Let's look at two of Able Corporation's two major competitors: Smith & White Corporation (S&W), a very large and aggressive domestic manufacturer, and Makatume, a Japanese powerhouse.
Smith & White markets a full line of moderate quality professional and consumer tools. It also markets such products as lawn and garden, hobby tools, and kitchen appliances, all under the same brand name as its power tools. It is a multi-national conglomerate that has dominant shares in all the markets in which it operates. Its strength lies in a unified strategy across all its product lines, power tool and non-power tool, of building and maintaining brand equity through massive amounts of national media advertising. The leverage gained through strong brand equity compels retailers, particularly the Big Boxes, to stock many of the S&W's products because of high end-user demand.
This demand-pull marketing strategy also has the synergistic effects of obtaining relatively higher prices, advanced placement, co-op advertising, high profile self space, and cross promotion.
S&W does have some significant weaknesses. These include high costs due to old manufacturing plants located in high labor cost urban areas, market confusion between its professional and consumer tools, and negative feelings on the part of its distributors stemming from a perceived abuse of their dominant market position. It also doesn't have much of a presence in the fast growing cordless segment.
In addition, a major hidden weakness is S&W's huge size, which makes it unwieldy in reacting to market phenomena during periods of rapid change.
Makatume markets only professional tools, which are highly regarded by tradesmen for their quality, robustness, and durability. It controls over 50% of the Japanese market and has leveraged that position to become the second biggest player in the U.S. market. For the past several years their sales in the U.S. have been aided by favorable exchange rates, although many economists now forecast a reversal of this advantage over the next two years. Makatume has an extremely strong cost position due to its relatively new manufacturing plants in Japan.
Makatume's greatest product strength is in the fast growing cordless segment. It controls a dominant 70% market share of the professional cordless market. Makatume's early entry into this segment, is both a blessing and a curse. By entering the market early, Makatume has been able to obtain its dominant market share, but it is now locked in to lower voltages due to wide acceptance of its interchangeable battery system. As the technology of battery efficiency progresses, Makatume is faced with a dilemma: Does it introduce its own higher voltages, thus legitimizing that market for others to enter, or does it wait until it has to respond to being outflanked by its competitors when and if they introduce their higher voltages?
The rest of the market is made up of several domestic and foreign niche competitors, none of which has greater than a 5% share of the total market. A phenomenon to watch, however, is the growing strength of Far East imports from China, which are beginning to make their impact on consumer tools because of their low price and good value. The yuan is the relevant currency affecting Chinese imports.
We can often better see ourselves when reflected through the perspectives of others. In this exercise you are to take the vantage point of the industry leaders, S&W and Makatume. This has the advantage of helping to anticipate competitive positioning that may effect the successful execution of Able's strategy. Based on the narrative above, please answer the following questions from the perspective of being their Director of Strategic Planning and Analysis. (For real world situations always keep in mind that the status and plans of competitors can almost never be known except through an analysis of their actions, and even then almost never with certainty. Dealing with imperfect information is one of the essential aspects of the economic problem.)
? How would you address each company's weakness?
? If you were Makatume, what would you do about higher voltages?
Please see response attached, which is also presented below. I hope this helps and take care.
1. How would you address each company's weakness? This is an interesting assignment, as you are asked to put yourself in the shoes of the Director of Strategic Planning and Analysis for each company.
Let's take a look at the kinds of things you would be interested in from both company positions:
A. First, you would attempt to take the perspective of S&W's Director of Strategic Planning and discuss S&W's weaknesses and what you would do about them.
- Smith & White markets a full line of moderate quality professional and consumer tools. It also markets such products as lawn and garden, hobby tools, and kitchen appliances, all under the same brand name as its power tools. S&W does have some significant weaknesses. These include high costs due to old manufacturing plants located in high labor cost urban areas, market confusion between its professional and consumer tools, and negative feelings on the part of its distributors stemming from a perceived abuse of their dominant market position. It also doesn't have much of a presence in the fast growing cordless segment. In addition, a major hidden weakness is S&W's huge size, which makes it unwieldy in reacting to market phenomena during periods of rapid change.
- However, some weaknesses are static (i.e., location and type of the building) and rather than focusing on these particular weaknesses, the Director will probably focus on ways to leverage the companies strengths and pursue opportunities that are good fit with the company (i.e., Are cordless units a good fit with the company? Should they increase the production of consumer tools in reaction to the external threat of the Chinese imports?)
- As the S&W's Director of Strategic Planning, she would position her company by leveraging its strengths. Michael Porter has argued that a firm's strengths ultimately fall into two headings: cost advantage and differentiation. Thus, you would probably be considering what your company's competitive advantage is when you are considering the company weaknesses. In some cases a weaknesses is the opposite of the strength (i.e., huge size of S&W is both a strength and a weakness). Therefore, part of my strategic planning would be to employ a full SWOT analysis and corresponding Matrix to begin the process of determining the best strategy to address the ...
Relating to Able Corporation's two major competitors, this discussion discusses and explains how to address each company's weakness. It also explains what Makatume should do about higher voltages.