Rayovac Corporation

Rayovac Corporation

Reasons for Remington Acquisition and Characterization of the Acquisition

            Rayovac acquired Remington to achieve product diversification. The company acquired all products offered by Remington in 2003 that include electric shavers, hot airbrushes, hairdryers, and curling irons (Anderson & Roberto, 2019). The acquired company was a low-cost producer, and its capital expenditure was about 1% of its revenues. The company outsourced production to mainland China such that the acquisition aimed at saving a considerable amount of money every year. Although Remington operations were limited to North America, Rayovac intended to exploit its already established global supply network to increase the acquired company's market internationally. At the time of acquisition, Rayovac was selling in more than a million stores in the US, while Remington had only 20,000 stores (Anderson & Roberto, 2019). Rayovac owners believed that they could establish the Remington brand name in the global market using their sales organization as well as their strong relationships with retailers on the ground. Other than achieving product diversification, Rayovac has a lower cost structure and increased market power globally. For instance, 19 out of the top 20 retailers internationally sold Rayovac's products after the acquisition. Additionally, the products were existing in more than a million stores in 120 countries (Anderson & Roberto, 2019). Further, the cost saved per year by the company rose above 3 % of the cost of sold goods.  

The acquisition can be characterized as a conglomerate. Both the Rayovac and Remington were in different industries, one offering batteries while the other personal care products correspondingly. Rayovac acquired Remington to broaden its range of products. The product offered by Remington, its brand positioning, as well as the customer line made it a logical diversification for Rayovac. The acquisition aimed at reducing costs and risks by operating different industries. Rayovac integrated Remington in its range of operations to achieve economies of scope. The integration involved closing several distributions and manufacturing facilities of Remington. Additionally, the two businesses combined their functional departments, and Rayovac absorbed Remington's global processes into its existing European and North American operations to establish international organization and infrastructure. For example, field sales, marketing, and sales management departments of the two companies were merged to form North American sales and marketing organization. Equally, research and development units were amalgamated into Rayovac's research department. Conversely, Rayovac reduced its plants and the number of suppliers. Consequently, operational costs and risks reduced significantly, and sales, as well as the global market share of the diversified products, increased considerably.  

Reasons for United Industries and Tetra Acquisitions

Rayovac acquired United Industries and Tetra to further the diversification of its products and enhance its competitiveness in the global market. Additionally, the company anticipated considerable growth in the pet supplies, insecticides, and lawn and garden care products. United Industries' market share for lawn products was approximately 24%, while that of insecticides 18 % with household insect control products retail sales in the US being about $1 billion in 2003(Anderson & Roberto, 2019). Rayovac anticipated sales increase as public awareness about insect-borne diseases is enhanced. Equally, the lawn and garden market division benefited from encouraging demographics as the population pursuing gardening was increasing considerably in then targeted Europe, Japan, and North America. The lawn and garden products sales were increasing at a rate of about 4 % annually. Nevertheless, insecticide and lawn and garden care sales were seasonal. Therefore, venturing into the pet supplies market was a strategy of reducing risks. Pet supplies in the US and Europe was about $8 billion and $4 billion correspondingly in 2004, with an annual growth of between 6% and 8 % (Anderson & Roberto, 2019). There were few significant competitors in the market operated by the United Industries, and Rayovac believed that they would have a competitive advantage after acquiring the company.

The integration of the United Industries in Rayovac was anticipated to lead to considerable cost savings. The savings were expected in the marketing and distribution since existed networks would facilitate cross-selling to customers in department stores. Additionally, purchasing, as well as the administration costs, would reduce after the acquisition. Rayovac planned to increase its revenues by expanding the distribution of the United Industries beyond North America using its global network. The CEO of the company, David A. Jones noted that the pet supplies market was growing faster but were highly fragmented (Anderson & Roberto, 2019). Therefore, the consolidation of the industry was necessary to meet global retailers' requirements. For that reason, Rayovac focused on acquiring and consolidating pet supplies companies such as Tetra holdings.

Interest in pet supplies and promising growth in the industry made Rayovac acquire Tetra holdings. The company wanted the major player in the pet supplies the global market. Rayovac's CEO noted that the combination of Tetra Holdings and United Pet Group would make the company the largest pet supplies manufacture in the world. Unlike the United Pet Group, the Tetra brand name was recognized globally in the pet supplies category at the time of acquisition. Consumers knew and trusted the brand, and that gave Rayovac easier entry into the global market. The acquisition and combination of the two pet supplies companies increased Rayovac's sales from international sources considerably.  

Reference

Anderson, R., & Roberto, M. (2019). Strategy Formulation Fall 2019 [Ebook]. Ivey Publishing.