Download As a conclusion Black and Decker should focus on 2

During the late 1990s,
the demand for power tools and accessories in
Europe grew more slowly than in the United States. It was expected that
Europe would continue to lag behind the United States.
limited space for Black and Decker to move.
The result was
Additionally, the US market is
saturated and it’s hard to increase the market share without innovative
products. Fail to add the company’s lineup of power tools and accessories
might result in market share loss in the future.
Financial Risks
The strength of the retail economies in various parts of the world: Black and
Decker’s business is subject to economic conditions in its major markets
including: depression, inflation, deflation, general weakness in retail,
automotive, property sales, and changes within the consumer purchasing
power. This can be seen, primarily in the United States and Europe and to a
lesser extent, in Mexico, Central America, the Caribbean, South America,
Canada, Asia, and Australia.
Unfavorable changes and instability of currency exchange rates or raw
material commodity prices, both in absolute terms and relative to competitors’
risk profiles: Black and Decker has a number of manufacturing sites
throughout the world and sells its products in more than 100 countries. The
out come is the company’s exposure to movements in the exchange rates of
various currencies against the United States dollar and against the currencies
of countries in which it manufactures. Black and Decker believes its most
significant foreign currency exposures are the Euro, Pound Sterling, and
Chinese Renminbi.
The unpredicted affect on the economic conditions, during wartime or terrorist
activates. This influences consumer’s confidence.
Interest rate fluctuations and other capital market conditions
MARKETING RISKS
Black and Decker’s ability to maintain commonly beneficial relationships with
key customers and to penetrate new channels of distribution: Black and
Decker has a number of significant customers, including two customers that,
in the aggregate, constituted approximately 30% of its consolidated sales for
2003. Lost of these significant customers or a major negative relationship
change with these significant customers could have an adverse effect on
Black and Decker’s business. The company’s inability to continue penetrating
new channels of distribution may have a negative impact on its future sales
and business.
Increased competition: Worldwide, the Black and Decker’s markets are highly
competitive on the basis of price, class, and after-sale service. Competitions
with domestic and foreign companies are strong they are well established
manufacturers that compete on a global basis. Certain major Black and
Decker’s customers sell their own “private label” brands which compete
directly with products sold by Black and Decker. Competition has been
intense in recent years and is expected to continue.
Changes in consumer preference or loyalties.
OPERATIONAL RISKS
Black and Decker’s ability to achieve projected levels of efficiencies and cost
reduction measures and to avoid delays in or unanticipated inefficiencies is
resulting from manufacturing and administrative reorganization actions in
progress or contemplated.
In both domestic and foreign power, changes in laws and regulations, which
include changes in accounting standards, taxation requirements, including tax
rate changes, new tax laws and revised tax law interpretations, and
environmental laws.
Unpredicted and unfavorable weather conditions could reduce demand for
Black and Decker’s products.
TECHNOLOGICAL RISKS
Black and Decker’s ability to develop and introduce new products at favorable
margins: Numerous uncertainties are inherent in successfully developing and
introducing new products on a consistent basis.
LEGAL RISKS
Black and Decker possess various patents and licenses on many of its
products and procedure in the Power Tools and Accessories segment:
Although these patents and licenses are important, Black and Decker does
not dependent on such patents or licenses with respect to its operations.
Filings with the Securities and Exchange Commission:
The effects of
litigation, environmental remediation matters, and product liability exposures,
as well as other risks and uncertainties detailed from time to time with Black
and Decker.
GENERIC STRATEGY
Customers look for the on the best available price with innovative technology.
From the cost sensitive perspective The Company should focus on Cost
Leadership Strategies. This strategy has some pitfalls such as shrinking profit
margin, tough competition.
In addition to Cost Leadership strategy Black and Decker should consider
Differentiation strategies which rely on some basis of product differentiation
such as flexibility, specific features, service, time and availability, low
maintenance, etc. as the basis for competition.
As a conclusion Black and Decker should focus on 2 generic strategies.
1) Cost Leadership
2) Product Differentiation Strategy.
MC KINSEY ANAYSIS
1.1.
POWER TOOLS AND ACCESSORIES
Long-term Industry attractiveness for Power Tools and Accessories segment:
Market growth rate is low, market size is large, demand variability is medium,
industry profitability is low, industry rivalry is moderate, and there are
opportunities in the emerging markets.
Competitive Strength / Business Position:
Brand equity is strong, market share is high, growth in market is stable, and
profit margins relative to competitors are low.
LONG-TERM INDUSTRY
ATTRACTIVENESS
COMPETITIVE STRENGHT BUSINESS POSITION
STRONG
AVERAGE
WEAK
HIGH
MEDIUM
LOW
Power Tools and Accessories market is saturated and not attractive for new
entrants. Even though, Black and Decker has been the leader in the segment,
it’s almost impossible to increase its market share in either US or European
market. According to the McKinsey analysis, Black and Decker should
expand to new emerging markets where the use of power tools was quickly
replacing the use of hand tools.
1.2.
HARDWARE AND HOME IMPROVEMENT
Long-term Industry attractiveness for Hardware and Home Improvement
segment:
Market growth rate is moderate, market size is medium, demand variability is
medium, industry profitability is medium, industry rivalry is moderate, and
there are significant opportunities in both global and emerging markets.
Competitive Strength / Business Position:
Brand equity is strong, market share is high, growth in market is negative, and
profit margins relative to competitors are average.
LONG-TERM
INDUSTRY
ATTRACTIVENESS
COMPETITIVE STRENGHT BUSINESS POSITION
STRONG
AVERAGE
WEAK
HIGH
MEDIUM
LOW
Hardware and Home Improvement market is still attractive for new entrants.
Black and Decker is also market leader in the most of the hardware and home
improvement segments. There are still some opportunities to increase its
market share in either US or European market. As a result, Black and Decker
may expand to new markets with spending some amount of investments in
specific locations.
1.3.
FASTENING AND ASSEMBLY SYSTEMS
Long-term Industry attractiveness for Fastening and Assembly Systems
segment:
Market growth rate is slow, market size is medium, demand variability is high,
industry profitability is medium, industry rivalry is moderate, and there are no
such opportunities in global and emerging markets.
Competitive Strength / Business Position:
Brand equity is strong, market share is high, growth in market is slow, and
profit margins relative to competitors are average.
LONG-TERM
INDUSTRY
ATTRACTIVENESS
COMPETITIVE STRENGHT BUSINESS POSITION
STRONG
AVERAGE
WEAK
HIGH
MEDIUM
LOW
Fastening and Assembly Systems market is stable and difficult to enter for the
new entrants. Black and Decker has been the leader in this segment too, and
it is still doing large amount of business with the US and European market
customers. So, Black and Decker should create some additional value in this
business, with the help of its recognition in the market. And as a result of this
ma y increase its market position.