Black And Decker Analysis 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. Immediately /Ongoing study DeWalt in Europe and Japan Marketing and Product Management Fall Semester 1998 Professor Robin Chase By

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