Case Analysis - B&D

Alexander Crow (Student Number: 1010417871)

Management, University of Toronto

MGMB01

Dr. Tarun Dewan

June 25, 2024

Executive Summary

Company Overview
B&D is a very well established company, and since its humble conception as a machine
shop in 1910 has grown to be the world’s largest producer of power tools, power tool
accessories, electric lawn and garden tools, and residential security hardware. Their sales reached
$4.8 billion in 1990, with 50% of their product revenues coming from outside the US. While
they pioneered the portable tools industry in the early 1900s, they made a transition “from garage
to house” in 1979 with the release of the hand held vacuum, and since then they've expanded
with a wide variety of products meant for at-home use. Although they experienced high
restructuring costs and multiple substantial acquisitions, B&D’s revenues and operating income
grew steadily and quickly from 1985-1990. Their strong suit remained power tools, as it
remained their largest product group comprising 29% of 1990 sales. B&D also became very
strong in terms of household tools, as they held at least a 50% share in the US for cordless
vacuums, irons, and toaster ovens, while also introducing 29 new household products in 1990
(heavily supported by media advertising).

The Problem
B&D suffers in one major area regarding the power tools market: the tradesmen segment.
This segment is very substantial, making up $420 million of the total $1.5 billion US portable
power tools market in 1990. This segment is also growing the fastest of the 3 at 9%, as opposed
to 7% for consumer and 0% for industrial. While B&D’s power tools have an overall share of
30% of the US market, they have only a 9% share of the tradesmen segment. Currently, this
segment is being dominated by Makita, so much so that trade accounts greatly prefer them while
the trade asks for rebate money and allowances for B&D products due to low profitability.
This lack of success is attributable to the differences in the purchase process of tradesmen
as opposed to other segments. Those in the industrial segment have a more formalized and
complex process regarding these large purchase decisions, and therefore are likely to use more
objective criteria and evaluate and weigh these criteria accurately. Fortunately, purchase decision
influencers in the industrial segment have very positive perceptions of B&D products, which is
likely due to superior product quality and reputation. However, the tradesmen segment is heavily
influenced by subjective factors such as brand perception, and they currently collectively
perceive B&D products as for at-home use and ineffective on a job site. This perception may be
attributable to the fact that B&D expanded heavily into products meant for home use and also
advertised these heavily. As tradespeople will likely consume such content and may also use
B&D products for their own home renovations, this positions B&D unfavorably towards them.
Even though B&D has very strong product quality, they’ve positioned themselves through media
in a way that makes them not be taken as seriously by professional tradesmen. Furthermore,
B&D’s professional tools are coloured charcoal-gray, which is used by other competitors as the
color of their home-use tools.
Type of Case
I believe that this is a decision case. This is because there’s a clear problem outlined, and
several possible action alternatives elaborated upon. It’s up to the case analyst to determine the
best course of action for the case protagonist given the information provided.

SWOT

Strengths Weaknesses

- B&D has high market share in the consumer - Low market share of 9% in the
and industrial market segments tradesmen segment
- Experienced strong growth in both revenues - Experienced a loss in profit
and operating income from 1986-1990 overall from 1980-1985 due to
- 2 studies found that B&D has one of the most low growth in revenue and high
powerful brand names globally (brand restructuring costs
strength ranked number 7 in the US and 19 in - Long term debt of $4.2 billion,
Europe), and that B&D products are of the which is 84% of total capital
highest quality in the industry - B&D’s belt sanders are
- B&d is the world's largest producer of power considered
tools, power tool accessories, electric lawn “weak/undeveloped”, and their
and garden tools, and residential security miter saws and routers/trimmers
hardware are also weak comparatively
- They had $4.8 billion in sales in 1990, and - B&D has a less than 10% share
50% of their product revenue came from in two-step distribution, which
outside the US accounts for 40% share of sales
- B&D is strong in cordless vacuum, irons, and in the tradesmen segment
toaster ovens, with a market share of over
50% in the US for each product
- Introduced 29 new household products in
1990
- B&D holds a 45% market share of the
consumer segment, and is the market leader
- B&D has good general product quality, with
8/14 products classified as “leadership” and
only one as “weak/undeveloped”
- They hold the number 7 spot in brand
strength for power tools

Opportunities Threats

- The tradesmen segment is expected to grow - There’s currently no growth in

9% in 1990 the industrial segment, where
- The consumer segment is expected to grow B&D holds a high market share
 by 7% in 1990, and B&D has a 45% market - By the late 1990s, Makita had
share 80% market share of the biggest
- Purchase decision influencers in the product category, cordless
industrial segment view B&D as having high drills, and 50% overall market
quality, differentiation, and excellent service share
- Retailers are not as positive as tradespeople - The trade is asking for rebate
towards Makita because they offer no chanel money and advertising
protection and sell through discount oriented allowances on B&D tradesmen
Membership Clubs (B&D doesn’t do this) products due to the near 0
- There’s very high brand awareness of B&D profitability in this segment
among tradespeople (98%)
- B&D products are viewed by
tradespeople as for at-home use,
and some of their products are
known to fail on the job site
- Their general perception is that
Makita has good baseline
options in all major categories,
and other suppliers have
particular product strengths
- B&D’s professional products
are coloured charcoal-gray,
which is the same as some other
brand’s consumer products; this
might create an unfavorable
perception

STP

Segmentation
The 3 segments that B&D competes in regarding power tools are industrial, tradesmen,
and consumer. The market is segmented effectively because it’s based on consumer needs: the
consumer segment requires tools for their own home use and aren’t necessarily professionally
involved in power tools or this kind of work, the tradesmen segment requires tools for their work
and are expected to show up to job sites with their own tools, and the industrial segment are
commercial contractors who need power tools for larger projects.

Targeting
All 3 segments are substantial in size, compatible with B&D’s goals and image, and B&D
has the product quality and resources to compete in them. Therefore, B&D targets all 3 segments
by launching a variety of products for their needs and selling through various distributors (e.g.
selling through retail distribution channels such as Home Depot to the tradesmen segment).
Positioning
B&D generally has effective positioning, as shown by their brand strength and market
share of power tools. Regarding how they position differently to the different segments, B&D
offers 3 separate lines and brand designations: “Black & Decker Industrial: Heavy Duty Power
Tools” for the industrial segment, “Black & Decker Professional: Power Tools & Accessories”
for the tradesmen segment, and simply “Black & Decker” for the consumer segment. They’ve
positioned themselves very successfully in the industrial segment, as the brand clearly occupies a
valued and distinct place in the minds of these consumers. B&D has also done very successful
positioning regarding the consumer segment, and this has been done through positioning B&D as
a consumer brand, a wide variety of recent product releases, and media advertising. However,
this perception impacts B&D negatively in the tradesmen segment who aren’t looking for
consumer tools.

Evaluation of Alternatives

The key issue is that the current position that B&D holds in the mind of consumers is not
ideal for tradesmen. Therefore, steps should be taken to alter their perception of B&D products
and remove the strong associations with home-use products.

Option 1
This option involves focusing on the segments where B&D is already successful, and
trying to squeeze profits out of the tradesmen segment without trying to compete for market
share and overthrow Makita as market leader. I don’t believe that this would be an effective
solution because it means that B&D will still be unsuccessful in the segment, and they already
have near-zero profitability. Cutting back on this segment would further reinforce B&D
perceptions as being for consumers and not for tradesmen, which will further undermine any
future attempts to reach this segment.

Option 2
So far, attempts to rebuild the B&D name in the tradesman segment haven’t been
successful, which suggests that integrated sub-branding may be the solution. While this has been
successful in the past, this would likely take away from B&Ds brand equity due to the
introduction of many new sub-brands. While this may increase revenues and profits due to
avoiding negative existing perceptions and generating sales through superior product quality, I
don’t believe that this would be successful positioning. B&D enjoys very strong brand equity
and is known by 98% of tradesmen based on the annual Image Survey. By splitting up their
professional products into different sub-brands, B&D would not position themselves in a
coherent manner. This strategy tries to circumvent the issues regarding B&D’s current
positioning, but doesn’t help to build their equity or reposition the brand in a way that's attractive
to the segment. Because tradesmen have a certain level of subjectivity to their purchase
decisions, they are also likely to be influenced by brand loyalty. If B&D separates into many sub
brands, even successful products won’t be heavily associated with them and won’t improve their
positioning.

Option 3
This option is to drop the B&D name from the segment, and use another brand instead.
The DeWalt brand has a positive reputation among the segment and is free of B&D’s negative
associations, and the brand “DeWalt - Serviced and Distributed by Black & Decker” received a
58% purchase intent. However, I don’t believe that this is the solution because dropping the
brand from the segment would only further reinforce the perception that B&D is only for home
use, and not to be used by professionals. They would essentially be admitting defeat and
signaling that the B&D brand can’t be successful in professional tradesmen tools. For this
reason, I don’t believe that they should be looking to change the brand name entirely, but rather
should pursue the option of repositioning the existing brand in a way that’s appealing to the
segment.

Positioning Decision

Short Run
The key issue is that the current position that B&D holds in the mind of consumers is not
ideal for tradesmen. Therefore, steps should be taken to alter their perception of B&D products
and remove the strong associations with home-use products. Additionally, there have been
instances of B&D products designed for home use mistakenly being used on job sites, which
suggests some confusion from tradesmen regarding the purposes of tools. I believe that for these
reasons, B&D should adopt the yellow coloring. This is because a function of positioning is to
make the brand distinct, and yellow has not been used by competitors for professional products.
This would also more clearly differentiate B&D’s consumer and professional products.
Secondly, the primary reasons for B&D’s perception as a consumer brand are because of
their significant expansion into that market. For example, launching 29 new household products
and also acquiring General Electric’s Houseware Division. Through these releases and
acquisitions, B&D is inadvertently signaling to consumers that they are moving away from tools
meant for professional use, and the strength of this positioning only further weakens their
reputability to tradesmen. This is emphasized by the quote from a tradesman, “. . . On the job,
people notice what you’re working with . . . if I came out here with one of those Black & Decker
gray things, I’d be laughed at.” As people who make their living with their tools, tradesmen
likely wouldn’t want to own products from a brand that is perceived as being not for professional
use. In order to alleviate this problem, I believe B&D should simply do with professional tools
what they did with consumer tools. Simply advertising and trying to communicate to tradesmen
that the products are meant for their use will be ineffective unless the company can actually back
this up with actions. These actions could mean new product releases for professional use,
research and development into existing products to improve them (especially the
“weal/undeveloped” ones), acquisitions of the departments of other companies who sell to the
segment, and media advertising to support these efforts. B&D is clearly very effective at
establishing brand equity as shown by their success in consumer segments, but as of now they
simply aren’t taking the same kinds of actions regarding professional tools. Therefore, in the
short run, they should begin R&D, development of targeted advertisements, development of new
product releases, and make their move “from the home to the garage”. Essentially, they should
do for professional tools what they did for home-use tools.

Long Run
In the long run, B&D should work to cultivate stronger relationships with retailers, and
consider offering channel protection. This is because it would take advantage of some negative
perceptions of retailers towards Makita. Although the exact costs and benefits of channel
protection are unknown, this should be considered because it would give B&D an advantage
over Makita regarding retailers. As B&D becomes more active in professional products, this will
cultivate a more positive reputation for their products regarding that segment. They should
continue this strategy in the long run due to the high growth of the tradesmen segment, and
reinvest earnings into further R&D and expansion in order to replicate their success from
consumer products.

Predicting Competitor Responses

Makita, the main competitor in the segment, would likely be forced to respond following
B&D’s positioning efforts, especially considering they would be losing market share. This might
include investing in R&D to create more competitive products, emphasizing selling through
Membership Clubs due to B&D’s lack of presence in that channel, and creating targeted ad
campaigns to showcase their product’s features or to better position themselves towards the
segment. However, their current success is due to their perception of offering a good baseline
option in all major categories and the rapid development of home improvement chain stores.
Their product quality is still presumably inferior to B&D’s (inferred from B&D’s product quality
tests) and they lack the overall brand strength. When B&D positions itself as making products
for professionals, Makita will have no competitive advantage other than using Membership
Clubs to sell, and this also hurts their relationship with retailers. Their only options to compete
would be to further develop their products or better advertising. Regarding the former, B&D
presumably has superior R&D capabilities and is further along in terms of product quality, so
they would be playing catch-up while B&D could continually reinvest their earnings for similar
improvement. Regarding the latter, Makita would have to consider if the costs of advertising to
gain share would be worth it, especially in the US market. This is because they sell their products
for more than twice the price in their home market Japan, and will therefore have much higher
margins than in America.
 Another competitor, Milwaukee will also suffer if B&D successfully repositions itself to
appeal to tradesmen. This is because they charge a premium of 10% over B&D products, but
such a premium won’t be justified when tradesmen start to use B&D products more frequently
and experience the improved quality. Their strength is presumably offering superior product
quality for a higher price, as they wouldn’t be successful with charging a premium otherwise.
Therefore, in response to the growth of B&D they would either be forced to drop their prices to
remain competitive or invest into R&D to continue to justify the price premium. However, they
might be more difficult to take share from than Makita due to more positive perceptions. This is
shown by the comparison survey of those who prefer Makita and those who prefer Milwaukee:
those who prefer Milwaukee evaluate the preferred brand more positively when compared to
Makita, and also view B&D as worse. This suggests a stronger level of brand loyalty and
perceived product quality, which is why they’re currently able to command a higher premium.
However, this is less of an issue due to the fact that they only have around 10% share of the
tradesmen segment as opposed to Makita’s 50%.

Overview

Ultimately, I don’t believe that the solution is anything as drastic as intensive

sub-branding or dropping the B&D name from the segment entirely. This is because B&D hasn’t
expanded into the tradesmen market the way it has into consumer markets, and their past
business actions and developments have all been geared towards the latter. B&D has very strong
brand equity and high product quality; they simply need to position themselves towards
tradesmen in a way that shows that they are serious about professional tools. This should be done
the exact way the consumer market was conquered. In terms of competitors, Makita is the largest
in the consumer segment due to having a strong reputation for product quality and taking
advantage of fast-growing home improvement centers. However, if B&D can replicate their
positioning success from customer markets their product quality and brand reputation will result
in taking market share. The tradesmen segment is substantial and growing quickly; therefore, it’s
important that B&D make the necessary investments and strides to maintain dominance in the
US power tools market.