Assessing the strategies of CEO David Jones to globalize Rayovac’s battery and flashlight business during 1999 to 2004 will determine if globalizing was strategically sound. An assessment on the attractiveness of each industry Spectrum diversified into will determine which business units have attractive degrees of competitive strength in their respective industries, and whether a strategy of related or unrelated diversification was pursued will determine which fits exists in both strategy and resources available within sister business units. An assessment of the company’s financial results will be based on data from the case and other sources. Recommendations from the assessments performed will be given on what it will take to restore the company to profitability and boost its long-term performance prospects.
Spectrum Brands Strategy for Diversification: Success or Failure? When assessing the strategies of CEO David Jones on globalizing Rayovac’s battery and flashlight business during 1999 to 2004, there is the need to consider the purchase of Rayovac in 1996 by a private equity company Thomas H. Lee Partners (THL) and what philosophies were instilled in Mr. Jones prior to becoming chairman and CEO of Rayovac (p. C292). One article in Business Week, written by Elizabeth Woyke and David Henry, stated: The story of Spectrum stretches back long before the buyout boom began…it follows a trajectory remarkably similar to recent deals. In August, 1996 …THL scooped up battery maker Rayovac for $326 million, borrowing much of the money…the…firm took Rayovac public…, and the stock…doubled in 13 months. THL gradually sold off…its shares, distributing the last…to its investors. It booked a fourfold gain…(2007, para. 6)… [The] relationship with Rayovac didn't end there. In January, 1999, THL bought United Industries Corp, a 30-year-old garden fertilizer and insecticide manufacturer, for $652 million, putting up $255 million of its own money…, THL installed Rayovac Chief Executive David A. Jones as the company's chairman, his third assignment...The goal: to have United's revenues grow to $1 billion…to prepare it for…sale…(para. 7). Mr. Jones made certain restructuring initiatives and organizational changes were instituted during the 1997 to 2007 time period. There were eight strategic moves that were placed in effect in 1997 for a comprehensive long term strategy to rejuvenate the battery market share of Rayovac. These efforts involved: 1) Building the Rayovac brand with increased advertising and promotion; 2) Broadening the battery lineup with technological innovations; 3) Improving merchandising and the attractiveness of the packaging; 4) Expanding distribution to more retailers in more countries; 5) Revamping battery manufacturing operations to cut production costs and to increase plant capacity; 6) Refining the supply chain and consolidate purchasing; 7) Offering very attentive customer service; 8) Create a results oriented, entrepreneurial organizational culture. In 1999 Mr. Jones enacted his strategy of globalizing the battery and flashlight business with a series of acquisitions in key foreign markets for achieving an 8 to 10 percent annual growth in revenues and profits. There are several acquisitions and economic factors that will determine if globalizing was strategically sound for the future security of the Rayovac brand. Globalizing Spectrum Brands
In 1999, Rayovac acquired ROV Limited in Latin America for $155 million. The acquisition of the independent company of Rayovac was made on the basis that ROV had the largest distribution chain in Latin America, and its sales were approximately $100 million versus the $20 million that Rayovac generated in Latin America. This strategy probably did not make strategic sense, due in part to the sales not meeting or surpassing the purchasing price (p. C292). In 2001, Rayovac introduced breakthrough technology of the one hour charger, and the high...