Black and decker corporation case study

Harvard Business School 9-595-057 Rev. March 30, 2001

Professor Robert J. Dolan prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Certain non-public data have been disguised.

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The Black & Decker Corporation (A): Power Tools Division

Joe, I like you guys. But, look, I give Makita 10 feet of space. I give you 10 feet of space. They outsell you 8 to 1. What are we going to do about that?

In January 1991, statements like this no longer surprise Joseph Galli. Black & Decker’s (B&D) vice president of sales and marketing for power tools had heard similar sentiments expressed by many trade accounts. Makita Electric of Japan had practically taken over the professional power tools for tradesmen business since it entered the United States market a decade ago. “Tradesmen” was one of the three major segments of the power tools business—the others being “Consumer” and “Industrial.” “Consumer” represented “at home” use, while both “Tradesmen” and “Industrial” covered professional users. The distinguishing characteristic of the Tradesmen segment was that these buyers, such as a carpenter, bought tools for their own use on a job site. In Industrial, the buyer was generally a corporation purchasing tools for use by employees. By late 1990, Makita’s success in the Professional-Tradesmen segment was such that it held an 80% share in cordless drills, the single largest product category, and a 50% segment share overall. B&D had virtually created the portable power tools business in the United States beginning in the early 1900s. While it maintained the #1 market share position in the Consumer and Professional-Industrial segments, its entry in the relatively new Professional-Tradesmen segment held only about a 9% share.

The trade was asking for advertising allowances and rebate money on B&D’s Tradesmen products and profitability in this segment was near zero. B&D’s senior management resolved to put an end to this “no win” game, and Galli set about developing and gaining corporate support for a viable program to challenge Makita for leadership in this segment. He could not help but see the irony of a 9% Tradesmen segment share and no profitability against the results of two recent research studies: one showing B&D to be among the powerful brand names in the world, and the second establishing B&D’s professional tools to be the highest quality in the industry.