Battery Industry

Topics: Battery / Pages: 4 (947 words) / Published: Oct 21st, 2012
Case Preparation For Discussion (Gillette)

1. Central problem/issue in case: The main problem is that, since its acquisition, Duracell has become a drain on the financial performance of Gillette. The board needs to decide what should be done to turn Duracell around and restore Gillette to a dependable financial performer.

2. How is the battery industry (you can use five forces analysis to answer this question)? Has it been changing? If yes, how? Overall, the industry is very attractive. New entrants realize the potential of snagging a piece of a highly profitable industry that produced $5.2 billion in revenue and $807 million operating margin. Threat of new entrants is low, as the capital requirements and technology development needed to stay relevant in the market proves to be a daunting barrier to entry. Also, in order to realize a significant profit, economies of scale must be realized to produce a massive amount of batteries while keeping costs low. This would be harder for smaller entrants to achieve. Threat of substitute products is low, as no replacement good has been introduced that may provide the consumer with the same benefits as using a battery. This makes the industry attractive. However, if a company produced a good that could replace the need for a battery, this would detrimentally alter the battery industry, making threat of substitute products a major factor of the industry. The bargaining power of suppliers is low because there is little differentiation between the inputs of the batteries, which can be acquired from many different suppliers. This low supplier power makes the industry attractive. The bargaining power of the buyer is fairly high, as there is high buyer concentration with low switching costs, which makes the industry less attractive. The major, key factor is the rivalry among competitors. There are three main competitors that comprise 85.76% of the battery market, in which they are constantly upgrading their

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