Case study - Rayovac. Business & Marketing Speech Presentation

CASE STUDY- RAYOVAC
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CASE STUDY- RAYOVAC
At present Rayovac’s strategy in the rechargeable battery business, according to Porter’s Five Force model, is the bargaining power of buyers and the threat of substitutes. As it is high, they can easily switch to the more convenient single-use alkaline batteries, even if it requires frequent replacement. Due to such marginal cost, the consumer, the techie, and family segment will be spending $250 on the product as heavy users. Since there is no established market leader in the rechargeable battery market, the bargaining power of suppliers is low as they look to penetrate the market and capture its share. Industry rivalry is low since both Duracell and Energizer are focusing on being volume sellers who represent a larger market share vs. a niche player in rechargeable batteries. The threat of new entrants is also high as global players like Sanyo, Sony and Panasonic who have been mostly unsuccessful in capturing market share within North America might piggyback on Rayovac’s collaboration, technology and outsourcing to them and try to enter the market since competition is meager (Orville, C. Walker Jr. & John W. Mullins, 2011).
The general approach towards the rechargeable battery is one that alkaline batteries offer convenience and are cheap, whereas the rechargeable batteries require more upfront investment in the charger and higher cost per battery relative to alkaline batteries. There is a lack of convenience as rechargeable batteries have to be charged before initial use and the overall lack of knowledge of consumers towards the new technology. The market leaders were also reluctant to promote this product line due to less volume and fear of cannibalization of alkaline batteries. The market leaders offered restricted products in this segment or did not promote it as much such as in the case of Energizer. The light users spent $25 or less on batteries. The heavy users, however, spent more. Within this segment, the family segment, which made close to $200 million of sales, relied on price and value for convenience, whereas the techies were young, adaptive to new technology and trends, and used high drain products the most. They had fewer on the go batteries, but would replace them frequently, which makes a perfect case for Rayovac’s rechargeable batteries. Moreover, unlike the North American consumer, the European consumers were more aware of the environmental aspects of single-use batteries and thus preferred rechargeable batteries.
Rayovac is currently the 3rd largest retailer in alkaline batteries and leader in rechargeable battery with its Varta and Rayovac brands, especially in Europe. In the alkaline segment, Duracell and Energizer have been established household brands, backed by global giants like P&G and Energizer holding, and mass merchandisers generate the most significant volume. Even though Rayovac’s alkaline battery performs at the same level as Duracell and Energizer, however, to get market share, the company has adopted a value-based approach: offering a high-quality product at a lower price point. In the rechargeable battery market, Rayovac enjoys a dominant position since the other two major players are looking to generate profits by volume. Duracell and Energizer also target the family consumer who does not use high drain products vs. the techies who use high drain products such as MP3 player, palm pilots, and others. This represents an opportunity for Rayovac to make its presence be in the rechargeable segment.
Rayovac has two major competitors: Duracell and Energizer. They are both similar in their product offering, i.e. they are offering single-use alkaline batteries; they are both owned by large global corporations who have economies of scale and relationships with retailers and distributors. They are both able to build a strong presence and sell in the market as a ‘premium’ brand. Duracell and Energizer have a global market share of 39% and the Canadian share of 35% respectively. Whereas Duracell and Energizer focused on single-use alkaline batteries, they had outsourced the production of rechargeable batteries. Conversely, Rayovac manufactured a large portion of battery lines, hearing aids and other specia...