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Essay topics, essay writing: Welch Leadership - 1627 words

Executive SummaryThis report analyzes Black & Decker's marketing problems and gives recommendations on marketing strategy in consideration of the possible implication and risks involved. The focus will be on Professional Tradesmen market segment under the Power Tools Division. Growing at 9% in 1990, it is the fastest growing market in the Power Tools market segment. However, B&D only managed 9% market share as the market leader is Makita Electric of Japan, having 50% of the market share followed by Milwaukee at 10%. B&D research concludes that product quality is not the issue as its products in Professional Tradesmen are highly competitive with its competitors. The issue is perception of B&D brand, often perceived by trade's people as good only for Consumer market rather than Professional market. Moreover, B&D Professional Tradesmen products are not highly differentiated in color, black / charcoal grey, often the favorite color used by competitors in Consumer's market.

B&D's also do not have big market share in all of Professional Tradesmen distribution channel especially the Home Centers. Home Centers like Home Depot and Home Club experiencing rapid development and one of the reason's of Makita's success for being the market leader.The recommended strategy is to use a new brand name, DeWalt, one of existing B&D brand line in stationary woodworking equipment. B&D research shows the trades people are aware and receptive to the brand. Another recommendation is to multi brand existing B&O product line, focusing on strong product line. The risk would be using extra resource to promote new brand as well as promoting multi brands.

It is recommended that B&D have strong color product differentiation between its Consumer products and Professional Tradesmen. B&D must also seek ways to improve its distribution channels, focusing on Home Centers and taking advantage on conflicts by retailers with Makita, the market leader to improve its sales in the distribution channels.1.0 Introduction The purpose of this report is to analyze Black & Decker's marketing problems and give recommendations on the marketing strategy in consideration of the possible implication and risks involved. The focus of this report will be on the tradesmen market segment under the Power Tools Division. "Tradesmen" segment are electricians, plumbers, carpenters, framers, roofers and general remodelers working in residential constructions. This report are derived from information that are given, therefore the limitation would be on the data made available. As such, the competitor's financial and marketing performance is not taken into consideration and whatever data available are assumed correct and current. 2.0 Situation Analysis:2.1 The Power Tools Market in United States (US)In 1990, portable power tools for U.S market is $1.5 billion, offering products for consumers, professional tradesmen and professional industrial.

Consumers market accounted for $530 million or 35% of the overall market, meanwhile professional tradesmen is $420 million (28%) and the professional industrial is $550 million (37%) Segmentation of the market was as shown in Figure 2.1.1Figure 2.1.1: US Market Segmentation for Power tools in 1990Among the three segments, Professional Tradesmen registered the highest growth, at 9% compared to 7% growth rate for Consumers and no growth for Professional Industrial segment. US Power tools market growth by segment was shown in figure 2.1.2Figure 2.1.2- US Power Tools Growth by Market Segment for 19902.2 Black and Decker (B&D) In 1990, B&D sales reached $4.8 billion with nearly 50% of product revenues are outside of United States (US). Out of the $2.4 billion revenues in US, the Power tools and Accessories division of B&D contributes to 29% compared to the other 4 main products group. B&D sales by products group was shown in figure 2.2.1 Figure 2.2.1: B&D 1990 sales by product groupB&D participated in all three market segment of power tools that is the professional industrial, professional tradesmen and consumer market. B&D brand of power tools hold 26% overall market share or $395 million of the $1.5 billion US power tools market B&D's Consumer's market registered the highest revenue of $250 million or 45% market share in 1990.

In Professional industrial, B&D has $110 million in revenue or 20% market share and the lowest is Professional Tradesmen, at 9% market share or $35 million in revenue. Comparison between B&D market share in the three segments against US overall market segment was shown in figure 2.2.2.Figure 2.2.2: B&D Revenue by Segment Compared to U.S Market Segment for 19902.3 Professional Tradesmen - Market ShareProfessional tradesmen revenues of $35 million in 1990 for B&D translated to about $3 million in operating income. Gross margin is 35% but SG+A costs were about 25%. The market leader in Professional Tradesmen's market is Makita Electric of Japan, having 50% of the market share followed by Milwaukee at 10% and thirdly B&D with Ryobi having 9% each. The Professional Tradesmen, Power Tools market share for 1990 was shown in figure 2.3. Figure 2.3: Power Tools, Professional Tradesmen Market Shares for 1990*Manufactured in part by B&D and marketed by Sears2.4 Professional Tradesmen - Distribution ChannelTwo Steps recorded the highest sales percentage at 40% and in second place is Home Centers at 25% sales.

Warehouse Home Centers were 15% and Membership Clubs were 10% with Farm Outlets having 5%. Home centers were growing importance in distribution of Professional Tradesmen's product. The largest single outlet of professional tradesmen tools sales in 1990 was the Home Depot at $5 million, second was Home Club at $3.5 million compared to the largest of the Two Steps, Ace and ServiStar at $2 million each. Home Depot is the largest of the rapidly growing collection of home improvement chain stores. With 145 stores and $3.8 billion sales in 1990, its pricing is 30% less than traditional hardware store and superior customer service.

Makita's rise to marketplace dominance was aided by the rapid development of this type of distribution.Figure 2.4.1: Professional Tradesmen - Sales by Channel Type for 1990The market leader, Makita held substantial sales market shares in all channel type meanwhile B&D only have 20% in Warehouse Home Centers and less than 10% in the other types with none in Membership Clubs.Figure 2.4.2: Professional Tradesmen - Makita / B&D Market Share by Channel Type for 1990In Professional - Tradesmen tools, the three main product type are Drills product with 30% market share, Saws product having 35% market share and Sanders product having less than 15% market share.Figure 2.4.3 - 1990 Professional - Tradesmen tools Market Share by Product TypeWithin the product type, in product for Drills, 16% is for cordless drivers drill and 13% is for corded drill. In product for Saw, 14% is for Circular saw, Miter Saw is 11%, Reciprocating Saw is less than 10% and Jig and Chop less than 5% each. In product for Sanders, Finishing Sanders is less than 10% and Belt Sanders is less than 5%Figure 2.4.4 - 1990 Professional - Tradesmen Tools Market Share by Product Type and Product LineIn product for Drills, Makita is the market leader having 80% market share in cordless drivers and 50% in corded. B&D comes in second with less than 10% in cordless drivers and 25% in corded followed by Milwaukee less than 5% in cordless and 20% in corded.Figure 2.4.5 - 1990 Market Shares of Professional - Tradesmen Tools for Drills (30%)In product for Saws, again Makita is the overall market leader, having 55% in circular saw, 45% in miter saw, 30% in reciprocating saw, 25% in jig saw and 50% in chop saw. Milwaukee is equally strong in reciprocating saw, having 30% market share (at par with market leader) followed by 15% in circular saw, 15% in jig saw, less than 5% in chop saw and none in miter saw.

B&D market share consider average, quite close in reciprocating saw at 25% market share, second in chop saw (20%) and miter saw (15%) but less than 10% in circular saw and jig saw. Skil is having 20% market share in circular saw. Figure 2.4.6 - 1990 Market Shares of Professional - Tradesmen Tools for Saws (35%)In Sanders product, Makita is very strong in finishing sanders, having 60% market share with Milwaukee having less than 5% and B&D having less than 10%. However, in belt sanders, Ryobi is the market leader, having 45% of market share followed by Makita 20% and none for Milwaukee and B&DFigure 2.4.7 - 1990 Market Shares of Professional - Tradesmen Tools for Sanders (>15%)Product development had been a B&D focus since 1985 and B&D tools were highly regarded in the demanding Professional Industrial segment. Figure 13 shown below is a summary of the results for all 14 major Professional Tradesmen products.

Most of B&D products in this segment pass the quality test, indicating that B&D's product quality was very strongly competitive in the large majority of product categories.Figure 2.4.8- Black & Decker Product Assessment Rank Portfolio 1990 Size Weak / Competitive Leadership ($millions) Undeveloped 1 Cordless Drills 67 2 Circular Saws 58 3 Corded Drills 56 4 Miter Saws 44 5 Finishing Sanders 36 6 Angle Grinders 23 7 Reciprocating Saws 21 8 Routers/Trimmers 19 9 Scruguns 16 10 Belt Sanders 16 11 Jig Saws 12 12 Hammers/Drills 11 13 Chop Saws 11 14 Impact Wrenches 7 S.W.O.T Analysis on B&DStrength Weaknesses Opportunities Threat No 1 share position in Consumer and Industrial segments Independent survey of 6,000 brands, B&D is no.7 in U.S and No.19 in Europe, top ten in U.S  Household products: Cordless vacuums, irons and toaster ovens, each having 50% market share in U.S B&D product quality was very strongly competitive in majority of product categories Buyers agree B&D easy to get service  Brand perception for Tradesmen segment buyers is second lowest B&D tools was not highly differentiated in color, Competing brands were more highly differentiated in color Survey indicates B&D tradesmen awareness among trades people is the highest (98%)  Long term debt is $4.2 billion about 84% of total capital  Retailers not uniformly positive on Makita, regarded as arrogant and dictatorial Makita offers no channel protection, selling the same product throughout a range of outlet including the discounted Membership club Milwaukee 10% and Makita 5% premium above Black & Decker  Makita held 80% share in cordless drill and 50% share overall in tradesmen segment Makita was 50% cheaper than Japan market Makita position with trades people was strong Milmaukee is having 10% of tradesmen market share Makita channel distribution via membership club is 85% Tradesmen perception Makita provided good baseline option on all categories3.0 Identifying Key Issues from S.W.O.T ...

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