Skil Corporation Case Study

Following matrix shows different companies in portable power tool industry and their competitive positioning

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Skil realized it was “stuck in the middle”, with a broad product line and no competitive advantage. They needed to re – design its strategy. So, it undertook following measures:

1. They decided to become a low-cost focus leader, wherein it served the price conscious masses and tried to specialize in this sector. This can be seen from the fact that they reduced the number of manufacturing plants from 11 to 3 with a new plant in Mexico. These 4 plants took care of their worldwide demands.  It turned out to be world’s lowest cost producer.  
2. Skil made many  trade-offs 

1. Decided to reduce its distribution channels, decided not to sell to mass merchandisers despite the fact that it formed significant part of sales of electric power tools and emphasized on hardware store, home centers etc. This allowed them to streamline their product and sales force. It also helped them to enlist the support of these channels in their marketing program and reserve prime shelf positioning
2. They decided to decrease the number of products they have on the market, infact they reduced their product line by 50%, though initially it made them loose 20% of their revenue. Then with the help of their innovative R&D department, redesigned their entire product line which ensured interchangeability between consumer and professional products. They also reduced the number of parts required in a particular product. This helped them attain more effective performance on products that remained.

It did away with its strategy of  trying to be everything to everyone. It didn’t blindly straddle Black and Decker just because they were profitable. Instead Skil decided to focus on a narrow but a well-defined segment.