Harvard Business School

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September 15, 1988

Skil Corporation

On March 23, 1979, Emerson Electric Company acquired Skil Corporation, a manufacturer of portable power tools, for $58 million. With sales of $2.6 billion in 1979, Emerson Electric produced a broad range of electrical and electronic products and systems.

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Emerson Electric Company

Emerson Electric, originally a manufacturer of electric motors and fans, had gradually expanded into a broad range of consumer and industrial products. It classified its businesses into commercial and industrial components and systems; consumer goods (including portable electric tools); and government and defense products (see Table A).
Table A

Sales and …show more content…
They were markedly superior in quality and precision to those designed for the consumer market. For example, the gears for a professional saw were made of steel, whereas consumer saw gears were made from powdered metal, a lower-strength material.
Professional tools sold at higher prices and gross margins than consumer tools. For example, while a professional drill retailed at $100 or more, a consumer drill typically cost less than $50. The average gross margin for a consumer drill was 37% compared with 45% for a professional drill. Within both markets, the range of price, quality, and size gradations was wide.
As consumer tools were becoming more sophisticated and of higher quality, however, the traditional distinction between consumer and professional tools was blurring. As a result, more and more tradespeople and other professionals were buying consumer tools, especially in developing countries where both markets were served through the same channels.

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Skil Corporation

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Product improvement in portable power tools took several forms. First was the use of battery power. Although the first cordless drill, driven by nickel cadmium batteries, was introduced in the early 1960s, cordless tools did not become commercially successful until the early