Background and Challenges
An Israeli hand tool manufacturer had already found success with entering global markets in Europe, Russia and Asia. Meanwhile, its entry into the US market had been much less successful.
The company had been hurt significantly during the global recession in 2008 and its US sales had never recovered. While the company’s US subsidiary was profitable, it had not experienced any growth since 2008 and was mostly reliant on one main customer for its sales.
Hoping to increase its market share and sales, the company turned to Tefen to analyze why it had been unable to grow and develop the right approach and strategy for market penetration.
Tools & Methodologies
Tefen began with an internal analysis of the company and an external analysis of the market.
The internal analysis covered the company’s P&L, its branding, organizational structure, sales strategy, and marketing. The analysis showed that the company was very strong in R&D and innovation, but very weak in sales and marketing. It also showed that 80% of the revenues from the US came from one customer, rendering the company completely reliant on this customer for its business.
The analysis also showed the client’s price point was more expensive than most of its competitors, and that its brand was relatively unknown in the market.
The external analysis covered the market, which was divided into two main segments: DIY hand tools users and professional hand tools users. The two segments have very different needs and perceptions of what is important to them. For example, the DIY segment cares mostly about price and doesn’t even look at the brand name. On the other hand, the brand name is extremely important to the professional users, who prefer buying the most expensive tools.
The external analysis also covered the main competitors in the market. In the professional market there was one main competitor that was the leader in the market, but in the DIY segment there were several players with significant market share.
Further analysis showed that the hand tool market closely follows the housing market, which has been growing steadily from 2010 and is expected to continue growing for the next several years.
Tefen developed six different approaches for increasing penetration in the US market, including strategies to focus on being a private label manufacturer for retailers or to develop partnerships or JVs with other hand tool companies.
Tefen ranked potential customers for each strategy based on an in-depth analysis of the potential customers’ product lines, history of working with OEMs or other tool companies, and the key decision makers at the companies. Based on this data, Tefen developed a tailored sales pitch for each potential customer.
Tefen developed a detailed implementation plan for the most attractive strategies and forecasted the company’s P&L for the next ten years, based on different scenarios. Tefen also developed goals and targets, measurements for success, and a risk mitigation plan.
With the new strategy and sales method in place, devised by Tefen, sales are forecasted to double in the next five years.