"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:
We have uploaded two case solutions, which both answer the following questions:
- What is the cause of Black & Decker Corp.’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
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Introduction – Black & Decker Corp.
Black & Decker Corp. started as a machine shop in 1910 by Duncan Black and Alonzo Decker. Now, they are the largest producers of power tools, home appliances, and garden tools in the world. This success can be attributed to Black and Decker’s invention and patent of the first portable power drill in 1917.
From there, the company has grown to become the worldwide tool supplier that it is today, with more than half of its revenues coming from outside of the United States. Under the leadership of CEO Nolan Archibald, the company has continued to become more profitable with revenues increasing to $5 billion and operating incomes to $500 million in 1990.
Black and Decker is such a good company, that a recent survey listed them among the top 10 companies in the States. Although they have diversified their available product line, Black and Decker still focus mainly on the development, manufacturing, and sale of power tools and accessories for tradesmen and homeowners.
However, despite all this success, the company is having some trouble with their image and branding. Even though they have some of the highest quality tools and best customer service in the market, many tradesmen believe Black and Decker to only be for minor homeowner use. Consumers in the Professional-Tradesmen segment tend to buy from brands like Makita and Milwaukee when seeing Black and decker as laughable.
After some extensive research, Joseph Gali, vice president of sales for B&D, has come up with 3 possible options to change the company’s image before they are completely isolated from that market segment. Below I will explain the options, select the best one, and explain why that option will be most profitable for Black and Decker.
Type of Case
Black & Decker Corp. has not recently made any decisions that need to be evaluated. In fact, at the end of the case, the analysts are given 3 options to decide from. They must carefully observe all the case facts and use this information to make an informed decision and report back to Gali. If the correct methods and processes are used, Black and Decker will be able to successfully market their product to the Professional-Tradesman segment, steering them clear of any revenue loss or other problems in the future. Therefore this is a decision case.
Black and Decker’s research has provided them with three options. They can choose to continue focusing on dominating the Consumer and Professional-Industrial segments and just leave the Professional-Tradesmen part completely.
The second suggested option is for Black and Decker to use a sub-branding strategy that had been proven to work before on several occasions. Using this method, the company would continue manufacturing and selling equipment but just under a ‘different company name’ by Black and Decker.
The third most intensive option is to drop Black and Decker from the Professional-Tradesmen segment completely, like in option one, but in this scenario instead of focusing on the other two segments, the company would re-enter the market with a new brand name.
This would a major change and Gali would need to decide the best way to propose this idea without losing his job. Using the DeWalt name, Gali would also need to determine how to handle possible liability issues and he would need to determine whether the yellow ‘safely’ color would differentiate their products from the competition while also encouraging sales.
Analysis – SWOT of Black & Decker Corp.
Although they have not been very successful in the Professional-Tradesmen segment of the power tools market, Black and Decker is far from being a bad company. The first owners literally invented the first portable drills.
Over the past 70 years, the Black & Decker Corp. has been extremely successful and has continued to grow and acquire new brands. They have consistently increased revenue, sales, and operating income as shown in the chart below.
Figure A – Black & Decker Corp. Revenues and Operating Income, 1986-1990
Continuing with some of their achievements from the introduction, the company is already making close to $5 billion in annual sales with half of that money coming from sales overseas. They consistently release new products for their household line, maintaining a respectable 50% share in that market.
Because of this, and is the seventh-largest company in the States, the company has brand recognition. The Black & Decker brand name is well-known by builders in homes and on job sites around the world, significantly more so than most of their competition.
They have high-quality products that work well and excellent customer service. Because of this the company has done well and captured 45% of the Consumer segment and a reasonable 20% of the Industrial segment. Even in surveys that are done without the brand name, Black and Decker’s products were ranked as being better than others in the industry.
All of this and their numerous revenue streams make Black & Decker a…