The U.S. Alkaline AA Battery Market: A Competitive Profile

Abstract

This paper follows the footsteps of eleven studies that have tried to analyze the competitive profile of U.S. consumer markets: Men’s Shaving Gel, Beer, Shampoo, Shredded/Grated Cheese, Refrigerated Orange Juice, Men’s Razor-Blades, Women’s Razor-Blades, Toothpaste, Canned Soup, Coffee, and Potato Chips.

Porter associates high market share with cost leadership strategy which is based on the idea of competing on a price that is lower than that of the competition. However, customer-perceived quality—not low cost—should be the underpinning of competitive strategy, because it is far more vital to long-term competitive position and profitability than any other factor. So, a superior alternative is to offer better quality vs. the competition.

In most consumer markets a business seeking market share leadership should try to serve the middle class by competing in the mid-price segment; and offering quality better than that of the competition: at a price somewhat higher to signify an image of quality, and to ensure that the strategy is both profitable and sustainable in the long run.

Quality, however, is a complex concept consumers generally find difficult to understand. So, they often use relative price, and a brand’s reputation, as a symbol of quality.

For 2008 we chose the Alkaline AA Battery because its sales were $667 million vs. $283 million for AAA. By the same token, we have focused our analysis on AA 4-pack because it was the most popular size with 2008 sales of $190 million.

In 2008 the AA 4-pack Alkaline Battery market was quite competitive with 30 brands with sales over $25,000.

Using Hierarchical Cluster Analysis, we tested two hypotheses: (1) That the market leader is likely to compete in the mid-price segment, and that (2) Its unit price is likely to be higher than that of the nearest competition.

For 2008 the results supported Hypothesis I and II. Both the market leader Energizer, and the runner-up Duracell, were members of the mid-price segment. Moreover, the unit price of Energizer was higher than that for Duracell, as we have hypothesized.

For 2007 the results did not support Hypothesis I, because Energizer found it to be a member of the premium segment, even though Duracell maintained its association with the mid-price segment.

We found that relative price was a strategic variable, as hypothesized.

We also discovered four strategic groups in the industry.