CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
33–20
2) The goal of maintaining premium brand quality has been mentioned as
one of the R&D objectives and has always been its strategy to
venture into new domains (S).
II. Consistent with the corporate’s mission and policies to invest in
emerging markets, corporate has recently established several research and
development facilities in China and in Wisconsin (S).
III. Role of technology:
1. Snap–on also relies on technology to improve its supply chain
infrastructure as one of its main objectives is to decrease the
operating expenses (S).
IV. N/A
V. R&D does provide the company with a competitive advantage especially
with a significant number of patents—over 600. Although R&D does provide
the company with a competitive advantage, competitors’ new products may
VI. Cannot be assessed from the information provided in the case.
VII. Technological discontinuity could adversely affect the company’s
operations, especially with the recent venturing into e–commerce domain (W).
4. Operations and Logistics
A. Snap–on has three major strategic objectives:
i. Enhancing its franchise network (S).
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
iii. Building in Emerging Markets (S).
a. Open its fourth manufacturing facility in Kunshan,
China.
B. Four core beliefs.
i. Nonnegotiable product and workplace safety (S).
ii. Uncompromising quality (S).
C. N/A
i. Continuous innovation to maintain its brand differentiation strategy
(S).
ii. Strong relationship with key partners and suppliers (S).
iii. Overreliance on the US market (W).
iv. Operations lagging behind in the emerging market sector (W).
D. N/A
5. Human Resources Management (HRM)
A).
i. Clearly stated strategy—“our behavior define our success: we
B).
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
33–22
i. Not much turnover between 2012 and 2013—shows stable and
content workforce (S).
ii. The trend has a positive impact on the company’s past performance,
however, it is doubtful that it will continue to be a positive
influence on future performance because the company is now faced with
C). N/A
D).
i. Quarterly feedback reviews (S).
ii. Good relationship among coworkers (S).
E). Based on online reviews, the company’s workforce diversity is mainly
focused now on employees in their early or late careers, highlighting the
6. Information Systems
A). Snap–on is a very traditional manufacturing company. Despite their effort
in investing a vast amount of money in technical education to attract a
B).
i. Not enough data for identifying the use of IS for assisting managers
and employees with their strategic or daily operations. However, that
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
ii. Even though the resistance doesn’t have much impact in the 20th
century, the lack of the use of new innovative IS will certainly
C). I suppose that the company is lagging behind its competitors. Snap–on
seems to be fixated on promoting their brand and high quality via “word–of–
mouths” among its customers rather than using the current latest internet
D. Summary of Internal Factors
Internal Factor Analysis Summary (IFAS)
Internal
Factors
Weight
Rating
Weighted
Score
Comments
Strengths
management
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
33–24
Differentiated
Product
0.15
5
0.75
Snap–on
Tools’
products are
unique in the
market.
employees.
Direct
Marketing to
Automobile
Service
0.15
5
0.75
The market is
pinpoint to
automobile
service.
can provide
unique
Weaknesses
Company
Structure is
Misunderstood
by the
0.1
2
0.2
The company
doesn’t
listen to
employees in
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
Employees
this way.
Rarely Respond
This makes
Lack of
Innovate
Marketing
0.05
1
0.05
Snap–on Tools
has no
innovate
marketing to
promote
products,
except for
social
connection.
changed.
Snap–on Relies
on US Market
Too Much
0.1
3
0.3
US market
contributes
65% of the
sales. It
will be a
disaster if
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
33–26
the US market
collapses.
Total Weighted
Score
1.00
3.6
V. Analysis of Strategic Factors (SWOT)
A. Situational Analysis
Strategic Factor Analysis Summary (SFAS)
Key
Strategic
Factors
Rating
Weighted
Score
Short
Inter
media
te
Long
Comments
Different
iated
Product
(S)
5
1
X
X
X
The
differentiated
product is an
advantage that
can last long
Supportin
g Skills
of USA
5
0.25
X
X
In order to
sustain the
innovation
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
33–27
support US tech
education and
train future
employees in the
long–run.
(W)
it will not be
able to survive
in the long–run.
Rarely
Respond
1
0.1
X
X
The company
needs to more
Company
Structure
is
Misunders
tood by
the
Employees
(W)
1
0.1
X
In this
situation, the
employees cannot
work for the
company very
well since they
cannot help to
develop the
company in the
right way. This
must be changed.
3
0.3
X
X
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
33–28
Products
Required
by Many
Fields
(O)
3
0.3
X
X
The unique
products in
Snap–on Tools
are required in
many fields.
Emerging
Market
(O)
3
0.3
X
X
The market will
not be emerging
all the time. It
will stop
emerging within
a few years.
No
Technolog
y in Use
(T)
1
0.3
X
X
The company
should rely
more on IT
systems to
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
quickly.
Total
Score
3.05
b. Review of mission and objectives—current mission and objectives are
appropriate in light of the key strategic factors and problems, but
strategies should be altered in order to achieve them.
VI. Strategic Alternatives and Recommended Strategy
A. Strategic Alternatives
1. Current objectives are good for the company
i. Snap–on should continue to fine tune strategy in order
2. Alternative strategies:
i. Differentiation—part of current strategy.
Pros:
a. Highly innovative, quality product because it’s
perceived to have value and is better than other
Cons:
a. People may not buy due to “fear of the unknown.”
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
33–30
b. Although this strategy is working in the US due to
c. Harder to sell in uncertain economic conditions.
ii. Enhancing its franchise network—part of current
strategy.
Pros
a. Snap–on works closely with franchisees to improve
their profitability and increase their sales.
Cons
i. Economic downturns make financing difficult.
Pros:
i. Snap–on initially served the automotive industry. Over
the years it expanded to engineering industries (aerospace,
ii. Growth of product line (14,000 products).
a) Attract buyers with different preferences,
increase profitability thanks to market
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
segmentation, and, for some businesses, even
out seasonal sales patterns.
b) Having multiple product lines may
iii. 65% of all revenue is in the US.
Cons:
i. Growth of market in different industries prevents
the company from focusing and dominating one market.
ii. Large amount of product line creates potential for
overextension–new products may cannibalize sales of older
iv. Build in Emerging Markets—started to employ.
Pros
i. New manufacturing facility in China, utilizing
technology, and cheap labor costs.
Cons
B. Recommended Strategy
1.
A. Differentiation—part of current strategy.
i. Invest in marketing and advertising in order to
continue creating differentiation
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
33–32
B. Enhancing its franchise network—part of current
strategy.
i. Continue to enhance relationship with franchisees.
ii. Continue to invest in marketing events that
C. Growth
i. Deal with the cons of large product mix by
recognizing product’s life cycle and altering the
marketing strategy at each stage in the cycle.
a. Introduction stage: marketing objectives
should be to create awareness.
b. Growth stage: focus on to maximize share and
penetration.
ii. Invest in market research to evaluate the
performance of products and continue developing
products that serve the customer’s wants and needs.
D. Build in emerging markets
i. Consider utilizing India as a market. Conduct
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
33–33
ii. Slowly open more products in China in order to
decrease dependence and risk on the US market.
2. These strategies will help resolve both long and short–
term problems by retaining their existing customers and
3. The company needs to issues guidelines on expanding into
4. The new strategies shouldn’t have an impact on the
VII. Implementation:
A. Organizational structure and programs:
1. Restructuring is in progress through several Rapid Continuous
Improvement (RCI) programs.
2. Able to support the recommended strategy from section VI.
B. Feasibility and timetables
1. Feasibility (financial)
a. Yes, the programs are financially feasible.
2. Pro–forma budgets
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
33–34
c. Use of innovative Information Systems (IS) should be
prioritized.
C. Standard operating procedures
1. Current operating procedures have helped the company to
VIII. Evaluation and Control
A. Current information systems are not capable of supporting the company’s
activities. We have no evidence of Snap–on actively operating their
current information systems to their advantage.
B. 1. Current control measures seem to meet the needs of the organization.
i. Discussion of control measures very limited in the case.
2. Suggested additional control:
i. Fully developed, 360–degree metrics to evaluate expansion into
C. Rewarding System
1. Since it is a franchise model, compensation is commission–based
for its franchisees.
2. Other compensation data not available in case: assumes that
Financial Ratios:
2013
2012
1. Liquidity Ratios
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
33–35
Current Ratio
2.30
2.37
Capital
Cash Ratio
0.29
0.35
2. Profitability Ratios
(%)
Net Profit Margin
11.9
10.6
Gross Profit Margin
48.2
47.3
Return on Investment (ROI)
8.1
7.5
Return on Equity (ROE)
16.4
16.8
(*From form 10-K)
3. Activity Ratios
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
Days of Inventory
100.03
95.31
Turnover
0.70
0.72
7.79
7.83
Average Collection Period
2.75
2.73
Accounts Receivable
Turnover
138.93
127.73
34.20
30.30
53.92
56.33
4. Leverage Ratios
Debt to Asset Ratio
0.46
0.51
0.42
0.49
0.062
0.065
11.45
10.25
CASE 33
SNAP–ON TOOLS: A VICTIM OF ITS OWN SUCCESS
33–37
Coverage of Fixed Charges
N/A
N/A
5. Other Ratios
Price/Earnings Ratio
(* From form 10-K)
13.15
10
(* From form 10-K)
26.7
26.9