I. Background and Problem Identification
Black and Decker (B&D) was founded in 1910 by Duncan Black and Alonzo Decker. By 1917, B&D had world’s first patent in portable power drills. Since then, B&D has been the world’s largest producer of power tools and power tools accessories. The power tools market in 1990 in the US mainly comprised of three segments-Professional Industrial Tools (PI), Professional-Tradesmen (PT) Tools and Consumer tools. B&D was a market leader in America power tools industry worth $1.5 Billion, with a share of 30%. It was number one in PI and consumer segments with a share of 20% and 45% respectively. However, its share in the fastest growing market segment of Professional-Tradesmen Tools was only 9%. Makita- a Japanese company had captured 50% share in PT market segment within 10 years of its introduction in the US market. Considering the dismal performance in PT segment, the vice president of sales and marketing, Joseph Galli, is faced with a challenge to change the strategy in P-T market segment to increase sales form 9% to nearly 20% in three years, with focus on taking major share away from Makita. Three options available with Joseph Galli for making a decision are: * Harvesting P-T market segment
* Sub-Branding in P-T market segment
* Re-Branding in P-T market segment
It is important to first identify the issues that are affecting B&D’s performance in the Professional-Tradesmen power tools segment. II. Situation Analysis
* Customers: The customers in Professional-Tradesmen market segment want more durable and rugged power tools than Consumer Users market segment. Brand perception and differentiation plays an important role in buyer decision making in this segment. Tradesmen take pride in their work and brand of tools they bring to work. They are ready to pay premium (5% to 10%) for better quality products in order to differentiate themselves form consumer user group. * Competition: B&D’s major competitors in P-T segment are Makita and Milwaukee. They charge price premium of up to 5% and 10% (respectively) over B&D in this segment for their products .Makita has no presence in Consumer segment but has 50% of the share in P-T segment. Makita also offers baseline options in all major categories in the P-T segment which is preferred by Tradesmen. Milwaukee is considered to be one of the best brands in P-T segment (80% agreement) compared to Makita (67%) and B&D (44%). Makita sold its products in Teal color whereas Milwaukee had red color for its products compared to charcoal-black colored tools sold by B&D. * Company: Black & Decker has highest awareness in P-T segment (98%) compared to its major competitors Makita (90%) and Milwaukee (95%). However, in spite of good quality products in P-T segment (based on market survey -table E), B&D is considered to be a consumer brand and has one of the lowest brand perception in P-T market segment (table C). B&D enjoyed better rating over Makita in ‘easy to get service’ and ‘stands behind its products’ categories. B&D is number one in Professional- Industrial and Consumer User segments but these segments are growing slowly. * Collaborators: There are major 5 channels of distribution channels for PT segment. These are Two Step, Home Centers, Warehouse Home Centers, Membership Clubs and Farm outlets. Two Step and Home Centers account for 65% of the distribution channel. Makita has majority share in these two channels as compared to B&D. B&D is not present in membership clubs which is a stronghold of Makita (85% share). Also as per the case study, Makita’ rise to market dominance was aided by rapid development of Home Centers such as the Home Depot. Based on the above 5-C or situation analysis, the problems faced by B&D in P-T segment can be summarized as below: * Brand Perception: First of all, the B&D suffers with perceived poor brand quality among the...
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