Impact of Potential Change Factors

The potential change factors that both industries share is offshore production that is drastically re-shaping their value chains while also changing the structure of many industry participants from a supply chain standpoint. The outsourcing of tool manufacturing to India is forcing investment in quality management and compliance (Dangayach, Deshmukh, 2006) while in the high tech industry the change factors of Chinese manufacturing (Albrecht, Morgenstern, Xia, 2008) is changing the cost structures of the high tech industry and product lifecycles. The change factor of regulatory compliance to sell into Europe and global markets with tighter environmental restrictions than the U.S. is also re-ordering both industries.

An Analysis of Strategic Intent

The strategic intent of the power tools industry is to concentrate on the construction industry and generate stable sales through the Original Equipment Manufacturer (OEM) market, where profitability and sales levels are consistently high. For the retail sector of the power tools industry, the focus on new product development through customer listening and voice of the customer programs is critical. For the high tech industry the strategic intent is to capitalize on the speed of product lifecycles and generate create inventory turns as the economy improves (Dangayach, Deshmukh, 2006).

Future Performance Projections

The following two tables illustrate the revenue growth, industry value-add, enterprises and employment in the high tech (semiconductor segment specific) and the power tools industries.

Both analyses reflect the relative slow growth of these two industries going forward. The combined factors to a global economic slow-down, the development of production centers outside the U.S. And the impact that is having on industry value chain dynamics including prices and the intensity of focus on new product introduction speed and time-to-market are reflected in the relatively flat growth of each industry.

Social and External Challenges

The impact of social networks and the platform they have provided consumers to comment and in many cases comment on quickly the directions and strategies of manufacturers (Bernoff, Li, 2008) is a powerful force on each customer facing process in the high tech and power tool industries as well. The social challenges of greater accountability and transparency is critical, as is the need for offering to participate in social media to stay connected with customers. There is a new level of participation required...

They must address their consumers, channel partners, major account and OEM partners as peers and partners if they are to survive and grow in this era of extreme transparency where trust, not price, is the king of transactions.
Conclusions and Recommendations

As both industries are going through a transformation of their value chains, both need to seek out stability of pricing, supplier quality and manufacturing process control. Quality must become the differentiator in power tool production, especially with manufacturing shifting to China. The need to make quality the center of high tech manufacturing is also evident in how extensively Apple is using contract manufacturing in China for the iPhone today. The reliance on just price will force both industries into a shakeout and contraction, even more severe than that brought on by the recession. Instead, the industry needs to stabilize and concentrate on quality first, differentiate by adding value in channels with greater reliance on electronic platforms to serve channel partners, reseller and OEM accounts. If both industries are to stability their losses, they must also concentrate on product lifecycles that are more attuned to the needs of user and less driven by supplier availability of parts or worse yet, supplier product line decisions. Manufacturers need to take ownership of the customer relationship as well, as social network are revolutionizing these industries with greater transparency and the requirement of great honesty than ever before.