Skil Corporation Case Analysis

1217 Words May 4th, 2012 5 Pages
Skil Corporation
The acquiring company Emerson had a strategy of producing low cost and high quality products. It started on a program of acquisitions to meets its aggressive goals of growing sales 15% annually. It had acquired only financially successful companies. But in 1979, it acquired Skil Corporation, a financially mediocre and low performing company for $58 million. Skil was a leading manufacturer of portable power tools serving the professional and consumer markets, the circular saw being the strongest and best seller amongst those tools, which it also invented, and was amongst the top three in power tools market share holdings in U.S. Other power tools that Skil manufactured included mid-priced drills and roto hammers. Skil
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2. Changes in Industry structure in 1979

Some changes are as follow The Rivalry between competitors was gradually focusing on price because of continually reducing product differentiation. Companies like Makita are leading the pricing based rivalry to gain a quick market share (sometimes 20% to 30% below mkt price). This might impact the already low industry profitability badly if other companies follow suit and start pricing aggressively. Companies are investing heavily on automation to increase production efficiencies and

volumes. Black & Decker is investing heavily on automation and computerization of processes. This would help them in reducing the cost of production and at the same time increase the quality of their products. At the same time they would aggressively target bigger market shares to break even on their investments. ( because they need large sales) A lot of integration was happening in the industry. Joint Ventures, Mergers and acquisitions were then popular words. As Emerson Electric Company acquiring Skil Corporation, Amstar acquiring Milwaukee and Robert Bosch acquiring Stanley. This is good for industry profitability as this would reduce competition and increase profiting production. Home centers were emerging as an important distribution channel clearly indicating the growth of the domestic/do-it-yourself consumer segment. The changes in industry structure in late 70s were

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