Parker

PARKER : Penning global strategy Ankita Jain Hrishikesh V Nilotpal Sinha Abhinav Sharma Great Lakes Institute of Management November 18, 2011 Caesar had perished from the world of men, had not his sword been rescued by a pen. Abstract In this study, we look at two strategies adopted by Parker Pen. The ? rst is a highly successful strategy of product di? erentiation through technological innovation. The second is an unsuccessful execution of globalization strategy. 1 A brief history of Parker Pen The Parker Pen Company was born in 1888 when George Sta? rd Parker tried to repair some fountain pens that were leaking and in the process began to manufacture his own pens. Six years later in 1894, Parker Pen won the patent of the †Lucky Curve† feed, which was claimed to draw excess ink back into the pen body when the pen was not in use. This technology remained the di? erentiating factor for Parker pens until the arrival of the Duofold in the 1930s. 1 2 The forty years period ra nging from 1920s to the 1960s, in the pre ballpoint pen era, was the golden period of Parker Pen’s reign when it consistently ranked either number one or number two in worldwide writing instrument sales.In 1931 Parker Pen created 1 2 Key words and phrases. Parker Pen, fountain pen, ball-point pen. This study was conducted for completion of the group project for Strategy Execution. 1 the Quink (quick drying ink) which eliminated the need for blotting and led to the development of the most widely used pen in history Parker 51 which generated over $400 million in sales. A Parker pen stood for quality, prestige, tradition, steadfastness and strength highlighted by the fact that Parker pens were the pen of choice to sign important documents in history such as the World War II armistices.Parker Pen expanded its business and by 1980s the company had extended up to 154 countries. The company adopted globalization strategy to establish market presence. However the execution of this st rategy was unsuccessful; the managers failed to create proper marketing strategies that would have made them compete in international markets with inexpensive products from other parts of the world. In 1993 Parker Pen was acquired by the Gillette Company, which already owned the PaperMate brand, one of the best-selling disposable ballpoints.In 2000, Gillette sold the writing instruments division to Newell Rubbermaid, whose own Stationery Division, Sanford, became the largest in the world owning such brand names as Rotring, Sharpie, Reynolds as well as Parker, PaperMate, Waterman and Liquid Paper. In recent years, Parker Pen has abandoned both the entry level market as well as the traditional retail outlets in North America and moved into up-scale luxury retailers. 2 Innovation as a di? erentiation strategy Throughout its history, Parker Pen has used technological innovation as a strategy to di? erentiate itself from the competition.The company has been a pioneer in research on writi ng instruments and introduced several revolutionary products . In this section, we look at some of the iconic products from Parker Pens which have driven both the company as well as the pen market. (The current portfolio of Parker Pen’s products can be found in Ref. [1]) 2. 1 Duofold – 1921 In 1921 the company introduced the Parker Duofold (Ref. [2]) fountain pen. It was a state of the art pen for its time and Parker Pen positioned the Duofold in the premier segment and priced it expensively $7. 00, equivalent to about $85 in 2011.In 1926 the Duofold became the ? rst pen in the world to have a guaranteed life of †forever†. It was an instant success. Sir Arthur Conan Doyle used one to write the exploits of Sherlock Holmes. General Douglas MacArthur signed the document ending World War II in the 2 Paci? c with his 20 year old Duofold (Ref. [3]). By the early 1930s the Duofolds design had grown dated in the USA but it remained popular in Europe until the 1960s . In 1988, Parker launched the Duofold Centennial series of pens. The modern Duofold is a key part of Parker Pens product portfolio. . 2 Quink – 1928 In 1928, after three years of research and an investment of $68,000, Parker Pen came up with Quink (a portmanteau word from ’quick’ and ’ink’; also known as Double Quink and Parker 51 Ink) that would eliminate the need for blotting. The success of Quink lay in the fact that it had a number of useful features: it resisted water, it did not clog, it had the desired quality of ink ? ow, it resisted moulding, it was non-corrosive, it did not leave deposits, it did not fade, and, most importantly, it was quick-drying.However, the new ink was strongly alkaline and contained isopropyl alcohol, a solvent not previously used in inks, which often damaged the pen barrels of that time which were manufactured using pyralin. This problem eventually led to the development of the world’s most successful pen, t he Parker 51 in 1941. In 1941, when the Parker 51 was launched, Double Quink was renamed and repackaged as †Parker 51 ink† as a marketing initiative. Parker Pen’s ink sales became the key to maintaining the company’s pro? tability.This revenue generation model is used by the modern day computer printer companies, whose main source of revenue comes from the sale of printer cartridges. Further enhancements were made to Parker Pen inks with its revolutionary †Super Chrome† ink. This ink was marketed in 1947 after a research period that lasted 17 years and cost over $200,000. This was the ? rst basic ink improvement in the last three centuries. Today, more than seventy years later, Quink is still the world’s biggest selling pen ink. 2. 3 Vacumatic – 1933 The Parker Vacumatic (Ref. 4]) fountain pen was introduced in 1933, as a replacing the Duofold as Parker’s top-of-the-line product. The Vacumatic featured a new ? lling mechanis m which boasted a much higher ink capacity than the Duofold. The pen remained Parkers top-of-the-line product until the launch of the Parker 51 in 1941. The US production continued through 1948, and until 1953 in Canada. 3 2. 4 Parker 51 – 1941 In 1941 Parker Pen introduced the Parker 51 (Ref. [5]) which arguably is the best pen of all time both in terms of popularity and sales. General Eisenhower signed the victory in Europe in 1944.The futuristic design of the Parker 51 heralded as †Ten Years Ahead† of its time, a revolutionary pen, with its hooded, tubular nib and multi-? nned collector, all designed to work in conjunction with the pen’s proprietary ink, allowing the nib to stay wet and lay down an even line with either the ultra-fast drying ink or more traditional inks. It was advertised as the ’The Worlds Most Wanted Pen’ which created huge demand which took Parker several years to ful? l. By 1970, the Parker 51 generated over $400 millio n in sales, higher than that generated by any single pen ever. 2. 5Jotter – 1954 In the 1940, the world had seen a ? erce battle for market share fought between the traditional fountain pens and the new ballpoint pens. Despite some initial success, ballpoint pens died a consumer death and by 1951, the fountain pen became the pen of choice of the world. In 1954, Parker Pens introduced its ? rst ballpoint pen, the Jotter which wrote ? ve times longer than the best ballpoint pens available in the market, the Eversharp and the Reynolds ballpoint pens. It was the introduction of Jotter that revived the ballpoint pen market. Parker sold 3. 5 million Jotters at $2. 5 to $8. 75 in less than one year. In 1957, Parker Pen introduced the T-ball Jotter with tungsten carbide textured ball bearing which to this date remains an industry standard. The famed styling of the Parker Duofold was revived in 1972 as a ball pen and within the next decade, ballpoint pens overtook fountain pen as the number choice of pen in the world. 3 Rise of competition – 1980s After about a century of dominating the ? ne writing instrument market, Parker Pen entered into a period of crisis in the 1980s and the reason for this was that the company was driven by the wrong strategy.Parker was facing competition from three fronts. First, the Japanese were mass marketing cheaper and disposable pens and had captured a large portion of the low end market in USA and Europe and were gradually eating into Parker Pen’s market share. Second, like the Japanese, American brands such as Paper Mate, Bic, Pilot, and Pentel had created signi? cance presence in the low end segment and gradually eroding and were pulling away parker Pen’s customer. Third, in the high 4 end segment which had been Parker Pens main target segment, competition had become ? ercer with reputed German brands such as Montblanc and A.T. Cross making progress in the European markets. 4 Globalization strategy – 1982 Parker Pen faced two contrasting challenges. On one side the weakened dollar generated high foreign revenue since about 80% of the company’s sales were abroad, the pro? ts derived from those sales represented even big pro? ts when translated to local currency. But on the other side, this over dependency on foreign sales exposed the company to foreign competitors, especially the inexpensive brands from Japan which used low pricing as a strategy to compete in the international market.Parker Pen realized that a competitive strategy based on product di? erentiation through technological innovation was not su? cient to thwart the challenge from competitors. In 1982, James R. Peterson became the CEO of Parker Pen,having joined it from Reynolds. He was given the responsibility of reinventing the brand. Peterson decided to launch a global marketing campaign to target all market segments. A consequence of the decision to adopt globalization was standardization. Everything includi ng products as well as marketing campaign was to be standardized for all the markets across the world. Issues in executing globalization strategy When Peterson took over Parker, he was met by a highly proud, mismanaged company that prided itself on its extensive decentralization. The atmosphere re? ected the founders pride in the fact that they had a unique pen for every place in the world. They were a federation of autonomous geographical units. It became immediately clear to Peterson that huge changes were on the anvil. The immediate problems were twofold. The ? rst was the products positioning. Having positioned itself at the higher end of the market for a signi? ant part of the previous century, it had now began to face problems with regard to its image. It was clear that a complete clarity of its brand positioning and image was essential. The second issue that confronted Peterson was its complete ine? ciency in managing its product portfolio. When Peterson entered Parker, it di dnt even have a proper idea of the range of products that it was manufacturing. It was a situation of complete chaos 5 with more than 500 products in simultaneous existence. Its decentralized structure had completely turned against its pro? ability, resulting in every distant subsidiary and distributor involved developing a customized product for that particular market. While the company was proud of its decentralized multinational structure, it was ailing on account of an obvious lack of economies of scale and a uni? ed command and strategy. The company clearly lacked a common driving force across markets. However, this decentralization had its positive aspects as well, most notably in the area of advertising. Pens meant and mean di? erent things to di? erent people.While the Europeans tended to choose a pen based on its style and feel, people in less-developed countries tended to see a pen as nothing more than a badge of literacy. Within Europe itself for instance, tastes tended t o vary from one country to another. While the French showed a de? nite attachment to the fountain pen, the Scandinavians favoured the ballpoint pen. The company justi? ed the existence of numerous advertising agencies in its employ feeling that while it bred a certain amount of ine? ciency, it paid o? from a sales standpoint. Many individual advertising ? ms were able to develop excellent customized messages for their audience that successfully struck a responsive chord within them. For instance, the Lowe Howard-Spink agency in London was able to make the UK division of Parker the most pro? table division during its tenure. Its creative genius is clearly visible in the advertisement that it created showing a dead plumber with a giant Parker pen protruding from his heart. The situation seemed bleak to Peterson. He immediately implemented a strategy by which Parker would position itself in the entry-level segment.He felt that in the face of the trends at that time, this would be the i deal positioning that would succeed in turning around the company. He also dissociated Parker from the numerous advertising ? rms that it was associated with, retaining only one, Ogilvy and Mather, to oversee a worldwide common strategy in terms of communication and advertising. However, this strategy failed miserably on two counts. It failed to provide a customized communication strategy to each market and thus failed to account for the cultLural di? erences across geographies.It also failed to leverage the premium positioning of the brand and reduced it to an entry-level brand. 5. 1 Two speci? c cases of execution failures The following examples show two speci? c cases of execution failure by Parker Pen. 6 (a) At a corporate level, Parker Pen targeted almost all market segments. However at the business level, management failed to introduce products which would cover the market segments with middle and lower income levels. This allowed competitors with inexpensive products to take up the market. (b) Some of the marketing campaign failed to adjust to the local environment.For example, when Parker Pen ? rst expanded their market to Latin America, they wanted their advertisement to say, †It won’t leak in your pocket and embarrass you. † The company did not realize that the Spanish word †embarazar † has two meanings; it means †to embarrass,† and it also means to †impregnate. † So, to some unsuspecting people, the ad read: †It won’t leak in your pocket and make you pregnant. † (Ref. [6]) 6 Acquisition of Parker by Gillette and beyond In May 1993, Gillette announced its acquisition of Parker Pen Holdings Ltd (Ref. [7]). (See Exhibit X).This made Gillette the world leader in the pen market. Gillette took an after-tax charge of $164 million for a reorganization of its overseas operations, including the integration of the Parker Pen facilities into the Gillette structure. Nearly 2000 jobs were l ost as a result of this restructuring process. Gillette sold the writing instruments division to Newell Rubbermaid, whose own stationery division, Sanford became the largest in the world with brand names such as Rotring, Sharpie, Reynolds as well as Parker, PaperMate, Waterman and Liquid Paper under its umbrella.The next few years were one of a complete downsizing of Parker, marked by job losses across the board. In July 2009, the 180 workers at the Parker headquarters of Newhaven, UK were given notice that the factory was going to be shut down on account of the production moving to France. On August 18, 2009, Newell Rubbermaid announced that Janesville Wisconsin would close the remaining operations of Parker. This resulted in the loss of 153 jobs. According to the company, †This decision is a response to structural issues accelerated by market trends and is in no way a re? ction on the highly valued work performed by our Janesville employees over the years. † Newell Rub bermaid stated an o? er of transitional employment services and severance bene? ts. What remained of the Parker brand was moved to the upscale segment of the writing instrument market and was sold via luxury retailers. Traditional retail outlets were abandoned. This completely removed the brand from the entry level segment of the market. 7 In 2011, Parker Pen announced the ? nest innovation in the history of writing, Parker 5TH Technology which o? ers a genuine ? th way of writing. Until then the world knew only four forms of ? ne writing – fountain pen, ball point, roller ball and the mechanical pencil. ground-breaking innovation has rea? rmed placed Parker as leaders in terms of both innovation and market share. 7 7. 1 Exhibits Financial statement 8 7. 2 Product display Duofold – Lucky 8 Limited Edition Ingenuity Parker 51 9 7. 3 Current product portfolio TABLE I T ype Ink Quink Fountain Pen Duofold, Premier, Sonnet, Vector, IM Ballpoint pen 7. 4 M odel Facet, Execut ive, Esprit, Frontier, Urban, I. M. , Vector JotterAcquisition of Parker by Gillette References [1] http://parkerpens. net/catalogue/parker catalogue 2009. pdf [2] http://www. parkerpen. com/en/discovery/range/iconic/duofold [3] http://www. patricktaylor. com/parker-duofold [4] http://www. vintagepens. com/Parker Vacumatics. shtml [5] http://www. pentrace. net/penbase/Data Returns/full article. asp? id=468 [6] http://parkerpens. blogspot. com/2007/09/advertizing-campaings-that-wentwrong. html [7] http://www. nytimes. com/1993/05/08/business/company-news-gillette-completesacquisition-of-parker-pen. html 10