Their size has left them vulnerable to more flexible competition that can produce at a lower cost.
Opportunities: They have an ideal opportunity to substantially expand their market share in the cordless market. Though the distributor network is currently a weak spot, Smith and White has an opportunity to restructure their distribution to their benefit. Their large size and brand recognition would give them the opportunity to form channel partnerships or enter direct marketing outlets such as through a web site.
Threats: Their largest competitor, Makatume, can compete on price. Makatume has older battery technology, but has the cost structure to develop new technology, enter that market, and pre-empt Smith and White. Smith and White would be forced into a follower position on technology and price. Also, Able is on the horizon with a strong cordless product. They have been seeking a buyout or merger, which could reinvigorate them as a major threat. There are also several smaller companies that have no barriers to expanding and innovating.
Smith and White needs to take 3 aggressive actions: Reduce costs, enter the battery market, and differentiate the professional line. This would be accomplished by making the professional and consumer lines separate business units. Relocate the manufacturing of the professional line to a lower cost environment. Develop a superior cordless line for the professional products to compete directly with Makatume and re-brand it with a similar but more robust image. The rebranding would have the required fundamental changes to the product to create a positive market acceptance (DeYoung 2006). The brand recognition and battery technology would differentiate the product. This would hold off the need to compete on price (Day & Reibstein 1997 p.36). Smith and White would be in a superior position with newer technology and higher voltages.
Smith and White should then use the battery technology and transfer it to their consumer brands and take market share from Able Co. These products could be sold through distributor partners. Resources would need to be dedicated to rebuilding the distributor relationship, but this will be vital. The long-range plans would include renovation or relocation of the consumer business to a lower cost area.
SWOT Analysis: Strategic Planning
Strengths: Makatume's dominant place in Japan's market gives them a great force for entry into the US market. They can easily increase their revenue by capturing shares of the US market. They would not be in a position to need to spend resources protecting an existing position. They also have the advantage of their new plants and their low cost structure. Their dedication to the professional market has simplified development and marketing.
Weaknesses: Though their dedication to the professional line can be a strength, it is also a limitation. It limits the market and restricts the outlets. Their current battery design is old and needs redeveloped. This will drain resources in the near term. They also suffer from low brand recognition in the US.
Threats: The most immediate threat is the exchange rate fluctuation. It may make it difficult to borrow or finance any expansion. They are also threatened by the several competitors that have a small market share. Makatume has no particular advantage over them.