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ALISE USTRIA FE DA CONCORREN' i RATION” QUESTOES GUIA 1. Anéllise as caracteristicas prineipais da estratégia competitiva de cada um dos “players” na indastria, Quais so as opgdes para a Skil face & concorréncia ? © Imitar Black & Decker ? © Diferenciar ? Como ? 3. Existe ov nfo na estrutura da industria algum conflito nos canais de distribuicgao ? Como explorar esse conflito em termos de posicionamento ? Cheng G. Ong rorate this ease in eallabraton with Professor ‘Michael E. Porter on the basis of published materials an Interviews with company executives. 181 intended asa tss for class discussion rather ‘han to ustateefectve or Inefcive handling of an ‘dministratce situation RSE ETE Harvard Business School 9-389-005 Skil Corporation n March 23, 1979, Emerson Electric Company acquired Skil Corporation, a manufacturer of portable power tools, for $58 million. With sales of $2.6 billion in 1979, Emerson Electric produced a broad range of electrical and electronic products and systems. Emerson Electric Company Emerson Electric, originally a manufacturer of elec- tric motors and fans, had gradually expanded into a broad range of consumer and industrial products. It classified its businesses into commercial and industrial components and systems; consumer goods (including portable electric tools); and government and defense products (see Table A) Emerson’s business units manufactured products principally in electrical and electronic fields, such as elec- ‘ric motors, controls, drives, and heating, ventilating, and air conditioning equipment. The company also manufactured power chain saws, gas cutting and weld- equipment, vacuum cleaners, bench power tools (which if sold to Sears), and other consumer goods. With a stated goal of being the so-called best-cost producer in as many of its markets as possible, Emerson stressed cost reduction. Emerson defined best cost as (Copyright © 1988 by the President and Flows of Harvard College “Tosrder copes cal (617) 485-6117 or wrt the Publishing Division, Harvard [Busines Schoo, Boston, MA 02163. No pat of this publication may be reproduced, sore i 4reuleval system, er tansmiied in any form oF by any ‘nuaiteslectonie, mechanies, photocopying, recording or etherwise without {he permission ofthe Harvard Business School ‘i Corporation Table A. Sales and Pretax income of Emerson Electic by Business Sogmonts ($ milions) 8 1979 Sues Pret Incr Sues Preto ome Commercial and industrial 51,380 201 $1,570 s30 Consumer 698 123 ‘565 141 Government and defense 76 21 19) 4 Intercompany sales 2) 20) Source: Company anneal zeports the lowest-cost producer of high-quality prod- ucts, making its products a superior customer value. Each division was measured on growth and return on invested capital Emerson had embarked on a program of ac- quisitions to meet its aggressive goals of grow- ing sales 15% annually and doubling, earnings by 1981, Previously, Emerson had acquired only financilly successful companies and had retained existing management. With the Skil acquisition, it broke precedent. Carried by highly profitable electronic switch company, Skil had registered mediocre financial perfor- mance. Because of Emerson’s major position in the chain saw industry with its Beaird-Poulan Division, for antitrust reasons Emerson had to divest Ski's $20 milion in chain saw sales on acquiring Skil. From Emerson's perspective, Skil was a turnaround situation. ‘Chuck Knight, CEO of Emerson, wondered Af Skil would represent a successful new diver- sifieation approach or prove that Emerson's past acquisition philosophy had been correct. Jim Hardymon and Bill Davis, Emerson veterans installed as Ski's new president and marketing vice president, had a more pressing, problem Faced with stiff competition from Black & Decker, Sears, and emerging Japanese compet- itors, Hatdymon and Davis had to forge a new strategic direction, ‘The Portable Power Tool industry ‘The power tool industry consisted of portable and stationary tools powered by electricity, gas- line, or air. Stationary tools such as table saws, band saws, radial arm saws, large grind: fers, and sanders were large, heavy units ‘mounted on floor stands. Portable tools were hand held and mostly powered by an electric motor. The gasoline-powered chain saw was one of the few portable tools with a nonelectric engine. Pneumatic power was largely restricted to automotive tools such as grinders, buffers, impact wrenches, drills, andhammers. In 1979, portable electric power tools accounted for the ‘majority of industry volume Portable electric power tools came in a wide range of sizes, prices, and qualities, Principal products were saws (circular, reciprocating, sabre, or jig); drills (corded or cordless, regular ‘or hammer); and sanders (disc, orbital, belt, or combined sander/grinders). Other products in- cluded routers, planes, roto hammers, impact wrenches, polishers, and screwdrivers. Exhibit 1 shows domestic U.S. sales of portable tools bby type of tool. ‘A typical company product line consisted of about 200 tools plus accessories, for which a variety of sizes and price points were available. The portable power tool market was becoming increasingly segmented by price point. Circular saws, for example, ranged in price from $24.99 to $198.99 with typically 20 price points in be tween, each point designating a certain level of ualty, durability, horsepower, and other prod- uct features, A typical manufacturer had 15 models, Portable electric power tools were used pri- marily for woodworking, metalworking, or au- tomotive repair. Power tools could be broadly divided into professional (also called industrial) and consumer categories. Professional tools were designed for heavy-duty use and had higher horsepower and a longer useful life. ‘They were markedly superior in quality and precision to those designed for the consumer market, For example, the gears for a protes- sional saw were made of steel, whereas con- sumer saw gears were made from powdered metal, a lower-strength material. Professional

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