Download - SDM Case Analysis Stihl Incorporated
Thursday, February 23, 2012
Case Analysis: Stihl Incorporated
Group 5
ROHIT NATH | GAURAV PATANGE | MANGESH PATIL MAHTAAB KAJLA | SACHIN KUMAR
Product line Primary focus in outdoor power equipment and handheld outdoor tools
Included both lightweight, simplified consumer versions as well as heavier, powerful versions for logging companies, landscapers etc.
Image in the market Manufacturer of High quality, innovative products
Superior customer service through highly trained maintenance technicians, sales staff, support services and committed management
Technology and experience Uses the latest technology including laser guided measurement, metal
cutting and quality control
More than 50 years of manufacturing experience
Culture Cooperative and desirable working for both employees and distributors
Sales & Distribution Management Term V
Situation Analysis- 5C’s Framework
Company
Distributors Two-step distribution channel- 1st step was the large wholesale
distributors and 2nd step was the independent retail dealers
12 geographically separate wholesale distributors. 6 of them centrally owned by Stihl
8000 independent retailers of which 55% represented Stihl exclusively
Number of exclusive Stihl retailers were increasing gradually due to added benefits provided by the company
Extremely healthy relationship with the distributors
Sales & Distribution Management Term V
Situation Analysis- 5C’s Framework
Collaborators
Two major buyer categories Commercial enterprises e.g. Landscapers, institutional groundskeepers,
loggers, farmers and construction companies
Consumers e.g. homeowners
Three main consumer segments The Baby Boomers- 78 million in size, born in 1946-1964, spent highly in
early years but are about to spend less and aging
Generation X- 55 million in size, born in 1965-1984, presently in their peak tool buying years and hence primary marketing targets
Generation Y- almost 79 million in size, born in 1985-2003, gradually entering the home buying phase, spend almost 5 times as much as baby boomers had in comparable ages
Historically bought mainly by males. However, in recent times women’s influence over purchasing decision as well as use of the product is increasingly rapidly
Sales & Distribution Management Term V
Situation Analysis- 5C’s Framework
Customers
Biggest rivals are Echo and Husqvarna Echo was one of the most progressive innovators in outdoor power equipment Echo had a solid dealer network in USA and Husqvarna was the world’s largest manufacturers of outdoor handhelds overall.
Produced products adapted to all manner of use in commercial as well as consumer business
In USA, Husqvarna sold its entire line through huge network of authorized dealers and selected products through Lowe’s, Amazon and Sear’s Craftsmen private label
Other rivals include Black & Decker, Briggs & Stratton, Club Cadet, Homelite, Honda, Makita, McCulloch, Poulan, Remington, Ryobi, Toro, Troy-Bilt, Weed Eater and Weed Whacker
Black & Decker produced only electrics whereas Remington specialized in light weight battery powered equipment
Briggs and Stratton made small engines for lawn mowers and other equipment. Adopted a multi-channel approach and were keen to sell to home centers
Honda was a minor contributor to handheld outdoor power equipment but are not to be taken for granted because of their technical prowess
Techtronic owned brands like Homelite, AEG, Dirt Devil, Hoover, Ryobi etc. Homelite supplied to home depot since mid- 1990’s. It had its manufacturing plant in China and had competence in making superior fast line changeovers
Sales & Distribution Management Term V
Situation Analysis- 5C’s Framework
Competitors
Economy is in recession
Demography is changing rapidly with gradually decreasing Generation X who are primary marketing targets
The upcoming Generation Y with their unique demands and spending habits are forcing companies to adopt new distribution channels eg. Internet delivery
Consistently increase in demand among female consumers
Competitors are gradually shifting to a multi-channel strategy to reach out to more customers
Sales & Distribution Management Term V
Situation Analysis- 5C’s Framework
Climate
Sales & Distribution Management Term V
Problem Identification
Should Stihl Inc. continue with the existing channel strategy or redesign it to stay relevant and appeal to tomorrow's consumers
Sales & Distribution Management Term V
Channel SWOT Analysis H
ard
war
e S
tore
s
Strengths Weakness
• Convenient Location • Broad range of product for a mid
size store • Customer Service
• Inability to provide after sales service
• Less space, less inventory – high chances of stock-outs
Opportunities Threats
• Channel Substitutes – e.g. Mass Merchants, Home Centres
• Greater bargaining power for procurement function due to cooperatives
• Providing High profitability to store owners; hence better bargaining power
Sales & Distribution Management Term V
Channel SWOT Analysis H
om
e Im
pro
vem
en
t C
en
ters
Strengths Weakness
• Wide and deep range of products • One stop shop experience • Supply chain efficiencies • Centralized Information • Low prices • Rationalized category management
• Frustrating shopping experience due to oversize understaffed stores
• Poor staff assistance • Nonexistence of after sales
technical support
Opportunities Threats
• Over focus on price cutting leading to substandard products
• Easily affected by recession
• Channel appealing to Gen Y (Exhibit 8) • Recession led financial distress of
distributor can give manufacturer better bargaining power
Sales & Distribution Management Term V
Channel SWOT Analysis M
ass
Me
rch
ant
Strengths Weakness
• Thousands of stores, huge retail space, broad range of SKUs
• EDLP Sears • Vast experience in maintenance &
replacement parts
Opportunities Threats
Wal-Mart • Undercutting sales margin • Brand erosion due to price
competition with low quality products
Sears • 1st preference to Craftsman
• Channel appealing to Gen Y (Exhibit 8) • Better opportunity to stabilize sales
as distributor is less prone to be affected by recession as it stocked general merchandise as well
Wal-Mart • Poor staff assistance • Nonexistence of after sales
technical support
Sales & Distribution Management Term V
Channel SWOT Analysis In
de
pe
nd
en
t Sp
eci
alty
De
ale
rs
Strengths Weakness
• Focus on specific & customized product (exhibit 1)
• Focus on quality & brands • High technical know how • Easy to monitor quality & other
parameters
Opportunities Threats
• Threat from mass merchants& other big retailers
• Change in consumer shopping patterns
• Opportunity to consolidate to compete with big stores
• Forward integration
• Declining bargaining power • Less appeal to Gen Y (Exhibit 8)
Sales & Distribution Management Term V
Channel SWOT Analysis O
nlin
e R
etai
lers
Strengths Weakness
• No need visit physical store • Peer feedback
Opportunities Threats
Increase in online shopping might make existing store network redundant
• Channel appealing to Gen Y (Exhibit 8)
• Unreliable source of information from less qualified peers
• Redundant search patterns on websites
• Low contact service
Sales & Distribution Management Term V
Effectiveness of Existing Channel Strategy
Exclusivity of brand
High customer service satisfaction
Easy control on product quality
High on relationship variables thus giving high performance (exhibit 2 & 3)
Changing customer shopping habits
Threat of backward integration by home centers
Inability of dedicated 8000 retailers to computerize
Declining purchasing power of new potential consumers
Be
nef
its
Pitfalls
Conclusion: Existing channel strategy seems to be inefficient for the future and Stihl can face serious challenge in next 3 to 5 years as Gen Y starts playing greater role
Proliferation of customer needs
Gen X (age group 35-54) customers are getting more inclined towards DIY (exhibit 8a)
Gen Y (age group 18-34) customers are undertaking more DIY projects than average population (exhibit 8b)
Gen Y enjoy all projects and more willing to take professional help than Gen X (exhibit 8c, 8e, 8g)
Shift in balance of channel power
Gen X prefer to purchase from departmental stores or hardware stores which are service focused while Gen Y prefer large home investment stores and mass merchandise (exhibit 8f)
Gen Y more rely on peer feedback and unbiased online information than Gen X who prefer staff help (exhibit 8d)
Many big stores owned their private brands and try to undercut others maintaining credible threat of backward integration
Changing strategic priorities
Forward integration and consolidation of 8000 dedicated independent stores is of mutual benefit to survive the demographic changes
Sales & Distribution Management Term V
Forces of Change
Maintain status quo for Gen X At peak purchasing period and current marketing strategies
with Gen X are working quite effectively
Position can be strengthened further through promotional activities
Sales & Distribution Management Term V
Go-To-Market Strategy for Gen X and Gen Y
Hybrid channel structure of Gen Y Detail information about products, exclusive dealers on
company website, social media websites Online promotion through user blogs and search engines Forward integration of some of the exclusive dealers to gain
size to compete with big players and at the same time maintaining exclusive brand image
Negotiate and establish long term strategic linkage with new management of financially distressed Home Depot, Lowe’s modify “why not” ad campaign suitably (exhibit 5)
Sales & Distribution Management Term V
Multi-channel Strategy
STIHL
Remaining of 8000 Dealers
Online Retailers Home Improvement
Centres
Consolidate Affiliated Distributor
Full-service/customized specialty products Mostly attractive to Gen X (Cash cow market)
Low cost/wide range of standard products Mostly attractive to Gen Y (future star market)