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BLACK &<br />DECKER<br />

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Strategy Proposal Agenda<br />Situational Analysis<br />Market<br />Competitors<br />Research Findings<br />Strategy Recommendations<br />Financial Forecasts<br />

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Market Analysis<br />Market Segments<br />Industrial $550M 0% Growth<br />Tradesmen $420M9% Growth<br />Consumer $530M7% Growth<br />Professional Segment Sales Channels<br />Two-Step 40% of Market<br />Home Centers 25% of Market & Growing<br />Warehouse HCs 15% of Market<br />Membership Clubs 10% of Market<br />Farm Outlets 5% of Market<br />Referred to Jointly as Professional Segment<br />

4.
Market Analysis<br />Black & Decker Share<br />Industrial 20% $110M of $550M<br />Tradesmen 9% $35M of $420M<br />Consumer 45% $250M of $530M<br /><ul><li>Major player in Consumer and Industrial Segments.

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Lacking in Tradesmen segment.

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Permeation into Consumer Segment likely hindering our perception in Professional Segment.</li></ul>Black & Decker Professional Channel Share<br />Two-Step <10% (40% of Market)<br />Home Centers <10% (25% of Market)<br />Warehouse HCs 20% (15% of Market)<br />Membership Clubs 0% (10% of Market)<br />Farm Outlets 15% (5% of Market)<br /><ul><li>Poor performance in channels that make up 65% of the professional market.

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Majority of Industrial sales come from Warehouse HCs.

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Tradesmen sales coming from Two-Steps and Home Centers</li></ul>Professional Segment<br />19% Share of $970M<br />

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Competitive Analysis<br />“Black & Decker makes a good popcorn popper, <br />and my wife loves her Dustbuster, but I’m out here <br />trying to make a living…”<br />- Bob, The Builder<br />

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Competitive Analysis<br />Brand Perception<br />Highest<br />Lowest<br /><ul><li> Black & Decker is in the bottom half of Brand Perception

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Need to better understand the cause of this, and if it is related to actual performance of Black & Decker professional tools</li></li></ul><li>Competitive Analysis<br />Professional Grade Tools<br />Consumer Grade Grade Tools<br />Hitachi<br />Makita<br />Black & Decker perceived in this space due to coloration.<br />Black & Decker<br />Milwaukee<br />

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Competitive Analysis<br />Top Competitor Strategies<br /><ul><li> Milwaukee

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Be the best of the best in the professional tool industry.

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Have a solid presence in the Industrial segment through the Warehouse sales channel.

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Charge an ultra-premium for tools, and deliver best-of-class service.

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Makita

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Provide high quality tools at a price premium just below Milwaukee.

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Offer products through every retail channel despite retail grievances.

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Offer limited service and warranty handling for inflated margins.</li></li></ul><li>Situation Review<br />Continued success in the Consumer and Industrial segments require no major strategy changes.<br />Poor performance in Tradesmen Segment caused by:<br />Poor Brand Perception overall in Professional Segment<br />Brand poorly differentiated from the lower grade products in the Consumer Segment<br />Permeation of Black & Decker in Consumer Segment has tarnished brand perception in Professional Segment<br />Need research to further understand perception/reality in the Tradesmen Segment. <br />

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Research Findings<br />Milwaukee Fanboys<br />Brand Awareness <br />Among Tradespeople<br />“Brand X is One of the Best” Agreement<br />Makita Favorers<br /><ul><li> Seeing a major discrepancy between awareness and product image.

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Makita Favorers indicate displeasure with Makita products where we are strong. Opportunity.</li></li></ul><li>Research Findings<br />Black & Decker Professional Power Tool Product Assessment<br /><ul><li> The professional quality of items 1, 2, 3, 5, 9, 13, and 14 are above that of our competitors.

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All other products need additional development.

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Proves that permeation into households in the consumer segment has inhibited our brand perception in the professional segment. Our products CAN stand in this market.</li></li></ul><li>Strategy Recommendations<br />Option 1<br />Harvest Tradesmen Channels and Focus on Consumer and Industrial.<br /><ul><li>No. Too easy to allow major Professional Segment competitors to enter consumer market and overtake B&D with a better durability perception.</li></ul>Option 2<br />Sub-Brand products with a new major label AND the Black & Decker.<br /><ul><li>Not enough. The B&D name is too tarnished in this space to continue use. Association with the name is only valuable in the service and warranty space.

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Option 3</li></ul>Drop the tainted Black & Decker name from the Professional Segment.<br /><ul><li>Best option. New brand entry, backed by B&D service and warranty handling. Also needs differentiated from consumer segment products by colorization. </li></li></ul><li>Strategy Recommendations<br />Potential Barriers to Option 3<br />Building a new brand from the ground up takes time. Three year expectations would not be deliverable as awareness needs built.<br />Unexpected consequences in consumer segment of pulling Black & Decker from professional market.<br />Color options limited, see next slide.<br />Potential Entries into Option 3<br />Black & Decker owned DeWalt brand saws have a very high brand recognition and durability/best-of-class reputation in the Professional Segment.<br />Futher, customers surveyed in prior research indicated a 51% Purchase Interest in DeWalt brand tools, and an even higher purchase interest of 58% when DeWalt is being serviced and distributed by Black & Decker. <br />Current tools durability, performance and reliability can compete in this market from day one.<br />

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Strategy Recommendations<br />Color Options<br />DeWalt<br />

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Strategy Recommendations<br />Official Recommendation<br />Proceed with Option 3, eliminating Black & Decker brand products from the Professional Segment.<br />Utilize the DeWalt brand name on all Professional Segment tools with a service and warranty handling endorsement by B & D. <br />Focus market entry under Dewalt name for the tools identified in research as having the highest quality, entry order determined by market share. <br />Cordless Drills, 16%<br />Circular Saw, 14%<br />Corded Drills, 13%<br />Finishing Sanders, 10%<br />Chop Saws, 5%<br />Scruguns, -%<br />Impact Wrenches, -%<br />Strategically enter the Home Center and Two-Step distribution channels at the same price point as Makita brand tools.<br />Utilize “Construction Yellow” as the brand color of DeWalt tools. <br />

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Potential<br />“Can I build with it?”<br />“Yes, I can.”<br />Serviced and Distributed by:<br />

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Financial Forecasts<br />Moving into this segment requires a 20% market share in 3 years by board.<br />Estimated spend per customer per year is $1,000 on three new tools, giving us an approximate cost per unit of $333.<br />Total market is at $420M annually, giving us unit sales of 1,261,261.<br />Serviced and Distributed by:<br />

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Financial Forecasts<br /><ul><li>Total forecasted sales for 1991 at 70% awareness and 58% purchase interest:

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1,374,774 * 0.09 * ( 0.70 / 0.58 )

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149,329

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31.5% Growth YOY, Yields 11% Market Share EOY 1991

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We can forecast the next three using the same formula.

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Here we find ~20% share is achieved EOY 1994 at the latest.</li></ul>Serviced and Distributed by:<br />

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Closing<br />Numbers prove viability of new venture<br />Move is necessitated by our current position in market, as current position presents a long-term threat to our most lucrative segment<br />Three year requirement is reachable, but can’t be guaranteed<br />Hardware in current state only needs new casing and packaging for retail entry<br />Move is a must for Black & Decker company<br />Serviced and Distributed by:<br />