elders and senior.
Individualism
As we know, only the group is important in Asian, especially in Taiwan and China, were the person is part of the group and living for the group. There no such as personal ambition, self glorification, only the harmony of the group. Asian countries are collectivism.
Masculinity
With a slight high masculinity parameters, the Asian countries show they are however a little bit focus on : great importance on earnings, recognition, advancement, challenge, and wealth.
Uncertainty Avoidance Index
With a low uncertainty avoidance score, the Asian countries show that they are people who have a high need for security, a strong belief in experts and their knowledge, a structured organizational activities, more written rules.

Long-Term Orientation
As expected, Asian countries and especially Taiwan and China, have a strong score in long-term orientation. Great believer in strong and trustful partnership, they do not see the need to get short-term profit and short-term relationship.

Communication strategies
Chinese and Taiwanese could be sensible and intellectual discussions, but individuals know their place in the team or organization. They know when to stop or when pushing too hard may be offensive or counterproductive.
Chinese and Taiwanese generally do not give voluntary information or give feedback. If you need feedback, it is really important to be polite. About any negative feedback , they actually do not like to express bad news. Giving negative feedback is perceived as confrontation, and it is something they do not like very much. About any positive feedback, this is beter received and perceived if it is done by the group and in the name of the group.
You have to know that they, both Chinese and Taiwanese, are not really comfortable about expressing self-glorification, it runs contrary to Chinese values of modesty and humility. The norm is to be self-deprecating, and any congratulation should come from others.
For example you should avoid to send a company letter ahead of your meeting that gives biography information with all the accomplishments of the each members of the team members, it is known as a western behavior but it is inappropriate .
Chinese avoid confrontation in general. This is done to save face and preserve group harmony (as confrontation could be perceived and translated as a winner and a loser situation). Individuals should discuss different viewpoints and try to build consensus.
This culture does not compartmentalize work and personal feelings. It is important to note everything is personal, perceived as personal, meaning that you have to be very careful about what you say and how you saying it in order to stay polite and build the harmony.

Negotiation strategies
While Westerners are generally results-oriented (focusing on tasks at hand, specific terms and conditions, and time efficiency, profit) Chinese and Taiwanese are relationship-oriented. They focus on harmony and flexibility, and are patient in getting the job done. Chinese are known to be tough negotiators.
It is really important to build trust based on mutual respect, modesty, equality and harmony. Chinese are not comfortable being rushed and hurried, or to be involved right into business discussions without proper introduction. They believe getting to know each other and building trust is necessary in negotiations.
From a western perspective, Chinese and Taiwanese take time to understand the reason, logic and motivating factors. They must be convinced there’s a win-win deal to be made. They think long term.
In negotiations, Chinese cultural priorities are relationship first followed by rationale, and legal. Check your cultural assumptions in relation to these priorities – they may be in reverse order.
Chinese listen more than they talk, as said before, it is really important them to understand and trust with who they work. They may appear to be delaying, but they are gathering pertinent details on issues and personalities. The indirect, unemotional style along with by elusiveness allows could be really disturbing for any western negotiators. To build a productive relationship each side must accept different styles of team building and group dynamics.
Chinese know what they want and are willing to compromise. ‘Give and take’ is a means to achieve harmony in Chinese culture. As such, compromise is not considered weak or giving in.
It is not unusual for Chinese to revisit items previously discussed and agreed upon, and try to renegotiate. If this happens, graciously enter into talks, be flexible and well prepared for what you are willing and unwilling to do, and prepare your organization that there may have to be changes.
Few tips * Attitude matters and yours will be constantly read by the Chinese. Your patience, professionalism, and courtesy are sending messages of your personal integrity. Understand that you must take many small steps before taking a larger steps. Focus on developing a consensus. * Know and stick with your company’s policy on ethics. Major Chinese businesses are familiar with the U.S. Foreign Corrupt Practices Act. You may be tested, but in the words of Professor Baocheng Liu, “Do not be a loose girl; be a fine lady” with consistent ethical practices. * Listen empathetically and observe. Pay attention to details. Note Chinese body language and hidden meanings.

Conclusion

Ethics is the matter of philosophy. It is directly related to business. It depends on the degree of implication of the company.
Through the brief discussion and the study of this case, we could easily conclude that ethics had relative effect on business, had also a great impact in the perception of a company for its customer. This perception, and the ethical issues, varies individually, with the culture as well.
Colgate was initially unsuccessful to come out from the issue initiated by the best product of Hawley and Hazel, the “Darkie”. As pressure from several group, ONG and association increased, Colgate had to take some management decision in order to handle the situation.
Giving up all the management rights to Hawley and Hazel was the real mistake done by Colgate in the primary negotiation. It is very difficult to find out a company which operates fully ethically in all operation, but ethics plays crucial role for the development of the organization, and obviously for the perception of this organization.
Organization which respect some ethical code and moral code has the support from their community and their customer. The customer has all the reasons to go for a specific company. Last but not least, we could finally say that good ethics gives good business.
“In law, a man is guilty when he violates the rights of another. In ethics he is guilty if he only thinks of doing so.”
Emmanuel Kant

Bibliography

http://www.geert-hofstede.com/ http://www.ventureoutsource.com/contract-manufacturing/benchmarks-best-practices/executive-management/china-how-to-negotiate-and-other-chinese-business-practice 'DATAMONITOR: Colgate-Palmolive Company' 2010, Colgate-Palmolive Company SWOT Analysis, pp. 1-9, Business Source Complete, EBSCOhost, viewed 11 January 2011.
'COMPANY SPOTLIGHT: COLGATE-PALMOLIVE' 2009, MarketWatch: Personal Care, 8, 5, pp. 18-25, Business Source Complete, EBSCOhost, viewed 11 January 2011.