THE EUROPEAN POWER TOOL MARKET End users : - Do It Yourself (DIY) : give importance to image, product quality and price - Professional : give importance to quality, durability and after-sales service Geography : - 47% of the worldwide industry - France, Germany, Great-Britain an Italy account for 75% of the region’s sales - Northern markets are more strutured and matured than the Southern ones Distribution: - DIY : wholesalers, hardware and mass merchandisers - Professional : wholesalers, hardware and direct sales

DYNAMICS Battery-powered tools : - advances in technology - represent 20% of all power tool production - evolution from the DIY segment to the professional segment Globalization : - competitive advantages for big companies - more flexibility - economies of scale resulting from expansion Eastern Europe and the Ussr : - opening up markets - restructuration of Eastern firms - investment risk

ISKRA’S POSITION In Europe : - represented under the Perles brand name on the DIY and professional segments - advantages : low labor costs & niche products which now are threatened In Eastern Europe : - limited presence ( unstable environment, suppliers…) - potential market In Yugoslavia : - represents 50% of the market share - the leader in the DIY and professional segments - threat of newcomers

GENERALIST COMPETITORS SEGMENTS STRATEGIES KSF Black & Decker DIY Professional Innovation Globalization Restructuring Proper segmentation Brand name Makita Competitive price After sales & quality Distribution Bosch - Expansion Skil Diversification Price Positionning

SPECIALIST COMPETITORS Niche Players : Festo, ELU, Kango Segments : DIY & professional Strategies : - premium price - focus on home market KSF : - quality - expertise

RECOMMENDATIONS ON ISKRA’S MARKET STRATEGY Keep and protect its dominating position on the Yugoslavian market on the DIY and the professional segments. Develop its position on the Western markets, under the Perles brand name on niche products. In the long term, Iskra should consider entering the Ussr market as an OEM.

ISKRA’S MANUFACTURING CAPABILITIES ADVANTAGES Price competitiveness Expertise Strong artistic talent which lacked the engineering of Western designers

ISKRA’S MANUFACTURING CAPABILITIES DISADVANTAGES Quality and productivity : - overemployment out of dated equipment Stock management : - building structure - high inventories - lack of process coordination Relationship with suppliers : - local suppliers - foreign suppliers

NICHE MANUFACTURER IN FRANCE AND ITALY UNDER THE PERLES BRAND NAME PROS Perles brand recognition Less mature so less quality oriented markets France represents 20% of the European market In Italy power tools imports account for 70% Clearance agreement with Italy Cheap source of raw material Geographical proximity CONS Competition from Black & Decker, Bosch and local players Distribution shortcomings High quality standards

SERVING AS AN OEM PROS Opportunities to go international and exploit economies of scale Low labor cost Underprice competition Technical expertise CONS Necessity for investments in production facilities Failed co-operation with ELU, Bosch and Ryobi Limited ressources Limited range of products

EXPANSION ON EASTERN EUROPEAN MARKETS PROS New emerging markets Low labor cost Possibility of acquisition of local manufacturers Becoming the link between the East and the West of Europe Western investment CONS Unstable environment Currency restrictions Efficiency and quality shortcomings Failed collaboration with Czechoslovakian, Polish and Ussr producers

RECOMMENDATIONS ON ISKRA’S MANUFACTURING STATEGY Process and Organisation : - Adopt the JIT policy - Increase collaboration with Wester European suppliers - Restructure manufacturing lines Productivity and Quality : - Reduce the number of employees and clarify their functions - Reward on quality - Invest in equipment