Please read the attached files.

Please read the attached files.


Purpose · Evaluate strategic alternatives using the Business Model Canvas · Evaluate the benefits and drawbacks of qualitative/quantitative market research tools   Topic We’ve just seen the results of Galli’s efforts to turn around B&D’s efforts in the tradesperson segment, with the launch of “Operation Sudden Impact.” This strategic direction represents a major shift for Black & Decker. In this 400-700 word writeup, please reflect on the likelihood that these efforts will succeed or fail to address the gaps in B&D’s value proposition for tradespeople. Specifically, use the following questions to guide your thinking: 1. You and your team identified a series of gaps in B&D’s strategy when we completed the Business Model Canvas. Do the initiatives in Operation Sudden Impact address those gaps? How? What remaining gaps would “keep you up at night” and how would you address them? 2. A major part of this new strategic direction is dropping the B&D Professional line in favor of a new brand: De Walt. What challenges do firms often face when embarking on rebranding efforts or updating an existing brand? How does using De Walt help to overcome these issues? 3. Other than the name change, what elements of the new value proposition would you be most excited about if you were a tradesperson? Why? 4. Additionally, we discussed the pros and cons of using market research. Part A of the B&D case revealed a gap between product performance and perceptions – blind tests of the tools demonstrated that B&D’s Professional line was largely at the top of the pack in terms of performance, but contractors perceived the quality of the product much more harshly. Does the shift to the De Walt brand help to repair these perceptions? What else might you have wanted to test before launch? 5. Other than sales performance, how else would you judge whether or not Operation Sudden Impact is a success or a failure? What else could we research and track? The Black & Decker Corporation (A): Power Tools Division The Black & Decker Corporation (A): Power Tools Division Joe, I like you guys. But, look, I give Makita 10 feet of space. I give you 10 feet of space. They outsell you 8 to 1. What are we going to do about that? In January 1991, statements like this no longer surprise Joseph Galli. Black & Decker’s (B&D) vice president of sales and marketing for power tools had heard similar sentiments expressed by many trade accounts. Makita Electric of Japan had practically taken over the professional power tools for tradesmen business since it entered the United States market a decade ago. “Tradesmen” was one of the three major segments of the power tools business—the others being “Consumer” and “Industrial.” “Consumer” represented “at home” use, while both “Tradesmen” and “Industrial” covered professional users. The distinguishing characteristic of the Tradesmen segment was that these buyers, such as a carpenter, bought tools for their own use on a job site. In Industrial, the buyer was generally a corporation purchasing tools for use by employees. By late 1990, Makita’s success in the Professional-Tradesmen segment was such that it held an 80% share in cordless drills, the single largest product category, and a 50% segment share overall. B&D had virtually created the portable power tools business in the United States beginning in the early 1900s. While it maintained the #1 market share position in the Consumer and Professional-Industrial segments, its entry in the relatively new Professional-Tradesmen segment held only about a 9% share. The trade was asking for advertising allowances and rebate money on B&D’s Tradesmen products and profitability in this segment was near zero. B&D’s senior management resolved to put an end to this “no win” game, and Galli set about developing and gaining corporate support for a viable program to challenge Makita for leadership in this segment. He could not help but see the irony of a 9% Tradesmen segment share and no profitability against the results of two recent research studies: one showing B&D to be among the powerful brand names in the world, and the second establishing B&D’s professional tools to be the highest quality in the industry. Black & Decker In 1910, Duncan Black and Alonzo Decker, Sr., started a machine shop and, in 1917, received a patent on the world’s first portable power drill with pistol grip and trigger switch; 73 years after receiving its first patent, B&D was the world’s largest producer of power tools, power tool accessories, electric lawn and garden tools, and residential security hardware. Headquartered in Professor Robert J. Dolan prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Certain non-public data have been disguised. 1 This document is authorized for use only by Jason Stornelli in 2023. Towson, Maryland, B&D’s sales reached $4.8 billion in 1990, with nearly 50% of product revenues from outside the United States. Alonzo G. Decker, Jr., was honorary chairman of the company and a member of the board of directors. He had been chairman of the board and chief executive officer from 1968 to 1975. Prior to his becoming CEO, the CEO post had always been held by his father or co-founder Black. From its roots in power tools, B&D began a move “from the garage to the house” in 1979 with the introduction of the very successful Dustbuster® hand-held vacuum. This “into the house” thrust led to the purchase of General Electric’s Housewares Division in 1984 for $212 million. As part of the sale agreement, B&D could use General Electric’s name on products only until 1987. Nolan Archibald, a Harvard Business School graduate and a former group president at Beatrice, became president and CEO in 1986. The early 1980s had been volatile years at B&D. It began the decade with a 19% net revenue increase to $1.2 billion in 1980, but sales stagnated at this level through 1983. In 1985, with net revenues at $1.7 billion, B&D posted a $215.1 million restructuring cost and a $158.4 million loss. For the 5-year period from 1981 through 1985, the company lost money. B&D’s $2.8 billion acquisition of Emhart Corporation in 1989 more than doubled B&D’s revenues and brought new strong brands, including Kwikset® locks and Price Pfister® faucets, but raised the company’s long-term debt to $4.2 billion, representing about 84% of total capital. Figure A shows the growth in B&D sales and net income since Archibald became CEO. Figure A Black & Decker Revenues and Operating Income, 1986-1990 $ in Billions 6 5.5 5 4.5 4 3.5 3 2.5 2 1.5 1 $ in Millions 550 500 450 400 350 300 250 200 150 100 50 1 1986198719881989199019861987198819891990 The five largest product groups and their percentage of B&D’s 1990 sales were: · Power Tools and Accessories 29% · Household Products 15% · Information Systems and Services 11% · Outdoor Products 9% · Security Hardware 9% 2 Household products included hand-held vacuums, irons, mixers, food processors and choppers, coffee makers, and toasters and toaster ovens. The well-known Dustbuster and Spacemaker® (under-the-cabinet appliances) brands were part of this group. The B&D franchise was especially strong in cordless vacuums, irons, and toaster ovens, each holding over a 50% market share in the United States. In 1990, 29 new household products were introduced, including the Power Pro™ Dustbuster® heavy duty cordless vacuum. The household products line was heavily supported with media advertising. The B&D name enjoyed substantial equity in both the United States and Europe. An independent survey of 6,000 brands showed Black & Decker’s brand-strength ranking to be #7 in the United States and #19 in Europe.1 This put Black & Decker in the company of Coca-Cola, Campbell’s, Walt Disney, Pepsi-Cola, Kodak, NBC, Kellogg’s, McDonald’s, and Hershey—the other firms rounding out the U.S. top ten. Power Tools Market In 1990, portable power tools in the United States was a $1.5 billion market. Products ranged from an electric screwdriver for the consumer who might use it once a year at home to heavy-duty miter saws used continually throughout the day at construction sites. Segmentation of the market was as shown in Figure B. Figure BSegmentation of the U.S. Power Tools Market Nonprofessional users accounted for $530 million or 35% of the market. In this Consumer segment, consumers bought tools at mass merchants, such as Wal-Mart and Kmart, and hardware stores for their own home use. The “for work” market was divided into a Professional-Industrial segment and a Professional-Tradesmen segment. The $550 million Professional-Industrial segment was made up primarily of commercial contractors working on large projects (e.g., office buildings, 1Landor Associates Survey. 3 bridges, etc.) and company assembly lines (e.g., automobile plants). In this segment, distributors (of which W.W. Grainger of Skokie, Illinois, with over 300 branch offices, was by far the largest) played an important role in providing technical expertise and service. For a given job, the distributor could both specify the contractor’s tool requirements and recommend specific brands. Grainger stocked more than 32,000 items to provide prompt delivery. In the Professional-Industrial segment, tools were typically purchased and owned by the company rather than the individual users. The Professional-Tradesmen segment was targeted largely at tradesmen such as electricians, plumbers, carpenters, framers, roofers, and general remodelers working in residential construction. These tradespeople were expected to show up at the job site with their own necessary tools of the trade in working condition. These buyers tended to patronize newly emerging retail distribution channels including home centers such as The Home Depot and Lowe’s, in addition to the traditional hardware stores, such as Ace. While the smallest of the three segments in 1990, at $420 million (28%), Professional-Tradesmen was growing fastest at 9% compared with a 7% growth rate for Consumer and no growth for Professional-Industrial. Some “heavy do-it-yourselfers” bought tools in the Professional-Tradesmen segment, but this segment primarily comprised people who made a living with their tools. B&D participated in all three segments. Black & Decker®-brand power tools held nearly a 30% share of the U.S. market overall.2 To serve these segments, B&D offered three separate lines and brand designations all under the Black & Decker family name, as follows: Approximate U.S. Market SegmentBrand LogoProduct Color B&D Segment Share 1990 B&D Segment Revenues 1990 Professional-Industrial · Size = $550MM Charcoal Grey20%$110 MM Professional-Tradesmen · Size = $420MM Charcoal Grey9%$35 MM Consumer · Size = $530MM Black45%$250 MM In the Professional-Industrial segment, B&D’s share was near parity with Milwaukee Electric of Brookfield, Wisconsin. Founded in 1924, Milwaukee was a privately held firm, selling only in the high end of the market at a rate of approximately $200 million per year worldwide. The second tier suppliers in the Professional-Industrial segment were Bosch, Porter Cable, and Makita. The very knowledgeable purchase decision influencers in the Professional-Industrial segment viewed B&D as offering high-quality, differentiated products and excellent service. At the other end of the performance spectrum, in the Consumer segment, B&D’s brand recognition and image helped it attain the #1 position in the marketplace with nearly a 50% share over suppliers such as Skil, Craftsman, Wen, and various private label products. 2In addition, it manufactured some professional power tools under the Craftsman label for Sears, which held an additional 4% of the Professional-Tradesmen segment. 4 B&D’s strengths in the Professional-Industrial and Consumer segments did not transfer to the Professional-Tradesmen segment, where the approximate share positions in 1990 were as shown in Table A. Table APower Tools, Professional-Tradesmen Approximate Segment Shares, 1990 Makita ~50% Milwaukee ~10% Black & Decker ~9% Ryobi ~9% Skil ~5% Craftsmana ~5% Porter-Cable ~3% Bosch ~3% aManufactured in part by B&D and marketed by Sears. Three product types—drills, saws, and sanders—represented nearly 80% of the total sales in the Professional-Tradesmen segment. The top three manufacturers offered broad product lines at approximately 175 SKUs each. Since its entry into the market in 1978, Makita had staked out leadership positions in virtually all products and distribution types within the Professional- Tradesmen segment. Exhibit 1 shows approximate shares for Makita, Milwaukee, and B&D for the largest categories in the segment. Exhibit 2 shows shares of Makita and B&D by the five major outlet types: (i) Two-Step (sales through distributors to independent retailers, such as Ace and ServiStar), (ii) Home Centers, (iii) Warehouse Home Centers, (iv) Membership Clubs, and (v) Farm Outlets. Professional-Tradesmen revenues of approximately $35 million in 1990 for B&D translated into about $3 million in operating income. Gross margins ran about 35%, but SG+A costs were about 25%. These numbers had become even more vivid for Galli in a recent Monday morning conversation with his boss, Gary DiCamillo, B&D’s president of Power Tools for the United States, who recounted this story: Joe, yesterday, I stopped by that new Home Depot. It was a nice afternoon; lots of people around. They had one of those woodworking guys out on the sidewalk giving demonstrations for a couple of hours. He was using all Skil saws, and he was just packing up to go home when I came by at about 4 o’clock. I said to him “What do you think of the Skil saws?” “Pretty good,” he said. So, I said, “Who else do you like?” He said “Oh, Milwaukee makes a nice reciprocating saw; Ryobi’s got some okay things.” “What about Makita?” I