The Black & Decker Corporation - Power

Tools Division
Case Analysis
Ahir Mahmood
1009429129
Professor Tarun Dewan

Executive Summary

The invention of power tools in the late 1800s has proven to be an asset around the globe
due to its purpose of reducing human effort when engaging in physically demanding
tasks such as cutting, drilling, sanding, etc. So, a corporation that specializes in
manufacturing power tools is Black & Decker (B&D) which was founded by Duncan
Black and Alonzo Decker in 1910. Then in 1917, the founders secured their first patent
for manufacturing the world’s first portable power drill featuring a pistol grip and trigger
switch. Afterward, in 1990, B&D became the most massive producer of electric lawn and
garden tools, residential security hardware, power tools, and power tool accessories. By
1990, this strong position in the industry enabled B&D to achieve $4.8 billion in sales
overall and approximately 50% of product revenues came from international sources.
However, a competitor of B&D known as Makita had developed a strong presence in the
Professional-Tradesmen segment by the late 1990s which provoked the senior
management in B&D to decide as to how B&D could challenge Makita for leadership in
this segment. These decisions consisted of getting behind the B&D name with sub-
branding, harvesting Professional-Tradesman channels, and dropping the B&D name
from the Professional-Tradesman segment. This proves that this is a decision case
because we must evaluate each alternative decision and choose one that caters to the most
prosperous outcome for B&D.

SWOT Analysis

Strengths
 The very knowledgeable purchase-
decision influencers in the
Professional-Industrial segment
viewed B&D as offering high-
quality, differentiated products and
excellent service.
 B&D has achieved and maintained
the number one position for market
share in the Consumer and
Professional-Industrial segments.
 B&D’s strong brand recognition
and image in the Consumer
segment has helped it attain the
number one position in the
marketplace with nearly a 50%
share over suppliers such as Skil,
Craftsman, Wen, etc.
 The B&D franchise is mainly
Weaknesses
 Success for B&D was not ensured
because after a 19% increase in net
revenue to $1.2 billion in 1980 the
sales stagnated at this level through
1983.
 For a five-year period from 1981-
1985 the corporation incurred more
expenses than revenue which
triggered a loss in money for B&D.
 In 1989, B&D acquired Emhart
Corporation for $2.8 billion which
increased B&D’s long-term debt to
$4.2 billion and that accounts for
84% of B&D’s total capital.
 B&D’s strength in the Consumer
segment has made a decent amount
of tradespeople view all B&D
products as for use at home rather
 strong in cordless vacuums, irons,
and toaster ovens with each one
holding over a 50% market share in
the United States.
 An independent survey of 6000
brands displayed that B&D’s brand
strength is ranked number seven in
the United States and number
nineteen in Europe.
 B&D conducted extensive field
tests by removing colors and labels
from B&D products and
competitor’s products to be used in
work situations for one month
which proved to be successful since
B&D’s products were highly
competitive in terms of product
quality in the Professional-
Tradesman segment.
Opportunities
 B&D has the reputation of being
the first company to receive patent
approval for portable power drills
which increases brand recognition.
 B&D prioritizes product
development by heavily investing
in research and development of
product quality which builds
B&D’s reputation.
 B&D’s 50% of product revenue
comes from foreign countries,
which shows that B&D has huge
potential for building its brand into
international markets.
 The Professional-Tradesmen
segment has the biggest potential
for sales and expansion due to it
than on the job.
 A study conducted on the
perception of brands by
tradespeople proved that only 36%
and 43% would be proud to own a
B&D product in contrast to
Milwaukee and Makita which are
86% and 78%.
Threats
 By late 1990, Makita had a 50%
segment share in the Professional-
Tradesman segment and B&D had
only 9%.
 All three market segments contain
a low growth rate for B&D which
can allow competitors to acquire
more market share than B&D.
 Individuals were asked to take a
survey about whether or not a
brand is one of the best and B&D
got the lowest result of 44%, unlike
Milwaukee and Makita which are
80% and 67%.
 having the highest growth rate of
9% compared to the other two
segments.
 According to the Professional
Power Tool Product Assessment,
certain products such as miter saws
and belt sanders are undeveloped
which allows B&D to increase
profitability by improving these
products and relaunching them into
the market.

Segmentation, Targeting, and Positioning (STP)

Segmentation

Professional- Professional- Consumer

Industrial Tradesmen
 Has a size of $550  Has a size of $420  Has a size of $530
million and accounts million and accounts million and accounts
for $110 million in for $35 million in for $250 million in
revenue from 1990 revenue from 1990 revenue from 1990
for B&D. for B&D. for B&D.
 Has no growth rate.  Has the fastest  Has a growth rate of
 This segment is growth rate of 9%. 7%.
composed of  This segment is  This segment is
commercial mainly composed of comprised of
contractors that individuals who individuals who
execute large make a living with purchase tools with
projects (e.g., office their tools. the sole purpose of
buildings, bridges,  The individuals their own home use.
etc.) and company frequently  These individuals
assembly lines (e.g., purchased B&D’s purchased tools
automobile plants). tools from retail from mass
 Distributors such as distribution centers merchandisers such
W.W. Grainger of such as Home Depot as Wal-Mart and
 Skokie and more and Lowe’s, and Kmart, and
provide technical hardware stores such hardware stores.
expertise and service as Ace.
for this segment.  Buyers in this
segment are
concerned about
product and brand
image.

Targeting

B&D should target the Consumer segment in the market because of its size, profitability,
and reachability. First, the Professional-Industrial segment has the biggest size of $550
million. However, when measuring the size of a segment we must consider its future
growth potential as well. So, when factoring in growth rates we find that the Professional-
Tradesmen segment has the highest one. However, the difference between the growth rate
in the Professional-Tradesmen segment and in the Consumer segment is only two
percent, which is insignificant. Also, the size between the Professional-Industrial segment
and the Consumer segment is only $20 million which is not concerning. So, in terms of
size, the Consumer segment is the biggest. Second, for profitability, the most profitable
segment is Consumer because the consumer segment accounts for 63.29% of the revenue
collected by B&D in 1990. Also, the Professional-Industrial segment accounts for
27.85% of the revenue collected by B&D in 1990 which is less than 63.29%.
Furthermore, the Professional-Tradesmen segment had a profitability of 8.86% in 1990,
which is close to zero. Finally, the Consumer segment is the most reachable because mass
producing B&D products and distributing those products in bulk among huge
merchandisers such as Wal-Mart and Kmart, and hardware stores are less complicated.
This is because the Professional-Industrial segment has lower reachability due to the
requirement of technical expertise and service provided by distributors. Also, the
Professional-Tradesmen segment has lower reachability because of the biased perspective
tradespeople have toward B&D products which consists of B&D products being
beneficial at home but not on the job.

Positioning
B&D’s greatest weakness is the mispositioning of its products through a lack of
differentiation among its three segments and improper distribution. There is a lack of
differentiation among B&D’s three segments because all professional-grade tools are
differentiated from each other by color. However, B&D’s colors for the consumer-grade
tools and professional-grade tools are identical which creates confusion for consumers
and tradespeople. This is because individuals from both segments can purchase products
from each other's segments which is caused by the lack of differentiation and improper
distribution. The improper distribution is caused when the Professional-Tradesmen
segment and the Consumer segment products are distributed to the same locations. So,
the only locations where both types of products are sold simultaneously are hardware
stores. This distribution would be fine if B&D differentiated its products from
professional-grade to consumer-grade. However, since differentiation is non-existent, and
the distribution of products is poorly executed it results in the mispositioning of B&D
products. Therefore, only distributing professional-grade tools to hardware stores and not
consumer-grade tools can fix improper distribution. Also, the application of distinct
colors toward professional-grade tools can assist B&D in differentiating itself once again.

Evaluation of Options

Option 1: Harvest Professional-Tradesmen Channels

Pros
 By focusing on B&D’s two strongest segments can increase the growth rate in
those markets which can also increase profitability.
 The focus directed toward the two strongest segments can assist B&D in
maintaining and strengthening its position as a market leader for both segments.

Cons
 Prioritizing profitability in the Professional-Tradesmen segment by sacrificing
focus on market share can lead to competitors acquiring more market share than
B&D which would decrease profit in the long run and make our initial problem of
Makita’s segment share of 50% worse.

Option 2: Get Behind Black & Decker Name with Sub-Branding

Pros
  Can change the biased perspective tradespeople have towards B&D products
which consists of B&D products being useful at home rather than on the job.
 This positive shift in the perspective tradespeople have towards B&D can increase
the number of sales and market share in the Professional-Tradesmen segment.

Cons
 The objective of investing to build market share is not guaranteed because it
requires B&D to increase market share from 9% to 20% in three years in the
Professional-Tradesmen segment with a major share take-away from Makita.
 Numerous attempts at rebuilding the B&D name in the Professional-Tradesmen
segment have proven not to be successful, which can only harm B&D by wasting
resources.

Option 3: Drop the Black & Decker Name from the Professional-
Tradesmen Segment

Pros
 DeWalt has a higher probability of becoming a powerful brand name than B&D
because DeWalt achieved a 70% awareness rating and most people who know
DeWalt have positive reactions to it.
 DeWalt attained 63% from tradespeople unlike B&D which attained 44% from
tradespeople in the “Is One of the Best” survey.
 58% of tradespeople would have purchase interest if the products in the
Professional-Tradesmen segment were branded as “DeWalt-Serviced and
Distributed by Black & Decker.”
 This option targets our main problem of not acquiring an adequate amount of
market share in the Professional-Tradesmen segment due to the biased perspective
tradespeople have toward B&D products.

Cons
 The objective of investing to build market share is not guaranteed because it
requires B&D to increase market share from 9% to 20% in three years in the
Professional-Tradesmen segment with a major share take-away from Makita.
 If this option fails to meet requirements, then reviving the B&D brand name will
be a tedious and unpleasant experience.
  The humiliation of dropping the brand name might make B&D lose brand
credibility due to it being the manufacturer of the world’s first portable power drill
and this could negatively impact the Professional-Industrial segment and the
Consumer segment.

Conclusion

The best decision to solve B&D’s problem of low market share in the Professional-
Tradesmen segment is option three. This is because option three solves B&D’s lack of
differentiation in the Professional-Tradesmen segment. So, differentiation is achieved by
B&D when it brands itself with the distinct color of industrial yellow which is bound to
be successful. This is because Makati and Milwaukee have already implemented this for
their professional-grade tools with distinct colors which made differentiation achievable
for those companies. Also, B&D can direct its resources to update the features of
particular products that were considered weak/underdeveloped, or B&D can abolish these
products from the market since none of those products will increase the market share for
B&D in Professional-Tradesmen segment.