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BULLDOGEXPANSION
1. International Market Expansion Strategy for Lead-acid batteries
Bulldog Battery Corporation
William Stewart, 12.13.13
1. Report title and content of analysis
a. Lead Acid Battery Demand
4. ResearchMethods
a. Economic filter
b. Regulatory filter
11. Spent Lead-acid batteries
a. Import Price elasticity of U.S. exports of Lead-acid batteries to Mexico
b. Interpretation of Results and intentions for continued research
15. Sources
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Lead-acid batterydemand
Currently, the global demand for all batteries has a value of approximately
$40B with an annual growth rate of 4% Figure1.i As of 2012, the Battery demand in
the U.S. was approximately $18B Figure 2.ii Lead-Acid accounts for half the
demand of rechargeable batteries; the U.S. demand for lead-acid batteries alone was
$6B in 2012 Figure 3.iii
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Figure 4
Research Methods
In order to identify markets of interest to sell batteries, preliminary research
required conducting a modified economic analysis for a set of countries that were
hand selected. These indicators included GDP per capita, current GDP % growth
Purchasing Power Parity, Kw/h usage per capita, and Web Penetration %.iv Each
variable was normalized in a score out of 10 for the initial 24 countries selected. The
minimum and maximum numbers were out of all the countries for that particular
variable, and applied the formula to all the variables for each country to get the first
set of scores. The year 2012 was used for all of the data obtained.
Preliminary economic Score:
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The minimum Kw/h per capita was 1,025, and the maximum was 23,538
Mexico’s average Kw/h per capita was 1772, so my formula would be 1+(1772-
1025)*(10-1)/(23,358-1025) to get the score of 1.46 multiplied by 5.
After acquiring a score for each variable for all the countries, weights were
used on the score for importance. So in this case, the scores were multiplied for
GDP%growth by 1, PPP by 2, Web penetration % by 3, GDP per capita by 4, and
Kw/h per capita by 5, as it was important to have a strong idea for the country with
the highest energy demand.v After calculating these weights, the formula was
finalized for each country to come up with the final score by adding all the variables
since they all would have a positive contribution.
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To calculate the regulatory score for each country, the indicators used were
Political Stability (lower score is better), Ease of doing business (lower score is
better), Import (higher is better), Exports (lower is better), and Tariffs and Taxes
(lower is better).vi Tariffs and taxes were multiplied by 1, political instability and
exports by 2, and imports and business ease by 3; then subtracted Tariffs and
Exports from Political Stability, Ease of doing business, and Imports. Imports
would be a positive indicator as the more a country imports something, the higher
consumption or demand there is, and exports as negative because if a country is
exporting a lot of a good then there is a likely chance that they have the ability to
produce a fair amount of what their country consumes. China would be a fair
example to properly display this score would filter out places where it is hard to do
business, eventhough there may be lots of industry activity. Chinese secondary
battery imports (2012) in this case have a score of 50, while also having a relatively
high score in ease of doing business and political instability, meaning it would be
harder for a smaller U.S. manufacturer to penetrate the already largely competitive
Chinese battery market. In order to calculate the final score, subtract the secondary
regulatory filter from the first economic filter. In Norway’s case, they scored 129 on
the first filter and 9.5 on the second filter. Their final score comes to 120, which is a
good, high score. However Norway is far from any distributor connections in
Europe, so therefore we would have to penetrate another Western European
country’s market where would have a better chance of establishing a buyer or
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distributor relationship, and then expand into other areas.
The above excel data is represented in Figure 5. The specific numbers of each
score are not so much important as are the relationships between each score and the
final score for each country. The Red bar represents the first filter, the yellow bar
represents the second, and the final score is represented by the green top part of the
bar. The higher the red means a better score, a lower yellow bar means a better
score, and by subtracting the second score from the first, the highest green bar
represents the best score for each country. From looking at Figure 5, you can see
Northern European Countries, Australia, Mexico, and Canada scored the highest.
With Mexico’s proximity to our borders, and its low score on filter two, an import
price elasticity analysis was made to forecast potential sales in Mexico, as discussed
in the next section.
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Figure6
Spent Lead acid batteries
The Commission for Environmental Cooperation under NAFTA
Environmental cooperation reports 525% Increase of Spent Lead Acid Batteries to
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Mexico. U.S. Lead recyclers have high technology for the disposal of these batteries,
due to high EPA regulations.vii While efforts are being made to increase regulations
for lead waste, many U.S. lead recycling plants are being closed as Mexican plants
continue to accept spent lead batteries; Mexico’s lead emissions standards are less
than one tenth of regulations in the U.S.; Canada’s regulations as well are not as
tight as those in the U.S. for SLABs, however are definitely higher than Mexico’s by
more than half. The cause of the recycling centres being shut down in the U.S. is the
illegal method of lead extraction, causing corporations to export spent batteries to
Mexico where laws regarding SLABs are lax and difficult to enforce; totalled to be
about 20 million SLABs exported to Mexico in 2013.viii Demonstrated below is the
import price elasticity of an increased tariff of Mexican battery imports from U.S;
and a rising demand of these imports due to closure of battery manufacturers in the
U.S.
The 2013 Mexicantariffs and taxes on lead acid batteries is 17%ix as seenin
the first excel sheet of the regulatory filter. The current demand for lead-acid
batteries in Mexico is currently at an 8% growth per year. Since price elasticity for
batteries has higher variation due to its application for vehicles, I assumed two
different PED for 2015 and 2016 that were both fairly elastic for Mexico’s demand
for batteries imported from the U.S., and more specifically, from Bulldog Batteries.
Assuming by the end of 2014 Bulldog will be setup properly for distribution to
Mexico, by 2015 the PED is assumed at 3.2 (Fairly elastic), with a U.S. Price of
$2,500. The number for Qdold was calculated by using the consumption import
level in Mexico, found on the U.S. Department of Commerce International Trade
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Statistics.x We have a new demand of almost 40 billion more with a 34% change in
price to $2,925 by 2015. In 2016, after Bulldog has established presence in Mexico
for one year, the PED is assumed to decrease to 2.5 as U.S. and also Chinese plants
will continue to close due to consolidations and acquisitions of U.S. subsidiary
companies for survival purposes. By the beginning 2016, the tariff of new lead acid
batteries is expected to increase to 25% due to the continuous surging imports of
SLABs from the U.S. With the 25% tariff and a slightly lower elasticity, we have a
new demand of almost 600B, 100B more than the Qdold expectedat the beginning
of 2016. Despite the increased tariff on U.S. batteries to Mexico, the increased
Qdnew is a cause of fewer U.S. competitors due to failures to comply with EPA
standards, and an increased growth for lead acid battery demand both in U.S. and
Mexico.
Results:
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Via the above calculations, the total Mexicandemand for Secondary
Batteries in dollar value is $1,879,000,000. Total value for U.S. storage battery
imports to Mexico is $203,620,890 (2012). At an 8% annual market growth, and
Bulldog’s Batteries 4% share of market, the expected sales to Mexico are $9,000,000
in 2016 (Possible to be more since U.S. Manufacturers are closing and our
continuous and persistent R&D efforts).
Further research needs to be made to identify more specifically the impact of
plants shutting down, and the import of SLABs into Mexico. Annex 8 of the Basel
convention prohibits the shipping of SLABs from Basel to Non-Basel parties. While
this is not strictly enforced, the U.S. is non-member and Mexico is, making it easier
to dump spent batteries in Mexico. A feasibility analysis of alternative recycling
locations should be made when determining other countries where there is export
potential. Additionally, following NAFTA’s development of tighter regulations for
lead waste will need to be made to fully assess projected prices and sales.
Another set of indicators will be set for a shorter list of the highest scoring
countries. These indicators could include data from economic indicators such as
capital investment in motive power vehicles, cellular towers, and an indication of
solar use. Additionally, as places in Europe and Asia have different plate sizes for
battery stations, making it difficult to gap the conversion from the metric systemto
the more common uses in North America. Not to say that these plates will not fit our
applications, however as each battery is custom for its use, the plate design and
specs will have to be specific for each customer.
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While this analysis is telling of potential sales in the Mexican market, the
fourth and final matrices will enrapture competitors, competitor pricing, and
growth for secondary battery applications in other specific targeted markets.
Calculations for exchange rates, shipping costs, domestic inflation, and production
will need to be made to determine the final cost for these sales, and therefore the
final profits from exports. Once an initial establishment outside of Bulldog’s current
markets is made, a sense of the impact from these economic factors will be more
evident, and further market expansion will be determined upon these quantitative
indicators and impacts on the Corporation and its stakeholders involved.
Sources:
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i Long-Lu Zue. ‘Global Lead-Acid Battery Market Development Status.’ Invest in
Taiwan. Industrial Technology Research Institute. 2011.
http://investtaiwan.nat.gov.tw/news/ind_news_eng_display.jsp?newsid=64
ii Buchamann, Isidor. ‘Battery Statistics’. Battery University. Demand for Secondary
Batteries. 2013.
http://batteryuniversity.com/learn/article/battery_statistics
iii Buchamann, Isidor. ‘Battery Statistics’. Battery University. US Battery Supply and
Demand. 2013.
http://batteryuniversity.com/learn/article/battery_statistics
iv World Bank Country Indicators. 2013.
http://data.worldbank.org/country
v World Bank Country Indicators. 2013.
http://data.worldbank.org/country
vi U.S. Department of Commerce. United States Census Bureau. U.S. International
Trade Statistics. 2013.
http://www.census.gov/foreign-trade/statistics/country/index.html
the World Bank. http://data.worldbank.org/country. 2013.
Duty Calculator. 2013.
http://www.dutycalculator.com/new-import-duty-and-tax-calculation/
vii Batter Council International. Regulatory&Legislative Update. 2013. Statistics cited
from the US Cenus Bureau.
http://c.ymcdn.com/sites/batterycouncil.org/resource/collection/A256885C-
60AB-4B8C-8636-18E6568F7C6E/UPDATE_May_2013.PDF
viii Rosenthal, Elisabeth. ‘Lead From Old U.S. Batteries Sent to Mexico Raises Risks’.
The New York Times. 2011.
http://www.nytimes.com/2011/12/09/science/earth/recycled-battery-lead-puts-
mexicans-in-danger.html?_r=0
ix http://www.dutycalculator.com/new-import-duty-and-tax-calculation/.2013.
x U.S. Department of Commerce. United States Census Bureau. U.S. International
Trade Statistics. 2013.
http://www.census.gov/foreign-trade/statistics/country/index.html
Other information was obtained from an internally produced Corporate Report with
the affiliated Corporation.
