3.1 Organic Development
Through reshaping the Rayovac brand and growing market share by evaluating strategies:
- Revitalize Rayovac brand by increasing and updating company’s marketing, advertising and distribution strategies (to include more retailers).
- Expanding product line up via technological innovation.
- Increasing plant capacity and production cost is reduced by revamping battery manufacturing operations.
- Improving merchandising and attractiveness of packaging.
- Refine the supply chain and consolidate purchasing.
- Attentive customer service.
- Entrepreneurial culture
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Long term growth through strategic acquisitions (Thompson & Gamble, 2007).
3.2 Overseas Presence by Acquiring
1999: ROV limited for $155 million and became the largest distributor of batteries in Latin America.
2002: Germany based Varta AG for $258 million, which is a leading European maker of general batteries with 2001 revenues of $390 million. Distribution operation of two companies was combined to generate expected cost savings of $30 -40 million.
2003: Remington Products Corporation for $222 million, which is a leading designer and distributor of battery powered electric shavers, beard and mustache trimmers, grooming products, and personal care appliances. This is a number one brand in U.S and its products are sold in 20,000 retail outlets in U.S.
2004: Ningbo Baowang Company in Ninghai, China, for a cash price of $17 million plus $14 million in assumed debt which helped Rayovac to penetrate the growing market in china.
2004: Microlite, a Brazil’s leading battery company for a price of $21 million plus $8million in assumed debt. This is a leading battery company with $53 million in net sales in 2003 and 49% market share. This gave Rayovoc a number one market position in Latin America (Figure 1).
2005: Privately owned United Industries Corporation for a value of $1.2 billion (Thompson, Strickland, & Gamble, 2008).
Figure. 1 The market share of Rayovac in Latin America
4.0 EVALUTATING GLOBAL STRATEGY
According to Thompson and Gamble (2007), evaluation of strategy is done on the basis of testing suitability.
4.1 POSITIONING
Overseas Acquisitions by Rayovac has helped him to establish itself as the leading value brand of alkaline batteries in North America and Latin America. Also, Rayovac became the world’s largest manufacturer of hearing aid batteries and the top supplier of rechargeable batteries in U.S and Europe (Thompson & Gamble, 2007).
4.2 VALUE CHAIN ANALYSIS
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To create a more value based alternative: Rayovac established itself as a leading marketer of value priced batteries comparable in quality to those of leading brands. Its prices were about 10-15% less than its competitors.
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To extend the company’s business into new product categories: Rayovac introduced a full line up of continuous new battery products. In 1993, introduced a long life of rechargeable batteries, chargers for high capacity nickel metal hydride, and new zinc air battery for hearing aids.
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To create a more cost- efficient operation out of combined companies: After acquiring Varta AG, distribution operation of two companies was joined to generate expected cost savings of $30 – 40 million. Similarly, after acquiring Remington, their R&D functions, sales management, and marketing were merged together to reduce supply chain cost, increasing plant capacity and production cost (Thompson & Gamble, 2007).
4.3 BUSINESS PROFILE
Since 1997, the company’s sales of battery had grown from $427 million to just over $1 billion at the end of fiscal 2004. Rayovac market share approximated 60 percent and their battery products were available in 1million store locations in 120 countries (Thompson & Gamble, 2007).
4.4 GRAND STRATEGIES – STRATEGIES FOR COMPETITIVE ADVANTAGE
A grand strategy can be defined as a comprehensive general approach that guides a company’s key actions. Rayovac is a dominant business firm, so we emphasize our analysis by two approaches as following:
Grand strategy selection matrix
For 1999, the company’s gains made it the fastest growing company battery company in U.S and holding a dominant market share in hearing aid batteries. It suggests concentrated growth, market development, product development, and innovation (Howard, 2005). Rayovac holds a 19 percent unit share, up from 8 percent back in 1996 in the alkaline battery segment. After completing its acquisitions year after year, their net sales increased to $1417 million from $922 million in fiscal 2003 reflecting a 54 % increase. Acquisitions contributed to nearly $409 million to sales in fiscal 2004 (Thompson & Gamble, 2007).
- Vertical integration and the Concentric diversification
Rayovac moved to Atlanta in 2004, and change name to Spectrum which have integrated Rayovac, VARTA, Remington, Vigoro, Cutter, and Tetra to be a major global manufacturer of consumer batteries, electric personal care products business. These deals have not only helped to accelerate Rayovac's sales and earnings but have diversified its businesses by category and geographically. The decision to diversify became after and (which owns competitor ) merged in January 2005 to create one of the biggest consumer products companies around and one of major competitor for Rayovac (Justin. 2006).
- Prospects and expectations
Rayovac provided a value based alternative by providing comparable product at a low cost. Also, it developed current internal strengths to utilize our resources efficiently with highly competitive product categories. Rayovac transformed itself into a global brand (Thompson & Gamble, 2007).
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Conglomerate diversification. We believe Rayovac has demonstrated a strong ability to execute in challenging markets and product categories, as well as make shrewd acquisitions that have supported its goal of establishing itself as a top-tier consumer-products company. Given the many benefits we see stemming from the diversification of its product lines and its participation in higher-growth businesses (Spectrum’s Annual Report, 2004).
4.5 CORPORATE CULTURE
- Spectrum’s brands have very good corporate cultures which help company management globalization.
- Extremely good management term that can implement the vision
- Wonderful skills and trained workforce
- Incentive programmed base on growing EPS (earning per share) and cash flow
- Professional business climate in Atlanta
- Political and government support for the business
(Spectrum’s Annual Report, 2004)
5.0 WAS GLOBALIZING A GOOD STRATEGIC MOVE
In end of 2004, the company sells its products in more than 120 countries and has 52 manufacturing and product development facilities in the world. Spectrum generates approximately 45% of sales outside of North America. The batteries up to 40% of company sales were globally. As the company focuses on becoming one of the leading global consumer products companies in the world, it has not only helped to Spectrum's sales and earnings, it also have diversified its businesses by category and geographically. "We are applying the same proven techniques and principles that we used in our very successful VARTA integration to that of Remington. By combining the many strengths of our two companies, we are creating a new world-class organization positioned to successfully compete in the global products marketplace and take advantage of a wide-range of growth opportunities," said Rayovac Chairman and CEO David Jones (Rayovac Announcement, 2008).
Strategically, Rayovac is well positioned to take advantage of the global market and economies of scale. Because Rayovac shifted its production line to China, and continued its expansion into global market. The company an opportunity to diversify revenue streams and markets while developing complementary back office operations and infrastructure. Because of the shared retail distribution channels among its diversified product lines Rayovac can now leverage its product volumes to gain better terms from retailers (Academon, 2008).
TO analysis the Spectrum global strategy, some case and information are used of determine by positive and negative point for business globally.
Positive for Spectrum Globalizing Business
- Lower prices strategy globally
By using lower prices strategy globally, Rayovac had became the third-ranked broad in North America with an estimated 19% market share, the second-ranked broad in Europe, with 25%market share, and the leading broad in Latin America.
Rayovac acquired battery factories in China, Latin America and Brazil to lower the manufacturing cost. For example, the labor cost and raw- materials are lower than other country.
- Take advantage of a wide-range of growth opportunities
For example, the battery manufacturers in the mainland china are rapidly increasing production of [higher-margin] rechargeable batteries. While China currently lags Japan and Korea for rechargeable batteries, the country is expected to become the main producer of these batteries for Japan and Korea.
Spectrum continued to benefit from synergies stemming from acquisitions (Howard, 2005).
Negative Point for Business
- The global competition, competitors
According to Spectrum Brand management: “Typically, because private-label brands are not supported by advertising or promotion, and retailers sell these private label offerings at retail prices below competing brands.” (Spectrum’s Annual Report, 2004). That is real case, in 2002 Spectrum brought the Varta, one of Germany-based leading European maker of general batteries, because the sales for private-label batteries grew unexpectedly fast in Germany, France, Italy etc. Company was totally declining sales and losing the profits.
- Increased in raw materials prices
There is increase of raw materials price take $18million in gross profit in 2004 such as zinc and inventory reductions at major retailers.
- negative strategic attribute – Rayovac’s debt structure
Figure2. The Spectrum Net Sales (in U.S million dollars)
Figure3. The Spectrum Net Income (in U.S million dollars)
Compare with net sales (Figure.2), the net income (Figure.3) had dropped from $55.8 million 2004, $46.8 million 2005, to a loss of $434 million 2006. Reason for that because in 1999 they spend $155 million for company called RAV in Latin America, in 2002 they spend $258 million for batteries company call Verta in Germany. Also, spend $31 million in China and $29 million in Brazil for buy manufactures. So there are coming results of “The Spectrum was spending too much”. “The company undertook to finance all of its acquisitions which are substantial to notes above $500m at 7.4% and 8.5% interest respectively and numerous others valued from 3 to several hundred million and comparable interest rates. Rayovac needs to reduce its overall debt load." (Spectrum’s Annual Report, 2004).
6.0 CONCLUSION
Rayovac’s global strategy is good strategy. During business globalization, it was leaded Rayovac to become No. 1 battery brand in Latin America, No. 2 battery brand in Europe and No. 3 battery brand in North America. Also the firm lowers the cost of production, positioned itself as value brand priced 15-20% below the competing brand. Rayovac has established itself as the leading value brand of alkaline batteries in U.S showing sales of $1billion at the end of fiscal 2004 and with a market share approximating 60 percent by adopting a strategy of series of acquisitions in key foreign markets. Rayovac has been highly successful in gaining a valuable market share, in 2005 the products were sold by 19 of the world’s 20 largest retailers and were available in 1 million store locations in 120 countries through efficient and effective merchandising, expanding distribution channels abroad, and excellent logistics system to reach the retailers anywhere in the world (Thompson, Strickland, & Gamble, 2008).
However, it doesn’t mean that Rayovac do well by turning functional tactics into action. For example, specific short-term objectives, major negative strategic attribute for Rayovac is its debt structure that the company undertook to finance all of its acquisitions, which includes investing into global structure growth and global expansion. Rayovac’s expansion was too fast, and they needed to reduce its overall debt load.
7.0 REFERENCE
Academon term paper and essay. (2008). Rayovac to Spectrum Brands: Case Analysis. Retrieved May 28, 2009, from
Howard, C. (2005). Spectrum Brands: Charged to the Max. Retrieved May 28, 2009, from http://www.businessweek.com/investor/content/may2005/pi20050524_2384_PG2_pi008.htm
. (2006). Spectrum CEO: Company could sell Rayovac. Retrieved May 28, 2009, from
Rayovac Announcement. (2008). Rayovac Announces Remington Integration Plans and Global Reorganization. Retrieved May 28, 2009, from
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Spectrum Annual Report. (2004). Form 10-K for RAYOVAC CORP. Retrieved May 28, 2009, from
Spectrum Brands. (2009). Introduction. Retrieved on May 30, 2009, from http://www.spectrumbrands.com/100years/
Thompson, A. Jr., & Gamble, J. E. (2007). Spectrum Brands’ diversification strategy: A success or a failure? In Thompson, A. Jr., Strickland, III. A. J., and Gamble, J. E. (2007). Crafting and executing strategy: The quest for competitive advamtages: Concepts and cases. (16th ed.). New York: McGraw-Hill/Irwin.