Essay, Research Paper: Black And Decker


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1. FINDINGS Black and Decker's DeWalt line has been so successful in the USA
that it is now the standard for both the Professional-Industrial and the
Professional-Tradesman market segments. Nolan Archibald, Chairman, President and
CEO of Black and Decker (B&D) saw the potential in 1994 to increase the
companies market share through worldwide sales of B&D products. While the
company had a definite presence in the European Consumer Power Tools market
segment, it lacked penetration in the Professional Power Tools segment. On the
other hand, in Japan, where there was a huge market for professional power
tools, B&D's market penetration was negligible compared to its competitors.
B&D's vision for DeWalt is to be the global "Value Power Tool"
provider of choice for every Professional Tradesperson and all worldwide
Industrial markets. Based on the facts, the product managers of the DeWalt line
have developed a global strategy based on the following conclusions: · DeWalt
is a highly successful product in the US market. B&D must leverage its brand
identity and marketing strategies employed in the US and also capitalize on
their established quality and pricing. · B&D must explore the formation of
strategic alliances with local distributors. Multiple and/or hybrid channels
must be used to reach customers quickly and as effectively as possible. ·
Through a global strategy, B&D can appeal to consumer homogeneity by
offering lower product costs while maintaining high product quality. The lower
product costs derived from the economies of scale will maximize customer value
exchange. · B&D must aggressively employ a hybrid push-pull communication
strategy to be successful in the two markets. This will enable B&D to get
the DeWalt name out to more customers in a diverse geography. · While Elu has
performed better than B&D Professional and B&D Proline product lines in
the European market, its lack-luster revenues compel B&D to replace the Elu
product line with the DeWalt line. · There exists cultural differences between
the US market and the European and Japanese markets. While the European market
is similar to that of the US, the Japanese market warrants a thorough study of
local conditions before entering it. The global strategy must consider factors
such as brand loyalty, product recognition, brand image and channel
intermediaries. · A direct presence in Europe and Japan is critical to
B&D's success. To effectively penetrate these markets, manufacturing and/or
assembly plants must be established locally. 2. SITUATION ANALYSIS i) US Market
In 1994 the DeWalt product line experienced worldwide sales which exceeded $350
million dollars. B&D's market share in the US comprised of 25% of the
professional industry, 40% of the professional tradesman industry, and 50% of
the consumer industry. B&D's marketing campaign in the US "Operation
Sudden Impact" was a great success leading to the reduction of Makita's
market share in the Professional-Tradesmen segment from over 50% to 30%. ii)
European Market The European market was 35% bigger than the US market. In 1994
the European power tools market was $2.5 billion. Of that $1.5 billion came from
the professional industrial and tradesman market, and $1.0 billion came from the
consumer tools market. The major competitors in the European power tool market
were Bosch, Makita, Hitachi and B&D. Bosch was considered "the standard
of excellence" in the European industry. Both Bosch and B&D held
approximately 30% of the consumer market, while in the professional market Bosch
held 30% and B&D held less than 10%(see Exhibit 1a and 1b for market
shares). In the professional power tools market, B&D offered three product
lines - Elu, B&D Professional and B&D Proline. Elu was a Swiss company
purchased by B&D in the early 1980's. Elu enjoyed brand recognition but
failed to reach a broad market. In the professional power tools segment, B&D
employed three distribution channels - specialty, traditional and modern
consumer. Consumer brands represent 70% of B&D's European power tool sales.
B&D was viewed as a highly "consumer-segment oriented" company in
Europe, similar to its situation prior to the introduction of the DeWalt line in
the US market. iii) Japanese Market Japan was the second largest in the
professional power tool market worldwide. Unlike the US and European markets,
Japan did not have a consumer power tool market. Two domestic producers -
Hitachi and Makita, dominated the industrial power tool market. They held the
majority of the market share at 40% and 35% respectively. Bosch held 10% of the
market share, and B&D held a slim 2% of the market (see Exhibit 1c).
Introducing the DeWalt product line in Japan poses a bigger challenge for
B&D than US and Europe. The DeWalt product line has never been sold in
Japan, there is no brand recognition and B&D lacks knowledge of the
distribution infrastructure. However, B&D cannot overlook the enormous
market potential in Japan. Hitachi and Makita have succeeded globally. By
entering Japan B&D has an opportunity to track their performance and
anticipate their movements. 3. SCENARIOS/OPTIONS i) Scenario/Option #1: Launch a
marketing strategy to capture the Professional Power Tool market share with the
DeWalt line of products in Europe alone. Venture into the Japanese market
pending input from a task force sent to Japan to evaluate the Professional Power
tool market. By focusing on the European market alone, B&D can solidify its
present market share in the consumer market, while building the Professional
Power Tool market. The consumer base, and distribution channel in Europe is
similar to the US. B&D will use same implementation strategy for DeWalt in
Europe as that in the US. B&D's aim will be to increase its market share in
the Professional Power Tool segment to 30% within 2 years. B&D will phase
out its existing industrial product lines - Professional, Proline and Elu and
launch the DeWalt brand. It already has distinct lines of distribution and
communication in place. B&D will leverage this position to effectively reach
the professional consumer. This will solidify the DeWalt name through price,
quality, and service. Additionally, B&D will have a task force working in
Japan to gain a better perspective of the markets, cultures, customers, and
strategies to effectively capture the power tool market. ii) Scenario/Option #2:
Position the DeWalt line of Professional Power Tools in Europe, keeping Elu in
place. Launch a B&D line of Consumer Power Tools and a DeWalt line of
Professional Power Tools in Japan. As in the first option, implementing a line
of DeWalt in Europe will be a seemingly easy task because of the presence of
B&D consumer product line. Keeping Elu will eliminate the global image of
DeWalt but will provide the consumer with options. It will be up to B&D, to
continue to build customer loyalty with quality products, value pricing, and
premium service. B&D expects to increase its combined market share to 25% in
2 years, but realizes that DeWalt's share will be diluted due to Elu's and
vice-versa. The goal will be to capture 20% of the professional power tool
market within 5 years. iii) Scenario/Option #3: Simultaneously, launch DeWalt
products in European and Japanese markets; eliminate the Elu product line in
Europe. B&D gained experience by launching its DeWalt line in the US, Latin
America and Australia. B&D will leverage the knowledge gained from marketing
campaigns in these countries to create a common a global strategy. B&D will
phase out its existing industrial product lines - Professional, Proline and Elu
and launch the DeWalt brand. In taking this approach B&D will be able to
offer highly functional quality products with lower prices by focusing on
customer homogeneity in Europe. The goal will be to capture 30% of the
professional power tool market within 2 years. For Japan, B&D will enter
into a strategic alliance with a local sales/distribution organization to
overcome market barriers. The goal will be to capture 20% of the professional
power tool market within 5 years. 4. RECOMENDATIONS/IMPLEMENTATION i) Common
Global Marketing Strategy B&D will implement a global strategy to market the
DeWalt product line. The main objective of this strategy will be to increase
B&D's market share in Europe and Japan through worldwide marketing of the
DeWalt line of products (Scenario 3). The common components of the strategy are
discussed first, followed by local caveats. a) Product/Pricing Plan B&D must
maximize its market potential by implementing realistic pricing objectives.
B&D's competitors offer a multitude of product variations. The competitive
offerings offer consumers a variety of products at various prices. The DeWalt
product line will be introduced internationally with the best available
standardized options. Through the practice of bundling the best product
capabilities, B&D will be able to offer low cost superior industrial tools.
Economies of scale in production will allow B&D to become the low cost
provider of power tools in the international market. The low cost and high
functionality will result in high value perception among B&D's consumers.
Exhibit 2 illustrates that B&D, with a smaller product line, can offer
products with better performance at lower prices as compared to its competitors,
who have a multitude of products. By pricing its products below competitors,
B&D may elicit competitive price wars within the industry. This could have a
detrimental effect on B&D's global market strategy and its bottom line.
B&D will take measures to protect itself from anti-trust lawsuits through
competitive pricing. b) Distribution Strategy B&D's worldwide distribution
strategy for the DeWalt product line will be based on the principle of
delivering the product to the right customer, at the right time and at the right
cost. In order to implement such a strategy, B&D will make the appropriate
investments required in the development of infrastructure, personnel and
product. As part of the infrastructure, B&D will build an assembly plant for
DeWalt products in Europe and in Japan. The location for the assembly plant will
be chosen so as to facilitate transportation of the component parts from
B&D's manufacturing plants in the US. This will hasten the process of
meeting the requirements of the local markets. The assembly plant will be the
hub for dispatching DeWalt products to distribution centers. These assembly
plants will be in a strategic geographic location. It is obvious that B&D
will have to use multiple channels and/or hybrid channels to deliver its product
to the international market. B&D will form key alliances with distributors
such as hardware stores and specialty stores. An attractive incentive scheme for
distributors will also be developed to push DeWalt products. As part of the
alliance, B&D will also assist the distributor with implementing Just In
Time (JIT) systems. These systems will help B&D in shipping the right
products while reducing the inventory at the distributor's warehouse. B&D
will take an active part in training the sales consultants in the stores to
allow them to convey the right message to the consumer. c) Communication Plan
The communication strategy will be centered on the relative value a customer
receives when purchasing the DeWalt brand of power tools. Relative value is the
ratio of perceived value to the product price. The international launch of the
DeWalt brand is focused on satisfying the homogenized needs and desires of the
global market namely price, quality, and service. By advocating a global
strategy centered on the homogenized needs of consumers, B&D will be able to
recognize synergies in all functions of the value exchange process. The
international DeWalt campaign will be centered on the value maximization. The
maximization of the consumers perceived value will be communicated to both the
end consumer and the market wise distribution channel. The distribution channel
serves the market by providing consultative selling or referencing of product
characteristics. The distribution channel significantly influences
consumer-purchasing behavior. B&D will adopt a "push" strategy to
leverage the existing distribution network through their message of value
maximization. It will work with its alliance partners to promote direct
marketing campaigns that stress product value and reliability. In addition,
B&D will also employ the pull strategy to stimulate demand by increasing
brand awareness and recognition. The DeWalt product line will be promoted
through trade journals, store displays, and point of sale promotions. Local
pricing situations should be considered. For example, things in Japan are
generally more expensive than in the US. So the prices there need not be reduced
tremendously there. d) Competitive Marketing With the introduction of DeWalt
line in Europe and Japan, B&D's competitors will certainly take notice.
Therefore, it is very important that the global strategy takes into account
competitors' moves. It's highly critical that coordinated efforts must be
seamlessly established with sales, marketing, manufacturing, and financial
departments before the roll out of DeWalt product line. Given Bosch's stronghold
on the European market and Hitachi and Makita on the Japanese market, the
competitors could easily launch a price war against market expansion. One way is
to aggressively market their products at lower prices and leveraging their
distribution channels to prevent or derail the introduction of DeWalt. In
addition, B&D may see negative advertising campaigns promoting
"domestic" products versus American products. As such, the best
approach to counter competitors' moves is to offer a "value priced"
product supported by excellent facilitating and supporting services. Besides
marketing Dewalt's brand image, an aggressive marketing program promoting the
product reliability and excellent customer service will counter any effective
promotions from competitors. Furthermore, to ensure the effectiveness of the
marketing effort, B&D needs to make sure that the infrastructure for its
products and supporting services can deliver the promises to the customers. Some
supporting services that will be bundled into B&D's products and offerings
are: · Establish customer support and sales centers in key locations in Europe
and Japan. This is essential especially in Japanese market where the preferred
custom is the establishment of a trusted business relationship. The presence of
local agents or distributors can be very helpful in providing this support. The
customer support and sales centers will be coordinated with the establishment of
distribution channels. · Establish warranty programs that meet or exceed
competitors' offerings; · Establish timely product repair and replacement
policies; · Develop an attractive package for B&D's products; · Guarantee
delivery dates and arrival times for shipments and the conditions of the
product. Shipments should arrive at the agreed time, and should be well packed
and undamaged upon arrival. · Establish a separate hot line for customer
complaints, product inquiry, product information, etc. This will allow B&D
to get feedback from its customers and continuously improve its product
development and supporting services. All of the above supporting services will
be met through B&D's distribution channels in Europe and Japan. ii) Europe:
Europe is geographically a large market with diverse cultures. However the
countries in Europe are well connected through various modes of transportation.
B&D will employ multiple assembly plants in Europe to serve the entire
continent. The existing Elu brand in Europe is bringing in less than 10% of
B&D Europe's revenues in the Professional segment. DeWalt in Europe will
replace the Elu brand completely. Furthermore, since the B&D professional
and B&D Proline range of products are not performing well, they will be
eliminated and replaced with the DeWalt product name. This means that DeWalt
will become the product for the professional segment, and B&D will be the
consumer market name. B&D has decided to implement this strategy to prevent
confusion amongst its consumers by not offering multiple competing product
lines. B&D will use a multiple channel strategy in Europe to sell DeWalt
products. They will have a direct sales force to concentrate on getting business
from the large industries where DeWalt could fit well in the
Professional-Industrial environment. B&D will also provide after sales
service and support for these customers. Exhibit 3A shows the proposed European
distribution channel. To support the Professional-Tradesmen segment, the source
of the DeWalt products will be from the three existing channels namely specialty
channels, traditional hardware channels and modern consumer channels. The
channels will have complete responsibility for the physical distribution of
DeWalt Power Tools including the service and support. The communication plan in
Europe will conform to the proposed global strategy. iii) Japan Japan poses a
different problem for B&D. Their presence in Japan is insignificant. However
there is a huge potential for introducing the professional line of DeWalt tools.
Japan also poses a different cultural barrier than Europe in terms of the living
standards and perspectives. Japan's distribution system is complex, labor
intensive and filled with seeming redundancy. It is expensive and accounts for
much of the differential between prices in Japan and rest of the world.
Difficulties with Japanese distribution are partly socio-cultural in nature.
Many Japanese are hesitant to disrupt longstanding relationships with suppliers.
The customers are concerned about timely shipments or lack of after-sales
service ability. B&D will research the market thoroughly to determine areas
where they can be successful. Due to the close-knit nature of business circle in
Japan, B&D will form a partnership with a firm who will be their focal point
for sales and distribution. The advantage in doing so is the firm's knowledge of
the local market, their selling techniques and existing business relationships
with potential customers. B&D will help the agency setup offices in
different locations in Japan. It will market the DeWalt products through a
direct sales-force to industries. The sales/distribution firm will
simultaneously sell the DeWalt product line within the Professional-Industrial
market segment and cater to the service needs of these industries. In addition
this firm will also market the DeWalt product line to local hardware stores and
assist B&D in training the store personnel in effective sales of B&D
tools. Exhibit 3B shows the proposed distribution channel in Japan. The
challenges for B&D in Japan are to increase brand recognition and leverage
the distribution network and strategic alliances. The communication strategy in
Japan will concentrate on increasing brand recognition and consumer value
optimization. Specifically: · B&D will work with the distribution channel
to provide informational seminars and promotional demonstrations. · As a
cost-effective means of reaching mass consumers, B&D will take part in
industry-specific trade shows. · B&D will work with strategic partners and
local advertising agencies to coordinate advertising campaigns. For instance, 21
billion passengers use commuter transportation in Japan annually. To promote
visibility of the DeWalt products, B&D will use "transit
advertising". Following is a tabulated set of recommendations and
associated timeframes: Recommendations Implementation Plan/Responsible Party
Timeframe 1 Combine Professional Product Lines in Europe Market DeWalt as the
Professional Product/ Marketing & Sales task force Immediately 2 Maximize
Market Potential Offer competitive prices, value, variety of products/ Product
Manager/Sales task force Immediately 3 Maximize Market Potential Provide Sales
and Customer service support to distribution channels/ Sales task force &
manufacturing Immediately 4 Use Distribution Channels to their potential Use
existing assembly plants Europe to centralize manufacturing and assist in
implementing JIT delivery systems / Manufacturing & Product Manager
Immediately 5 Employ hybrid push pull communication strategy Advertise, provide
informational seminars, demonstrations / Sales & Marketing Task force
Immediately 6 Compile data and interpret Japanese market Form a task force that
consists of a representative from manufacturing, marketing, sales, and product
management to study and interpret the data.
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