Rayovac’s growth and success can be attributed to a well-defined and executed strategic plan. First, as the third largest battery maker, Rayovac’s alkaline battery strategy is to compete on price. They price their alkaline batteries below Duracell and Energizer to gain market share. Rayovac has made significant progress in establishing partnerships with low-cost mass merchandisers to distribute its products. Giants, such as Wal-Mart, Lowes, and BJ’s Warehouses have teamed with Rayovac to market its batteries.
Currently, Rayovac batteries can be found in over 100,000 stores in North America, tripling its distribution points in just four years. Second, Rayovac has had significant global expansion. They have concentrated on the Latin America market and have copied its North American strategic and marketing plan and implemented throughout Latin America. To continue to grow the 24% market share in Latin America, Rayovac will continue to expand distribution outlets with mass merchandisers. In addition, Rayovac will expand its product offering by introducing the successful North American products.
Rayovac has plans to further expand its European market. With a foothold in the UK, Rayovac again will leverage its North American distribution strategy by partnering with mass merchandisers. Rayovac’s key relationship with Wal-Mart in the U. S. will help further expand its operations in continental Europe. Additionally, Rayovac will continue to expand. Recomendations For the most part, Rayovac has implemented a very successful strategic platform evidenced by their consistent financial performance and record earnings in 2000 and 2001.
The company should maintain its focus as the low cost provider of consumer batteries offering a full range of battery solutions. Rayovac needs to continue to expand its alkaline business (accounts for nearly 50% of sales) and increase its retail outlets in North America. They have increased their number of retail outlets threefold since 1996, but are still only sold in half of their targeted retail distribution channels. The company also plans to increase their penetration in Latin America, a market they have identified to have the highest growth otential. The area where we see Rayovac with a potential strategic problem is in the Hearing Aid Battery market. The company is currently the worldwide leader with a 62% market share, however sales have fallen 5-10% over the past two years, the only segment in their product line with declining sales. Besides increased competition from the other major battery manufacturers (Duracell & Energizer), Rayovac is faced with the threat of forward integration by leading 1 4 US Census Bureau. (2001). Population Growth. Retrieved November 27, 2001 from www. census. ov16 hearing aid manufacturers. Companies such as Siemens and Beltone already produce their own hearing aid batteries and there is potential for others to follow suit. Many opportunities exist in this market for Rayovac to capitalize on and extend their worldwide market leadership position. Hearing aids are an underdeveloped market, as only a small percentage of those requiring them actually wear them. As mentioned earlier, the Baby Boomer generation is entering their golden years, which will provide tremendous growth in the Hearing Aid market over the next ten years.
Technology continues to improve. Manufactures are designing smaller in-the-ear and canal devices. Many of the larger, international manufacturers such as Telex and Widex are developing digitally enhanced hearing aids. With this new technology comes the need for configuring battery solutions. We recommend Rayovac forming several strategic alliances with some of the top international OEMs such as Widex, Starkey or Unitron. Rayovac must focus on their core competency, making batteries.
A strategic alliance would allow both partners to branch out externally and leverage off of each other’s distribution channels to reach previously unavailable distributors (i. e. audiologists) and retail outlets. (Exhibit 8) Numerous co-branding and copackaging options would be available through an alliance to help with economies of scale and allow Rayovac to generate positive sales growth and protect its leadership position in this emerging market. ____________________________________________________________ _____________________ BACKGROUND OF THE ORGANIZATION Rayovac Corporation is known to be the largest manufacturer of batteries in the world. The company makes many different batteries to sell both for personal, household use, and commercial use. The household batter consists of standard battery sizes such as AAA, AA, C, D, and 9-volt. Sales of these batteries are used for electronic devices, but as times change, and technology is changing, new demands are needed for batteries as competitors try to keep up with the changes also.
Rayovac Corporation introduced the idea of rechargeable batteries to stay ahead and create the "next big idea" according to the case study. STRATEGIC PROBLEM The problem that Rayovac Corporation is currently experiencing is that launching the rechargeable batteries in Canada have not been a big hit for them, as consumers are not being attracted to them. Rayovac is concerned that bringing the rechargeable batteries into the rest of the North America market and soon the rest of the world, it would negatively affect their sales also. SWOT ANALYISIS
The strengths of Rayovac are they are a very profitable organization, and are recognized globally for their brand. The strategy they use is an intensive strategy, which gears to position and promote their battery products in North America and other parts of the region. According to the case, a weakness of Rayovac Corporation is their inability to outdo their competitors like Duracell and Energizer which dominates the market in terms of prices. Also, another weakness of Rayovac is their inability to market their new battery products efficiently and effectively in the current target market.
The company now has bigger opportunities because of their new management system, to enter and lead the North American market by providing battery and rechargeable batteries to households and commercially. With that, hey even have an opportunity to be the sole battery manufacturer in the market and beat out Energizer and Duracell. With Rayovac continuously innovating, the company can gain loyalty from their customers to make them more competitive in the market, and create new opportunities for the business. For Rayovac, a major concern is new technology.
Having technological advancement be so fast paced now-a-days could be a threat for Rayovac because other competitors are changing their products with the change in technology faster than Rayovac. Hopefully, with the rechargeable batteries, it will relieve some of this threat for the company. PLAN OF ACTION By analyzing this case, it is clear that there are three reliable alternatives for Falconi’s approach for Rayovac Corporation into introducing rechargeable batteries into the North America market. The first alternative would be to withdraw the rechargeable batteries product line from the Canada market and not move forward with the product.
Based on given evidence, sales of the rechargeable battery in Canada were not exceeding competitors and a strong impact on that was the inability to market the product correctly. If they decide to move forward with the rechargeable battery line, then in Canada they would have to take a much more aggressive approach to selling the batteries. The second alternative would be to expand the rechargeable battery into North America by using an aggressive market challenger strategy, which would competitively generate lower prices, at quality products.
If Rayovac did this, it would have a chance at redeeming themselves in the market with their competitors. They would be using a guerilla strategy which is an aggressive approach to knock down prices yet have quality products; something similar to what Wal Mart does with their products. The third alternative would be to use the company’s resources to focus and segment on a one-time use alkaline battery and bring in the rechargeable battery so there is a safety net with which the company can fall back on if the new product fails in the North America market.
MARKETING STRATEGY In order for Falconi to to proceed with his decision to enter the rechargeable battery into the North America market and continue in the Canada market, he would need to find a more suitable marketing strategy for Rayovac. For Rayovac to compete in the market, they have to effectively use a guerilla tactic to provide quality products at cheaper prices. By using this strategy, they can keep ahead of the competition by being industry leaders regarding prices.
Also, Rayovac should consider using a defensive marketing strategy to keep them on the offense with their competition. By defensive I mean, Rayovac has used a counter offensive approach to position the rechargeable battery product line in North America through the use of their core competencies to gain a competitive advantage. Rayovac’s main goal is to dedicate resources to rechargeable batteries and the company has to be able to obtain a significant portion of the segment within the first few years and generate an increase of overall sales.
Canada had control over its product lines in retail places like Wal Mart and tried to maintain a close link with products in the United States. However, the objective was to capitalize on the U. S production volumes, promotions, and branding strategies behind the overall Rayovac name. Rayovac also has a budget issue and needs to maintain a positive return on investment at all times. The Canadian opertaion was highly leveraged and lacking investment in projects and resulted in negative short-run returns.
Rayovac would need to promote long-term investment and increase their cash flow for the product to succeed and dominate the market. In order for Rayovac to achieve their goals, they would have to proceed with the rechargeable battery in the Canada market at a more aggressively, fast-paced rate and with a proactive stance toward building the market up for rechargeable batteries in the North America region. The main product for the Rayovac Corporation is the rechargeable battery which will be promoted in the North America region targeting household consumers, commercial, and industrial users.
In order to differentiate the product from the competitors to gain a competitive advantage, Rayovac will maximize quality creating quality products while minimize the cost to be affordable for all types of consumers. The company has to use an effective pricing strategy to ensure that they will meet the demands of their consumers by having cheaper rechargeable battery products than their competitors. Because of the strategic pricing of the product the consumer might be able to decide in availing the product rather than buying other products.
The company is also suggested to use perceived-value pricing as their pricing strategy to ensure that the cost of the product will meet the demands of the target market. According to the case, the strategy Rayovac uses in launching the products can attract the attention of the consumer like their strategy in having a lower price than competition. The most effective way to market the product would be through the use of Banner ADs and TV ADs, where information provided would be rich and able to reach a large and broad market of people.
The rechargeable batteries will be distributed through retails and wholesale stores and supermarkets where the consumers; household and commercial can purchase them. RECOMMENDATIONS Given the analysis of this case, I have come to the conlusion of recommending that the rechargeable batteries be brought into the North America market using the market challenger strategy. The guerrilla tactic which is a very aggressive approach used to minimize costs and maximize the quality of products will allow Rayovac Corporation to give the rechargeable battery the push it needs to be successful and a market leader.
Their ultimate goal is to be an industry leader, and using this tactic would very much increase their chances. Even places like Wal Mart use the guerrilla tactics, where they cut prices to be very affordable for consumers and have quality products, they have nearly created a monopoly in their industry. Rayovac Corporation has the potential to achieve this goal if they obtain control over their product line in Canada. They will be able to push the product and segment in to the United States with a very proactive, aggressive approach.
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