„Black & Decker“

Assignment 5
Marketing Management & Mature Consumers

by

Nihat Canak

07/26/2006

Index of contents

1 Black & Decker’s Diversification Strategy  1

2 Acquisition of General Electric’s Houseware Division  2

3 Acquisition of Emhart  3

4 Black & Decker’s Business Portfolio 2000 ... 4

5 Nolan Archibald  5

6 Divested Business Units  6

7 Strategic Recommendations  7

Bibliography  8

1 Black & Decker’s Diversification Strategy

During the 1984–1992 period Black and Decker had established themselves as a leader in the power tool industry. It was their feeling however, that the market for such tools was maturing to the point where expansion within the industry would provide little or no additional revenues so they decided to diversify. Black and Decker began their expansion operation by acquiring General Electric’s small household appliance segment, the leader in the industry. The success of the GE deal, and the reorganization efforts of their new CEO Nolan Archibald, led Black and Decker to continue on this path of acquisitions and diversification in other areas¹.

By diversifying, Black and Decker lost focus of its core products (power tools). Customers began to think that Black and Decker tools were losing quality because of their lack of specialization. When they decided to divest the other business ventures, the customers’ view of Black and Decker tools was positively affected as they regained market share. However its image could be better, so by advertising and sponsoring home improvement television shows, Black and Decker could have a better image and gain more market share. Black and Decker has divested much of its broad enterprises including its household and recreational outdoor products in favor of a more focused business model in the power and professional tools market. They also need to regain their reputation of quality by advertising and sponsoring home improvement television shows².

However, Black & Decker has now a diversified product line that competes in the consumer and professional power tools markets. The company also has a fastening business and a home and hardware business that provide diversification from tools. Such diversification helps mitigate the volatility associated with cyclical swings in any particular market. Black & Decker is known for its innovation, which would help the company to continue to develop new products for these and other markets. The company has come up with numerous "firsts". For instance, it introduced the portable drill, cordless power tools, and laser levelers. This high degree of innovation has resulted in a reasonably high vitality index, which measures the portion of total sales derived from products introduced in the last three years³.

2 Acquisition of General Electric’s Houseware Division

Black & Decker purchased the assets of GE Housewares division in 1984 for $300 million and thereafter produced coffeemakers using the GE brand name from 1984 through 1986. These coffeemakers were originally sold nationwide for between $45 and $72. Although it was a small part of GE’s company, it held more market share than other houseware distributors. That acquisition was an additional $500 million a year in revenue for Black & Decker because it was able to offer products like irons, coffee makers and toasters. There were several other acquisitions in the mid 1980’s, which allowed Black & Decker to offer even more new products such as portable woodworking tools and stronger drill bits. After all the new changes, Black & Decker Manufacturing Company also changed its name to Black & Decker Corporation to help market those changes.

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1 Press Release: http://www.bdk.com/

2 Dr. Mattson: Black & Decker, 2004 Radford

3 Datamonitor: Black and Decker Corporation, 2005 New York