A successful business strategy can not only lead organization to grow the business and build customers loyalty, but also develop its business competitively. Also, a good business strategy can well conduct functional operations to achieve the organization's target . Just like what Ross and Kami say, "Without a strategy, the organization is like a ship without a rudder". Hence, setting a correct business strategy and fitting in the current circumstance of organization is a vital mission and responsibility for managers.
Rayovac Corporation is the third largest batteries and flashlight leading manufacturer in the world. Also, the products are sold by the world's top 25 retailers and are available in 120 countries . In, 1999, CEO David adopted and implemented a global strategy on Rayovac Corporation. This report analyses how Raoyovac developed its global strategy through the organic development and acquisitions. It also evaluates the Rayovac's global strategy by the concept of testing suitability and further discusses the corporate culture and model of grand strategy clusters. Finally, this report critically analyses and evaluates whether globalizing was good strategic move of Rayovac or not.
Background of Rayovac Corporation
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Rayovac Corporation has 100 years history when a French Battery Company started its business in 1906 in Madison, Wisconsin. During 1970s and 1980s, Rayovac became the No.1 market leader of value-priced batteries in North America. Because Rayovac implemented the strategy which was to sell a battery comparable in quality to other competitors but the averaging price was 10-15 percent lower than the other main competing brands. However, due to Rayovac's two main competitors, Duracell and Energizer, the market share of Rayovac was changed to the No. 3 brand in the North America in early 1990s.
Now, Rayovac is the No. 1 battery brand in Latin America, No. 2 brand in Europe and the third largest batteries and flashlight maker in worldwide. After Thomas H. Lee Partners acquired Rayovac in 1996, David A. Jones was appointed to be the chairman and CEO of Rayovac. Through an initial offering of common stock, Rayovac became a public company and started to trade its shares on the New York Stock Exchange in 1997. More importantly, in 1999, in order to restructure Rayovac's batteries and flashlight business, excite sales growth and expand market share around the world, CEO David Jones used global strategy on Rayovac's battery and flashlight business.
How Rayovac Developed Its Global Strategy
To be a market leader, a company must develop its own capabilities in areas where internal strategic control is pivotal to protect its competitiveness. In 1999, CEO David Jones adopted organic development and overseas acquisitions as a strategy to globalize Rayovac's battery and flashlight business. 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.
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.
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.
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.
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- 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
- Justin, R. (2006). Spectrum CEO: Company could sell Rayovac. Retrieved May 28, 2009, from http://atlanta.bizjournals.com/atlanta/stories/2006/08/21/story4.html
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