"Black & Decker Corp. (A): Power Tools Division" highlights Black & Decker Corp. and its performance in comparison with its competitors in the power tools market. This case study allows students to come up with a decision regarding Black & Decker Corp.'s Tradesman segment of power tools based on three options.
Robert J. Dolan
Harvard Business Review (595057-PDF-ENG)
March 30, 1995
Case questions answered:
- What is the cause of B&D’s 9% share vs. Makita’s 50%?
- How does the buying behavior of the tradesman impact the situation?
- What is Makita’s competitive strategy and what role does Milwaukee (the #2 brand in the segment) play?
- Which action alternative should B&D pursue?
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Case answers for Black & Decker Corp. (A): Power Tools Division
Introduction - Black & Decker Corp. (A): Power Tools Division
Black & Decker Corp. (B&D) Professional-Tradesman power tools segment has not been doing very well with only 9% market share and low profitability. The market leader in that segment, Makita, had a 50% market share. Joseph Galli, the vice president of sales and marketing for power tools was put in charge of changing that by senior management. There were three options that Galli came up with that B&D could take in order to become profitable and possibly increase market share in the segment: harvest the segment, use sub-branding to get behind the B&D name or drop the name from the segment.
This case is a decision case because it requires you to make a decision between the three options as to what is better for Black & Decker to do with respect to their Tradesman segment of power tools. The problem is evident, that they only have a 9% market share in the segment compared to Makita’s 50%, as well as low profitability despite higher product quality and is among the most powerful brand names in the world. Also, there is still more to be done, therefore it cannot be a problem or evaluation case.
Company - Black & Decker Corp.
In the 1900s, Black & Decker Corp. essentially created the portable power tools industry in the US by creating and patenting the world’s first portable power drill with a pistol grip and trigger switch. In 1990, B&D was the world’s biggest provider of power tools and their accessories, electric lawn and garden tools, and residential security hardware. B&D represented 20% of the Professional-Industrial segment, 45% of the Consumer segment, and 9% of the Professional-Tradesman segment. According to the BCG matrix way of looking at business strategy and portfolio management, the Professional-Industrial segment for power tools is a cash cow with its 0% growth rate but a 20% market share. The Consumer segment is closer to the star quadrant, but also a cash cow with its relatively low growth rate and 45% market share. The Professional-Tradesman segment is a problem child because it has a high growth rate of 9% but a low market share of 9%.
In the Professional-Industrial segment, key purchase decision-makers saw Black & Decker Corp’s products to be high quality and differentiated as well as offering exceptional service. This led to their success in this segment. B&D’s success in the Consumer segment is driven by the strength of the brand as number 7 in the world. The success of their household product line has spilled over into the power tools and accessories business allowing for their success. However, this success in the Consumer segment led to difficulty in the Professional-Tradesman segment because the B&D brand is associated with the household; B&D is seen as a brand fit for the home, not for the job, leading to a small, 9% market share.
The Professional-Tradesman segment consumer would use their power tools to make a living, and the demands of the job were much different than the demands of the regular consumer segment for home improvement. A typical plumber, electrician, or remodeler working in home improvement would typically invest $3000 in 10 or so tools for the job and would spend roughly $1000 every year to buy replacement tools when needed. The strength of the Black & Decker Corp. brand within the Consumer segment led to the Professional-Tradesman consumer seeing B&D as a household, consumer brand, although their products were differentiated between the two segments. The perception was that their products were not fit for the job, despite the actual high quality of the products that B&D put out.
Makita and Milwaukee were B&D’s main competitors in the Professional-Tradesman segment with roughly 50% and 10% of the segment’s market share respectively. Both were seen as the most high-end brands in this segment, where Black & Decker Corp’s brand perception was in the second-lowest category. Makita’s strategy was to focus on product quality and cover all possible distribution channels and product types while allowing customers to have minimal service and warranty coverage in exchange for cost savings. They were priced just below Milwaukee. Makita had a strong market share in the Tradesman segment across all distributors, being particularly strong in the membership club channel that B&D did not even participate in. The consumer sentiment towards Makita was not uniformly positive, seeing them as “dictatorial and arrogant” for offering no channel protection and selling the same products through all distribution channels. Also, by marketing their product as appropriate for Father’s Day gifting, in the Tradesman segment, this was seen as dumbing down their products. The Tradesman consumer used the products for work as professionals, but as a Father’s Day gift it was being marketed as a consumer product. Despite this, Makita’s high quality and relatively low cost, as well as the rise of Home Centre distribution channels, are what helped Makita grow its market share to 50% in the Professional-Tradesman segment. Milwaukee’s strategy was to compete in the high-end tool market, providing exceptional product quality and service levels in all segments. Consumers who prefer Milwaukee have very strong feelings about the brand and Milwaukee has the highest agreement with the statement that the brand is “One of the Best” at 80% agreement. In the competition for market share, taking away market share from Milwaukee would be most difficult because of the high levels of satisfaction of consumers with the brand, although they do not offer a full range of products, with no miter saws or belt sanders on the market.
In the power tools division, Black & Decker Corp’s strengths are...
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