Black & Decker
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1. How would you characterize Black & Decker’s international expansion during the 1950s and 1960s? What strategy was the company pursuing? What was the key feature of the international organization structure that Black & Decker operated with at this time? Did Black & Decker’s strategy and structure make sense given the competitive environment at that time?
The company grew rapidly during the 1950s and 1960s due to its strong brand name and near monopoly share of the consumer and professional power tools markets. This monopoly was based on Black &. Decker’s pioneering development of handheld power tools. It was during this period that Black & Decker expanded rapidly in international markets, typically by setting up wholly owned subsidiaries in a nation and giving them the right to develop, manufacture, and market the company’s power tools. As a result, by the early 1980s, the company had 23 wholly owned subsidiaries in foreign nations and two joint ventures.
During its period of rapid international expansion, Black & Decker operated with a decentralized organization. In its 1979 annual report, the company described how, “In order to be effective in the market place, Black & Decker follows a decentralized organizational approach. All business functions (marketing, engineering, manufacturing, etc.) are kept as close as possible to the market to be served.” In effect, each wholly owned subsidiary was granted considerable autonomy to run its own business.
2. How did the competitive environment confronting Black & Decker change during the 1980s and 1990s? What changes did Black & Decker make in its (a) strategy and (b) structure to compete more effectively in this new environment?
By the mid-1980s, however, this structure was starting to become untenable. New competitors had emerged in the power tool business, including Bosch, Makita, and Panasonic. As a result, Black & Decker’s monopoly position had eroded. Throughout the 1980s, the company pursued a strategy of rationalization. Factories were closed and the company consolidated production in fewer, more efficient production facilities. This process was particularly evident in Europe, where different national operating companies had traditionally had their own production facilities. As the company noted in its 1985 annual report, “Globalization remains a key strategic objective. In 1985, sound progress was made in designing and marketing products for a worldwide market, rather than just regional ones. Focused design centers will ensure a greater number of global products for the future. . . . Global purchasing programs have been established, and cost benefits are being realized.”
During this period, while the company maintained a number of design centers, it cut the number of basic R&D centers from eight to just two. The autonomy of individual factories also started to decrease. The factories that remained after the round of closures had to compete with each other for the right to produce a product for the world market. Major decisions about where to produce products to serve world markets were now being made by managers at the corporate headquarters. Even so, national subsidiaries still maintained a fair degree of autonomy. For example, if a national subsidiary developed a new product, it was still likely that it would get the mandate to produce that product for the world market. Also, if a national subsidiary performed well, it was likely to be left alone by corporate management.
By the 1990s, however, it was clear that this change had not gone far enough. The rise of powerful retailers such as Home Depot and Lowe’s in the United States had further pressured prices in the power tools market. Blacker & Decker responded by looking for ways to garner additional manufacturing efficiencies. During this period, Black & Decker shut down several more factories in its long-established subsidiaries and started to shift production to new facilities that it opened in Mexico and China. As this process proceeded, any remaining autonomy enjoyed by the managers of local factories was virtually eliminated. Corporate managers become much more aggressive about allocating products to different factories based on a consideration of operating costs. In effect, Black & Decker’s factories now had to compete with each other for the right to make products, and those factories that did riot do well in this process were shut down.
3. By the 2000s, what strategy was Black & Decker pushing in the global marketplace? How would you characterize its structure? Did the structure fit the strategy and environment?
In 2001, Black & Decker announced yet another restructuring initiative. Among other things, the initiative involved reducing the workforce by 700 people, to 4,500, shutting long-established factories in the United States and Britain, and shifting production to low-cost facilities. By 2004 this process reached a logical conclusion when the company reorganized its power tools business into two separate global divisions—one that was charged with the global development, manufacture, and marketing of Black & Decker power tools, and another that was charged with the same for the company’s professional DeWalt brand. At this point, the company operated some 36 manufacturing facilities, 18 outside of the United States in Mexico, China, the Czech Republic, Germany, Italy, and Britain.
It had seven design centers, and two basic R&D centers, one in the United States and one in Britain. Increasingly, the design and R&D centers in the United States and Britain took on responsibility for new-product development for the global market. Throughout the early 2000s, successively larger shares of production were allocated to factories in just three nations, China, Mexico, and the Czech Republic, and in its 2004 annual report, Blacker & Decker indicated that this process was likely to continue.
4. Why do you think it took nearly two decades for Black & Decker to effect a change in strategy and structure?
I think the reason why Black & Decker took so long time to change its strategy and structure is that Black & Decker though its business was easy because of monopoly. Black & Decker’s international expansion strategy and structure was decentralization and wholly owned subsidiaries. At first, each subsidiary has own autonomy. However, when Black & Decker tried to change its strategy and structure, so Black & Decker had to cut down employees and factories. I think this was the one main obstacle. Then, Black & Decker decided to concentrate 2 main brands, Black & Decker and DeWalt. I think this is another main obstacle for Black & Decker to effect a change. Black & Decker had to consider which brand should be focused on. It’s not that easy to choose. From beforehand selection to choice and maintain until now, Black & Decker has to spend the time.