Case Discussion We will read several cases in this class. The cases are chosen to highlight different aspects of marketing and their implication for marketing strategy. Cases are unlike most writing. They are not research articles, news articles, or nonfiction books. They do not make an argument or reach a conclusion. That is your job. Below, is a set of instructions for the case discussion; however, you need not restrict yourself to these guidelines, please feel free to add any info that you consider relevant and important. One thing to keep in mind is that the firm’s actual decision/ action in real life (which you might come across while you do your research) may not be the best approach . The report must contain : a.)Central Problem : Define clearly and concisely the basic problem in the situation. B.) Analysis of Situation :What tools and concepts from this course can help us in analyzing the case? Include an Environmental Scan and a SWOT analysis for this company related to the problem of interest. c.)Identify Alternative Strategies : Based on the analysis in b. , identify possible alternative strategies to cope with the problem defined in a . d.) Course of Action : Recommend courses of action Prepare your own individual 3-4 page word processed overview of the case, covering the points listed above. (Make sure you include an Environmental Scan, a SWOT analysis, and at least 2 alternative strategies). CASE DISCUSSION RUBRIC Criteria Central Problem: Clear and Concise Definition of the Problem in the A B C Clear and Vague or incomplete Wrong problem comprehensive definition of the definition, describing description of the problem symptoms instead of problem. When the problem, or no Situation. applicable, linking the 10% problem to the problem definition symptoms the company is exhibiting. Situation Analysis: Complete analysis of Partial analysis of the Wrong analysis or Identifying the proper the situation, using situation or ignoring unfit tools and tools and concepts to proper tools and some potential tools concepts for analysis analyze the case. concepts and concepts from – Wrong/Missing 20% the course – Env. Scan & SWOT Wrong/ Missing either Env. Scan or SWOT Alternative Strategies: Completely Incomplete Incomplete Identify all possible identifying alternative identification of Identification of alternative strategies strategies alternatives (missing alternatives (missing a max of two) more than two to cope with the strategies) problem defined. 20% Course of Action. Choosing a logical Choosing an 40% course of action that incomplete course of reflects an informed action. evaluation of Successfully wrong course of the action. case. Connecting, Choosing a Successfully Little or no Synthesizing, reformulates available reformulates reformulation of Transforming ideas, claims, available ideas, available ideas, 10% questions, formats, claims, questions, claims, formats and etc. in novel ways to formats, etc. in questions to create create novel ways to new insights, create unique arguments, insights, conclusions and arguments, suggestions. unique insights, arguments, conclusions and suggestions. AND extends them create new ideas, solutions or knowledge that crosses boundaries conclusions, and to suggestions. For the exclusive use of Y. Zhou, 2017. Harvard Business School 9-595-057 Rev. March 30, 2001 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. Copyright © 1995 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. 1 This document is authorized for use only by Yuhan Zhou in Integrated Marketing Management taught by Mazen Jaber, Saginaw Valley State University from August 2017 to February 2018. For the exclusive use of Y. Zhou, 2017. 595-057 The Black & Decker Corporation (A): Power Tools Division 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 $ in Millions 6 550 5.5 500 5 450 4.5 400 4 350 300 3.5 250 3 200 2.5 150 2 100 1.5 50 1 1 1986 1987 1988 1989 1990 1986 1987 1988 1989 1990 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 This document is authorized for use only by Yuhan Zhou in Integrated Marketing Management taught by Mazen Jaber, Saginaw Valley State University from August 2017 to February 2018. For the exclusive use of Y. Zhou, 2017. The Black & Decker Corporation (A): Power Tools Division 595-057 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 B Segmentation 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 This document is authorized for use only by Yuhan Zhou in Integrated Marketing Management taught by Mazen Jaber, Saginaw Valley State University from August 2017 to February 2018. For the exclusive use of Y. Zhou, 2017. 595-057 The Black & Decker Corporation (A): Power Tools Division 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: U.S. Market Segment Professional-Industrial • Charcoal Grey 20% $110 MM Charcoal Grey 9% $35 MM Black 45% $250 MM Size = $420MM Consumer • Product Color Size = $550MM Professional-Tradesmen • Brand Logo Approximate B&D B&D Segment Segment Share 1990 Revenues 1990 Size = $530MM 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 This document is authorized for use only by Yuhan Zhou in Integrated Marketing Management taught by Mazen Jaber, Saginaw Valley State University from August 2017 to February 2018. For the exclusive use of Y. Zhou, 2017. The Black & Decker Corporation (A): Power Tools Division 595-057 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 A Power 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 ProfessionalTradesmen 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 said. He said, “Oh, they’re okay—they’re all pretty good really—you just have to stay away from that Black & Decker!” 5 This document is authorized for use only by Yuhan Zhou in Integrated Marketing Management taught by Mazen Jaber, Saginaw Valley State University from August 2017 to February 2018. For the exclusive use of Y. Zhou, 2017. 595-057 The Black & Decker Corporation (A): Power Tools Division Black & Decker and the Professional Segment Buyer While the “just got to stay away from that Black & Decker” view was perhaps extreme, Galli understood that B&D’s strength as a consumer brand was not necessarily beneficial for the Professional-Tradesmen segment. Some tradespeople viewed all B&D products as for use at home rather than on the job; and, conversely, there had been instances of a B&D product designed for at home use being subjected to the demands of the job site and failing. The typical plumber, electrician, or general remodeler working in residential construction had about $3,000 invested in 10 or so “tools-of-the-trade.” He or she bought tools when a replacement was needed, spending on average $1,000 per year. Tools and their performance were a constant topic of conversation at the job site. Generally, tradespeople were satisfied with the tools available—the perception being that Makita provided a good baseline option in all major categories, and other suppliers had particular product strengths, e.g., Skil in circular saws. As noted above in Exhibit 2, this buyer bought most frequently in independently owned stores served by distributors, i.e., the Two-Step in Exhibit 2. However, the Home Centers noted in Exhibit 2 were growing in importance. For example, the largest single outlet of ProfessionalTradesmen tool sales in 1990 was The Home Depot at approximately $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. The Home Depot was the largest of the rapidly growing collection of home improvement chain stores. With 145 stores and $3.8 billion in 1990 sales, The Home Depot’s strategy was to stock 30,000 items in a 100,000 square foot location, with prices about 30% less than the traditional hardware store, while also providing superior customer service. Makita’s rise to marketplace dominance was aided by the rapid development of this new type of distribution. B&D’s research on tradespeople’s perceptions of suppliers’ quality showed four tiers in the marketplace, as shown in Figure C. Figure C Brand Perceptions of Professional-Tradesmen Segment Buyers Highest Lowest —Makita —Bosch —Black & Decker —Milwaukee —Hitachi —Ryobi —Porter Cable —Skil —Panasonic —Craftsman (Sears) —Wen Both Milwaukee and Makita priced at premiums over B&D, averaging 10% and 5%, respectively. Despite the price premium over B&D, Makita’s prices on some products were less than half of what the product sold for in Makita’s home market, Japan, where Makita was #2 in market share to Hitachi. While Makita’s position with tradespeople was strong, retailers were not uniformly positive toward Makita. Some regarded it as “arrogant and dictatorial.” Makita offered no channel protection, selling the same products throughout a range of outlets including the discount oriented Membership Clubs, which B&D had decided not to include among its distributors of ProfessionalTradesmen tools (see Exhibit 2). Some believed Makita to be “trading-down” its offerings by, among other things, positioning them as appropriate for Father’s Day giving. While no tradesperson would explicitly note “product color” as a key attribute in the purchase decision, color was generally regarded as a significant product differentiator. Consumer tool manufacturers had largely followed B&D’s 1981 lead of making consumer tools black or charcoal 6 This document is authorized for use only by Yuhan Zhou in Integrated Marketing Management taught by Mazen Jaber, Saginaw Valley State University from August 2017 to February 2018. For the exclusive use of Y. Zhou, 2017. The Black & Decker Corporation (A): Power Tools Division 595-057 grey. B&D’s policy was to use black as its consumer grade color and charcoal grey for its Professional-Industrial and Professional-Tradesmen grades. Competing brands of professional tools were more highly differentiated in color, as shown in Figure D. Figure D Color Differentiation: Professional End Users • Makita - Teal • Milwaukee - Red • Bosch - Dark • Hitachi - Green • Black and Decker - Charcoal Grey Black/Charcoal Grey • Black and Decker • Craftsman • Skil • Wen • Private L Label Products Professional Grade Consumer Grade Black & Decker Product Research Product development had been a B&D focus since 1985 and B&D tools were highly regarded in the demanding Professional-Industrial segment, so Galli believed that the source of B&D’s share problem in the Professional-Tradesmen segment was not inherent product quality. This belief was tested in two ways. First, B&D conducted laboratory tests on its own and competitive products to assess performance, reliability, and durability. Figure E summarizes the results for the 14 major Professional-Tradesmen products. B&D’s offerings were characterized on a scale ranging from weak/undeveloped to competitive to leadership. Second, B&D did extensive field tests. All identifying marks and colors were removed from products (both B&D and competitors). The products were then used in actual work situations for one month. Users provided comments on product performance and their interest in buying the product when a replacement was needed. This user testing supported the findings of the laboratory tests of Figure E, i.e., B&D’s product quality was very strongly competitive in the large majority of product categories. 7 This document is authorized for use only by Yuhan Zhou in Integrated Marketing Management taught by Mazen Jaber, Saginaw Valley State University from August 2017 to February 2018. 58 56 44 36 23 21 19 16 16 12 11 7 CORDLESS DRILLS CIRCULAR SAWS CORDED DRILLS MITER SAWS FINISHING SANDERS ANGLE GRINDERS RECIPROCATING SAWS ROUTERS/TRIMMERS SCRUGUNS BELT SANDERS JIG SAWS HAMMERS/DRILLS CHOP SAWS IMPACT WRENCHES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 11 $67 PORTFOLIO 1990 SIZE ($millions) WEAK/ UNDEVELOPED COMPETITIVE PROFESSIONAL POWER TOOL PRODUCT ASSESSMENT Black & Decker Product Assessment RANK Figure E LEADERSHIP 595-057 -8- For the exclusive use of Y. Zhou, 2017. This document is authorized for use only by Yuhan Zhou in Integrated Marketing Management taught by Mazen Jaber, Saginaw Valley State University from August 2017 to February 2018. For the exclusive use of Y. Zhou, 2017. The Black & Decker Corporation (A): Power Tools Division 595-057 Research on Brand Awareness and Perceptions Telephone surveys and B&D’s annual Image Study provided data on brand awareness, relative perceived quality, and ratings on specific attributes. Overall awareness of the major brands among the Professional-Tradesmen segment end users are shown in Table B. Table B 1990 Total Awareness of Power Tool Suppliers Among Tradespeople Awareness Black & Decker Milwaukee Skil Makita Bosch 98% 95% 93% 90% 87% Hitachi Hilti Porter Cable Ryobi 77% 73% 67% 50% Respondents were also asked to state their level of agreement with the statement, “Brand X is one of the Best.” The data on percentage of respondents “agreeing” or “strongly agreeing” with the statement are in Table C. Table C ”One of the Best” Agreement Data Milwaukee Makita Black & Decker 80% 67% 44% The Image Study provided the same agree/strongly agree data at the level of specific attributes. In particular, Table D segregates those expressing a preference for Makita and those expressing a preference for Milwaukee and compares perceptions of those brands to perceptions of B&D. Table D Percent Agreeing with the Statement Those Who Prefer Makita Makita B&D Makes High-Quality Tools Makes Durable/Rugged Tools Proud to Own Easy to Get Service Stands Behind Products 82% 71% 78% 44% 56% 51% 48% 43% 67% 61% Those Who Prefer Milwaukee Milwaukee B&D 91% 91% 86% 68% 69% 43% 42% 36% 66% 52% As Galli reflected on the research data, he recalled some of the comments made to him by two tradesmen during site visits: “. . . Black & Decker makes a good popcorn popper, and my wife just loves her Dustbuster, but I’m out here trying to make a living . . .” 9 This document is authorized for use only by Yuhan Zhou in Integrated Marketing Management taught by Mazen Jaber, Saginaw Valley State University from August 2017 to February 2018. For the exclusive use of Y. Zhou, 2017. 595-057 The Black & Decker Corporation (A): Power Tools Division “. . . On the job, people notice what you’re working with . . . if I came out here with one of those Black & Decker gray things, I’d be laughed at.” Galli knew that a copycat strategy, e.g., paint it blue and spend some advertising dollars on a “Black & Decker as appropriate for the tradesmen” theme, would not receive internal support. Three options presented themselves: Option 1. Harvest Professional-Tradesmen Channels In this strategy, B&D would focus on the Consumer and the Professional-Industrial segments. In the Professional-Tradesmen segment, the focus would be on profitability even at the expense of market share. Option 2. Get Behind Black & Decker Name with Sub-Branding While there had been several half-hearted attempts to rebuild the B&D name in the Professional-Tradesmen segment, they had not been successful. One new aspect which might offer promise, though, was the sub-branding strategy, which had been so successful with the Spacemaker line and which Galli had used earlier in his career in the accessories business. Specifically, he had ® transitioned replacement saw blades from “Black & Decker” brand to “Piranha by Black & Decker.” ™ ™ (See Exhibit 3.) In 1990, B&D had introduced the Sawcat and Super Sawcat circular saws with some success. An intense sub-branding program could be developed in an integrated fashion. Option 3. Drop the Black & Decker Name from the Professional-Tradesmen Segment Galli imagined what internal reaction would be to such a proposal. Everyone had taken great pride in the #7 “brand power” position of the B&D name. As one of his colleagues commented to him, “Joe, it can’t make sense to pull the name of the creator of the power tools industry from a power tool. You’d be saying that B&D can’t make it in power tools. Besides, if General Electric can put its name on everything from jet engines to telephones, why can’t we?” If he were to propose dropping the B&D name, he would need an alternative. One possibility was to develop a new brand name free of any negative associations, similar to Toyota’s creation of the Lexus brand. The other would be to use some other name already in B&D stable of brands. One of ® these possibilities was the DeWalt brand from a line of stationary woodworking equipment. DeWalt was founded in 1918 and bought by Black & Decker in 1960. DeWalt was a leader in sales of large radial arm saws permanently installed at lumber yards. While sales of DeWalt products had reached $70 million annually at one time under B&D, the company had recently deemphasized the line due to the amount of product liability exposure that came with large, stationary woodworking equipment. The DeWalt name had never been used on a portable power tool. The DeWalt name had been included in the awareness research described in Table B above. It received a 70% awareness rating, and most of those who knew DeWalt were positively disposed to it. Surprisingly, it had achieved an “Is One of the Best” agreement percent of 63% from tradesmen as compared to B&D’s 44% (Table C). Further research on the DeWalt brand showed that 51% of tradespeople would have some “purchase interest.” The “level of endorsement” by B&D impacted the “purchase interest” score. Specifically: 10 This document is authorized for use only by Yuhan Zhou in Integrated Marketing Management taught by Mazen Jaber, Saginaw Valley State University from August 2017 to February 2018. For the exclusive use of Y. Zhou, 2017. The Black & Decker Corporation (A): Power Tools Division Identified As • • • DeWalt DeWalt–Serviced and Distributed by Black & Decker DeWalt–Manufactured, Serviced and Distributed by Black & Decker 595-057 % Purchase Interest 51% 58% 53% Galli felt that any plan involving investing to build market share—Option 2 or Option 3— would have to provide for a minimal objective of doubling B&D’s Professional-Tradesmen segment share from under 10% to nearly 20% within three years, with major share “take-away” from Makita. Operating income would be expected to improve steadily from under 10% to at least 12%. He also knew that the Membership Clubs, which represented about 10% of segment sales for the industry were and would continue to be off-limits. Thus, he would not be able to attack the 85% share Makita held within that channel. He wondered what type of reaction to expect from Makita if he pursued a “build share” option. Finally, he considered the risk. On the one hand, B&D was not making much money in the Professional-Tradesmen segment anyway, so financial risk was limited. On the other hand, there might be implications for the other two segments and embarrassment in the retail channels. One of the color options he was considering was a bold “Industrial Yellow”—a familiar job site color associated with safety, but not yet used by any power tool brand. But, if the strategy was not success, Galli could not think of anything good that could come from his product being the same color as a lemon. 11 This document is authorized for use only by Yuhan Zhou in Integrated Marketing Management taught by Mazen Jaber, Saginaw Valley State University from August 2017 to February 2018. For the exclusive use of Y. Zhou, 2017. 595-057 Exhibit 1 The Black & Decker Corporation (A): Power Tools Division Market Shares of Professional-Tradesmen Tools by Product Type—1990 Approximate Shares Approximate % of Market Makita Milwaukee B&D Drills (30%) - Cordless Drivers - Corded 16% 13% 80% 50%