Black And Decker Globalization Strategy 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) saw the potential in 1994 to increase the companies market share through worldwide sales of B 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’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 must leverage its brand identity and marketing strategies employed in the US and also capitalize on their established quality and pricing. B 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 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 must aggressively employ a hybrid push-pull communication strategy to be successful in the two markets. This will enable B to get the DeWalt name out to more customers in a diverse geography. While Elu has performed better than B Professional and B Proline product lines in the European market, its lack-luster revenues compel B 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’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’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. Bosch was considered the standard of excellence in the European industry. Both Bosch and B held approximately 30% of the consumer market, while in the professional market Bosch held 30% and B held less than 10%(see Exhibit 1a and 1b for market shares). In the professional power tools market, B offered three product lines – Elu, B Professional and B Proline. Elu was a Swiss company purchased by B 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 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 held a slim 2% of the market (see Exhibit 1c). Introducing the DeWalt product line in Japan poses a bigger challenge for B than US and Europe. The DeWalt product line has never been sold in Japan, there is no brand recognition and B lacks knowledge of the distribution infrastructure.
However, B cannot overlook the enormous market potential in Japan. Hitachi and Makita have succeeded globally. By entering Japan B has an opportunity to track their performance and anticipate their movements. 3. SCENARIOS/OPTIONS i) Scenario/Option #1: Launch a marketing strategy to capture the Professional Power Tool market share with the DeWalt line of products in Europe alone. Venture into the Japanese market pending input from a task force sent to Japan to evaluate the Professional Power tool market. By focusing on the European market alone, B can solidify its present market share in the consumer market, while building the Professional Power Tool market.
The consumer base, and distribution channel in Europe is similar to the US. B will use same implementation strategy for DeWalt in Europe as that in the US. B’s aim will be to increase its market share in the Professional Power Tool segment to 30% within 2 years. B&D will phase out its existing industrial product lines – Professional, Proline and Elu and launch the DeWalt brand. It already has distinct lines of distribution and communication in place. B&D will leverage this position to effectively reach the professional consumer.
This will solidify the DeWalt name through price, quality, and service. Additionally, B&D will have a task force working in Japan to gain a better perspective of the markets, cultures, customers, and strategies to effectively capture the power tool market. ii) Scenario/Option #2: Position the DeWalt line of Professional Power Tools in Europe, keeping Elu in place. Launch a B&D line of Consumer Power Tools and a DeWalt line of Professional Power Tools in Japan. As in the first option, implementing a line of DeWalt in Europe will be a seemingly easy task because of the presence of B&D consumer product line.
Keeping Elu will eliminate the global image of DeWalt but will provide the consumer with options. It will be up to B&D, to continue to build customer loyalty with quality products, value pricing, and premium service. B&D expects to increase its combined market share to 25% in 2 years, but realizes that DeWalt’s share will be diluted due to Elu’s and vice-versa. The goal will be to capture 20% of the professional power tool market within 5 years. iii) Scenario/Option #3: Simultaneously, launch DeWalt products in European and Japanese markets; eliminate the Elu product line in Europe. B&D gained experience by launching its DeWalt line in the US, Latin America and Australia.
B&D will leverage the knowledge gained from marketing campaigns in these countries to create a common a global strategy. B&D will phase out its existing industrial product lines – Professional, Proline and Elu and launch the DeWalt brand. In taking this approach B&D will be able to offer highly functional quality products with lower prices by focusing on customer homogeneity in Europe. The goal will be to capture 30% of the professional power tool market within 2 years. For Japan, B&D will enter into a strategic alliance with a local sales/distribution organization to overcome market barriers.
The goal will be to capture 20% of the professional power tool market within 5 years. 4. RECOMENDATIONS/IMPLEMENTATION i) Common Global Marketing Strategy B&D will implement a global strategy to market the DeWalt product line. The main objective of this strategy will be to increase B&D’s market share in Europe and Japan through worldwide marketing of the DeWalt line of products (Scenario 3). The common components of the strategy are discussed first, followed by local caveats. a) Product/Pricing Plan B must maximize its market potential by implementing realistic pricing objectives.
B’s competitors offer a multitude of product variations. The competitive offerings offer consumers a variety of products at various prices. The DeWalt product line will be introduced internationally with the best available standardized options. Through the practice of bundling the best product capabilities, B&D will be able to offer low cost superior industrial tools. Economies of scale in production will allow B&D to become the low cost provider of power tools in the international market.
The low cost and high functionality will result in high value perception among B&D’s consumers. Exhibit 2 illustrates that B, with a smaller product line, can offer products with better performance at lower prices as compared to its competitors, who have a multitude of products. By pricing its products below competitors, B may elicit competitive price wars within the industry. This could have a detrimental effect on B’s global market strategy and its bottom line. B&D will take measures to protect itself from anti-trust lawsuits through competitive pricing. b) Distribution Strategy B&D’s worldwide distribution strategy for the DeWalt product line will be based on the principle of delivering the product to the right customer, at the right time and at the right cost. In order to implement such a strategy, B will make the appropriate investments required in the development of infrastructure, personnel and product. As part of the infrastructure, B will build an assembly plant for DeWalt products in Europe and in Japan. The location for the assembly plant will be chosen so as to facilitate transportation of the component parts from B’s manufacturing plants in the US.
This will hasten the process of meeting the requirements of the local markets. The …