January 25th, 2003Iskra - Ljubljana / Slovenia1. January 25th, 2003Iskra - Ljubljana / Slovenia2.

January 25th, 2003 Iskra - Ljubljana / Slovenia 1



THE POWER TOOLS INDUSTRYTHE POWER TOOLS INDUSTRYTHE POWER TOOLS INDUSTRYTHE POWER TOOLS INDUSTRY

Definition:Definition: Power tools include any tool containing a motor and capable to be guided and supported by an operator.

International IndustryInternational Industry• Segmentation:Segmentation: The power tools industry is divided in two segments > Professional and Do-It-Yourself (DIY).

• Figures:Figures: in 1989, a global turnover of €5 billion. Major markets: North America (28%), Europe (47%) and Far East (18%).

• Growth:Growth: 3% growth rate per annum since 1980.



European IndustryEuropean Industry• Figures:Figures: 47% of the international market. 75% of European market dominated by Germany, France, Great Britain and Italy.

Growth rates are very irregular.

• Sales:Sales: see below the part of each country in 1989.

• Germany: 7 000 000 pieces, 28%

• France: 5 000 000 pieces, 20%

• Great Britain: 4 300 000 pieces, 17%

• Italy: 2 500 000 pieces, 10%

Total:Total: 18 800 000 pieces18 800 000 pieces75%75%



European IndustryEuropean Industry

• Distribution Channels: Distribution Channels: • Professionals:Professionals: Hardware stores, tools specialists, direct sales

• DIY:DIY: Wholesalers, hardware stores, home centers, supermarkets

• Competition:Competition: in 1989, 75 power tools manufacturers in the world. These are the major competitors in Europe (often multinationals):

• Black & Decker:Black & Decker: 100 countries. 25% of total market Major incomes source: DIY segment. Good brand image

• Makita:Makita: Japanese company. Efficient price and quality strategy Only on professional segment. Wide range of tools

• Bosch:Bosch: Germany. Present in Professional and DIY segments


ISKRA POWER TOOLS - POSITIONISKRA POWER TOOLS - POSITIONISKRA POWER TOOLS - POSITIONISKRA POWER TOOLS - POSITION

SWOT ANALYSIS : INTERNALSWOT ANALYSIS : INTERNAL

Strengths:Strengths: - Low-priced products and workforce

- Quality of the products

- Experience acquired on Eastern Europe markets

Weaknesses:Weaknesses: - Unable to supply the requested quantities

- Problems with suppliers & production process

- Very limited tools range (less than competitors)

- Lack of communication and of creativity

- High indirect costs



SWOT ANALYSIS : EXTERNALSWOT ANALYSIS : EXTERNAL

Opportunities:Opportunities: - Enter the Western Europe Markets : France, Italy

- Perles Brand: an existing tools company

- Reinforce the presence in Eastern Markets

- Opportunities in Russia and in the new States

Threats:Threats: - Political crisis & war threats in Eastern Europe

- High customs and entrance fees (in 1991)

- Rude competition: Bosch, Black & Decker, …

- Lack of presence in Western Countries


MANUFACTURING COSTS (%)

50%

15%

9%

12%

14%

Materials Machining Molding Assembly Final Assembly




Europe:Europe:

Both DIY and Professional segments

• Joint-Ventures with Perles and Skil

• Iskra as OEM Supplier

Eastern Europe:Eastern Europe:• Czechoslovakia: Naradi, Merkuria (10% market shares)

• Poland: Celma

• USSR: Institute of Power Tools

Yugoslavia:Yugoslavia:• 50% market shares

• Sales with Iskra Commerce



Competitors’ StrategyCompetitors’ Strategy

• Black & Decker:Black & Decker: Largest market share (25%) > DIY and Professional > Sales in 100 countries

• Bosch:Bosch: Third largest power tool manufacturer > DIY and Professional segments > Strong position in Europe

• Makita:Makita: Presence on foreign markets except Europe > Professional segment only

• Skil:Skil: Major manufacturer > Professional segment in the Nordic markets and DIY segment in the rest of Europe (Germany, France)

• Niche players:Niche players: Festo > Majority of sales on their own markets



Key Success FactorsKey Success Factors

• Small power tool manufacturers:Small power tool manufacturers: Makita, Skil, Niche players

• Niche Products

• Price Competitiveness

• Quality

• Large power tool manufacturers:Large power tool manufacturers: Black & Decker, Bosch

• Numerous and innovative products

• Low costs

• Strengthening of their presence in foreign markets


STRATEGIC RECOMMENDATIONSSTRATEGIC RECOMMENDATIONSSTRATEGIC RECOMMENDATIONSSTRATEGIC RECOMMENDATIONS

MANUFACTURING RECOMMENDATIONSMANUFACTURING RECOMMENDATIONS

• The simplification of the manufacturing chain: The simplification of the manufacturing chain: Fluidity of the process

• The implementation of the Just In Time (JIT),The implementation of the Just In Time (JIT), which allows a best management of stocks. Difficulties in delivery delays.

• The new organization must be more flexibleThe new organization must be more flexible to adapt itself to the products demand.

• New investments are indispensable in machines and computersNew investments are indispensable in machines and computers (especially for the design department) to reach a high level

• Too high indirect costs for the production volume.Too high indirect costs for the production volume. The motivation of the employees (internal promotion and training).



MANUFACTURING RECOMMENDATIONSMANUFACTURING RECOMMENDATIONS

• Improve the internal relationship between different departments,Improve the internal relationship between different departments, in particular between design and manufacturing

• It’s necessary to hire young designersIt’s necessary to hire young designers to increase the creativity of the department and to create new tools

• A better performance improves the fluidity of information.A better performance improves the fluidity of information. A better circulation of information

• Iskra must find new suppliers,Iskra must find new suppliers, who respond to Iskra’s quality checklists

• To establish a system to harmonize the paymentTo establish a system to harmonize the payment of the customers and the suppliers



THE IMPLEMENTATION OFTHE IMPLEMENTATION OF

THE MANUFACTURING STRATEGYTHE MANUFACTURING STRATEGY

• Evaluate and study the problems,Evaluate and study the problems, then to invest in new technology (JIT, Computer-Aided Design, …)

• The fluidity of the communicationThe fluidity of the communication will increase the productivity. Try to improve the circulation of information in the firm.

• With more creativity,With more creativity, the engineers can create new products to raise the line of products which is too limited.

• Better order the premisesBetter order the premises for a best result in terms of competitiveness and production process.



Manufacturing Options: Niche playerManufacturing Options: Niche player

• Focus on European Markets: Focus on European Markets:

France and Italy

• Specialize on company’s expertise: Specialize on company’s expertise:

Angle grinders and drills

• Strengthen ties with volume players: Strengthen ties with volume players:

Skil



Manufacturing Options: OEM playerManufacturing Options: OEM player

• Focus on Eastern and Western EuropeFocus on Eastern and Western Europe

• Sell in both Professional and DIY segmentsSell in both Professional and DIY segments

• Apply a low costs strategyApply a low costs strategy

• Agreements with volume manufacturers on Agreements with volume manufacturers on distribution channelsdistribution channels



Investment OpportunitiesInvestment Opportunities

• Negotiate agreements with volume manufacturers:Negotiate agreements with volume manufacturers:

Distribution channels

• Reorganize the production process:Reorganize the production process:

New machines, standardization of tasks, …

• Invest in Research & Development and Design Invest in Research & Development and Design

Innovation, creativity



MARKET STRATEGYMARKET STRATEGY

Before deciding to “conquer” the Western Europe:

• Make a Market StudyMake a Market Study to know and to test our capacities to enter the Western Europe

• Restructure and improve firm’s internal capacities:Restructure and improve firm’s internal capacities: this will determine our success on new markets

• Perform the marketing and the distribution network:Perform the marketing and the distribution network: the case of Iskra Commerce

• Improve the Brand and Quality Image:Improve the Brand and Quality Image: to be known



MARKET STRATEGYMARKET STRATEGY

Establishing an external strategy:

• Choose a market and segments:Choose a market and segments: Eastern or Western Europe, Professional or DIY?

• Plan a Joint-Ventures and cooperation plan:Plan a Joint-Ventures and cooperation plan: throughout Perles, with larger players

• Establish a network in Western Europe:Establish a network in Western Europe: A central office, an After-Sales Service, etc …

• Develop direct sales method:Develop direct sales method: in Professional segment



MARKET STRATEGY - PRIORITIESMARKET STRATEGY - PRIORITIES

Establishing an external strategy:

1.1. Reinforce Perles presence in Western Reinforce Perles presence in Western EuropeEurope

2.2.Concentrate our efforts on France and Italy, Concentrate our efforts on France and Italy, in Professional and DIY in Professional and DIY segmentssegments

3.3. Serve as a Niche PlayerServe as a Niche Player

4.4. Serve as an OEM Player if investment is Serve as an OEM Player if investment is mademade

5.5. Study opportunities in Russia and Eastern Study opportunities in Russia and Eastern EuropeEurope

January 25th, 2003Iskra - Ljubljana / Slovenia1. January 25th, 2003Iskra - Ljubljana / Slovenia2.

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