Xxx Consulting Group Llp

XXX Consulting Group LLP

“How to turn around the Duracell division?”

Mr. Kilt,

Duracell’s revenues have been increasing steadily for the last four years, however; our operating margins have dropped by more than ten percent. Duracell operates in an industry where seventy five percent of its customers buy alkaline batteries out of impulse. On the other hand, the battery industry itself has low entry barriers allowing for more production and allowing consumers costs to drop. The industry in which Duracell operates faces increasing rivalry amongst competing firms, there is significant treat of new entrants, and the buyers have the bargaining power.

Energizer currently holds 36.5 percent of the alkaline battery sales. In addition, Energizer also produces and markets zinc carbon batteries under the name Eveready. The competition in the industry is strong and any company can benefit not only from alkaline batteries but from zinc carbon as well. For example, in underdeveloped countries such as India alkaline batteries made up only 3 percent of the battery market, leaving a 97 percent market share for zinc carbon batteries to profit from. Any company looking to diversify can enter the market, acquiring zinc carbon factory’s overseas since most have not switched to alkaline due to the rough economic conditions of upgrading these factories overseas.

Since the consumer report that was published in December of 1999 stating that “shopping is simple: buy by price” the buyers seemed to have gain an even stronger purchasing power. Rayovac is one relatively new threat to the industry that has been capitalizing on price, rather than quality. From the consumers perspective they find the quality of a Rayovac AA battery priced 15 cents cheaper similar to our ultra-line.Rayovac seems to be the only company in the industry over the course of the last five years with constantly increasing growth revenues, while also raising their operating margin. The customers...