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companies participating in the power tool industry

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Scenario:

Able Corporation has just hired you for the newly created position of Director of Strategic Planning and Analysis. Able Corporation is an old and venerable American manufacturer of a full range of portable electric power tools (PEPT). The company, which was a family owned business, is being considered as a possible acquisition by Walden International, Incorporated, a foreign conglomerate which is primarily driven by short-term, quarterly financial considerations. There has been virtually no investment in Able Corporation for several years and as a result, many of the product lines are stale and outdated, the operations are inefficient and costly, and there have been net operating losses in two of the last four years. Also, the president to whom you will be directly reporting has held the position for two years, is related by blood to the previous owners, and has had some part in the development of the previous strategy.
The company offers a full range of power tools of professional and consumer quality and serves both consumer and industrial channels. With the exception of circular saws, Able's market share is no greater than 3% in any of its product lines. The market share of circular saws is a dominant 40%, with very strong brand equity and loyalty among both professionals and consumers. The quality of the tools, except for circular saws, is considered low to moderate amongst end-users.

Able Corporation has non-competitive, high product costs due to its two badly placed (in high labor cost, unionized areas) and obsolete manufacturing plants. These plants are so old and have been so badly maintained that some investment must be made in them just in order to remain in business at all. It has been a strategy of Able in the past to drive sales through gaining market share in order to leverage its high operating costs, but this strategy is increasingly being questioned. It is now the general consensus of Able's senior management team that in order for the corporation to survive, Able must do whatever it can to capture greater share in the two growing segments of the power tool market, consumer channels and cordless products.

Able has had some success in the cordless business segment, and has gained a reputation as a cordless innovator with a couple of its products. Any beachheads that have been established, however, have evaporated as competitors have essentially copied the product and used their superior marketing power to displace Able at the retailers. Able has then moved on to introduce the next innovative product. This strategy of first in, abandon, and move on has been highly debated within the senior management team of Able, with a desire of some to transfer resources from research and development to the marketing and sales departments.

Able Corporation has little information on its market share, the size of market, the dynamics that drive the market, or its relative product cost positions. No competitive analysis has been performed in years. The internal information that is available to run the business is inconsistent from one functional department to another. The monthly meetings of the senior management team have been reduced to arguments over the attainment of company metrics, with each department pointing to its own set of reports to support its positions. The friction among the senior management team is having its effect on the rest of the employees of Able Corporation. Many of the employees fear losing their jobs due to the acquisition. As a result of years of declining sales and layoffs, a culture of pessimism and failure exists. Indeed, the new owners fear that many employees in key positions will leave the company taking away their industry expertise.

Walden's top management has come to realize that it seriously miscalculated the underlying financial health and market position of Able Corporation. In addition, Walden has no expertise of its own in the specific product markets or general operating environment of Able. The chief executive officer of Walden is very concerned with making the acquisition a success and has called a special meeting of the Strategic Officers Steering Committee (SOS-C). This is made up of key company-wide strategic experts from across all the business units of Walden. The meeting is to take place in six months and will determine the strategic direction of Able Corporation for the next five to ten years.

Power tools consist of such products as circular saws, drills, routers, reciprocating saws, planes, and hammer drills. Approximately 80% of all power tools sold are corded, while the remaining 20% are cordless. All things being equal, a cordless tool is comparable in price to a similarly featured corded tool. The cordless segment is by far the faster growing of the two at a compound annual rate of 10% vs. 3% for corded. This is due to its perceived portability and relative ease of use. Cordless tools are locked into their performance by the state of battery technology, which limits battery life, power output, capacity, and size. As advances in technology increase battery life, capacity and output, and decrease battery size, the pace of the growth of the cordless segment increases. At present, the growth rate is expected to remain at 10%, but at any time disruptive advances in battery performance can greatly increase even this high growth rate.

The U.S. power tool market in which Able Corporation operates is divided into professional and consumer products, consumer and industrial channels, and consumer and professional end-users. A professional tool is defined by high reliability, high durability, and enhanced features. They are built to withstand the rigors of daily use by such tradesmen as carpenters, electricians, wood-workers, and plumbers in the performance of their jobs. Professional tools cost more to manufacture, but are sold at high enough prices to realize higher margins than comparable consumer tools. A consumer tool is defined as lower reliability, lower durability and less features, and is primarily used by do-it-yourself individuals (DIY'ers) for occasional jobs around the home.

Professional tools are sold in consumer and industrial channels, whereas consumer tools are sold exclusively in consumer channels. The industrial channel has been declining at a rate of approximately 5% per year, for the past five years. The decline has now stabilized and the forecast is for flat growth over the next five years. It currently represents 45% of the total market of all tools sold in the U.S. market. The industrial channel is characterized by distributors that provide a range of greater services and thus higher prices, and its customers consist solely of professional tradesmen. There is much fragmentation in this channel, with no distributor greater than 5% of the total channel.

Consumer channels have been experiencing a tremendous 20% per year growth over the past five years, and are expected to grow at a 5% rate over the next five years. The growth has been caused by the emergence of the "Big Box" retailers such Wal Mart, Home Depot, and Lowes. These three dominate the market and exert extreme price pressure on all their suppliers, including those providing portable electric power tools. Because of their lower prices relative to the industrial channels, professional end users have increasingly been shopping in the consumer channels. Currently, 60% of all professional end users buy their professional tools in consumer channels, and this number is expected to increase over the next five years.

PROBLEM
1250 - 1500 words
Details: Now that you have studied economic indicators, it's time to turn your attention to competition and considering the future via forecasting. Prepare a report detailing the following
Review the web sites of the following companies participating in the power tool industry: Black and Decker, Makita, Bosch. List as many corporate, business, functional, and operating strategies for each company as you can glean from the posted literature.
Using the Library, Internet and other phase resources to research this topic, please complete the task with in-text citations and references in APA format.

Objective: Conduct various environmental analyses as they relate to an organization.

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Solution Preview

Student: I have tried to compile material from the company's website as well as external sources (I have provided you those links). The reason for this was that most of the company's website do not provide adequate information with respect to strategies. Therefore, do visit these links as well for further insight and let me know if you need further clarification or assistance. Thanks.

Black and Decker:

Black & Decker is a global marketer and manufacturer of quality products used in and around the home and for commercial applications. It is also a major supplier of information systems and services to government and commercial client's world-wide. With products marketed in over 100 countries and approximately half of its revenues from outside the United States, Black & Decker's product lines hold leading market share positions in their industries.

The company is the world's largest producer of power tools and accessories. It's household products business is the U.S. leader and among global competitors in the small household appliance industry.

Some of the important strategies followed by the company are:

The company's focus on Total customer satisfaction comes from the fact that it launched the first one year customer satisfaction guarantee on its products way back in 1974 in USA.

In 1984, Black & Decker announced a major reorganization plan to realign corporate management and consolidate manufacturing.

Since 1999, the focus of the company began on more fully globalizing the business by employing the internet and "e-business" strategies to support key retail partners as they expand in North America and around the world.

Another notable strategy of Black and Decker has been that it has continuously been acquiring other companies such as tools group Pentair Inc., in order to expand its market share.

Further, Black & Decker is committed to preserving the quality of the environment. They incorporate sound environmental management principles into the design, manufacture and packaging of their products. They are a leader within their industries in chemical emissions reductions, product stewardship and battery recycling.

source: www.blackanddecker.com

Black & Decker is involved with numerous new ...

Solution Summary

Review the web sites of the following companies participating in the power tool industry: Black and Decker, Makita, Bosch. List as many corporate, business, functional, and operating strategies for each company as you can glean from the posted literature.

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