Black & Decker case study. Background ( Product and Market) And Problem Definition
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vvvv (student)
Black & Decker Case
Introduction
Black and Decker (B&D) is a pioneer in portable power tools. In 1991, it is a $5 billion in sales company with 29% of these sales coming from Power Tools and Accessories. B&D is the world's largest producer of power tools and the U.S. market overall leader.
Background ( Product and Market) And Problem Definition
B&D has a strong in the consumer and industrial markets, but is weak in the Professional-Tradesmen (P-T) market. In this , B&D is not generating profits and, at the same time, retailers want more advertising allowances and rebates.
The U.S. power tools market is divided into three segments: Consumer (home users), P-T (contractors who purchase their own tools), and Industrial (procuring professional buying in large quantities for industrial usage). The P-T segment is the fastest growing segment at the moment. B&D’s products are generally regarded as high quality and have a 45% of the Consumer market share and 20% of the Industrial. However, in the P-T segment B&D holds only 9% of the market and is in near parity with Milwaukee Electric (10%) and trails Makita, which has captured 50% of the market.
Makita was able to grow rapidly in the P-T market as its dominance was aided by the rapid development of a new type of distribution channel, the Home Centers such as Home Depot, which Makita actively sought. B&D, however, was not able to grow quickly in the P-T market due to Tradesman's perception of P-T Line as a “consumer” product, incapable for professional tasks. In some surveys, the quality of B&D P-T products often outranked those of the manufactures whose quality was perceived to be better, implying that B&D's problem is not of having bad products, but of having a bad reputation. One factor contributing to the perceived higher quality of its competitors is that both are priced at a premium.
Another factor is related to the color of the product. In the power tools industry, color is often used for product differentiation. Consumer tools in the market are Black or Charcoal Grey. B&D uses Black for Consumer and Charcoal Grey for Professional Grade tools, this lack of color differentiation makes it difficult for purchasers to determine which products are Professional and which are Consumer, which may have facilitated the use of B&D consumer grade products to professional tasks, thus generating an inordinate high rate of failure. Conversely, other manufacturers use higher color differentiation and use colors such as teal (Makita), red (Milwaukee), to differentiate the P-T products from the black/charcoal grey consumer products.
