Known primarily for its power tools, Black & Decker is one of the world's older multinational

corporations. The company was founded in Baltimore, Maryland, in 1910, and by the end of the

1920s had become a small multinational company with operations in Canada and Britain.

Today the company has two well-known brands, Black & Decker consumer power tools and its

DeWalt brand of professional power tools. It sells its products in over 100 nations, and has

revenues in excess of $5 billion, more than half of which are generated outside of the United

States.

The company grew rapidly during the 1950s and 1960s due to its strong brand name and

near monopoly share of the consumer and professional power tools markets. This monopoly

was based on Black & Decker's pioneering development of handheld power tools. It was during

this period that Black & Decker expanded rapidly in international markets, typically by setting

up wholly owned subsidiaries in a nation and giving them the right to develop, manufacture,

and market the company's power tools. As a result, by the early 1980s, the company had 23

wholly owned subsidiaries in foreign nations and two joint ventures.

During its period of rapid international expansion, Black & Decker operated with a

decentralized organization. In its 1979 annual report, the company described how “In order to

be effective in the marketplace, Black & Decker follows a decentralized organizational

approach. All business functions (marketing, engineering, manufacturing, etc.) are kept as close

as possible to the market to be served.” In effect, each wholly owned subsidiary was granted

considerable autonomy to run its own business.

By the mid-1980s, however, this structure was starting to become untenable. New

competitors had emerged in the power tool business, including Bosch, Makita, and Panasonic.

As a result, Black & Decker's monopoly position had eroded. Throughout the 1980s, the

company pursued a strategy of rationalization. Factories were closed and the company

consolidated production in fewer, more efficient production facilities. This process was

particularly evident in Europe, where different national operating companies had traditionally

had their own production facilities. As the company noted in its 1985 annual report,

“Globalization remains a key strategic objective. In 1985, sound progress was made in

designing and marketing products for a worldwide market, rather than just regional ones.

Focused design centers will ensure a greater number of global products for the future…. Global

purchasing programs have been established, and cost benefits are being realized.”

During this period, while the company maintained a number of design centers, it cut the

number of basic R&D centers from eight to just two. The autonomy of individual factories also

started to decrease. The factories that remained after the round of closures had to compete

with each other for the right to produce a product for the world market. Major decisions about

where to produce products to serve world markets were now being made by managers at the

corporate headquarters. Even so, national subsidiaries still maintained a fair degree of

autonomy. For example, if a national subsidiary developed a new product, it was still likely that

it would get the mandate to produce that product for the world market. Also, if a national

subsidiary performed well, corporate management was likely to leave it alone.

By the 1990s, however, it was clear that this change had not gone far enough. The rise of

powerful retailers such as Home Depot and Lowe's in the United States had further pressured

prices in the power tools market. Blacker & Decker responded by looking for ways to garner

additional manufacturing efficiencies. During this period, Black & Decker shut down several

more factories in its long-established subsidiaries and started to shift production to new

facilities that it opened in Mexico and China. As this process proceeded, any remaining

autonomy the managers of local factories enjoyed was virtually eliminated. Corporate

managers became much more aggressive about allocating products to different factories

based on a consideration of operating costs. In effect, Black & Decker's factories now had to

compete with each other for the right to make products, and those factories that did not do

well in this process were shut down.

In 2001, Black & Decker announced yet another restructuring initiative. Among other

things, the initiative involved reducing the workforce by 700 people, to 4,500, shutting longestablished factories in the United States and Britain, and shifting production to low-cost

facilities. By 2004 this process reached a logical conclusion when the company reorganized its

power tools business into two separate global divisions—one that was charged with the global

development, manufacture, and marketing of Black & Decker power tools, and another that

was charged with the same for the company's professional DeWalt brand. At this point, the

company operated some 36 manufacturing facilities, 18 outside of the United States in Mexico,

China, the Czech Republic, Germany, Italy, and Britain. It had seven design centers, and two

basic R&D centers, one in the United States and one in Britain. Increasingly, the design and

R&D centers in the United States and Britain took on responsibility for new-product

development for the global market. Throughout the early 2000s, successively larger shares of

production were allocated to factories in just three nations, China, Mexico, and the Czech

Republic, and in its 2004 annual report, Black & Decker indicated that this process was likely to

continue.

Case Discussion Questions

1. How would you characterize Black & Decker's international expansion during the 1950s

and 1960s? What strategy was the company pursuing? What was the key feature of the

international organization structure that Black & Decker operated with at this time? Did

Black & Decker's strategy and structure make sense given the competitive environment

at that time?

2. How did the competitive environment confronting Black & Decker change during the

1980s and 1990s? What changes did Black & Decker make in its (a) strategy and (b)

structure to compete more effectively in this new environment?

3. By the 2000s, what strategy was Black & Decker pursuing in the global marketplace?

How would you characterize its structure? Did the structure fit the strategy and

environment?

4. Why do you think it took nearly two decades for Black & Decker to effect a change in

strategy and structure?