Business Groups and Market Segments of The Black and Decker Corporation - Case Study Example

? Case Study- The Black & Decker Corporation Table of Contents I. Case Study Synopsis 3 A. Company Overview; Dissecting the Case 3 B. Business Groupsand Market Segments 4 C. DeWalt and Brand Positioning 5 D. Risks 5 C. Market Characteristics, Current State of Marketing 6 II. Alternative Strategic Options 7 III. Marketing Tactics Formulation 8 A. Marketing Tactics for each Element of the Marketing Mix 8 A.1. Product 9 A.2. Promotion 9 A.3. Pricing 10 A.4. Place 10 B. Decision Implications for the Black & Decker Organization 10 References 12 I. Case Study Synopsis A. Company Overview; Dissecting the Case The Black & Decker Corporation is an American firm that manufactures and markets power tools, power accessories, fastening systems, products for home improvements, and hardware. It manufactures its products in eleven countries spread worldwide, and markets those in a hundred plus countries. Its biggest markets are the United States, which accounted for 55 percent of all revenues in 2008, and Europe, for 25 percent in the same year. 2008 revenues were US 6.086 billion dollars, while gross margins were 32.8 percent for that year. By product group contribution, power tools contributed 73 percent of all revenues in 2008, at US 4.3 billion dollars, followed by hardware and products for the improvement of the home, at US 900 million dollars, making up 15 percent of all revenues. The balance was made up for by revenues from fastening systems, which was the smallest product group by revenue for that year, accounting for 12 percent of all sales, valued at US 700 million dollars (Black and Decker, n.d., pp. 1-14). By way of a look forward, by 2012 the Black & Decker Corporation had ceased to be an independent firm, having been bought out by Stanley Works in 2010, so that the merged entity had come to be known as Stanley Black & Decker Inc.(Google Finance, 2012; Stanley Black & Decker Inc., 2012; Black and Decker, n.d.; Reuters, 2012 (b)). Meanwhile, a cursory look at the share price performance of the combined firm from the time of the merger shows that in general the merger has had a positive impact, with shares appreciating from the time of the merger by about 20 percent, from about US 60 dollars a share to around US 80 dollars a share peak achieved in early 2012. The hypothesis is that the traditional market strengths of the original Black & Decker Company had something to do with this share price appreciation(Reuters, 2012; Google Finance, 2012; Reuters, 2012 (b)): Image Source: Google Finance, 2012 B. Business Groups and Market Segments Three product groups serve as the organizing principle of the organization. These product groups are, as already mentioned earlier, power tools, product for home improvement and hardware, and fastening systems. Of the three, as has been noted earlier, power tools make up the bulk of the revenues (73 percent), followed by home improvement at 15 percent, and fastening systems at 12 percent of all revenues. Absolute profits rankings are the same, with power tools contributing the most to profits, followed in the same order by the two other product groups (Black & Decker, n.d., pp. 1-14). Three different market segments for the power tools product group, the largest product group, have differing characteristics, defined along customer type. As discussed earlier, these are industrial users, general consumers, and professionals. Of the three, the company has had success with industrial users and general consumers, while as noted earlier, prior to the launch of the DeWalt brand, the corporation had suffered anemic following among professionals, owing to the market perception that the company's products were inferior (Black & Decker, n.d., pp 3-5). Moreover, the three market segments also differ in some other profound ways. Industrial users are the most demanding, requiring that products show resistance to wear and resilience, even as the rewards include long-lasting relationships with buyers, and large and frequent orders. Professionals, using the products as essential trade tools, tend to be more stable customers than consumers and are less conditioned by season. Consumer sales trends are somewhat affected by the seasons, with sales skewed somewhat upwards towards the December holiday season (Black & Decker, n.d., p. 3). C. DeWalt and Brand Positioning DeWalt was launched partly to offset the weak image of Black & Decker products among professionals, and to shore up market share and loyalty/brand equity among the industrial users. As noted earlier, the weak position of the corporation among professionals was due to them associating the corporation's products with its offerings for the common consumers. The DeWalt brand was positioned exactly to offset this negative brand association, and it proved a success, not only with them, but also with industrial users and ordinary consumers as well Black & Decker, n.d., pp. 1-14; The Times 100 & Wilson and Wilson Publishing Ltd., 2012; Pride and Ferrell, 2007, pp. 3-6; Hunt and Arnett, 2006, pp. 822, 826; PRWeek, 2008; Barodine Marketing, 2010; Hassan et al., 2003, p. 448). D. Risks Among the key risks that have implications on marketing and future marketing prospects for the firm include the following: changes in the preferences of customers, distribution challenges, and keeping the business with large accounts; components supply sourcing issues; differing strengths of different geographic markets, reliance on US and Europe; increased competition worldwide; adverse effect of price hikes on demand; sufficiency of cash flows to fund operations; the credit crunch and credit costs and sourcing issues; operations streamlining tied to profitability; acquisition ability integration issues; product attributes include litigation and claims potential; potential for recalls as another product attribute; goodwill and related assets that are non-tangible can depreciate and hurt financials (Black & Decker, n.d., pp. 5-7). C. Market Characteristics, Current State of Marketing The case states that the aspects of differentiation valued by the market are quality of the products, pricing, and the quality of service after the sale. Quality, as the market defines it, is further qualified as relating to the products being functional, reliable, performs excellently, is fit for its intended use, and delivers on its stated promises. Industrial users and professionals have the most stringent requirements for quality, with the end-consumers trailing in stringency of quality requirements. Knowing this, the corporation has been noted to tweak its marketing mix for its product offerings to take into consideration these market characteristics (Black & Decker, n.d., pp. 1-14; The Times 100 & Wilson and Wilson Publishing Ltd., 2012; Pride and Ferrell, 2007, pp. 3-6; Hunt and Arnett, 2006, pp. 822, 826; PRWeek, 2008; Barodine Marketing, 2010; Hassan et al., 2003, p. 448). The corporation's key distribution channels consist of a network of distributors, wholesalers, and retailers, who push the products in both online and brick and mortar fashion. The corporation does not sell direct to end-users, even as the products can be had and are widely made available in the retail stores. Channels/distribution is a vital aspect of the marketing mix for Black & Decker. Meanwhile, competition is strong and diverse, and has been noted in Risks, is present in different markets worldwide. They include Bosch, AEG, Makita, and Rockworth, among others (Black & Decker, n.d., p. 4). II. Alternative Strategic Options Product development is a serious effort and is a key competitive advantage, and it is geared towards a keen sense of what the market needs. Product development is marketing driven, in other words, historically. One strategic option to keep growing, fend off competition, and address the risks and issues that the corporation faces from 2009 onwards is to further emphasize marketing-based product development. This is to improve further on the product aspect of its marketing mix(Black & Decker, n.d., pp. 1-14; The Times 100 & Wilson and Wilson Publishing Ltd., 2012; Pride and Ferrell, 2007, pp. 3-6; Hunt and Arnett, 2006, pp. 822, 826; PRWeek, 2008; Barodine Marketing, 2010; Hassan et al., 2003, p. 448). With regard to how price and market forces, as well as the adverse economic climate all play together to impact sales and profits at Black & Decker, one strategic option is to tweak pricing downwards across all product groups, or else to create another value brand to cover the value-based end of the market, where DeWalt and its other brands can focus on the high end (Black & Decker, n.d., pp. 1-14; The Times 100 & Wilson and Wilson Publishing Ltd., 2012; Pride and Ferrell, 2007, pp. 3-6; Hunt and Arnett, 2006, pp. 822, 826; PRWeek, 2008; Barodine Marketing, 2010; Hassan et al., 2003, p. 448; Pride and Hughes, 2011, pp. 342-345; Lamb et al, 2011, pp. 47-49). III. Marketing Tactics Formulation A. Marketing Tactics for each Element of the Marketing Mix The chosen strategy is to continue to focus on product development, and to continue with the marketing-driven focus for such product development, while basically maintaining the marketing mix for the different brands. This means, foremost, continuing to shun the value and budget proposition, where margins are low, and which can dilute the premium image of the brands and products offered by the corporation (Black & Decker, n.d., pp. 1-14; The Times 100 & Wilson and Wilson Publishing Ltd., 2012; Pride and Ferrell, 2007, pp. 3-6; Hunt and Arnett, 2006, pp. 822, 826; PRWeek, 2008; Barodine Marketing, 2010; Hassan et al., 2003, p. 448; Pride and Hughes, 2011, pp. 342-345; Lamb et al, 2011, pp. 47-49). A.1. Product The marketing tactics tied to product include sharpening the premium image of the brands, and highlighting the value propositions that are important for each of the market segments. This means reinforcing premium product attributes, via product demonstrations, and via providing samples of new and upcoming products for trial and evaluation by customers (The Chartered Institute of Marketing 2011; Black & Decker, n.d., pp. 1-14; The Times 100 & Wilson and Wilson Publishing Ltd., 2012; Pride and Ferrell, 2007, pp. 3-6; Hunt and Arnett, 2006, pp. 822, 826; PRWeek, 2008; Barodine Marketing, 2010; Hassan et al., 2003, p. 448; Pride and Hughes, 2011, pp. 342-345; Lamb et al, 2011, pp. 47-49). A.2. Promotion Distribution tactics can include leveraging on new social networking trends to promote consumer and professional segment products. Also, there are trends related to the promising use of online referral programs to rack up consumer interest and sales of Black & Decker products via the Internet, partnering with distributors and retailers for that purpose (The Chartered Institute of Marketing 2011; (Black & Decker, n.d., pp. 1-14; The Times 100 & Wilson and Wilson Publishing Ltd., 2012; Pride and Ferrell, 2007, pp. 3-6; Hunt and Arnett, 2006, pp. 822, 826; PRWeek, 2008; Barodine Marketing, 2010; Hassan et al., 2003, p. 448; Pride and Hughes, 2011, pp. 342-345; Lamb et al, 2011, pp. 47-49; Crane, 2007). A.3. Pricing There is a temptation to adjust pricing downwards due to the risks of reduced sales from the financial crisis, and the risks identified earlier. The pricing tactics can include keeping prices stable, or offering other non-price incentives to customers, such as product bundling with accessories at special prices (The Chartered Institute of Marketing 2011; Black & Decker, n.d., pp. 1-14; The Times 100 & Wilson and Wilson Publishing Ltd., 2012; Pride and Ferrell, 2007, pp. 3-6; Hunt and Arnett, 2006, pp. 822, 826; PRWeek, 2008; Barodine Marketing, 2010; Hassan et al., 2003, p. 448; Pride and Hughes, 2011, pp. 342-345; Lamb et al, 2011, pp. 47-49). A.4. Place The distribution channels are key to the success of the corporation, and tactics can include reinforcing distribution relationships via trade shows and cash incentives tied to pushing new and upcoming products (The Chartered Institute of Marketing 2011; Black & Decker, n.d., pp. 1-14; The Times 100 & Wilson and Wilson Publishing Ltd., 2012; Pride and Ferrell, 2007, pp. 3-6; Hunt and Arnett, 2006, pp. 822, 826; PRWeek, 2008; Barodine Marketing, 2010; Hassan et al., 2003, p. 448; Pride and Hughes, 2011, pp. 342-345; Lamb et al, 2011, pp. 47-49). B. Decision Implications for the Black & Decker Organization The strategic decision is essentially more of the same, or reinforcing the current strategy of the corporation, which means that in essence the marketing mix for the different brands are preserved, and tactics are geared towards enhancing the different attributes of the existing marketing mix. Therefore, there are no significant impacts on the organization because of this decision (The Chartered Institute of Marketing 2011; Black & Decker, n.d., pp. 1-14; The Times 100 & Wilson and Wilson Publishing Ltd., 2012; Pride and Ferrell, 2007, pp. 3-6; Hunt and Arnett, 2006, pp. 822, 826; PRWeek, 2008; Barodine Marketing, 2010; Hassan et al., 2003, p. 448; Pride and Hughes, 2011, pp. 342-345; Lamb et al, 2011, pp. 47-49). References Barodine Marketing (2010). Product Brandishing: Marketing Professional Products to the Trades. Barodine Marketing/ebarodine. Retrieved 10 April 2012 from http://www.ebarodine.com/marketing-professional-products-to-th-trades.html Black and Decker (n.d.). The Black & Decker Corporation Case Study, Black and Decker. Crane, M. (2007). Six Marketing Tactics Worth Paying For. Forbes.com. Retrieved 10 April 2012 from http://www.forbes.com/2007/05/16/google-yahoo-zoomerang-ent-sales-cx_mc_0517marketing.html Google Finance (2012). Stanley Black & Decker Inc.. Google. Retrieved 10 April 2012 from http://www.google.com/finance?cid=33589 Hassan, S. et al. Understanding the new bases for global market segmentation. Journal of Consumer Marketing 20 (5)/Emerald Insight. Retrieved 10 April 2012 from http://home.arcor.de/mba2006/emic1.pdf Hunt, S. and Arnett, D. (2006). Does marketing success lead to market success? Journal of Business Research 59 (2006). Retrieved 10 April 2012 from http://www.google.com/url?sa=t&rct=j&q=marketing%20mix%20black%20decker&source=web&cd=25&ved=0CDsQFjAEOBQ&url=http%3A%2F%2Fsdh.ba.ttu.edu%2Fjbr06%2520-%2520does%2520marketing%2520success%2520lead%2520to%2520market%2520success.pdf&ei=qoyGT5azI9HMrQenkYTZBg&usg=AFQjCNFFKQi16jBIzzWD994xxmbvkxwp7w Lamb, C. et al. (2011). Essentials of Marketing 7th Edition. Cengage Learning/Google Books. Retrieved 10 April 2012 from Google Books http://books.google.com/ Pride, W. and Hughes, R (2011). Business, 11th Edition. Cengage Learning/Google Books. Retrieved 10 April 2012 from Google Books http://books.google.com/ Pride, W. and Ferrell, OC. (2007). Marketing 14th edition Ilustrated. Cengage Learning/Google Books. Retrieved 10 April 2012 from Google Books http://books.google.com/ PRWeek, 2008. Superbrands case studies: Black & Decker. PRWeek.com. Retrieved 10 April 2012 from http://www.prweek.com/uk/news/787538/Superbrands-case-studies-Black---Decker/?DCMP=ILC-SEARCH Reuters (2012). Financials: Stanley Black & Decker Inc (SWK). Reuters.com. Retrieved 10 April 2012 from http://www.reuters.com/finance/stocks/financialHighlights?symbol=SWK Reuters (2012 (b)). Overview: Stanley Black & Decker Inc (SWK). Reuters.com. Retrieved 10 April 2012 from http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=SWK Stanley Black & Decker Inc. (2012). History. StanleyBlack & Decker. Retrieved 10 April 2012 from http://www.stanleyblackanddecker.com/company/history Stanley Black & Decker Inc. (2012 (b)). 2011 Business Segment Trends. StanleyBlack & Decker. Retrieved 10 April 2012 from http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTMwMTM4fENoaWxkSUQ9LTF8VHlwZT0z&t=1 The Chartered Institute for Marketing (2011). Plan your marketing tactics. Business Link UK Government. Retrieved 10 April 2012 from http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1075314178&type=RESOURCES The Times 100 & Wilson and Wilson Publishing Ltd. (2012). Marketing mix (Price, Place, Promotion, Product). The Times 100 Business Case Studies. Retrieved 10 April 2012 from http://businesscasestudies.co.uk/business-theory/marketing/marketing-mix-price-place-promotion-product.html Read More