Black And Decker Essay, Research Paper

1. FINDINGS Black and Decker’s DeWalt line has been so successful in the USA

that it is now the standard for both the Professional-Industrial and the

Professional-Tradesman market segments. Nolan Archibald, Chairman, President and

CEO of Black and Decker (B&D) saw the potential in 1994 to increase the

companies market share through worldwide sales of B&D products. While the

company had a definite presence in the European Consumer Power Tools market

segment, it lacked penetration in the Professional Power Tools segment. On the

other hand, in Japan, where there was a huge market for professional power

tools, B&D’s market penetration was negligible compared to its competitors.

B&D’s vision for DeWalt is to be the global "Value Power Tool"

provider of choice for every Professional Tradesperson and all worldwide

Industrial markets. Based on the facts, the product managers of the DeWalt line

have developed a global strategy based on the following conclusions: ? DeWalt

is a highly successful product in the US market. B&D must leverage its brand

identity and marketing strategies employed in the US and also capitalize on

their established quality and pricing. ? B&D must explore the formation of

strategic alliances with local distributors. Multiple and/or hybrid channels

must be used to reach customers quickly and as effectively as possible. ?

Through a global strategy, B&D can appeal to consumer homogeneity by

offering lower product costs while maintaining high product quality. The lower

product costs derived from the economies of scale will maximize customer value

exchange. ? B&D must aggressively employ a hybrid push-pull communication

strategy to be successful in the two markets. This will enable B&D to get

the DeWalt name out to more customers in a diverse geography. ? While Elu has

performed better than B&D Professional and B&D Proline product lines in

the European market, its lack-luster revenues compel B&D to replace the Elu

product line with the DeWalt line. ? There exists cultural differences between

the US market and the European and Japanese markets. While the European market

is similar to that of the US, the Japanese market warrants a thorough study of

local conditions before entering it. The global strategy must consider factors

such as brand loyalty, product recognition, brand image and channel

intermediaries. ? A direct presence in Europe and Japan is critical to

B&D’s success. To effectively penetrate these markets, manufacturing and/or

assembly plants must be established locally. 2. SITUATION ANALYSIS i) US Market

In 1994 the DeWalt product line experienced worldwide sales which exceeded $350

million dollars. B&D’s market share in the US comprised of 25% of the

professional industry, 40% of the professional tradesman industry, and 50% of

the consumer industry. B&D’s marketing campaign in the US "Operation

Sudden Impact" was a great success leading to the reduction of Makita’s

market share in the Professional-Tradesmen segment from over 50% to 30%. ii)

European Market The European market was 35% bigger than the US market. In 1994

the European power tools market was $2.5 billion. Of that $1.5 billion came from

the professional industrial and tradesman market, and $1.0 billion came from the

consumer tools market. The major competitors in the European power tool market

were Bosch, Makita, Hitachi and B&D. Bosch was considered "the standard

of excellence" in the European industry. Both Bosch and B&D held

approximately 30% of the consumer market, while in the professional market Bosch

held 30% and B&D held less than 10%(see Exhibit 1a and 1b for market

shares). In the professional power tools market, B&D offered three product

lines – Elu, B&D Professional and B&D Proline. Elu was a Swiss company

purchased by B&D in the early 1980’s. Elu enjoyed brand recognition but

failed to reach a broad market. In the professional power tools segment, B&D

employed three distribution channels – specialty, traditional and modern

consumer. Consumer brands represent 70% of B&D’s European power tool sales.

B&D was viewed as a highly "consumer-segment oriented" company in

Europe, similar to its situation prior to the introduction of the DeWalt line in

the US market. iii) Japanese Market Japan was the second largest in the

professional power tool market worldwide. Unlike the US and European markets,

Japan did not have a consumer power tool market. Two domestic producers -

Hitachi and Makita, dominated the industrial power tool market. They held the

majority of the market share at 40% and 35% respectively. Bosch held 10% of the

market share, and B&D held a slim 2% of the market (see Exhibit 1c).

Introducing the DeWalt product line in Japan poses a bigger challenge for

B&D than US and Europe. The DeWalt product line has never been sold in

Japan, there is no brand recognition and B&D lacks knowledge of the

distribution infrastructure. However, B&D cannot overlook the enormous

market potential in Japan. Hitachi and Makita have succeeded globally. By

entering Japan B&D has an opportunity to track their performance and

anticipate their movements. 3. SCENARIOS/OPTIONS i) Scenario/Option #1: Launch a

marketing strategy to capture the Professional Power Tool market share with the

DeWalt line of products in Europe alone. Venture into the Japanese market

pending input from a task force sent to Japan to evaluate the Professional Power

tool market. By focusing on the European market alone, B&D can solidify its

present market share in the consumer market, while building the Professional

Power Tool market. The consumer base, and distribution channel in Europe is

similar to the US. B&D will use same implementation strategy for DeWalt in

Europe as that in the US. B&D’s aim will be to increase its market share in

the Professional Power Tool segment to 30% within 2 years. B&D will phase

out its existing industrial product lines – Professional, Proline and Elu and

launch the DeWalt brand. It already has distinct lines of distribution and

communication in place. B&D will leverage this position to effectively reach

the professional consumer. This will solidify the DeWalt name through price,

quality, and service. Additionally, B&D will have a task force working in

Japan to gain a better perspective of the markets, cultures, customers, and

strategies to effectively capture the power tool market. ii) Scenario/Option #2:

Position the DeWalt line of Professional Power Tools in Europe, keeping Elu in

place. Launch a B&D line of Consumer Power Tools and a DeWalt line of

Professional Power Tools in Japan. As in the first option, implementing a line

of DeWalt in Europe will be a seemingly easy task because of the presence of

B&D consumer product line. Keeping Elu will eliminate the global image of

DeWalt but will provide the consumer with options. It will be up to B&D, to

continue to build customer loyalty with quality products, value pricing, and

premium service. B&D expects to increase its combined market share to 25% in

2 years, but realizes that DeWalt’s share will be diluted due to Elu’s and

vice-versa. The goal will be to capture 20% of the professional power tool

market within 5 years. iii) Scenario/Option #3: Simultaneously, launch DeWalt

products in European and Japanese markets; eliminate the Elu product line in

Europe. B&D gained experience by launching its DeWalt line in the US, Latin

America and Australia. B&D will leverage the knowledge gained from marketing

campaigns in these countries to create a common a global strategy. B&D will

phase out its existing industrial product lines – Professional, Proline and Elu

and launch the DeWalt brand. In taking this approach B&D will be able to

offer highly functional quality products with lower prices by focusing on

customer homogeneity in Europe. The goal will be to capture 30% of the

professional power tool market within 2 years. For Japan, B&D will enter

into a strategic alliance with a local sales/distribution organization to

overcome market barriers. The goal will be to capture 20% of the professional

power tool market within 5 years. 4. RECOMENDATIONS/IMPLEMENTATION i) Common

Global Marketing Strategy B&D will implement a global strategy to market the

DeWalt product line. The main objective of this strategy will be to increase

B&D’s market share in Europe and Japan through worldwide marketing of the

DeWalt line of products (Scenario 3). The common components of the strategy are

discussed first, followed by local caveats. a) Product/Pricing Plan B&D must

maximize its market potential by implementing realistic pricing objectives.

B&D’s competitors offer a multitude of product variations. The competitive

offerings offer consumers a variety of products at various prices. The DeWalt

product line will be introduced internationally with the best available

standardized options. Through the practice of bundling the best product

capabilities, B&D will be able to offer low cost superior industrial tools.

Economies of scale in production will allow B&D to become the low cost

provider of power tools in the international market. The low cost and high

functionality will result in high value perception among B&D’s consumers.

Exhibit 2 illustrates that B&D, with a smaller product line, can offer

products with better performance at lower prices as compared to its competitors,

who have a multitude of products. By pricing its products below competitors,

B&D may elicit competitive price wars within the industry. This could have a

detrimental effect on B&D’s global market strategy and its bottom line.

B&D will take measures to protect itself from anti-trust lawsuits through

competitive pricing. b) Distribution Strategy B&D’s worldwide distribution

strategy for the DeWalt product line will be based on the principle of

delivering the product to the right customer, at the right time and at the right

cost. In order to implement such a strategy, B&D will make the appropriate

investments required in the development of infrastructure, personnel and

product. As part of the infrastructure, B&D will build an assembly plant for

DeWalt products in Europe and in Japan. The location for the assembly plant will

be chosen so as to facilitate transportation of the component parts from

B&D’s manufacturing plants in the US. This will hasten the process of

meeting the requirements of the local markets. The assembly plant will be the

hub for dispatching DeWalt products to distribution centers. These assembly

plants will be in a strategic geographic location. It is obvious that B&D

will have to use multiple channels and/or hybrid channels to deliver its product

to the international market. B&D will form key alliances with distributors

such as hardware stores and specialty stores. An attractive incentive scheme for

distributors will also be developed to push DeWalt products. As part of the

alliance, B&D will also assist the distributor with implementing Just In

Time (JIT) systems. These systems will help B&D in shipping the right

products while reducing the inventory at the distributor’s warehouse. B&D

will take an active part in training the sales consultants in the stores to

allow them to convey the right message to the consumer. c) Communication Plan

The communication strategy will be centered on the relative value a customer

receives when purchasing the DeWalt brand of power tools. Relative value is the

ratio of perceived value to the product price. The international launch of the

DeWalt brand is focused on satisfying the homogenized needs and desires of the

global market namely price, quality, and service. By advocating a global

strategy centered on the homogenized needs of consumers, B&D will be able to

recognize synergies in all functions of the value exchange process. The

international DeWalt campaign will be centered on the value maximization. The

maximization of the consumers perceived value will be communicated to both the

end consumer and the market wise distribution channel. The distribution channel

serves the market by providing consultative selling or referencing of product

characteristics. The distribution channel significantly influences

consumer-purchasing behavior. B&D will adopt a "push" strategy to

leverage the existing distribution network through their message of value

maximization. It will work with its alliance partners to promote direct

marketing campaigns that stress product value and reliability. In addition,

B&D will also employ the pull strategy to stimulate demand by increasing

brand awareness and recognition. The DeWalt product line will be promoted

through trade journals, store displays, and point of sale promotions. Local

pricing situations should be considered. For example, things in Japan are

generally more expensive than in the US. So the prices there need not be reduced

tremendously there. d) Competitive Marketing With the introduction of DeWalt

line in Europe and Japan, B&D’s competitors will certainly take notice.

Therefore, it is very important that the global strategy takes into account

competitors’ moves. It’s highly critical that coordinated efforts must be

seamlessly established with sales, marketing, manufacturing, and financial

departments before the roll out of DeWalt product line. Given Bosch’s stronghold

on the European market and Hitachi and Makita on the Japanese market, the

competitors could easily launch a price war against market expansion. One way is

to aggressively market their products at lower prices and leveraging their

distribution channels to prevent or derail the introduction of DeWalt. In

addition, B&D may see negative advertising campaigns promoting

"domestic" products versus American products. As such, the best

approach to counter competitors’ moves is to offer a "value priced"

product supported by excellent facilitating and supporting services. Besides

marketing Dewalt’s brand image, an aggressive marketing program promoting the

product reliability and excellent customer service will counter any effective

promotions from competitors. Furthermore, to ensure the effectiveness of the

marketing effort, B&D needs to make sure that the infrastructure for its

products and supporting services can deliver the promises to the customers. Some

supporting services that will be bundled into B&D’s products and offerings

are: ? Establish customer support and sales centers in key locations in Europe

and Japan. This is essential especially in Japanese market where the preferred

custom is the establishment of a trusted business relationship. The presence of

local agents or distributors can be very helpful in providing this support. The

customer support and sales centers will be coordinated with the establishment of

distribution channels. ? Establish warranty programs that meet or exceed

competitors’ offerings; ? Establish timely product repair and replacement

policies; ? Develop an attractive package for B&D’s products; ? Guarantee

delivery dates and arrival times for shipments and the conditions of the

product. Shipments should arrive at the agreed time, and should be well packed

and undamaged upon arrival. ? Establish a separate hot line for customer

complaints, product inquiry, product information, etc. This will allow B&D

to get feedback from its customers and continuously improve its product

development and supporting services. All of the above supporting services will

be met through B&D’s distribution channels in Europe and Japan. ii) Europe:

Europe is geographically a large market with diverse cultures. However the

countries in Europe are well connected through various modes of transportation.

B&D will employ multiple assembly plants in Europe to serve the entire

continent. The existing Elu brand in Europe is bringing in less than 10% of

B&D Europe’s revenues in the Professional segment. DeWalt in Europe will

replace the Elu brand completely. Furthermore, since the B&D professional

and B&D Proline range of products are not performing well, they will be

eliminated and replaced with the DeWalt product name. This means that DeWalt

will become the product for the professional segment, and B&D will be the

consumer market name. B&D has decided to implement this strategy to prevent

confusion amongst its consumers by not offering multiple competing product

lines. B&D will use a multiple channel strategy in Europe to sell DeWalt

products. They will have a direct sales force to concentrate on getting business

from the large industries where DeWalt could fit well in the

Professional-Industrial environment. B&D will also provide after sales

service and support for these customers. Exhibit 3A shows the proposed European

distribution channel. To support the Professional-Tradesmen segment, the source

of the DeWalt products will be from the three existing channels namely specialty

channels, traditional hardware channels and modern consumer channels. The

channels will have complete responsibility for the physical distribution of

DeWalt Power Tools including the service and support. The communication plan in

Europe will conform to the proposed global strategy. iii) Japan Japan poses a

different problem for B&D. Their presence in Japan is insignificant. However

there is a huge potential for introducing the professional line of DeWalt tools.

Japan also poses a different cultural barrier than Europe in terms of the living

standards and perspectives. Japan’s distribution system is complex, labor

intensive and filled with seeming redundancy. It is expensive and accounts for

much of the differential between prices in Japan and rest of the world.

Difficulties with Japanese distribution are partly socio-cultural in nature.

Many Japanese are hesitant to disrupt longstanding relationships with suppliers.

The customers are concerned about timely shipments or lack of after-sales

service ability. B&D will research the market thoroughly to determine areas

where they can be successful. Due to the close-knit nature of business circle in

Japan, B&D will form a partnership with a firm who will be their focal point

for sales and distribution. The advantage in doing so is the firm’s knowledge of

the local market, their selling techniques and existing business relationships

with potential customers. B&D will help the agency setup offices in

different locations in Japan. It will market the DeWalt products through a

direct sales-force to industries. The sales/distribution firm will

simultaneously sell the DeWalt product line within the Professional-Industrial

market segment and cater to the service needs of these industries. In addition

this firm will also market the DeWalt product line to local hardware stores and

assist B&D in training the store personnel in effective sales of B&D

tools. Exhibit 3B shows the proposed distribution channel in Japan. The

challenges for B&D in Japan are to increase brand recognition and leverage

the distribution network and strategic alliances. The communication strategy in

Japan will concentrate on increasing brand recognition and consumer value

optimization. Specifically: ? B&D will work with the distribution channel

to provide informational seminars and promotional demonstrations. ? As a

cost-effective means of reaching mass consumers, B&D will take part in

industry-specific trade shows. ? B&D will work with strategic partners and

local advertising agencies to coordinate advertising campaigns. For instance, 21

billion passengers use commuter transportation in Japan annually. To promote

visibility of the DeWalt products, B&D will use "transit

advertising". Following is a tabulated set of recommendations and

associated timeframes: Recommendations Implementation Plan/Responsible Party

Timeframe 1 Combine Professional Product Lines in Europe Market DeWalt as the

Professional Product/ Marketing & Sales task force Immediately 2 Maximize

Market Potential Offer competitive prices, value, variety of products/ Product

Manager/Sales task force Immediately 3 Maximize Market Potential Provide Sales

and Customer service support to distribution channels/ Sales task force &

manufacturing Immediately 4 Use Distribution Channels to their potential Use

existing assembly plants Europe to centralize manufacturing and assist in

implementing JIT delivery systems / Manufacturing & Product Manager

Immediately 5 Employ hybrid push pull communication strategy Advertise, provide

informational seminars, demonstrations / Sales & Marketing Task force

Immediately 6 Compile data and interpret Japanese market Form a task force that

consists of a representative from manufacturing, marketing, sales, and product

management to study and interpret the data.