Strategic Management-1

SKIL Corporation
Skil Corporation was a manufacturer of portable power tools. Emerson Electric
Company, a manufacturer of Electrical and Electronic products and systems,
acquired Skil Corporation in 1979, as a part of its growth strategy. Emerson was
lowest cost producer of high quality products, making its products of superior
customer value.

The power tools industry: The power tool industry consisted of portable and
stationary tools, powered by electricity, gasoline or air. Portable electric power
tools accounted for majority of industry volume. Consumer tools were becoming
more sophisticated and of higher quality. Difference between professional and
consumer tools was decreasing. The industry is currently witnessing heavy
rivalry because of slow industry growth and high number of existing competitors.
There are over 20 firms in the United States itself that manufacture power tools.
Black and Decker was the market leader. It priced its products lower than its
competitors. Companies had to spend more on R & D to come up with new
product designs and which provide cost leadership in the industry. Industrial
Customers and Consumers demanded high-quality durable products with low
cost. The consumer segment is brand sensitive. Companies strongly strong
focussed on (a) Product differentiation and (b) Low operating cost. However,
product differentiation wasn’t possible to a large extent and rivalry between
competitors came on price because of reducing product differentiation. All of the
major cost components in manufacturing have significant economy of scale.
Manufacturers did not have the technology and scale to produce all the
necessary components. Only the critical components that directly affected the
performance of the product were produced in-house and rest were purchased
from specialized suppliers. The cost of purchased components was determined
by the volume of purchase.

SKIL Corporation: It sold tools on a worldwide basis, Europe constituting its

largest market. Skil manufactured multiple different models for different
countries, depending upon the local needs of the market. Circular saw line was
the single strongest product area. Skil relied more on product publicity than on
advertising. Majority of Skil's sales were from hardware stores and home centres,
which served consumers and professionals alike, followed by Contractor supply
and Mill supply. From exhibit 2 and 3, we can observe that during the period
from 1975 – 1979 SKIL Corporation is spending 50% to 70% of the amount spent
Group-13, Section-A
Mohan M S | Prabhanshu Uchhana | Saikumaar N | Rajesh Kumar Acha |
Sandeep Kumar | Sudhir Ambekar | Yagna Srikanth
 Strategic Management-1
SKIL Corporation
by Rockwell on consumer advertising but is making double the revenues.
Industry leader Black and Decker is also spending higher on advertising as a % of
Revenues. However, SKIL’s financial results were not great during the period but
it was improving.

Group-13, Section-A
Mohan M S | Prabhanshu Uchhana | Saikumaar N | Rajesh Kumar Acha |
Sandeep Kumar | Sudhir Ambekar | Yagna Srikanth