Case

Case

The main question is should Rayovac proceed with this idea or not, and if they do what strategy should they choose for market entry. It is very important that if Rayovac are to go ahead with pursuing the rechargeable battery market, that the project does not generate any negative cash flows to the business, as it is something the company simply can't support.

If Rayovac go ahead with this new business idea, what strategy would be best for Rayovac to pursue? Should they become a niche or a volume player in the market, or should they decide to run with this idea at all?

yes/no…

Niche Strategy:

At the moment most rechargeable batteries are sold through niche retailers. The positives of this is that it would allow Rayovac to charge a higher price, and obtain a margin of around 60% of retail price. Also there would be less variable costs like advertising and promotion. This would be due to the fact that niche-market shops employ knowledgeable staff who will help the consumer, and this will help promote the product when you compare it with the sales staff of the mass-merchandiser.

However the downside is that niche retailers represent a much smaller portion of sales, and also distribution would be lower, and therefore lower possible sales volume. Also, it is unlikely that the mass-merchandisers will ignore this technology if it becomes popular, so would Rayovac be as well off to get in there first?

At a selling Price of $25.00 per unit:

Contribution is 60% of retail price
Market sales projections for Rayovac in 2005 are $40million.
Variable costs are roughly $35,000 (advertising and promotion costs) altogether.
Total Sold = 40million/25.00 = 1,600,000
variable cost per unit = 1600000/35000 =

Contribution is sales-variable costs
$800,000-$35,000=$765,000

$765,000/60*100 = $1,275,000
$1,275,000-765,000 = 510,000 TOTAL FIXED COSTS

Breakeven Point = Fixed Costs/(Unit Selling Price - Variable Cost)
Breakeven Point =...