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MULTI-PURPOSE TOOLS: THE FINAL

PRESENTATION

BY:-ASTHA SAITH(A046)

SHREY AGARWAL(D002)ARNAB MALLICK(D036)

GAURAV SINGH(D058)AMIT KARIWALA(E021)TULIKA SINGHAL(E053)

RAVI THAKUR(A061)SAURABH DHOLE(D023)VARUN VERMA(B062)

SAMRIDDHI GOEL(E014)


2/15

EXECUTIVE SUMMARY

The problem at hand was of a Multipurpose Hand tools which was losing revenuesin the wake of increasing competition from new players which are offering theproducts at a lower price. Furthermore it was rooted to a single distributionchannel which was proving to be a jinx to its growth.

So what needed to be analyzed was the reasons for the decline, which could be

attributed to product changes, ad-hoc price point and distribution. When analyzedfurther


3/15

FLOW OF THE PRESENTATION

APPENDIX

THE WAY AHEAD

KEY FINDING & RECOMMENDATION

APPROACH & METHODOLOGY

PROBLEM STATEMENT

INVESTIGATION

CONTEXT


4/15

In the wake of increasing competition and the fate of Multi- purpose hand tools Company hangsin a balance given the various growth drivers the industry has to offer

THE CONTEXT

Held the Monopoly in the Multipurpose hand tool segment for a decade Priced its product at $50 to gain competitive advantage and maximize profits

Market Scenario changed in the past 2 yrs. With the introduction of cheapercompetitive products priced at $30.

The current Value Chain is skewed towards a single distribution channel i.e.Hardware retailers whereas the competitors have started explaining theDiscount retailers like Walmart, Lowe, Target etc.

This resulted in DECLINING REVENUES & FALLING MARKET SHARE

Growing Exports market triggering market demand Opportunity to enter growing markets via Trade fairs & exhibitions Increase in Govt. funding and policy reforms to the related industries which are

its direct end users.

INDUSTRY GROWTH DRIVERS


5/15

When the problem was INVESTIGATED, various factors were foundwhich could have stunted growth for the company.

Revenues

Price

Cost ofMaterial

Functionalities

Channel

Volume

PriceSensitivity

Supply chainDynamics

Rationalization

ProductQuality andDesign

Services

Brand value

Industry Analysis and Reports/SME views

Interviews with CFO andBusiness Heads

Workshop with theProcurement Team tounderstand the complete end-end cycle.

Survey among hand tool usersfor understanding usagepattern


6/15

Taking the investigation forward, it was time to define a clear

PROBLEM STATEMENT

Inability of the company to adapt to the changing hand toolmarket environment triggered by the influx of new players

It is affecting the firms Supply chain, Manufacturing, Logistics,

Sales and Distribution

The Firms Profitability and Revenue are getting impacted

We would be proposing solution(s) that would help the Company arrest thedecline in revenues and register growth in its multipurpose hand tool

product line.


7/15

Defining the problem was only the beginning, a thorough APPROACH& METHODOLOGY had to be defined to tackle the problem

Situation Complication Questions Answers

Market Leader for

several years

Product priced at $50

Sales Volume at 100

mn units/year

Competition has

emerged in last 2

years

Competing product

priced at 30$

How to we increase

the revenues of the

product line

DecliningRevenues

Product

Lack ofproduct

Innovation

Limitedreplacement

demand

ChangingConsumerBehavior

Price

Single Price forall consumers

Constant priceover years

Distribution

SingleDistribution

Channel

NewerChannels havegreater reach

GOVERNINGTHOUGHT

KEY LINES

SUPPORT LINES


8/15

MARKET ANALYSIS

Professionals use a greater varietyof tools, most of which are alsomore expensive than those used byconsumers.

As per Power & Hand Tools industryforecasts to 2011 & 2016, Powertools to outpace their more durablehand tool counterparts.

Cordless power tools to growfaster than corded

% of Overall Hand-tool

Demand

Professiona

l Users

Consumer

Market

Consumers

ProfessionalUsers

Growth Projections


9/15

Post the analysis, the KEY FINDINGS were brought out which couldpave the way ahead

Monopolistic

Competitive

No pressure onprices

No incentive to

reduce costs

Intense pressure

on prices and

thus costs


10/15

So, it was high time the ground rules were set and to plug the

loopholes RECOMMENDATIONS

Have two segments one for home consumers and the other forprofessionals. This will help boost revenues as findings suggestConsumer segment will drive growth in the future

Segment Markets

The company must check for inefficiencies in their value chain

They might either be giving disproportionately high margins forone particular element OR using a cost ineffective element

Check forInefficiencies

The company must see if it can find other channels to reach the endconsumer and thus reduce channel margins

Different product through different channels, professional throughnormal retail route while consumers through discount stores

AlternativeChannels

As trend shifts towards more automated products, the companyshould consider shifting to producing automated toolsAutomated Tools


11/15

0.00

0.20

0.40

0.60

0.80

1.00

1.20

0.00 0.20 0.40 0.60 0.80 1.00 1.20

Quality

P

rice

Result of Cluster Analysis of asample of Customers

Households Professionals

DIY Customers Carpenters

Plumbers

Craftsmen

Toolmakers

Households

Professionals

One option to look at was SEGMENTING THE CUSTOMERS


12/15

Outsourced

manufacturing

In-house

manufacturing

Hand-Tool

Company

Dealer owned

Distributors

Merchandise

groups

Independent

Wholesalers

Hardware

Stores

10%

20%

$ 50$ 40$ 35

Discount Stores-

Wall-mart/Sears

$ 35

The other was to optimize the DISTRIBUTION CHANNEL

$ 42

Around 16% price cuts can be achieved by reducing the length of the channel


13/15

THE WAY AHEAD


14/15

APPENDIX I: Sensitivity Analysis

Price Demand Revenue

$72.00 81 $5,832.00

$60.00 90 $5,400.00

$50.00 100 $5,000.00

$40.00 110 $4,400.00

$32.00 121 $3,872.00


15/15

The case is set in the year 2006-07

They have the capacity to add similar product to their product line

Product revenues are declining

There exists a market for premium/professional customers

There would not be any product cannibalization

Current cost of production 30$ (industry average of gross margin is 35%)

Market is not segmented

Generally speaking, hand tools products are applied in the following market segments:

Households (DIY)

Professionals (e.g. carpenters, plumbers, craftsmen, toolmakers etc).

There is a price within which the elasticity is linear, beyond which it becomes non-linear( 30 60)

We are giving a high quality product currently not valued by the customer - marketing efforts

APPENDIX II: Assumptions

Date post:	05-Apr-2018
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