2013

Black & Decker

STRATEGIC MARKETING
MANAGEMENT MBA5320E

Submitted by
Fouad AlShikh 6513873

Professor
Foster, Simin

9/18/2013
Contents
Problem Statement ....................................................................................................................................... 1
5Cs Analysis .................................................................................................................................................. 2
Company: .................................................................................................................................................. 2
Collaborators:............................................................................................................................................ 4
Customers: ................................................................................................................................................ 4
Competitors: ............................................................................................................................................. 6
Climate (Context): ..................................................................................................................................... 9
Findings & Recommendations .................................................................................................................... 10
Action Plan .................................................................................................................................................. 11
Appendix 1: SWOT Analysis for Black & Decker .......................................................................................... 12
Appendix 2: Consumer Analysis .................................................................................................................. 13
Appendix 3: 5 Cs Analysis for Black & Decker ............................................................................................. 14
References .................................................................................................................................................. 15

Black & Decker 2

Problem Statement

Black & Decker, a US based power tool manufacturer has managed to attain a leadership

position not just in the overall power tool market but also in distinct segments such as the

consumer segment for power tools and the professional-Industrial segment. However, despite a

strong brand image and a reputation for quality, the company only has a 9% share of the

Professional-Tradesmen segment for power tools. While this should not be a matter of concern

since the company is currently enjoying a rather favorable position in terms of its revenue and

operating income , the fact that the Professional-Tradesmen segment is the fastest growing

segment of the power tools industry raises concerns for the management especially as direct

interaction with tradesmen has resulted in direct attacks to the companys image in terms of not

being preferred as a potential option for power tools by the Professional-Tradesmen segment.

The current scenario has put the management of Black & Decker into a critical position

where they need to make certain adjustments in order to attain a position of complete leadership

in the power tools industry. Either they could focus totally on the Consumer and Professional-

Industrial Segment and forgo the growth opportunity in the Professional-Tradesmen Segment or

they could opt for repositioning the brand using a new brand name.

The fact that the Black & Decker brand name has not managed to have an impact on the

Professional-Industrial Segment needs to be sorted out in order to gain a competitive edge in the

power tools industry where currently foreign players in the form of brands like Makita Electric

of Japan and local players like Milwaukee Electric of Brookfield are dominating the

Professional-Tradesmen segment. Being number three in this particular segment while losing out

Black & Decker 1

to a foreign competitor and a local competitor respectively contrasts with the companys image

of being a world leader in power tools.

5Cs Analysis

The following section looks at a 5C analysis (appendix 3) for Black & Decker to

highlight the companys strengths, weaknesses, opportunities and threats later summarized in

appendix 1.

Company:
In the following section we would be discussing Black & Decker with respect to its product

line, market share, and image in the market, technical expertise, culture and goals.

Product line: Being the worlds largest producer of power tools, power tools accessories,

electric lawn and garden tools and residential security hardware, Black & Decker makes products

for all three segments of the power tools market; the Consumer Segment, Professional-Industrial

Segment and Professional-Tradesmen segment. Product categories also include household

products such as hand-held vacuums, irons, mixers, food processors etc.

Market Share: The Company enjoys a 45% market share in the $530 million Consumer

Segment with revenues of 1990 reported at approximately $250 million. The company sells

under the brand name Black & Decker in this market segment. The Professional-Industrial

segment which is a $550 million market allows Black & Decker to have a 20% market share

with the companys revenues reported to be approximately $110 million in 1990. The third

segment comprising of Professional-Tradesmen is a $420 million market where black & Decker

only enjoys approximately 9% of the market with revenues reported to be $35 million in 1990.

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Amongst its product groups, the company enjoys a significant market share of approximatley

29% in Power Tools and Accessories while other product categories have market shares

between 15% to 9%.

Image: The Company has a strong image in the global market as evident by the fact that

its name is ranked number 7 in the US and 19 in Europe. With nearly 50% of the revenues

coming from outside the US market, it can easily be said that Black & Deckers brand name is

recognized not solely in the US market although it enjoys a position amongst the top ten brands

there.

Although the company has a well-established image globally, its perceived as a high

quality brand for the upper end of the market. However, market segments looking for a rough

and tough product in the power tools category do not opt for Black & Decker despite the brands

strong image and high quality indicating that there is a certain misconception about Black &

Deckers products being too fragile to handle heavy-duty jobs. On the whole, Black & Deckers

professional tools are considered to be the highest in quality in the power tools industry.

Technology and experience: The Company is highly experienced in the production of

power tools especially as it has been experimenting with this technology over the last 73 years

considering the fact that the first machine shop by the founder s of Black & Decker started in

1910. Being pioneers and industry leaders over seven decades has made Black & Decker the

worlds largest producer of power tool accessories, electric lawn and garden tools as well as

residential security hardware.

Culture and goals: As far as the companys goals are concerned, it is aiming for

leadership in all three segments of power tools. With leadership in both the Consumer and

Industrial segments, the countrys low market share in the form of a 9% share of the Tradesmen

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segment is a point of concern which has led to the aim of looking for a course of action which

can establish Black & Decker as a powerful brand in all three segments. The current challenge is

to look for strategies that can take away market leadership from Makita, the current leader in the

Professional Tradesmen segment.

The companys culture is orientated towards innovation with an emphasis on high quality

as evident by the fact that product development has been the companys focus since 1985. With

29 new household products introduced in 1990, this innovative culture is taken quite religiously

with an emphasis on media advertising for promoting the companys new products especially in

the household product line.

Collaborators:
In terms of collaborators we would be discussing the companys distributors and retailers.

We have already explored the three types of markets that Black & Decker is supplying to. Each

of these markets is supplied through a different set of distribution channels which collaborate

with companies like Black & Decker in terms of making their products available to the

respective customers.

The consumer market is reached through retail chains such as Wal-Mart which act as

collaborators for selling the firms consumer power tools and household products. The

Professional-Industrial segment makes use of industrial supply companies like W.W.Grainger for

selling power tools to large scale contractors. The Professional-tradesmen segment buys directly

from retailers like Home Depot and Ace Hardware.

Customers:
In this section we would be discussing the key consumers of the power tool industry with

an emphasis on Black & Deckers current customers. Secondly we would be analyzing the
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consumer behavior in each of these segments through a simple framework to assess the

vulnerabilities and opportunities that Black & Decker can be exposed to.

Nonprofessional User: Currently we are looking at two kinds of users for Black &

Deckers products, the professional and nonprofessional users. The nonprofessional user is the

Consumer Segment which we have already discussed in the section on the companys market

share. This nonprofessional user makes up 45% of the market and has immense brand loyalty

for Black & Deckers products.

Consumer Behavior & Cognition in the Consumer Segment

The consumer segment of Black and Deckers products is mostly looking for household

products and is easily influenced by media advertising especially as the brand is popular and had

a strong brand image. Plus their innovative approach keeps the consumer nonprofessional

segment looking for newer products. The fact that Black & Deckers new Power Pro Dustbuster

has gained immense popularity in the household segment shows how this particular market can

easily be persuaded to buy the companys products.

The consumer segment for power tools in particular is a $530 million market in the US

and is looking for a product that they may use at home with a frequency being as low as once a

year. This segment buys its products from stores like Wal-Mark and K-Mark so getting through

to them through advertising is important in order to convince them about the product that they

would eventually be picking from a store.

Professional User: The professional user is further divided into the Professional-

Industrial segment and the Professional-Tradesmen segment.

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 Consumer Behavior & Cognition in the Professional-Industrial Segment: The

Professional-Industrial segment includes commercial contractors working on large projects and

can be influenced by the technical advice and expertise of distributors like W.W Grainger who

have a wide network of regional offices. These distributors can influence the contractors tools

requirements and preferred brands for use and since companies are responsible for purchasing

the tools rather than individual users, the brands popularity can have an impact in this case too.

Similarly since the specific distributors selling these brands stock the products in bulk, they may

be highly influential in selling the product while at the same time they can be influenced by the

manufacturer in terms of being considered preferred distribution channels.

Consumer Behavior & Cognition in the Professional-Tradesmen Segment: The

Professional-Tradesmen segment which includes tradespeople who have to use the products to

make a living and are looking for tools that are reliable and have been used by other

tradespeople. For this segment it is very important to follow the status quo and so they would not

opt for anything that other tradespeople would consider inappropriate for the job. These groups

are not brand conscious and are not looking for innovation. This is the fastest growing segment

of the market and the image of the product is more important to them compared to the brand

name. (Refer to appendix 2 for a summary of this consumer behavior and cognition)

Competitors:
The companys largest competitor is Makita Electric of Japan which entered the US market a

decade ago. The company is a major competitor in the Tradesmen segment and enjoys leadership

in this category of power tools.

Matika has a 50% market share in the Professional Tradesmen segment with an 80% share

particularly in cordless drills. Although Black & Decker has been the pioneer of portable power

tools, its leadership is limited to the Consumer and Professional-Industrial segments while
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Makita has established a name in the Professional-Tradesmen segment. Talking specifically

about the Professional-tradesmen segment, Makita is a very strong competitor considering the

fact that other brands individually have not managed to capture more than 10% of the market.

For instance, Milwaukee has a 10% market share in this segment whereas Ryobi is at parity with

Black & Decker at 9%. Brands like Skil, Craftsman, Porter-cable and Bosch have market shares

between 3 to 5 percent suggesting that this end of the market has a lot of competition for Black

& Decker and the company has very low chances of attaining leadership with its current

strategies.

Even in the Professional-industrial segment Black & Decker has to face direct

competition from Milwaukee Electric of Brookfield. This competitor is a privately held firm and

competes with Black & Decker only in the high end of the Professional-Industrial market

segment.

At a lower end, competition in the Professional-Industrial segment is greater in the form

of companies like Bosch, Porter cable and Makita.

As far as the Consumer Segment is concerned, Black & Decker faces competition from

companies like Skil, Craftsman, Wen and several private label products with all of these brands

making up 50% of the market share of the Consumer segment.

Since our main point of concern is the Professional-Tradesmen segment, we can look at

the breakdown of the segment in terms of competition to get further clarity about the kind of

competition that Black & Decker currently faces. Although Makita has an 80% share of the

cordless drills product category in the Professional-Tradesmen power tools segment, the market

share in corded drills does not have that much disparity since Black & Decker has approximately

25% of the Professional-Tradesmen market in this product category. In most categories of saws

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in the Professional-Tradesmen segment, Black & Decker comes second to Makita indicating that

the company has scope in terms of establishing its name in this market segment too. A

breakdown of this segments specifically shows that Black & Decker is losing out to Makita

specifically in the cordless drills product category in the Professional-Tradesmen segment

which make up only 16% of this market segment.

Competitors Strengths: If we look further at the strengths and weaknesses of the

competitors, we can see that Makita offers a price advantage for its products in the US market as

some of its products are being sold at half of their actual price in Japan. Surprisingly, in its home

market Matika comes second to Hitachi in market share suggesting that one of the reasons for the

success of Makitas products in the US market could be the fact that they are imported products

from Japan and are being sold at a cheaper price compared to their original price in the Japanese

market. Although Black & Deckers products are less pricey compared to Makitas the company

may be enjoying an advantage due to its pricing strategy in the international market.

One particular advantage that competitive brands have over Black & Decker is their

attention to color differentiation. Where all of Black & Deckers power tools are being sold in

shades of either black or grey, regardless of the segments they are targeting, competing brands

have been very particular about keeping the colors of Professional grade tools highly distinctive.

For instance, Matika and Milwaukee have assigned teal and red as colors for their

professional tools respectively whereas Black & Deckers professional grade tools are sold in

charcoal grey. Although this may not be a reason for not opting for Black & Decker tools in the

Professional-Tradesmen segment, the fact that black and charcoal gray are the colors that have

been typically assigned to consumer grades tools of brands like Craftsman, Skil, Wen, Black &

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Decker as well as for tools for private labels may be creating a misconception in the minds of the

tradespeople in terms of the durability and usage of Black & Decker power tools.

Makitas and Milwaukees vulnerabilities: There are certain weaknesses that should be

noted specifically for Makita. Although the brand is highly popular amongst tradespeople,

retailers feel that the company shows a lot of rigidity in dictating terms. The same products are

offered through all channels which offer no channel protection to any specific distribution

channel. This indicates that distribution through the retailer channel could actually be used to its

advantage by Black & Decker if its offers come sort of incentives to retailers for selling to the

Professional-Tradesmen segment.

If we compare the results of the image study we can see that even the ones who prefer

Matika as the preferred brand rate Black & Decker higher in terms of ease of getting service

whereas those who prefer Milwaukee rate Black & Decker comparative to Milwaukee in terms

of ease of getting service. This suggests that Black & Decker is rated high in terms of service

even by those who prefer other brands suggesting that this may be a weak area for competing

brands and Black & Decker could gain a competitive edge here.

Climate (Context):
Black & Decker is currently enjoying a favorable position in terms of being a company

headquartered in the US market where it enjoys a favorable position in the form of a high quality

recognized brand. With a ranking of 19 amongst 6000 brands in Europe, the company has a

substantial name in the European market too. With 50% of the revenue coming from outside the

US, Black & Decker has managed to have risk aversion during times of economic downturns.

With a $1.5 billion power tools market in the US, Black & Decker does not really have to

worry about being affected by economic downturns in the international market. The US market
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provides a politically sound avenue for growth whoever foreign competition has managed to

affect the companys current position in its home market.

Findings & Recommendations

Having discussed the 5Cs for Black & Decker brings us to the point where we can

critically look at the three options identified for targeting the Professional-Tradesmen segment.

Option 1 talks about harvesting the Professional-Tradesmen channels where Black & Decker

would be looking at its own profitability while forgoing the market share. This option could

mean charging higher prices for the products which are already being sold in this segment and

expecting brand loyalty to retain the customers who would be willing to pay for the products.

However, given the credibility of competitive brands, this may backfire in terms of generating

lower profitability due to loss of customers due to availability of options.

Option 2 talks about sub-branding whereas Option 3 talks about introducing DeWalt as

an alternative brand with a specific level of endorsement introduced by Black & Decker. The fact

is that the Professional-Tradesmen segment is well aware of the quality and credibility of Black

& Decker but is still not opting for it because of the perception attached to it in terms of being

associated to fragile household products. Therefore sub-branding may not be able to solve the

problem of removing that perception.

Option 3 seems like the best alternative especially as it still endorses the product and

would be able to position the power tools with a completely new image in the market.

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Action Plan

The following action plan has been suggested which should work in terms of

repositioning Black & Deckers products in the market as tools for the Professional-Tradesmen

Segment. Since the idea is to drop the Black & Decker brand name from the Professional-

Industrial Segment, the product line would no longer be using the companys brand name as a

logo anymore. The fact that we still need some sort of endorsement for enhancing credibility

would need the use of an endorsement like DeWaltServiced and Distributed by Black &

Decker especially as this specific endorsement has resulted in the greatest potential purchase

intent of approximately 58% according to the research done on the DeWalt brand.

We had discussed earlier how retailers are not too eager to keep Makita even though the

product is popular amongst tradespeople. Black & Decker can attain a competitive edge in this

area by distributing their Professional-Tradesmen power tools through selected distribution

channels while giving additional incentives in the form of after sales services to preferred

retailers. Not only would this increase the incentive to sell the products, these retailers would be

eager to stock power tools serviced and distributed by Black & Decker under the DeWalt brand.

The fact that a new brand would be endorsed by Black & Decker would require some

basic changes to the strategy in terms of the products appearance. Since Black & Decker is not

launching the brand under its own name, changing the color and opting for yellow as the new

color for the power tools should work well in terms of establishing a new brand image in the

market. Since the company does not want to get stuck with a yellow colored product under its

brand name if the product is not successful, there should not be a major issue of this strategy is

pursued since the brand name would be DeWalk rather than Black & Decker.

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Appendix 1: SWOT Analysis for Black & Decker

Strengths Weaknesses

Pioneers of portable power tools business in the US Only 9% market share of the professional tradesmen
No. 1 market share in consumer and professional- segment
industrial segment Trade asking for advertising allowances and rebate
Name amongst powerful brands in the world on B&Ds Tradesmen products
Professional tools recognized as having high quality Zero profitability in Tradesmen products
Worlds largest producer of power tools , power High long term debt of $4.2 billion
tool accessories , electric lawn and garden tools and No particular strength highlighted for B&D power
residential security hardware in 1990 tools in the Professional-Tradesmen segment
Sales of $4.8 billion in 1990 Professional tools not well differentiated like
Revenue stream not concentrated in the US as 50% competitors
of the product revenue comes from outside the US
Associated with General Electrics brand name
New brands like Kwikset and Price Pfuster
in the portfolio
Growing revenue and operating income
B&D franchise strong in cordless vacuums, irons,
toaster oven- each with over 50% market share in
the US
Amongst top ten brands in the US
Participation in all three segments of power tools
Power tools holding 30% of the US market
Highest brand awareness amongst Power Tool
suppliers in terms of Tradespeople

Opportunities Threats
Fast growth rate of professional-tradesmen segment Makita of Japan with leadership in professional
More than 50% sales growth coming from outside power tools segment
the US 80% share of cordless drills and 50% in overall
Sales potential in Europe professional tradesmen segment held by Makita
Opportunity in membership club distribution Tradesmen perceiving Skil, Milwaukee and Makita
Retailers negative perception of Matika as better options in power tools
Color regarded as a significant product
differentiator

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Appendix 2: Consumer Analysis

Customer Type Characteristics Consumer Behavior

Nonprofessional: Buys products for home Brand Loyal
Consumer Segment use Influenced by media
Low frequency of usage advertising
Buys from Wal-Mark
and K-Mark
Looking for newer
products

Professional User: commercial contractors Influenced by the

Professional- Usage in large construction technical advice and
Industrial Segment projects expertise of distributor
Brands popularity is
important

Professional User: Individual tradespeople Follows the status quo

Professional- Use power tools to make a Not brand conscious
Tradesmen living Not looking for
Segment Fastest growing segment innovation.
Product image more
important than brand
quality

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 Appendix 3: 5 Cs Analysis for Black & Decker
Company
Product line: power
tools, power tools
accessories, electric lawn
and garden tools and
residential security
hardware, household Professional-Tradesmen
products
Market Share: 45% in
Consumer Segment
20% in Professional-
Industrial
9% in professional-
Tradesmen
Image: High quality
brand
Technology and
experience: 73 years in
power tools
Culture and goals:
Innovative/ Product
Development
Black & Decker
Context/Climate
Customer
Stable Political
Consumer Segment environment
Risk aversion through
Professional-Industrial geographical diversity
Local & International
growth
Competitors
Collaborators
Professional Tradesmen
Consumer Segment : segment: Makita Electric
Retails chains (Wal- Professional-Industrial
Mart) Segment: Milwaukee
Professional-Industrial Electric of Brookfield.
segment: Industrial Lower end-Professional-
supply companies Industrial Segment: Bosch,
(W.W.Grainger) Porter cable and Makita.
Professional-Tradesmen Consumer Segment: Skil,
Segment: Retailers Craftsman, Wen and Private
(Home Depot and Ace Labels
Hardware)
14
References

- Capones Marketing Framework

- Strategic Marketing Management Class note week1 winter 2013, Prof. Foster

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