BESA CASE STUDY

By:SHWETA GAUTAMSIDDHARTH SHUKLASMITA SINGHSNEHA JOSHISONAL SEWAK

The Portable Power Tool Industry

• Consisted of portable and stationary tools powered by electricity, gasoline, or air.

• Wide range of sizes, prices and qualities.• Price point segmented market• Tools can be divided into professional(industrial) and

consumer categories.• Professional buyers of tools were a highly diverse

group that include metalworkers, building contactors, carpenters, plumbers, electricians and farmers.

Contd…..

• Consumer buyers of tools mainly hobbyists and do-it-yourselfers.

• They have 15 separate distribution channels. • The significant ones are the industrial channels and

consumer channels.• There was constant development in the technology

field.• Huge amount of competitors in the industry like

Sears and Black & Decker.

Industry Attractiveness

• Medium industry attractiveness as – High number of competitors.– Companies with technological capabilities may enter.– Profitability for companies.– Large market size.– Stiff competition– Growth potential

Changes in the portable tool industry

Changes in portable power tools industry

• The industries has mainly consisted of two types of tools– Stationary tools

e.g.. table saws, band saws, radial arm saws etc. – Portable tools

generally hand held and mostly powered by an electric motor

Contd…• In 1979,the portable electric power tools accounted for

the majority of industry volume • Industry came in wide range of products.• Principal products were

– saws(circular,reciprocating)– drills(corded or cordless,regular or hammer)– sanders(disk,orbital,belt or combined sander)

• Other products- routers,planes etc.

contd•  Primarily use of portable electric power tools were-

wood working, metal working or automatic repair.• At later power tools were divided into two categories-

– professional / industrial category • heavy duty use• longer useful life• had higher horsepower• superior in quality

Contd…– Consumers category

• More sophisticated• Higher quality

• Preference towards consumer tools.

Competitive strategy

Change in product improvement

• Use of battery power-

- In 1960s cordless drill having nickel cadmium battories were used but did not become commercially successful in early 1970s

- Due to improvement in battery technology the sales of cordless tools growing rapidly in late 1970s

• Availability of lighter material

such as Mg,aluminium,plastic.

Competitive strategy of skil corp. in 1979

• Strengths:– Innovation– Considerable global market share– Full product line

• Weaknesses:– Heavy investment in R&D– Metallic electric tools– Advertising budget low

Competitive strategy of skil corp. in 1979

• Threats:– Stiff competition

• Opportunities:– Expansion in global market– Customer loyalty

• Low cost strategy• Broad differentiation strategy

Evaluating relative position• GE Business Screen

– Medium industry attractiveness• High number of competitors• Large market size• Growth potential

– Medium competitive position• Technology• Brand Loyalty• Market Share

• Earn selectively

Evaluating relative position :ANSOFF MODEL

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NEW

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MARKET DEVELOPM

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Skil Corp

Strategic options for Skil Corporation

Analysis so far :

• Growth of the market :Good• Professional buyers:8%

per year• Consumer or do-it yourself

buyers:2% per year.

• Competition: Intense

• Medium Industry attractiveness

Market Target of Skil: Europe, United States, others (worldwide)

Products :line and depth was considerably high .

Channels :products sold through all the distribution channels

Marketing:Poor

BLACK & DECKER; 0.311; 46%

Makita; 0.111; 16%

Bosch; 0.105; 15%

HITACHI; 0.083; 12%

SKIL; 0.071; 10%

MARKET SHARE

BLACK & DECKERMakitaBosch

Skil Corporation:

Skil Corporations net income 1974

1975

1976

1977

1978

1979

0

1000

2000

3000

4000

5000

6000

net in-come($'ooo)

selected

Strategic options for skil corp:

Skil Corporation

Defensive Strategies.

Defensive Strategies.

Diversification Diversification

Mergers and Acquisitions.Mergers and Acquisitions.

Divestment or LiquidationDivestment or Liquidation

Differentiation Strategies/ Innovative Strategy

Differentiation Strategies/ Innovative Strategy

Figure 15.1

Options for Skil

Options for Skil

Strategic options for skil corp:

Differentiation Strategies• Skil Corporation already has been capitalizing

on its differentiation strategy.• Invested heavily ($2.7 million) in Research and

engineering .• Innovation Strategy is one of the differentiation

strategies. • New models and designs were developed

focusing on best product performance .• Maintained its position in the circular saw

s(differentiated):Skil had 7 different U.S saws,2 European,2 Canadian,2 for exports, totalling 35 models using 12 motors .

• Higher percentage of professional tools.

Defensive Strategies• Broaden product line to fill in gaps that competitors

may go after.• Keep prices low on products that match other

competitors.• Sign exclusive agreements with distributors.• Offer free training• Reduce delivery time• Improve service• Sign contracts with the best suppliers.• Patent new innovations.• Invest selectively.• Milking strategy

Diversification Strategies• Add new markets and increase sales and profitability • Add by expanding into new market segments within your industry• Diversification may require new equipment, new facilities, new

operating skills and new staff.• Merger and/or acquisition of other businesses might be an

attractive method of diversification – you can buy the equipment, the facilities and acquire the staff and skills with the new firm.

• Partnerships and/or alliances with other businesses can be an alternative method of market diversification.

• “A diversification strategy can be used as either an offensive or defensive strategy.”

Divestment or Liquidation• Extreme Price Pressures• Business Position is Weakened by stiff competition;

Losing Money over R&D• No Longer Part of Strategic Direction• Predictions about the future decline in market surface.

RECOMMENDATIONS • Strategy we would like to recommend for Skil

Corporation is that of Diversification.• Since the present markets are saturated.• Should go in for market development.• Mergers and acquisitions help enable

utilization of competencies of both the firms.• Partnerships or alliances• Marketing strategy needs to be more

aggressive • Could offer free training for the use of their

products• Offer distributors an incentive to increase

sales .

Thank You