...BLACK & DECKER Black & Decker Corporation (B&D) tried to run a diversification strategy. During the 1980’s Black and Decker had established themselves as a leader in the power tool industry. However, they had a feeling that that the market for such tools was maturing to the point where expansion within the industry would provide little or no additional revenues so they decided to diversify. Black and Decker began their expansion operation by acquiring General Electric’s housewares business for $300 million in 1984. The success of the GE deal, and the reorganization efforts of their new CEO Nolan Archibald, led Black and Decker to continue on this path of acquisitions and diversification in other areas. B&D then tried to acquire American Standard Inc. which had an impressive $127 million profit in 1987 and was in excess of the $70 million that was generated by B&D. But then, the acquisition was unsuccessful. Even after the failure, they did not hold back from their diversification strategy and acquired Emhart Corporation, a diversified manufacturer of industrial product, for a $2.8 billion in March 1988, a price that was over by 33% of the Emhart’s preannouncement value. The deal was considered unfavorable for B&D because its stock price dropped 15 points after the announcement of the acquisition. With this acquisition, B&D incurred a debt of &4 billion. So from 1993 – 1996, they started to sell the segments of Emhart that did not prove to be strategic...
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...Cause of B&D’s 9% share in the Tradesman segment; In the 1990’s Black and Decker had a great position in the market for their products to appeal to the Professional Industrial segment and the Consumer segment but when it came to the Professional Tradesmen segment they were lacking. Their 9% market share vs. Makita’s 50% market share in the tradesmen segment was incomparable. Makita clearly had a better product in the eyes of the Professional Tradesmen. In the Professional Segment most of the people who buy the products are people who need these tools to make a living such as carpenters, electricians, plumbers, roofers, and general remodelers. Black and Decker were branded for tools to use at home. Therefore, tradesmen looked at the Black and Decker brand as tools for home use, and not for work. Since they were branded for home use it seemed as if they weren’t made for everyday use, and would not hold up for the wear and tear a carpenter or electrician would need them to. B&D clearly had a problem with brand association with its consumers. In exhibit 2 it shows that Black and Decker failed in capitalizing in the Membership Club distribution channel which was in the top five profitable distribution channels. Makita did distribute its tools to membership clubs and it turned out to be very successful channel for them having 85%. Black and Decker had such a lack of profitability in the tradesmen segment due to having the wrong brand perception and inadequate distribution...
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...Black and DECKER: power tools Case study Problem Statement Black and Decker has established its brand strength to be among the top ten firms in the United States. By creating the portable power tools business in the early 1990’s and being the world’s largest producer by the end of the decade, the firm has been vouched for offering high quality, differentiated products and excellent service in the Professional-Industrial segment. Powerful brand perception has helped Black and Decker attain the number one position in the Consumer segment. Although Black and Decker has been leading in two of the three segments of the $1.5 billion portable power tools market, it could not make a significant impact in the Professional-Tradesmen segment that was fast growing at 9%. Black and Decker has managed to occupy only 9% with no profitability of the total segment share against Makita and Milwaukee who stand at 50% and 10% respectively. Despite Black and Decker’s success in the Consumer and Professional-Industrial segment, according to surveys conducted of tradesmen, results showed poor quality perception and lack of proud ownership of the tools for the use of job specific applications and instead are perceived to be ideal for home tasks. The low favorability of Black and Decker’s power tools in the Professional-Industrial segment as compared to Makita’s and others may be attributed to (among other factors) the incompetence in product differentiation through the use of color schemes across...
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...BLACK & DECKER CASE Problem Statement: With Black & Decker being one among the most powerful brand names in the world and establishing its professional tools to be the highest quality in the industry, B&D failed to make an impact in the Professional-tradesmen segment. B&D was known for offering high quality, differentiated products and excellent service in the Professional-Industrial segment whereas its brand recognition, and image helped it attain the #1 position in the market place for Consumer segment. B&D occupied only 9% of the total share as against Makita who was leading the Professional-Tradesmen segment with 50% market share. Though B&D leads in the other two segments, it could not capture the tradesmen segment due to the following reasons. B&D was branded more as home tools; it lacked in capitalizing one of the most profitable distribution channels (membership clubs) whereas the same channel proved to be very successful for Makita (85%); the unremarkable grey color did not help B&D; and while B&D was focused in three segments, Makita was focused on only one segment of the market. Therefore, Joseph Galli, Vice president of sales and marketing for B&D, has to decide which one of the three marketing strategies must be implemented to take, the market share in the Professional-Tradesmen segment, away from the current leader Makita. Recommendation: I would recommend B&D to use the strategy of Re-branding i.e; using DeWalt name and the color yellow in order...
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...Black & Decker Case Memo If you think Galli should pursue a build share strategy, what actions do you recommend? Does DeWalt idea have any merit? How about using current name? Remember you have at least three audiences to please: a. The end consumer, i.e. the Tradesman b. Retailer c. Nolan Archibald and GarydiCamillio Actions that I recommend to Galli: * He should focus on leading distribution channels which are “Two-step” and “Home Centers”. Respectively 40% and 25% percent of Professional-Tradesmen Segment sales are done through these channels as shown in Exhibit 2. Especially emphasizing on sales through Home Centers is essential. Although sales through Two-Step channels are more frequent than Home Centers, Home Centers are growing in importance. They can provide superior customer services, lower prices and stock a huge amount of products. Two-step channels, that are sales through distributors to independent retailers can also provide technical expertise, service, stock a large number of products and deliver promptly as in the Professional-Industrial Segment. It will also enable to reach plenty of retailers. This action will also help to decrease SG+A costs. Therefore all parties will be pleased. * While focusing on Two-step and Home Center sales, I am not saying that he should stop sales through other channels. Sales through warehouse home centers, membership clubs and farm outlets should also be carried out. Consumers should be able to reach B&D...
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...Black and Decker Study Case 1. What is the cause of B&D’s 9% share vs. Makita’s 50%? The brand perception associated with B&D was in the lower half in comparison Makita. People believed B&D provided good products for the consumer but not for the professional. This view of the consumer product translated into the professional segment. Coloration may even have an impact on this as people that used the colors associated with B&D were not taken seriously in the professional segment. Consumers believed that the service behind B&D was good, but felt the quality associated with the Makita brand was superior for the demands of the workplace. B&D was to be used at home, while professionals should only use Milwaukee and Makita brands. In comparison people viewed B&D below Makita as one of the best brands to use. Causes: Negative spillover effect. Price, color, and brand association. 2. How does the buying behavior of the tradesman impact the situation? The buying behavior of the tradesmen impacts the situation by the word of mouth. The poor perception of B&D in the professional segment resulted in B&D being viewed as having an inferior product. Also, if one tradesmen uses products of high quality and status others will want to do the same. If a tradesmen shows up to a job site with equipment that is less superior to what others are using, they may be looked at as unprofessional. Thus, having the best products by your side shows a level...
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...Joseph Galli, the vice president of sales and marketing for power tools in Black & Decker Corporation, is presented with options for the next steps to solve the company’s problem of having low sales in the Professional-Tradesman segment where profitability is practically zero. B&D only holds about 9% of the market share which is shockingly low considering its high quality and its success in its other two segments. Galli is now considering three options: I. Focus on its successful segments (Consumer and Professional-Industrial segments) while trying to harvest any profitability in the Professional- Tradesman segment II. Sub branding to rebuild the B&D name III. Drop the B&D name from the Professional-Tradesman segment, ultimately creating a new brand Before we look at which option(s) is most appropriate, we need to conduct a thorough analysis. Also, it is important to note that this is a decision case, since the company is facing a well-defined problem (which I will go into detail later) with multiple alternatives. The purpose of this paper is to evaluate which alternative(s) are most suitable for B&D SWOT ANALYSIS Strengths The company has an amazing brand strength as it is ranked #7 in the US and #19 in Europe. Among its competition, B&D has the highest awareness at 98%. Furthermore, the company sells quality products at competitive prices (it is 5%-10% lower than its competitors). B&D conducted 2 tests to determine the quality...
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...Case overview:The pioneer of the power tools industry is facing the blues of very low market share compared to the leader in a particular product segment. The case depicts a peculiar situation of a market leader in two product segments taking a backseat and suffering at the hands of strong competitors in another product segment. The case also brings out importance of the consumer perception and behavior in selling the product. The reasons for different and often indecipherable consumer behavior patterns need to be found out. The case also brings out an interesting fact of the market leader not being able to translate a powerful brand name and quality in actual numbers showing profitability. Situation analysisMakita electric of Japan had practically taken over the professional power tools for tradesman business since it entered the US market a decade ago. The trade was asking for advertising allowances and rebate money on B&Ds Tradesman products and profitability in this segment was near zero. Since its entry into the market in 1978, Makita had staked out leadership positions in virtually all products and distribution types within the professional tradesman segment. Professional tradesman revenues of approximately $35 million in 1990 for B&D translated into about $3 million in operating income. Some trades people viewed all B&D products as for use at home rather than on the job and conversely there had been instances of a B&D product designed for home use subjected...
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...I. PARTIES TO THE CASE: Kenneth L. NORD, Plaintiff-Appellant, v. the BLACK & DECKER DISABILITY PLAN, Defendant-Appellee. II. FORUM: The district court ruled in favor of Black & Decker Corp. The 9th Circuit Court of Appeals reversed III. STATUTE(S) INVOLVED IN THE CASE: The court is being asked to interpret if Black and Decker denial of his disability benefits violated ERISA. The court must determine whether the claimant is entitled to social security disability benefits. IV. STATEMENT OF FACTS: Kenneth Nord is a former employee as a Material Planner for Kwikset Corporation, a subsidiary of the Black & Decker Corporation. The responsibilities that Nord had in his position include ordering goods, interacting with vendors, and maintaining inventory levels. For the most part, this position is sedentary, but it does require up to six hours of sitting and up to two hours of standing or walking per day. Throughout his employment, MR. Nord was enrolled in the Black & Decker Disability Plan, this plan grants complete discretion to the plan manager to make disabilities determinations. In addition, this plan also gives the plan manager the authority to distribute one or more responsibilities to a Claim Administrator....
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...Buying Behaviour: Black & Decker Case Background Black and Decker (B&D) is a pioneer in portable power tools. In 1991, it is a $5 billion in sales company with 29% of these sales coming from Power Tools and Accessories. B&D is the world's larges producer of power tools and the U.S. market overall leader. Problem Statement B&D has a strong market share in the consumer and industrial markets, but is weak in the P-T market as it is currently experiencing decreased market share. In this segment, B&D is not generating profits and, at the same time, retailers want more advertising allowances and rebates. Analysis The U.S. power tools market is divided into three segments: Consumer (home use buyers), Professional-Tradesmen (P-T) (contractors who purchase their own tools), and Industrial (procuring professional buying in large quantities for industrial usage). The P-T segment is the one experiencing the largest growth potential. B&D is one of the most powerful brands in power tools. Its products are generally regarded to have high quality. B&D currently has 45% of the Consumer and 20% of the Industrial markets. However, in the P-T segment B&D holds only 9% of the market and is in near parity with Milwaukee Electric (10%) and trails Makita, which has captured 50% of the market. 1) What is the cause of B&D’s 9% share vs. Makita ‘s 50% in the Professional segment? Makita was able to grow rapidly in the P-T market as its...
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...Oct. 24 2014 Yinan Wang (Nancy) Title: Marketing Myopia Author: Theodore Levitt Year: 2004 Source: Levitt, T. (2004) Marketing Myopia, Harvard Business Review, Jul-Aug, pp138-149; originally published in Harvard Business Review, July/Aug. 1960, pp. 45-56. Insight：Interesting Readability: a little hard to read Relevance: good practice Overall: 7.5 Key Content: The article focus on trade will get successful when they cater for customers’ demands rather than selling their products for clients. The effective corporate management is very essential for development of companies. Some firms’ business stopped growing because of failing business management, such as incorrect business orientation and purposes, concrete matters. The article showed that petroleum industry makes its business get success because improved manufacture oil product’s efficiency, products innovation and gas and oil transmission, in particular, developed domestic central-heating system to compete with rivalry. Also pointed that the car industry’s ford company through saving its product costs to reduce its cars price to meet more customers’ demands to purchase its cars and increase industry profits. Therefore, for pursuing enterprise business success, corporations must pay attention to customer creating and customer-satisfy organism through a powerful leadership. Learning / Reflection: In the article, successful company leader utilize marketing...
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...Skil Case Analysis Introduction Skil Corporation is a portable power tools manufacturer that was acquired by Emerson Electric Company in 1979. When Skil was first acquired, it had mediocre financial performance. Its main competitors in the portable power tool industry were Black & Decker, Sears, and some Japanese manufacturers. In 1979, the electric power tools were making up the majority of the portable power tool industry. Practical Applications The Competitive Environment - The main competitive force for Skil was rivalry among present competitors. Skil and Black & Decker were two competing companies that were the first in the industry to begin using high-strength plastic in their tools, which had lead to great reduction in cost. In 1979, the electric power tool market in the United States made up 37% of the worldwide market ($868 million out of $2,350 million). In the United States during 1979, mass merchandisers such as Montgomery Ward, and J.C. Penney were the primary sellers of Black & Decker and Skil portable electric power tools. Home centers were a steadily growing channel for professional and consumer power tools, and both professionals and consumers shopped at them. Home centers were growing competition for mass merchandisers, with sales of $83 million in 1979 and growing at 13% annually. In terms of global electric power tool market share, Black & Decker, Makita, Bosche, Hitachi, and Skil ranked the highest in order of share percentage. Black & Decker...
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...was surprised to learn that the tradesmen segment for Black and Decker is solely lacking. Whatever steps the company will take to offset the consumer market, it should be effective and done with careful consideration. It is almost impossible for me to imagine just the organization can continually sell tradesmen products. The competition appears to be gaining in the marketplace. I see less of Black and Decker products in the store than in recent years. Do you believe that the company is thinking about discontinuation of consumer products because of the fierce competition? According to Kohler and Keller (2012), understanding customer needs in new ways is the life blood of most manufacturing organizations. Since businesses use teams of people and analytical tools when procuring items for business applications, would to say that most business acquisitions take longer (Perkins, 2014)? In the case of acquisition of farm equipment would this be the case? Black and Decker manufactures a large number of heavy duty products made just for farming. Dump carts, spreaders, blade aerators, tine dethatchers, tow rollers, cultivators, tillers and soil sharks are products which are costly. Is it possible that a farmer would pay cash for any of these products? According to Echambadi (2014), it is not wise to strategy for an organization to attempt to satisfy every segment of the marketplace. Do you believe that Black and Decker should narrow its overall market of products? Reference...
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...Valuing Publicly Traded Equity Securities: The Black & Decker Corporation (BDK) [1] I. Introduction This teaching note describes the valuation of publicly traded equity securities using the Discounted Cash Flow (DCF) and Price/Characteristic (market comparison) approaches, with a specific spreadsheet example for The Black and Decker Corporation. Free cash flow valuation and comparables (comps) are key tools in fundamental analysis, the process of picking stocks with high expected return based on an analysis of the company. In theory, buying stocks of companies that are undervalued in the stock market will produce high returns as other investors slowly realize the company’s true value and quoted share prices increase to match that value. Three basic ideas underlie the application of discounted cash flow (DCF) analysis. First, the value of a company is ultimately derived from the cash that can be extracted from that company, and more cash is preferred to less. Second, cash received in the future is not as valuable as cash received today. Third, risky cash flows are valued less than cash flows known with relative certainty. The process of valuing publicly traded equity using DCF involves three steps. First, condensed financial statements, also called pro-forma statements, are forecasted several years into the future. Second, the forecasted statements are used to calculate free cash flows for the entire firm, which are then discounted by the...
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...For the exclusive use of S. Kaya, 2015. Harvard Business School 9-595-057 Rev. March 30, 2001 The Black & Decker Corporation (A): Power Tools Division Joe, I like you guys. But, look, I give Makita 10 feet of space. I give you 10 feet of space. They outsell you 8 to 1. What are we going to do about that? In January 1991, statements like this no longer surprise Joseph Galli. Black & Decker’s (B&D) vice president of sales and marketing for power tools had heard similar sentiments expressed by many trade accounts. Makita Electric of Japan had practically taken over the professional power tools for tradesmen business since it entered the United States market a decade ago. “Tradesmen” was one of the three major segments of the power tools business—the others being “Consumer” and “Industrial.” “Consumer” represented “at home” use, while both “Tradesmen” and “Industrial” covered professional users. The distinguishing characteristic of the Tradesmen segment was that these buyers, such as a carpenter, bought tools for their own use on a job site. In Industrial, the buyer was generally a corporation purchasing tools for use by employees. By late 1990, Makita’s success in the Professional-Tradesmen segment was such that it held an 80% share in cordless drills, the single largest product category, and a 50% segment share overall. B&D had virtually created the portable power tools business in the United States beginning in the early 1900s. While it maintained the #1 ...
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