Duracell Turnaround
Individual Case Assignment #2
Sangshin Jung (207975691)
SGMT 3000
Section R
Prof. Stan Xiao Li
March 5, 2013
Dear Mr. Kilt,
With a careful analysis, I would like to give you few recommendations and implement action plan for you to turnaround Duracell division of your company. I would like to start with some market analysis recommendation. Based on the analysis, the battery market is very saturated and highly competitive. The profit margin decline year by year and it is not likely the market size would expand in any near future. More on that, the main focus for turnaround should be focus on cost control, take a cost leadership and form an industry alliance to further save on cost. The industry itself is very competitive and matured not much room to grow other than emerging market.
As you requested, I would like to point out major reason for declining on profitability of Duracell. Now, the batteries are common commodities and it is not necessary for customer to look at much on product differentiation and brand. According to the study, the purchase decision for batteries is done by impulse and there is no significant brand differentiation. Thus, the price is a main factor. With mature market and price sensitive customers, it is evitable for Duracell and competitors to lower the price to attract the customer. Thus, profit margin continuously decline. There are few segments especially rechargeable and lithium ion battery market has been grow (as a result, overall revenue grow), still big market is alkaline battery and market is already saturated. Moreover, the sales in emerging market has not been substantially improved, adding a burden for each companies focused more on price. Because of the market is highly saturated, advertisement and marketing plays big role. And battery consumption is based on impulse decision, not rational decision. Thus, the composition of advertisement in marketing cost is extremely high. With high cost on the advertisement, it
Sangshin Jung (207975691)
SGMT 3000
Section R
Prof. Stan Xiao Li
March 5, 2013
Dear Mr. Kilt,
With a careful analysis, I would like to give you few recommendations and implement action plan for you to turnaround Duracell division of your company. I would like to start with some market analysis recommendation. Based on the analysis, the battery market is very saturated and highly competitive. The profit margin decline year by year and it is not likely the market size would expand in any near future. More on that, the main focus for turnaround should be focus on cost control, take a cost leadership and form an industry alliance to further save on cost. The industry itself is very competitive and matured not much room to grow other than emerging market.
As you requested, I would like to point out major reason for declining on profitability of Duracell. Now, the batteries are common commodities and it is not necessary for customer to look at much on product differentiation and brand. According to the study, the purchase decision for batteries is done by impulse and there is no significant brand differentiation. Thus, the price is a main factor. With mature market and price sensitive customers, it is evitable for Duracell and competitors to lower the price to attract the customer. Thus, profit margin continuously decline. There are few segments especially rechargeable and lithium ion battery market has been grow (as a result, overall revenue grow), still big market is alkaline battery and market is already saturated. Moreover, the sales in emerging market has not been substantially improved, adding a burden for each companies focused more on price. Because of the market is highly saturated, advertisement and marketing plays big role. And battery consumption is based on impulse decision, not rational decision. Thus, the composition of advertisement in marketing cost is extremely high. With high cost on the advertisement, it