ON THE JOB: FACING BUSINESS CHALLENGES AT BLACK & DECKER
Power- Tool Maker Has a Remodeling Project of Its Own
Nolan Archibald had a bit of a mess on his hands. He had recently been promoted to chairman and CEO of Black & Decker, a multibillion-dollar power-tool manufacturer that was having profit problems and losing market share. Most troublesome, the company was generally annoying many of the wholesalers and retailers it relied on to sell products to consumers and construction professionals.
The company had developed a reputation for being arrogant, to put it mildly. In the words of a former Black & Decker employee, referring to Archibald's predecessors: "Management seemed to think it had the answer to every question and would generously impart its wisdom to the masses:' Such an attitude nearly got Black & Decker kicked out of Wal-Mart, the largest retailer in the United States. Not the best plan for selling products, to say the least.
In addition, inventory shortages plagued retailers. If a Black & Decker product turned out to be popular with the public, retailers had a pretty good chance of running out of it because Black & Decker put a lot of emphasis on meeting its internal financial goals. The company restrained production toward the end of the year to make sure its inventory levels dropped quite low. This practice made Black & Decker's financial statements look good, but it was driving retailers away.
To make matters worse, Archibald's predecessors had recently purchased General Electric's entire line of small household appliances (at the time, the biggest brand transfer in history), and although the new line of products provided a strong stream of revenue, it gave Black & Decker yet another distribution headache. Before the acquisition, most Black & Decker products were sold through hardware stores, home-improvement centers, mail-order retailers, and discount stores. To be successful, small appliances had to be sold through department stores as well, and Black & Decker had little experience in this area. Unfortunately the company tried to use the same approach it had used with power tools, which served only to alienate the department stores that had grown used to good treatment from General Electric.
How could Nolan Archibald repair the bad reputation that Black & Decker had gained with wholesalers and retailers? How could he combat the pressure from competitors who were trying to push Black & Decker off the shelf? How could he handle the new small appliances, given the company's lack of experience? In short, what steps could he take to ensure Black & Decker's survival and continued success?
Meeting Business Challenges at Black & Decker
It's hard to say which is more impressive: the speed at which Nolan Archibald and his colleagues turned around the corporate culture or the thoroughness of the results. Black & Decker used to be a manufacturer driven by financial measurements; it is now well on its way to being Archibald's vision of a worldwide marketing powerhouse. The company's approach to managing its marketing channels is a central component of the new Black & Decker.
The change started with strategic planning, as it should. In Archibald's own words: "You analyze the problems that are unique to the company and the industry and then determine what the strengths and weaknesses are. Then you develop a plan to leverage the strengths and correct the weaknesses." Archibald and his colleagues made sure that marketing channels were a part of that strategic plan. Moreover, the new approach manages channels as a vital marketing resource, rather than simply as a pipeline for pumping products to customers.
The analysts who have observed Black & Decker's remarkable turnaround point out several aspects of channel management that have been a vital part of the success. The first change was simple but most important: more respect for marketing intermediaries. Black & Decker had a tough act to follow when it acquired General Electric's small-household-appliance line. Known as "Generous Electric" in some circles, GE went out of its way to be a good supplier. This effort included ample support of retailer promotions, deep inventories to prevent product shortages in the stores, and a general level of respect for the people and organizations on the front line. Black & Decker's efforts to improve relations started by emulating this regard for retailers. Out of this new respect flowed assistance. Black & Decker took several important steps to help its channel partners. One of these was implementing a segmented channel strategy that focuses specialized sales assistance on the company's two major groups of customers: industrial or professional customers and retailers. This channel strategy allows Black & Decker to give each kind of intermediary the unique help it needs. Another key step was to train its sales force thoroughly, not only in mastering product performance but also in helping retailers with inventory management, purchasing, and in-store product displays. Also, the promotional budget was beefed up to help pull customers into retail stores.
Giving assistance is now mutual. Black & Decker established a number of dealer advisory panels, which retailers can use to give the company feedback on new products customers would like to see. By using its channel as a source of marketing-research information, Black & Decker benefits by getting a better picture of customer needs, and the retailers benefit by being able to deliver the right products.
Coordinated physical distribution is another change that helps both the company and its intermediaries. To better mesh its delivery systems with the needs of distributors and retailers, Black & Decker changed virtually every aspect of its physical distribution. This overhaul included new locations for distribution centers, modified transportation policies, and more powerful systems for managing and coordinating information.
Increasing the number of products held in inventory is another important step. Maintaining a deeper inventory gives retailers the confidence that they'll be able to keep up with demand, particularly during the Christmas shopping season, when many tools and small appliances are purchased.
Yet another element in Black & Decker's strategic plan is growth through acquisition, which has been tied closely to marketing channel management. The $2.8 billion purchase of Emhart is a good example. Some observers criticized the move, which gave Black & Decker a big presence in hardware. However, the logic was clear after a second look: Some of Emhart's products (like lawn and garden tools, sprinkler systems, locks, and faucets) fit in perfectly with Black & Decker's existing consumer goods channels; other Emhart products mesh well with the industrial channels. The units of Emhart that didn't align with the existing marketing channels were put up for sale.Black & Decker's dramatic turnaround is convincing evidence of the importance of managing marketing channels effectively. Its sales are growing in every channel of distribution it uses. In fact, the company is starting to be praised as a strong marketing organization that helps create demand for its retailers.