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    Details: The research you conducted in Phase 2 of the fiercely competitive U.S. PEPT industry has revealed two major participants, 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 if and when 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.)

    Perform a SWOT analysis for Smith & White and for Makatume. How would you, as a CEO minimize each company's weaknesses and threats?
    How would you maximize each organization's strengths and opportunities?
    If you were Makatume, what would you do about higher voltage batteries?

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    Solution Preview

    Let us start with SWOT of Smith and White.

    Smith and White:


    Strong product range: Smith and White has a wide range of product offerings in the form of full range of professional and consumer tools, lawn, garden, home appliances, etc. Therefore, the company has a presence in numerous market segments and caters to a wide range of customers.

    Strong market share in numerous markets: Apart from having a presence in numerous markets, Smith also enjoys a strong or dominant market share in all the markets that it operates, which shows the capability of the company to capture market share and leadership position in all the products that it manufacturers.

    Unified strategy: This is strength of the organization as it allows organizations to develop strong brand equity via large spending on advertising. Unified strategy allows the company to reap the advantage of advertising in various product segments.

    Shelf space: Strong brand equity of the company's products allows company to command premium shelf space at major retailers, especially at big box retailers:

    Premium pricing: The Company is able to command higher, premium pricing for its products due to higher demand. Further, other benefits of such high demand include advanced placement, co-op advertising, high profile self space, and cross promotion.


    Obsolete manufacturing plants: The Company's manufacturing plants are old and obsolete and thus find it difficult to compete with other players in terms of efficiency and quality.

    High costs: The old and obsolete plants results in high manufacturing costs, thereby reducing the operating margins of the company.

    Market confusion between its professional and consumer tools: The wide range of offering in both professional and consumer tools is also a bane for the company as it results in confusion for the ...

    Solution Summary

    The research you conducted in Phase 2 of the fiercely competitive U.S. PEPT industry has revealed two major participants, Smith & White Corporation (S&W), a very large and aggressive domestic manufacturer, and Makatume, a Japanese powerhouse.