Blacker and Decker Corporation: Power Tools Division

Blacker and Decker Corporation: Power Tools Division

Introduction

        Black and Decker is a US based power tool manufacturer that has gained a leadership position in the overall power tool market, specifically in the distinct Consumer and Professional-Industrial segment of the market. Despite the company’s strong brand image and reputation for quality products and services. Black and Decker suffers from only having a 9% share in the Professional Tradesman segment. This is a concern since the Professional-Tradesman segment is the fastest growing segment in the power tool industry with an estimated growth rate of 9% compared to the Consumer and Professional-Industrial segments 7% and 0% respectively. As a result of being in such a poor position in the Professional-Tradesman segment the company must now decide on whether to only focus on the Consumer and Professional-Industrial Segment or drop the Black and Decker name and reposition themselves with a new brand name within the segment. Therefore, this case will be approached as a decision case analysis.

5C’s Analysis

Company:

        Black and Decker is currently the world largest producer of power tools and a variety of other products such as power tool accessories, electric lawn, garden tools and security hardware. The company sells products in all three of the segments that make up the power tool market. They consist of the Consumer segment, Professional-Industrial segment, Professional-Tradesman segment. Aside from power tools in the company also generates sales in a variety other product groups, which include household products and outdoor products.

        Within the induvial segments Black and Decker holds a 45% of the market share in the Consumer segment approximating to roughly $250 million of revenue in 1990. In the Profession-Industrial segment which Blacker and Decker own roughly 20% of the market share and an estimated revenue of $110 million. The third segment of the market includes the Professional-Tradesmen segment where the company holds only 9% of the market share with a reported revenue of $35 million in 1990.

        Through independent surveys done of 6,000 brands is it evident that Black and Decker has a strong brand image in the global market being ranked 7th in the US and 19th in Europe. With almost 50% of the company’s revenue being generated from outside the US it further emphasizes that the company is not only recognized for its quality in the US alone. Despite the company’s brand image being seen as high quality it is clear that the consumers of the Professional-Tradesmen segment do not view the company as such and this is possibly due to a misconception.

Collaborators:

        When it comes to collaborators each of the segments are supplied through a different set of distribution channel. The Consumer segment is reached through retail chains such as Wal-Mart and Kmart where consumers typically go to purchase home use products. Products for the Professional-Industrial segment are distributed through industrial companies such as W.W Grainger which sell the power tools to commercial contractors.  The Professional-Tradesmen segment is sold through distribution channels, such as Home depot and Ace Hardware.

        Through Exhibit 2 we can see that Black and Decker is performing poorly in the channels that make up 65% of the professional market, which is a big contributor to their overall lack of market shares in the Professional-Tradesmen segment. Furthermore, it is noted that Home Centers are becoming an increasingly popular destination for consumer in the Professional Tradesmen segment. Therefore, it is crucial for the company to form better relations with these Home Centre companies.

Customers:

        The customers in the power tool market can be divided between nonprofessional users (consumers) and professional users. We can also further divide the professional users between Tradesmen, which are residential contractors and Industrial which are commercial contractors. Although they are from different segments customers of the market have grown accustomed to using colour as a key differentiator between professional grade products and consumer grade products. Professional grade products are typically a very vibrant and bright colour that pops up in your face at first glance, whereas consumer grade products are mostly charcoal grey. This is another major factor as to why Black and Decker is doing so poorly in the Professional-Tradesmen segment. The company also uses charcoal grey as the colour for their professional grade products, which causes the products to be perceived as a consumer grade product due to its colouration.

Competitors:

        The company’s largest competitor is currently Makita Electric, which only entered the US market a decade ago, but has already become the leader in the Professional-Tradesman segment of the market holding roughly 50% of the market share and 80% specifically in the cordless drills. This makes Makita an enormous threat as no other company in this segment has been able to gain over 10% of the marker share.

        Aside from Makita the company is in tight competition with Milwaukee Electric in the Professional-Industrial segment. Milwaukee is a privately held firm that only sells in the high end of market with the same amount of market share as Black and Decker with each company having 20% of the market share.

        At the lower end of the market Black and Decker is in competition with companies such as Skil, Craftsman, Wen, and various private label products with an overall combined market share of roughly 50% of the Consumer segment.

        Competitor Strength: If we analyze the strength and the weakness of the competitors, we are able to see that Makita has a price advantage for its products in the US market. As mentioned in the case Makita prices on some products were less than half of what its sold in Japan. A key reason for this could be the fact that Makita’s products are imported over from Japan where production and labour cost are potentially cheaper than what they are in the US. Even though Black and Decker’s products are cheaper than Makita’s the company still has the advantage due to its pricing strategy.

        A particular advantage that Makita, Milwaukee and other competitive brands have over Black and Decker is their attention to colour differentiation as mentioned earlier. Black and Decker’s power tools are all sold in either charcoal grey or black regardless of the segment the company is targeting. Competing brands have notice the attention consumers to pay colour and have used it to make their professional grade tools much more distinctive. An example would be Makita and Milwaukee using teal and red as the colour for their professional grade tools respectively, whereas Black and Decker uses Charcoal grey. This puts the company as at disadvantage as charcoal grey is typically assigned to consumer grade tool brands like Skil, Craftsman and Wen, as result many people assume all of Black and Decker’s products are of low end.