Illinois Tool Works – Retooling for continued growth and profitability Group 8, Section B June 13, 2018
2 Slide Content Slide 3 History, product areas and business model of ITW Slide 4 Decentralization and Acquisition strategy of ITW Slide 5 Issues due to above strategy Slide 6 Recalibrating strategy to a centralized one Slide 7 Uncertainty of future growth Slide 8 Evaluation of Resources Providing Competitive Advantage Slide 9 Diversification Slide 10 Proposed components of future strategy Appendix ITW 2018-2022 Actual Strategy Targets Contents
3 Founded in 1912 by Frank W. England, Paul B. Goddard, Oscar T. Hogg and Carl G. Olson as a manufacturer and seller of metal- cutting tools Founded in 1912, the company operates on a business model composed of three elements across seven product areas ITW: History and Business Model Founded World War 1 and 2 Beyond 1960 Quickly expanded into products such as truck transmissions and pumps realizing demand in WW 1; Earned representation on War Production Board of WW 2 After getting listed in 1960s, strengthened position in construction, industrial and packaging materials Automotive OEM Food Equipment Test Measurement and Electronics Welding Equipment Specialty Products Seven Product Categories Power and Fluids Construction Products ITW Products and Business Model Business Model Elements 80/20 Management Process 1 Focus on most rewarding areas generating 80% of the total value. Point is to concentrate its efforts, key resources and investments on key customers and products best positioned for profitable growth 2 Customer Back Innovation Emphasis on solving customer problems. ITW had a strong 16,000 patent portfolio, 1900 of which were applied in 2015 only. 3 Decentralized Entrepreneurial Culture The company believed that employees understood the business model, strategy and core values, and were allowed to empower their own businesses and customize their approach
4 Decentralization and Acquisitions • The company would follow small acquisitions, average around 30-50 per year between 2003-2012 • Focused on targets valued under USD 100 million • Thumb rule for each acquisition aimed at the area where company was not competitive such as complementary product or important customers • After acquisition, ITW would also improve the operation excellence by deploying 80/20 principle and retained the identity of the new company • It also maintained the identity of the company for its employees do not feel left-out Until 2012, the company followed extreme form of decentralization and acquired small companies creating hundreds of smaller entities to operate on their own Decentralization Acquisition • ITW would consider splitting the businesses as soon as they reached USD 50 million in revenue •
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