Skil Corp
1 Analysis of the structure of the Portable Electric Tool Industry
Industry Structure Attractiveness: Moderate / Low
This is primarily because of high rivalry between competitors. Despite of the low threats from other factors impacting industry structure, the industry is currently witnessing heavy rivalry because of slow industry growth and high number of existing competitors. Refer Table 1 for our evaluation of power tools industry structure based on Porter’s 5 Forces.
Table 1
2 Changes in Industry structure in 1979
There are a few notable changes in late 1970s which are mentioned here.
Rivalry between competitors is slowly gravitating on price because of reducing product differentiation. Companies like Makita are leading the pricing based rivalry to gain a quick market share. This might impact the already low industry profitability badly if other companies follow suit and start pricing aggressively.
Companies are investing heavily on automation to increase production efficiencies and volumes. Black & Decker is investing heavily on automation and computerization of processes. This would help them in reducing the cost of production and at the same time increase the quality of their products. At the same time they would aggressively target bigger market shares to break even on their investments.
A lot of consolidation is happening in the industry. Joint Ventures, Mergers and acquisitions are the latest buzzword with Emerson Electric Company acquiring Skil Corporation, Amstar acquiring Milwaukee and Robert Bosch acquiring Stanley. This is good for industry profitability as this would reduce competition and increase synergized production.
Home centers are emerging as an important distribution channel clearly indicating the growth of the domestic/do-it-yourself consumer segment.
The changes in industry structure in late...
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