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Black & Decker 1990 Strategy (MBA Case)

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Black & Decker 1990 Strategy (MBA Case)

  1. 1. BLACK &<br />DECKER<br />
  2. 2. Strategy Proposal Agenda<br />Situational Analysis<br />Market<br />Competitors<br />Research Findings<br />Strategy Recommendations<br />Financial Forecasts<br />
  3. 3. 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. 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.
  5. 5. Lacking in Tradesmen segment.
  6. 6. 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.
  7. 7. Majority of Industrial sales come from Warehouse HCs.
  8. 8. Tradesmen sales coming from Two-Steps and Home Centers</li></ul>Professional Segment<br />19% Share of $970M<br />
  9. 9. 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 />
  10. 10. Competitive Analysis<br />Brand Perception<br />Highest<br />Lowest<br /><ul><li> Black & Decker is in the bottom half of Brand Perception
  11. 11. 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 />
  12. 12. Competitive Analysis<br />Top Competitor Strategies<br /><ul><li> Milwaukee
  13. 13. Be the best of the best in the professional tool industry.
  14. 14. Have a solid presence in the Industrial segment through the Warehouse sales channel.
  15. 15. Charge an ultra-premium for tools, and deliver best-of-class service.
  16. 16. Makita
  17. 17. Provide high quality tools at a price premium just below Milwaukee.
  18. 18. Offer products through every retail channel despite retail grievances.
  19. 19. 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 />
  20. 20. 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.
  21. 21. 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.
  22. 22. All other products need additional development.
  23. 23. 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.
  24. 24. 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 />
  25. 25. Strategy Recommendations<br />Color Options<br />DeWalt<br />
  26. 26. 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 />
  27. 27. Potential<br />“Can I build with it?”<br />“Yes, I can.”<br />Serviced and Distributed by:<br />
  28. 28. 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 />
  29. 29. Financial Forecasts<br /><ul><li>Total forecasted sales for 1991 at 70% awareness and 58% purchase interest:
  30. 30. 1,374,774 * 0.09 * ( 0.70 / 0.58 )
  31. 31. 149,329
  32. 32. 31.5% Growth YOY, Yields 11% Market Share EOY 1991
  33. 33. We can forecast the next three using the same formula.
  34. 34. Here we find ~20% share is achieved EOY 1994 at the latest.</li></ul>Serviced and Distributed by:<br />
  35. 35. 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 />