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    Strategic Management for Able Corporation

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    Let's look at two of Able Corporation's 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 shelf 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 and more firms produce higher voltage tools, Makatume is faced with a dilemma: Does it introduce its own higher voltages, thus undermining its leading position in lower voltage interchangeable battery tools or 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.)

    Please respond to the following:

    Take the perspective of S&W's Director of Strategic Planning to develop a full SWOT analysis of S&W, identifying and explaining at least five factors for each category (strengths, weaknesses, opportunities and threats) and propose a complete strategy (implementation, ramification and evaluation) which addresses one of S&W's weaknesses and what you would do about it.
    Take the perspective of Makatume's Director of Strategic Planning to develop a full SWOT analysis of Makatume, identifying and explaining at least five factors for each category (strengths, weaknesses, opportunities and threats) and propose a complete strategy (implementation, ramification and evaluation) which addresses one of Makatume's weaknesses and what you would do about it.
    If you were Makatume, propose a complete strategy explaining what would you do about higher voltages issue?

    Do not propose a higher voltages strategy for response to questions 1 or 2. ..


    Analyze the relationships between a firm and the political and economic forces within its community.
    Apply critical thinking skills to analyze business situations.
    Use effective communication techniques.

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    Solution Preview

    Smith & White and Makatume

    The Smith and White Corporation
    Smith & White Corporation (S&W) is a very large and aggressive domestic manufacturer of the power tools. On the basis of the SWOT analysis of Smith and White Corporation, a basic understanding about its internal and external environment can be gained:
    • The organization has a prominent presence in various markets owing to its status of a multinational conglomerate.
    • It sells an inclusive series of high quality professional and consumer tools for its customers.
    • Integrated strategy gives Smith & White a distinct competitive advantage because consumer demand allows the company to sell in large volumes and to gain much-desired product placement in retail stores.
    • Smith & White Corporation employ high amount of advertising in the national media to develop and maintain its brand equity through an integrated strategy for all product lines, power tool and non-power tool (Graves, 2007).
    • The company's demand-pull marketing strategy strengthens it be rendering synergistic impressions in incurring comparatively higher prices, encouraged placement, co-op advertising, high profile shelf space and cross promotion.
    • High costs are incurred by the organization due to its obsolete manufacturing plants and expensive labor.
    • In company's operations there is an uncertainty among the professional and consumer tools.
    • Negative response from the distributors is directing the company towards the apparent exploitation of their governing position in the market.
    • It has not registered a noticeable presence in the rapidly growing market for cordless tools.
    • The massive size of the organization is one of its latent weaknesses. Subsequently, the task of restructuring the organization in a fast-changing environment becomes hard.
    • As a result of its strong brand position, the organization can reap various benefits as evident in the case of "Big Boxes", who stocks S&W's products.
    • Combined advantages such as securing higher prices, co-operative advertising, superior ...

    Solution Summary

    The solution examines strategic management for Able Corporation. The relationship between a firm and the political and economic forces within its community are determined.