Black & Decker 2014 Annual Report Download - page 22

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The Company faces active global competition and if it does not compete effectively, its business may suffer.
The Company faces active competition and resulting pricing pressures. The Company’s products compete on the basis of,
among other things, its reputation for product quality, its well-known brands, price, innovation and customer service
capabilities. The Company competes with both larger and smaller companies that offer the same or similar products and
services or that produce different products appropriate for the same uses. These companies are often located in countries such
as China, Taiwan and India where labor and other production costs are substantially lower than in the U.S., Canada and Western
Europe. Also, certain large customers offer house brands that compete with some of the Company’s product offerings as a
lower-cost alternative. To remain profitable and defend market share, the Company must maintain a competitive cost structure,
develop new products and services, lead product innovation, respond to competitor innovations and enhance its existing
products in a timely manner. The Company may not be able to compete effectively on all of these fronts and with all of its
competitors, and the failure to do so could have a material adverse effect on its sales and profit margins.
SFS is a continuous operational improvement process applied to many aspects of the Company’s business such as procurement,
quality in manufacturing, maximizing customer fill rates, integrating acquisitions and other key business processes. In the event
the Company is not successful in effectively applying the SFS disciplines to its key business processes, including those of
acquired businesses, its ability to compete and future earnings could be adversely affected.
In addition, the Company may have to reduce prices on its products and services, or make other concessions, to stay
competitive and retain market share. Price reductions taken by the Company in response to customer and competitive pressures,
as well as price reductions and promotional actions taken to drive demand that may not result in anticipated sales levels, could
also negatively impact its business. The Company engages in restructuring actions, sometimes entailing shifts of production to
low-cost countries, as part of its efforts to maintain a competitive cost structure. If the Company does not execute restructuring
actions well, its ability to meet customer demand may decline, or earnings may otherwise be adversely impacted; similarly if
such efforts to reform the cost structure are delayed relative to competitors or other market factors the Company may lose
market share and profits.
Customer consolidation could have a material adverse effect on the Company’s business.
A significant portion of the Company’s products are sold through home centers and mass merchant distribution channels in the
U.S. and Europe. A consolidation of retailers in both North America and abroad has occurred over time and the increasing size
and importance of individual customers creates risk of exposure to potential volume loss. The loss of certain larger home
centers as customers would have a material adverse effect on the Company’s business until either such customers were replaced
or the Company made the necessary adjustments to compensate for the loss of business.
Low demand for new products and the inability to develop and introduce new products at favorable margins could adversely
impact the Company’s performance and prospects for future growth.
The Company’s competitive advantage is due in part to its ability to develop and introduce new products in a timely manner at
favorable margins. The uncertainties associated with developing and introducing new products, such as market demand and
costs of development and production may impede the successful development and introduction of new products on a consistent
basis. Introduction of new technology may result in higher costs to the Company than that of the technology replaced. That
increase in costs, which may continue indefinitely or until and if increased demand and greater availability in the sources of the
new technology drive down its cost could adversely affect the Company’s results of operations. Market acceptance of the new
products introduced in recent years and scheduled for introduction in future years may not meet sales expectations due to
various factors, such as the failure to accurately predict market demand, end-user preferences, and evolving industry standards.
Moreover, the ultimate success and profitability of the new products may depend on the Company’s ability to resolve technical
and technological challenges in a timely and cost-effective manner, and to achieve manufacturing efficiencies. The Company’s
investments in productive capacity and commitments to fund advertising and product promotions in connection with these new
products could erode profits if those expectations are not met.