Brown Home Tools Corporation (BHT) is the leading U.S. manufacturer of durable, quality and virtually serviceless manual lawn mowers, grass edgers, trimming shears and tree cutters (i.e., all without motors). Maintaining a focus on these products within the larger lawn-care market, the firm has built up a commanding a 65% market share within its niche. BHT has maintained market leadership for several decades by being the low-cost, high volume producer, all with little change in its product line or investment in advertising. Effective cost management, cutting-edge production equipment, electronic data storage, high worker efficiency, well-understood processes as well as excellent employee commitment and loyalty to the founder, 85% majority stockholder and current CEO, Charles Brown, have made BHT a consistently high performer. Although generally risk-adverse, Brown said the following at a recent executive meeting, “I feel it’s time to diversify. Our lawn mower/implement market is very stable and profitable, but offers no foreseeable growth potential. Diversifying into small kitchen counter-top appliances such as microwaves, toasters, can openers, mixers, etc. seems attractive to me. This would provide some big growth potential and diversify risk at the same time. I’ve watch as Black & Decker’s creative advertising and product innovation programs have helped them make the move to include counter-top appliances in its power-tool line and I think it’s time to follow.” Although management frequently defers to Brown’s recommendations, the vice-president of Strategic Planning, Sam White, offered an alternative: “I have often thought that metal file cabinets might be an attractive niche for us. While the file cabinet industry does not have the growth or innovative potential that kitchen counter-top appliances might, the kitchen counter-top appliance industry already has some well recognized players. Although the file cabinet market is highly mature, with well established and well managed competitors, it does offer an opportunity to diversify our risk. Even though it might be costly, we should consider having BHT either internally develop a file cabinet line or look for a file cabinet manufacturer to acquire.” As Charles Brown listened, he thought to himself, “Maybe we should first investigate whether our current products have an appeal beyond our domestic market. But to which specific country or region should we first go? What might be the best corporate-level international strategy to pursue? And, given our products, what entry strategy might provide the best risk/control trade-off for our situation?” At the end of the meeting, no decision had been made. 1. Do you support or not support (state explicitly) Charles Brown’s proposed product diversification strategy? Why?
2. Is Sam White’s recommendation better or worse (state explicitly) than Charles Brown’s recommendation? Why? 3. Describe in some detail: two significant problems unique to acquisitions with which BHT would need to be concerned if it were to buy a firm already producing metal file cabinets and two significant problems unique to internal development with which BHT would need to be concerned if it were to internally develop a metal file cabinet business. Do NOT provide prescriptions for the concerns identified.
4. Regardless of your response to the three questions above, recommend and justify an appropriate product diversification for BHT other than the ones proposed by Charles Brown or Sam White. Be very specific in both the recommendation and the justification.
5. Identify BHT’s business-level strategy. Name and describe the levels of the dimensions/elements of BHT’s organizational structure that would most likely have fit this business-level strategy for successful implementation.
6. Provide and justify your specific recommendations for Brown’s three questions regarding international expansion (do not just list criteria).