The Black & Decker

Corporation (A):

Power Tools
Divisions

BBA (Hons) Section (C)

Batch 38

Mr. Zamin Abbas

Submitted to: Taimoor Gohar (083805-060)

Submitted
from:
Segmentation of Power Tools

Case Study

Black and Decker Corporation (A): Power Tools Division

In 1910, Duncan Black and Alonzo Decker, Sr., started a machine shop “Black and
Decker Corporation” headquartered in Towson, Maryland and began making
industrial products make-believe and sold by others 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, Black & Decker (B&D) was also a leading producer of
electric lawn and garden tools, security hardware (locks and locksets, Baldwin and
Weiser brands), general and decorative hardware products (Baldwin), plumbing
products and specialty fastening and assembly systems (Emhart). Black and
Decker`s sales reached $4.8B in 1990, with nearly 50% of product revenues
coming from outside the United States. Alonzo G. Decker was chairman of the
plank and chief administrative bureaucrat from 1968 to 1975. Nolan Archibald, a
Harvard business school graduate and a former group president at Beatrice,
became the president and CEO of B&D in 1986.

The early 1980s had been unpredictable years at B&D. It began with a 19% net
revenue increase to $1.2B in 1980. But sales stagnated at this level through 1983.
Then in 1985, B&D with net revenues of $1.7B posted a $215.1M reconstructing
cost and then they lost $158.4 million. For the 5 year epoch from 1981 through
1985 the company loss money. After that the B&D name enjoyed sizeable equity in
mutually united state and Europe and the Black & Decker’s brand’s strength
ranking to be number seven in the US and number 19 in Europe.

The five largest product groups and their percentage of B&D`s 1990 sales were as
follows:

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Segmentation of Power Tools

 Power Tools and Accessories 29%

 Household Products 15%

 Information Systems and Services 11%

 Outdoor Products 9%

 Security Hardware 9%

The B&D name enjoyed substantial equity in both the United States and Europe.
B&D has made huge revenues from its successful segmentation throughout the
world market. Ranging from the work (Professional-Industrial Tools, Professional-
Tradesmen Tools) to Consumer Tools respectively.

In 1990, United States the business of portable power tools was a $1.5 billion
market. The products ranged from heavy duty instruments and day to day use
instruments. B&D segmented their clients into three categories.

 Professional industrial tools

 Professional tradesmen tools

 Consumer tools

The first two are categorized in work division and the third one was for non-
professional user like home users. Nonprofessional users accounted for $530 MM
or 35% of the market. Consumer segments bought tools at mass merchants, such
as wall mart and Kmart and hardware stores for their own home use and the
segment of tradesmen was made up of 420 MM. Professional-industrial segment
distributors played a significant role in providing technical proficiency and
services, in this professional-industrial segment tools were typically purchased and
owned by company rather than individual users.

The professional tradesmen segment was targeted largely at tradesmen such as

electricians, plumber, carpenters, framers, roofers or remodeler working in
residential constructions. These trades’ people were expected to show up at the job
site with their own necessary tools of the trade in working condition. These buyers
fended to patronize newly emerging retail distribution hardware stores such as

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Segmentation of Power Tools

Ace. While smallest of the three segments in 1990 the professional tradesmen
segment was growing fastest as compared to consumer and no growth for
professional industrial..In this segment the growing was very fast at 9% compare
with the 7% growth rate for consumer and no growth for professional industrials.
Share of industrials was 20% which revenues $110 m, tradesmen’s share was 9%
with the revenue on $35MM. Consumer’s share was 45% with the 250 MM revenue
in 1990. In industrial segment B&D shares was nearly equivalence with Milwaukee
Electric of Brookfield, Wisconsin. Founded in 1924, Milwaukee was privately held
firm selling only in the high and of the market at the rate of more or less $200 m
per year worldwide. the second level supplier in the professional industrial
segment were Bosch, Porter cable, and Makita.

Black and Decker product development had been a B&D focus since 1985 and B&D
rules were highly regarded in the demanding professional-industrial segment, so
the source of B&D share problem in the professional tradesman segment was not
inherent product quality, this belief was tested in two ways, first B&D conduct
laboratory test on its own and competitive product to assesses performance,
reliability and durability. Second, B&D did extensive field test. . Research on brand
awareness and perception of B&D’s annual image study provided data on brand
awareness, relative perceived quality and relating on specific attribute, and the
awareness of B&D is 98%, Milwaukee 95% and Makita 90%. The level of
agreement with the statement brand x is one of the best which is Milwaukee 80%,
Makita 67% and B&D 44%.

B&D conduct a research in 1985. The main point for conducting this research is
that B&D is very good in professional industrial segment but lacking in
Professional tradesmen-segment. The research was conducted in two ways

First way is that B&D conduct laboratory test, competitive assessment and
leadership which includes the leadership of weaker and undeveloped product

Second way is that they conduct field test in which they removes the color and
name of the company and give it to the users and collect their comments,
suggestions and product quality.

Brand Awareness and Perception

They conduct the surveys like telephone survey, annual image, perceived quality
and rating on specific attributes. In the brand awareness and perception they do
the survey and collect data on the bases of followings.

 Total awareness of power tool suppliers among trades people

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Segmentation of Power Tools

 One of the best agreement data

 Percent agreeing with the statement

Joseph Galli, after reflecting the research data collected by the company
researchers on Awareness Agreement etc, realized that he had three options in
front of him:

Option 1. Harvest Professional-Tradesmen channels, B&D would focus on the

consumer and professional-industrial segments. Main focus here would be
profitability even at the expense of the market share.

Option 2. Get behind B&D name with sub-branding. The sub-branding strategy
would be a promising offer. It had been very successful with the spacemaker line
and which Galli had used earlier in his career in the accessories business.

Option 3. Drop the B&D name from the professional-tradesmen segment. Galli
imagined what internal reaction would be to such a proposal. Everyone had taken
great pride in the number 7 brand power position of the B&D name. 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 shares
take-away from Makita.

He wondered what type of reaction to expect from Makita if he pursued a “build

share” option. Finally he considered the risk. B&D was not making much money in
the professional-tradesmen segment anyway so financial risk was limited. Also,
there might be implications for the other two segments and embarrassment in the
retail channels.

Mission:-

“Segmentation of Power Tools”