Skil Corporation

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Harvard Business School

9-389-005

op y

September 15, 1988

Skil Corporation

On March 23, 1979, Emerson Electric Company acquired Skil Corporation, a manufacturer of portable power tools, for $58 million. With sales of $2.6 billion in 1979, Emerson Electric produced a broad range of electrical and electronic products and systems.

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Emerson Electric Company

Emerson Electric, originally a manufacturer of electric motors and fans, had gradually expanded into a broad range of consumer and industrial products. It classified its businesses into commercial and industrial components and systems; consumer goods (including portable electric tools); and government and defense products (see Table A).
Table A

Sales and
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Portable tools were hand held and mostly powered by an electric motor. The gasoline-powered chain saw was one of the few portable tools with a nonelectric engine. Pneumatic power was largely restricted to automotive tools such as grinders, buffers, impact wrenches, drills, and hammers. In 1979, portable electric power tools accounted for the majority of industry volume.

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Portable electric power tools came in a wide range of sizes, prices, and qualities. Principal products were saws (circular, reciprocating, sabre, or jig); drills (corded or cordless, regular or hammer); and sanders (disc, orbital, belt, or combined sander/grinders). Other products included routers, planes, roto hammers, impact wrenches, polishers, and screwdrivers. Exhibit 1 shows domestic U.S. sales of portable tools by type of tool.
A typical company product line consisted of about 200 tools plus accessories, for which a variety of sizes and price points were available. The portable power tool market was becoming increasingly segmented by price point. Circular saws, for example, ranged in price from $24.99 to
$199.99 with typically 20 price points in between, each point designating a certain level of quality, durability, horsepower, and other product features. A typical manufacturer had 15 models.

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Portable electric power tools were used primarily for woodworking, metalworking, or automotive repair. Power tools could

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