Gillette Energy Drain : the Acquisition of Duracell
Industry: Portable power industry in the US
The acquisition of Duracell was seen as many as a smart move. Analyst, shareholders, executives, had high expectations with this merger. Unfortunately, this acquisition created several problems for Gillette since their main goal of profit maximization was not being accomplished. Main issues:
• Should Gillette divest Duracell?
• Is Gillette using the appropriate strategies to deal with the big and small competitors?
• Stock prices are decreasing considerably
External Analysis
Industry Structure
• Dry cell batteries industry generated US$ 2.6 Billion in US domestic sales in 2000.
• 75% of all alkaline battery sales were impulsive purchasing.
• AA size batteries accounted for almost 50% of all sales.
• The industry was highly competitive, and the three big players were constantly developing new products.
• There were three main distribution channels for batteries: discounters, 52.5% of sales; drug stores, 23.8% of sales; and supermarkets, and 23.7% of sales.
Industry trends
• Alkaline batteries were the preferred by American consumers.
• Due to high percentage of impulsive purchasing, manufacturers have to make sure to provide the effective displays for the batteries. Great amount of sales is dependent on the retailers’ effective display.
• Retailers are creating their own private brands (manufactured by the same big players)
Sociocultural segment
• In the US, where time is money, people are always in the rush. This probably explains why the high percentage of battery sales is impulsive purchasing. In addition, the American culture is highly receptive to technological innovations, so more efficient batteries are going to be needed.
Economic Segment
• Even though the case did not mention anything about the economic situation in the US, it is important to considerate that recent economic conditions in the US are not as good as ten years ago. Thus, it would increase the demand for low price batteries,
The acquisition of Duracell was seen as many as a smart move. Analyst, shareholders, executives, had high expectations with this merger. Unfortunately, this acquisition created several problems for Gillette since their main goal of profit maximization was not being accomplished. Main issues:
• Should Gillette divest Duracell?
• Is Gillette using the appropriate strategies to deal with the big and small competitors?
• Stock prices are decreasing considerably
External Analysis
Industry Structure
• Dry cell batteries industry generated US$ 2.6 Billion in US domestic sales in 2000.
• 75% of all alkaline battery sales were impulsive purchasing.
• AA size batteries accounted for almost 50% of all sales.
• The industry was highly competitive, and the three big players were constantly developing new products.
• There were three main distribution channels for batteries: discounters, 52.5% of sales; drug stores, 23.8% of sales; and supermarkets, and 23.7% of sales.
Industry trends
• Alkaline batteries were the preferred by American consumers.
• Due to high percentage of impulsive purchasing, manufacturers have to make sure to provide the effective displays for the batteries. Great amount of sales is dependent on the retailers’ effective display.
• Retailers are creating their own private brands (manufactured by the same big players)
Sociocultural segment
• In the US, where time is money, people are always in the rush. This probably explains why the high percentage of battery sales is impulsive purchasing. In addition, the American culture is highly receptive to technological innovations, so more efficient batteries are going to be needed.
Economic Segment
• Even though the case did not mention anything about the economic situation in the US, it is important to considerate that recent economic conditions in the US are not as good as ten years ago. Thus, it would increase the demand for low price batteries,