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In this study, we look at two strategies adopted by Parker Pen. The rst is a...

In this study, we look at two strategies adopted by Parker Pen. The rst is a
highly successful strategy of product di erentiation through technological innova-
tion. The second is an unsuccessful execution of globalization strategy.

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Parker penning global strategy Document Transcript

  • 1. PARKER : Penning global strategy Ankita Jain Hrishikesh V Nilotpal Sinha Abhinav Sharma Great Lakes Institute of Management November 18, 2011Caesar had perished from the world of men, had not his sword been rescued by a pen. Abstract In this study, we look at two strategies adopted by Parker Pen. The first is a highly successful strategy of product differentiation through technological innova- tion. The second is an unsuccessful execution of globalization strategy.1 A brief history of Parker PenThe Parker Pen Company was born in 1888 when George Stafford Parker tried to repairsome fountain pens that were leaking and in the process began to manufacture his ownpens. Six years later in 1894, Parker Pen won the patent of the ”Lucky Curve” feed,which was claimed to draw excess ink back into the pen body when the pen was not inuse. This technology remained the differentiating factor for Parker pens until the arrivalof the Duofold in the 1930s. 1 2 The forty years period ranging from 1920s to the 1960s, in the pre ballpoint pen era,was the golden period of Parker Pen’s reign when it consistently ranked either numberone or number two in worldwide writing instrument sales. In 1931 Parker Pen created 1 Key words and phrases. Parker Pen, fountain pen, ball-point pen. 2 This study was conducted for completion of the group project for Strategy Execution. 1
  • 2. the Quink (quick drying ink) which eliminated the need for blotting and led to the de-velopment of the most widely used pen in history Parker 51 which generated over $400million in sales. A Parker pen stood for quality, prestige, tradition, steadfastness andstrength highlighted by the fact that Parker pens were the pen of choice to sign impor-tant documents in history such as the World War II armistices. Parker Pen expanded its business and by 1980s the company had extended up to154 countries. The company adopted globalization strategy to establish market presence.However the execution of this strategy was unsuccessful; the managers failed to createproper marketing strategies that would have made them compete in international mar-kets with inexpensive products from other parts of the world. In 1993 Parker Pen wasacquired by the Gillette Company, which already owned the PaperMate brand, one of thebest-selling disposable ballpoints. In 2000, Gillette sold the writing instruments divisionto Newell Rubbermaid, whose own Stationery Division, Sanford, became the largest inthe world owning such brand names as Rotring, Sharpie, Reynolds as well as Parker,PaperMate, Waterman and Liquid Paper. In recent years, Parker Pen has abandoned both the entry level market as well as thetraditional retail outlets in North America and moved into up-scale luxury retailers.2 Innovation as a differentiation strategyThroughout its history, Parker Pen has used technological innovation as a strategy todifferentiate itself from the competition. The company has been a pioneer in researchon writing instruments and introduced several revolutionary products . In this section,we look at some of the iconic products from Parker Pens which have driven both thecompany as well as the pen market. (The current portfolio of Parker Pen’s products canbe found in Ref.[1])2.1 Duofold - 1921In 1921 the company introduced the Parker Duofold (Ref.[2]) fountain pen. It was astate of the art pen for its time and Parker Pen positioned the Duofold in the premiersegment and priced it expensively $7.00, equivalent to about $85 in 2011. In 1926 theDuofold became the first pen in the world to have a guaranteed life of ”forever”. It wasan instant success. Sir Arthur Conan Doyle used one to write the exploits of SherlockHolmes. General Douglas MacArthur signed the document ending World War II in the 2
  • 3. Pacific with his 20 year old Duofold (Ref.[3]). By the early 1930s the Duofolds design had grown dated in the USA but it remainedpopular in Europe until the 1960s. In 1988, Parker launched the Duofold Centennialseries of pens. The modern Duofold is a key part of Parker Pens product portfolio.2.2 Quink - 1928In 1928, after three years of research and an investment of $68,000, Parker Pen came upwith Quink (a portmanteau word from ’quick’ and ’ink’; also known as Double Quink andParker 51 Ink) that would eliminate the need for blotting. The success of Quink lay inthe fact that it had a number of useful features: it resisted water, it did not clog, it hadthe desired quality of ink flow, it resisted moulding, it was non-corrosive, it did not leavedeposits, it did not fade, and, most importantly, it was quick-drying. However, the newink was strongly alkaline and contained isopropyl alcohol, a solvent not previously usedin inks, which often damaged the pen barrels of that time which were manufactured usingpyralin. This problem eventually led to the development of the world’s most successfulpen, the Parker 51 in 1941. In 1941, when the Parker 51 was launched, Double Quink was renamed and repackagedas ”Parker 51 ink” as a marketing initiative. Parker Pen’s ink sales became the key tomaintaining the company’s profitability. This revenue generation model is used by themodern day computer printer companies, whose main source of revenue comes from thesale of printer cartridges. Further enhancements were made to Parker Pen inks with itsrevolutionary ”Super Chrome” ink. This ink was marketed in 1947 after a research periodthat lasted 17 years and cost over $200,000. This was the first basic ink improvement inthe last three centuries. Today, more than seventy years later, Quink is still the world’sbiggest selling pen ink.2.3 Vacumatic - 1933The Parker Vacumatic (Ref.[4]) fountain pen was introduced in 1933, as a replacing theDuofold as Parker’s top-of-the-line product. The Vacumatic featured a new filling mech-anism which boasted a much higher ink capacity than the Duofold. The pen remainedParkers top-of-the-line product until the launch of the Parker 51 in 1941. The US pro-duction continued through 1948, and until 1953 in Canada. 3
  • 4. 2.4 Parker 51 - 1941In 1941 Parker Pen introduced the Parker 51 (Ref.[5]) which arguably is the best pen ofall time both in terms of popularity and sales. General Eisenhower signed the victory inEurope in 1944. The futuristic design of the Parker 51 heralded as ”Ten Years Ahead” ofits time, a revolutionary pen, with its hooded, tubular nib and multi-finned collector, alldesigned to work in conjunction with the pen’s proprietary ink, allowing the nib to staywet and lay down an even line with either the ultra-fast drying ink or more traditionalinks. It was advertised as the ’The Worlds Most Wanted Pen’ which created huge demandwhich took Parker several years to fulfil. By 1970, the Parker 51 generated over $400million in sales, higher than that generated by any single pen ever.2.5 Jotter - 1954In the 1940, the world had seen a fierce battle for market share fought between the tradi-tional fountain pens and the new ballpoint pens. Despite some initial success, ballpointpens died a consumer death and by 1951, the fountain pen became the pen of choice ofthe world. In 1954, Parker Pens introduced its first ballpoint pen, the Jotter which wrotefive times longer than the best ballpoint pens available in the market, the Eversharp andthe Reynolds ballpoint pens. It was the introduction of Jotter that revived the ballpoint pen market. Parker sold3.5 million Jotters at $2.95 to $8.75 in less than one year. In 1957, Parker Pen introducedthe T-ball Jotter with tungsten carbide textured ball bearing which to this date remainsan industry standard. The famed styling of the Parker Duofold was revived in 1972 as aball pen and within the next decade, ballpoint pens overtook fountain pen as the numberchoice of pen in the world.3 Rise of competition - 1980sAfter about a century of dominating the fine writing instrument market, Parker Penentered into a period of crisis in the 1980s and the reason for this was that the companywas driven by the wrong strategy. Parker was facing competition from three fronts.First, the Japanese were mass marketing cheaper and disposable pens and had captureda large portion of the low end market in USA and Europe and were gradually eating intoParker Pen’s market share. Second, like the Japanese, American brands such as PaperMate, Bic, Pilot, and Pentel had created significance presence in the low end segmentand gradually eroding and were pulling away parker Pen’s customer. Third, in the high 4
  • 5. end segment which had been Parker Pens main target segment, competition had becomefiercer with reputed German brands such as Montblanc and A.T. Cross making progressin the European markets.4 Globalization strategy - 1982Parker Pen faced two contrasting challenges. On one side the weakened dollar generatedhigh foreign revenue since about 80% of the company’s sales were abroad, the profits de-rived from those sales represented even big profits when translated to local currency. Buton the other side, this over dependency on foreign sales exposed the company to foreigncompetitors, especially the inexpensive brands from Japan which used low pricing as astrategy to compete in the international market. Parker Pen realized that a competitivestrategy based on product differentiation through technological innovation was not suffi-cient to thwart the challenge from competitors. In 1982, James R. Peterson became the CEO of Parker Pen,having joined it fromReynolds. He was given the responsibility of reinventing the brand. Peterson decided tolaunch a global marketing campaign to target all market segments. A consequence of thedecision to adopt globalization was standardization. Everything including products aswell as marketing campaign was to be standardized for all the markets across the world.5 Issues in executing globalization strategyWhen Peterson took over Parker, he was met by a highly proud, mismanaged companythat prided itself on its extensive decentralization. The atmosphere reflected the founderspride in the fact that they had a unique pen for every place in the world. They were afederation of autonomous geographical units. It became immediately clear to Peterson that huge changes were on the anvil. Theimmediate problems were twofold. The first was the products positioning. Having posi-tioned itself at the higher end of the market for a significant part of the previous century,it had now began to face problems with regard to its image. It was clear that a completeclarity of its brand positioning and image was essential. The second issue that confronted Peterson was its complete inefficiency in managingits product portfolio. When Peterson entered Parker, it didnt even have a proper ideaof the range of products that it was manufacturing. It was a situation of complete chaos 5
  • 6. with more than 500 products in simultaneous existence. Its decentralized structure hadcompletely turned against its profitability, resulting in every distant subsidiary and dis-tributor involved developing a customized product for that particular market. While thecompany was proud of its decentralized multinational structure, it was ailing on accountof an obvious lack of economies of scale and a unified command and strategy. The com-pany clearly lacked a common driving force across markets. However, this decentralization had its positive aspects as well, most notably in thearea of advertising. Pens meant and mean different things to different people. While theEuropeans tended to choose a pen based on its style and feel, people in less-developedcountries tended to see a pen as nothing more than a badge of literacy. Within Europe itself for instance, tastes tended to vary from one country to another.While the French showed a definite attachment to the fountain pen, the Scandinaviansfavoured the ballpoint pen. The company justified the existence of numerous advertisingagencies in its employ feeling that while it bred a certain amount of inefficiency, it paid offfrom a sales standpoint. Many individual advertising firms were able to develop excellentcustomized messages for their audience that successfully struck a responsive chord withinthem. For instance, the Lowe Howard-Spink agency in London was able to make the UKdivision of Parker the most profitable division during its tenure. Its creative genius isclearly visible in the advertisement that it created showing a dead plumber with a giantParker pen protruding from his heart. The situation seemed bleak to Peterson. He immediately implemented a strategy bywhich Parker would position itself in the entry-level segment. He felt that in the faceof the trends at that time, this would be the ideal positioning that would succeed inturning around the company. He also dissociated Parker from the numerous advertisingfirms that it was associated with, retaining only one, Ogilvy and Mather, to oversee aworldwide common strategy in terms of communication and advertising. However, thisstrategy failed miserably on two counts. It failed to provide a customized communicationstrategy to each market and thus failed to account for the cultLural differences acrossgeographies. It also failed to leverage the premium positioning of the brand and reducedit to an entry-level brand.5.1 Two specific cases of execution failuresThe following examples show two specific cases of execution failure by Parker Pen. 6
  • 7. (a) At a corporate level, Parker Pen targeted almost all market segments. Howeverat the business level, management failed to introduce products which would cover themarket segments with middle and lower income levels. This allowed competitors withinexpensive products to take up the market.(b) Some of the marketing campaign failed to adjust to the local environment. Forexample, when Parker Pen first expanded their market to Latin America, they wantedtheir advertisement to say, ”It won’t leak in your pocket and embarrass you.” The com-pany did not realize that the Spanish word ”embarazar ” has two meanings; it means ”toembarrass,” and it also means to ”impregnate.” So, to some unsuspecting people, the adread: ”It won’t leak in your pocket and make you pregnant.” (Ref.[6])6 Acquisition of Parker by Gillette and beyondIn May 1993, Gillette announced its acquisition of Parker Pen Holdings Ltd (Ref.[7]).(See Exhibit X). This made Gillette the world leader in the pen market. Gillette took anafter-tax charge of $164 million for a reorganization of its overseas operations, includingthe integration of the Parker Pen facilities into the Gillette structure. Nearly 2000 jobswere lost as a result of this restructuring process. Gillette sold the writing instruments di-vision to Newell Rubbermaid, whose own stationery division, Sanford became the largestin the world with brand names such as Rotring, Sharpie, Reynolds as well as Parker,PaperMate, Waterman and Liquid Paper under its umbrella. The next few years wereone of a complete downsizing of Parker, marked by job losses across the board. In July2009, the 180 workers at the Parker headquarters of Newhaven, UK were given noticethat the factory was going to be shut down on account of the production moving to France. On August 18, 2009, Newell Rubbermaid announced that Janesville Wisconsin wouldclose the remaining operations of Parker. This resulted in the loss of 153 jobs. Accordingto the company, ”This decision is a response to structural issues accelerated by markettrends and is in no way a reflection on the highly valued work performed by our Janesvilleemployees over the years.” Newell Rubbermaid stated an offer of transitional employment services and severancebenefits. What remained of the Parker brand was moved to the upscale segment of thewriting instrument market and was sold via luxury retailers. Traditional retail outletswere abandoned. This completely removed the brand from the entry level segment of themarket. 7
  • 8. In 2011, Parker Pen announced the finest innovation in the history of writing, Parker5TH Technology which offers a genuine fifth way of writing. Until then the world knewonly four forms of fine writing - fountain pen, ball point, roller ball and the mechanicalpencil. ground-breaking innovation has reaffirmed placed Parker as leaders in terms ofboth innovation and market share.7 Exhibits7.1 Financial statement 8
  • 9. 7.2 Product display Duofold - Lucky 8 Limited Edition Ingenuity Parker 51 9
  • 10. 7.3 Current product portfolio TABLE I T ype M odel Ink Quink Fountain Pen Duofold, Premier, Sonnet, Vector, IM Ballpoint pen Facet, Executive, Esprit, Frontier, Urban, I.M., Vector Jotter7.4 Acquisition of Parker by GilletteReferences[1] http://parkerpens.net/catalogue/parker catalogue 2009.pdf[2] http://www.parkerpen.com/en/discovery/range/iconic/duofold[3] http://www.patricktaylor.com/parker-duofold[4] http://www.vintagepens.com/Parker Vacumatics.shtml[5] http://www.pentrace.net/penbase/Data Returns/full article.asp?id=468[6] http://parkerpens.blogspot.com/2007/09/advertizing-campaings-that-went- wrong.html[7] http://www.nytimes.com/1993/05/08/business/company-news-gillette-completes- acquisition-of-parker-pen.html 10