Black And Decker Essays - Marketing, DeWalt, Market Penetration

Black And Decker 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