The Battery Industry in the United Kingdom - Case Study Example

THE BATTERY INDUSTRY IN THE UNITED KINGDOM By Name Course Instructor Institution Location Date Introduction Market forecasting entails analysis of the future market characteristics, quantitative figures and trends by use of the previous information. Producers use the forecasting analysis reports to predict the future behaviour of customers (Mintel 2010). Price elasticity of demand measures how the customers' purchases for a particular product change due to an increase or decrease in the commodity's price while holding other determinants of demand constant (Cooper 2003). Market structures include the features of the market that influence behaviour of customers. There are four different market structures namely perfect completion, monopoly, monopolistic competition and oligopoly (Yildirim & Philippatos 2007). The article examines what happens in the battery market in the United Kingdom from the year 2004 onwards a) The battery market between 2004 and 2008 The Mintel research shows that battery sales volume is increasing between the period 2004 to 2009 (Woodall et al., 2010). More adults remain home rather than spending in trips to save money. In the process of staying home, they use they spend more on activities that require batteries. The battery manufacturers employ mechanisms to counter the prospected drop in consumer purchases for batteries in 2008 as a result of a recession by massive promotion. The promotion sees a rise in the average number of packs that individuals buy from 4.5 to 4.7. The promotion includes free samples (Mintel 2010). The price per pack does not change but the quantity per package increases. Because of the amount that consumers buy during the 2008, there is an increase in the amount that they have in store that consequently reduces the demand for batteries in 2008 (Mintel 2010). Between the end of 2007 and mid 2008, the users opt to use the accumulated stock pot cells rather than going for new ones. The battery purchases remain small in the course of the period. The average value per pack thus falls to 4.5 similar to the value of 2007. There is a fall in demand for non-rechargeable batteries and an increase in demand for the rechargeable ones that further lowers the alkaline battery market in 2008 (Mintel 2010). Zinc batteries consumption is by the ones that are not capable of to buying a charger. The sales promotion make a third of the market be under free samples, and the price falls by 2.4%. The VAT and price changes by the battery manufacturers make the average demand for batteries to fall by 3% in 2008. This explains the increase in sales (Mintel 2010). Sales units (Million) Index Value at current prices Value at current prices(£millions) index Value at 2009 (prices £millions) Index 2004 584 100 415 112 450 122 2005 596 102 413 112 445 120 2006 620 106 410 111 436 118 2007 615 105 402 109 418 113 2008 611 105 389 105 391 106 There is a prospect of a rise in battery demand between 2009 and 2014 due to the increasing population that can lead to a general increase in demand for cells. The increased population calls for increased consumption of battery- using machines among households. The hope lies in the condition that the appliances use the removable batteries rather than the built-in ones. The demand increase is not expected to lead to increased prices. According to minimal, the cell sector can only maintain market prices by selling more units (Pollet, et al, 2012). Mintel research shows that the manufacturing is innovative, but the competition in the market is stiff. The new skills can be copied by rivals that can produce cheaply. There is no incentive to raise prices, but use the innovativeness and heavy promotion to increase the brand loyalty. Research shows that these increase positive perceptions about the premium cells. The consumers are used to more units for small amounts of money (Mintel 2010). The study claims that the use of removable batteries is not becoming obsolete soon. Despite the influx of the market with electronic devices that use integrated or internal batteries. The value for the cells is expected to decline as a result of innovations such as smyGrid charge. Rechargeable batteries perform best in the battery market. They have a small segment in the market but the sector growth is rapid. The increase from 2005 to 2008 is 56% and they occupy 2.4% of the total battery market by 2008. The cost –saving feature makes the consumers that have less cash during the recession to prefer them. They have less negative degrading effect on the environment that the other kinds of cells (Mintel 2010). b) Price Elasticity of Demand The elasticity of demand (Ed ) is measured by use of the following formula Ed= S of batteries over the period The following are the changes in demand and prices for the batteries. Change of a variable=Current numerical value of a variable-previous numerical value of a variable. Change in sales/quantity demanded change in price 2004-2005 12 -5 2005-2006 24 -9 2006-2007 -5 -18 2007-2008 -3 -27 Total 28 -58 Price Elasticity of Demand (PEoD) = (% change in quantity demanded)/ (% change in price) PEoD= (12+24+-5+-3)/ (-5+-9+-18+-27) PEoD= (28)/ (-58) Thus, PEoD= -0.48 The value –o.48 implies that any 1% increase in price of batteries leads to a reduction in quantity purchased by 0.48% of the total quantity. The negative elasticity means that the batteries are a normal good (Mintel 2010). There is a drop in the elasticity trend in 2007 due to stagnation of demand. An assumption of promotion activities and campaigns in the UK markets explains the decline in elasticity. The campaigns and battery promotions that appear ‘smart' lead to increased purchases. The rate of increase in demand is 4.5% and 4.7% in the period between 2007 and 2008 though the market does not experience price change (Mintel 2010). c) The rise and fall of own label batteries The period before 2009 sees own label cells making up a growing proportion of alkaline batteries because of the low cost of manufacturing as compared branded lines. 2009 sees as a sharp fall of a tune of 14% in value. The current value of sales is 12-13% from the former 15% in 2008. The products by major grocery multiples and value chains such as Wilkinson. Some brands such as Tesco perform better than others in the market. The decline is as a result of huge promotions by major brands such as the quantity discount by Panasonic in 2009 (Mintel 2010). Despite the higher cost of rechargeable batteries, they appear economical over their lifetime. There is an assumption of saving £2000 by purchasing the rechargeable cell. The recession of 2009 causes a demand decline of alkaline batteries. The year 2009 sees demand for alkaline sales decline adversely because of the fall in price of zinc-carbon and recession experience. The alkaline segment faced stock accumulation by consumers in 2008. Alkaline batteries are the most affected by increase in demand for rechargeable batteries in the afterwards (Armaroli & Balzani 2011). Zinc-carbon batteries see a rise in demand in 2009. Supermarkets methodologies help to lower their prices compared to other batteries. The introduction is economical for customers that are not well-to-do and the ones with devices that do not consume excessive power. There is a decline of 0.1 in sales in 2009 and 14% in 2008 (Mintel 2010).There are many types of specialist cells but, one segment has significant sales although from a relatively low base. The lithium button cells have experienced a growth of 17% in sales and 9% value by 2009. The discounters and pound stores because the rise by offering a package of 36 different sizes of for just one pound and sex toy manufacturers that made the toys specific button cells. Consumer electronic products are being reduced in size between 2003 and 2008 that further raise the demand for small-sized batteries such as AAA. The decline in the alkaline market share is attributed to the development of other brands of cells with a similar size (Mintel 2010). d) Market Structure and Incentives The United Kingdom battery market has four segments namely zinc-carbon, alkaline/manganese secondary/rechargeable and speciality. The initial market is dominated by alkaline cells. The dominance comes after the cells overtake the market from zinc- carbon cells for estimate three decades. The huge promotional, campaign by carbon for cheapness sees the customers that are financially affected by recession opt for the cheap carbon cells. There is an increase in demand for rechargeable. Rechargeable batteries have preference because of consumer environmental concern (Mintel 2010). Market leadership is the incentive that makes large firms to perform well in the industry. The market share is dominated by two brands; Dura cell and Energizer(Jennings 2009) The two players have distinct market strengths but use healthy grocery multiple, high-street and DIY channels and sell to renowned retailers. Duracell is a leader in general purpose market except for rechargeable, and it results in UK alkaline battery production (Mintel 2010). Energizer results in UK rechargeable battery production. Panasonic is the third largest and is strong outside the grocery multiple, high street and DIY channels and the strength exhibits itself when it comes to convenience. This is an oligopoly market because large firms dictate the amount that is supplied in the market (Thompson & Gamble 2008)The Brand Awareness use is a barrier that makes smaller companies to be specialized in other products as follows; Unicross-rechargeable batteries, Philips and SANYO; Electric goods and others speciality batteries (Mintel 2010). References Armaroli, N., & Balzani, V. (2011). Expect an electricity-powered world. Energy & Environmental Science, 4(9), 3193-3222. Cooper, J. C. (2003). Price elasticity of demand for Oil in 23 countries. OPEC review, 27(1), 1-8. Jennings, A. A. (2009). Zinc battery pollution and litter. Journal 135(9), 815-823. Mintel Oxygen (2010) United Kingdom Battery Market Size and Forecast Reports: Academic Edition, 2010) Thompson, A. A., & Gamble, J. E. (2008). 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