|
|
BLACK & DECKER
Black & Deckef (B&D), once known almost exclusively as a manufacturer of power tools for professionals, is now involved in “the manufacturing, marketing, and servicing of a wide range of power tools, household products, and other labor-saving devices generally used in and around the home and by professional users.” In the 1970s, before broadening its base to include a larger segment of the household market, B&D was flying high. It had captured a large share of
the world’s power-tool market, and financial analysts were betting strongly on B&D’s future.
By 1981, however, the picture began to change. Earnings had begun to slip, and a worldwide recession caused a significant downturn in the power-tools segment of B&D’s business, its bread and butter. Other events in the world economy added to B&D’s problems. A strong U.S. dollar eroded B&D’s competitive position in export markets and made B&D vulnerable to competition from abroad.
While these events were taking place, Japan’s Makita Electric Works Ltd. and Germany’s Bosch began to erode B&D’s market share. Makita adopted a global strategy for its products
that allowed it to become the lowest-cost producer in the world. It decided that consumers in different countries really did not need significantly different products; then it combined its cost advantage with aggressive marketing, took advantage of the relatively weak yen compared with the U.S. dollar and B&D’s mistakes to make serious inroads in the power-tools market. By the late 1970s and early 1980s, Makita was able to nearly equal B&D’s 20 percent market share in professional tools worldwide.
B&D’s problems were partly a result of its own strategy. By 1982, B&D operated twenty-five manufacturing plants in thirteen countries on six continents. It had three operating groups as well as the headquarters in Maryland. Each group had its own staff, which led to duplication and overstaffing. In addition, individual B&D companies, such as B&D of West Germany, operated autonomously in each of the more than fifty countries where B&D sells and services products. The company’s philosophy had been to let each country adapt products and product lines to fit the unique characteristics of each market. The Italian firm produced power tools for Italians, the British subsidiary made power tools for Britons, and so on.
As a result, countries did not communicate well with each other. Successful products in one country often took years to introduce in others. For example, the highly successful Dustbuster, which was introduced in the United States in the late 1970s, was not introduced in Australia until 1983. When efforts were made to introduce B&D home products into European markets, the European managers refused to comply. Even though sales were stagnating, B&D held a large percentage of the power-tools market in the early 1980s—over 50 percent on the Continent and 80 percent in the United Kingdom. European managers felt that home appliances and products were uniquely American and would not do well outside of the United States.
In order to meet the tailor-made specifications of different markets, design centers were not being used efficiently. At one point, 8 design centers around the world had produced 260 different motors, even though the firm needed fewer than 10 different models. Plant capacity utilization was low, employment levels were high, and output per employee was unacceptable.
For several years, B&D split its consumer and professional tools into two different groups. Because each group did not work together to develop new product lines, Makita was able to spot a market niche that it could exploit, the mid-priced tools. In addition, B&D had begun to stagnate in new product development. It appeared that the company had decided to concentrate on its top lines and sell them aggressively.
As B&D moved into the mid-1980s, management realized that something had to be done. One area where the Japanese had not made significant inroads was the housewares and small-appliances market. Japanese consumers were not fond of those items, so Makita and other competitors had not established a strong home market to use as an export base. B&D was having trouble introducing its own line of housewares because of its image as a power-tool manufacturer. As a result, B&D acquired the small-appliances division of General Electric in 1984 to give it more shelf space in housewares and also a large enough line of products to provide economies of scale in manufacturing.
In April 1989 B&D acquired Emhart Corporation, the world-wide manufacturer of such leading brands as Kwikset door locks and hardware, Price Pfister faucets, True Temper lawn and garden products, Molly bolts, POP rivets, and other consumer and commercial products. The debt incurred to acquire Emhart was creating problems for B&D as management looked for ways to cut costs and service the debt.