January 25th, 2003Iskra - Ljubljana / Slovenia1

January 25th, 2003Iskra - Ljubljana / Slovenia2

January 25th, 2003Iskra - Ljubljana / Slovenia3 THE POWER TOOLS INDUSTRY Definition: Definition: Power tools include any tool containing a motor and capable to be guided and supported by an operator. International Industry Segmentation: Segmentation: The power tools industry is divided in two segments > Professional and Do-It-Yourself (DIY). Figures: Figures: in 1989, a global turnover of €5 billion. Major markets: North America (28%), Europe (47%) and Far East (18%). Growth: Growth: 3% growth rate per annum since 1980.

January 25th, 2003Iskra - Ljubljana / Slovenia4 THE POWER TOOLS INDUSTRY European Industry Figures: Figures: 47% of the international market. 75% of European market dominated by Germany, France, Great Britain and Italy. Growth rates are very irregular. Sales: Sales: see below the part of each country in Germany: pieces, 28% France: pieces, 20% Great Britain: pieces, 17% Italy: pieces, 10% Total: pieces75%

January 25th, 2003Iskra - Ljubljana / Slovenia5 THE POWER TOOLS INDUSTRY European Industry Distribution Channels: Professionals: Professionals: Hardware stores, tools specialists, direct sales DIY: DIY: Wholesalers, hardware stores, home centers, supermarkets Competition: Competition: in 1989, 75 power tools manufacturers in the world. These are the major competitors in Europe (often multinationals): Black & Decker: Black & Decker: 100 countries. 25% of total market Major incomes source: DIY segment. Good brand image Makita: Makita: Japanese company. Efficient price and quality strategy Only on professional segment. Wide range of tools Bosch: Bosch: Germany. Present in Professional and DIY segments

January 25th, 2003Iskra - Ljubljana / Slovenia6 ISKRA POWER TOOLS - POSITION SWOT ANALYSIS : INTERNAL Strengths: Strengths: - Low-priced products and workforce - Quality of the products - Experience acquired on Eastern Europe markets Weaknesses: Weaknesses: - Unable to supply the requested quantities - Problems with suppliers & production process - Very limited tools range (less than competitors) - Lack of communication and of creativity - High indirect costs

January 25th, 2003Iskra - Ljubljana / Slovenia7 ISKRA POWER TOOLS - POSITION SWOT ANALYSIS : EXTERNAL Opportunities: Opportunities: - Enter the Western Europe Markets : France, Italy - Perles Brand: an existing tools company - Reinforce the presence in Eastern Markets - Opportunities in Russia and in the new States Threats: Threats: - Political crisis & war threats in Eastern Europe - High customs and entrance fees (in 1991) - Rude competition: Bosch, Black & Decker, … - Lack of presence in Western Countries

January 25th, 2003Iskra - Ljubljana / Slovenia8 ISKRA POWER TOOLS - POSITION

January 25th, 2003Iskra - Ljubljana / Slovenia9 ISKRA POWER TOOLS - POSITION Europe: Both DIY and Professional segments Joint-Ventures with Perles and Skil Iskra as OEM Supplier Eastern Europe: Czechoslovakia: Naradi, Merkuria (10% market shares) Poland: Celma USSR: Institute of Power ToolsYugoslavia: 50% market shares Sales with Iskra Commerce

January 25th, 2003Iskra - Ljubljana / Slovenia10 ISKRA POWER TOOLS - POSITION Competitors’ Strategy Black & Decker: Black & Decker: Largest market share (25%) > DIY and Professional > Sales in 100 countries Bosch: Bosch: Third largest power tool manufacturer > DIY and Professional segments > Strong position in Europe Makita: Makita: Presence on foreign markets except Europe > Professional segment only Skil: Skil: Major manufacturer > Professional segment in the Nordic markets and DIY segment in the rest of Europe (Germany, France) Niche players: Niche players: Festo > Majority of sales on their own markets

January 25th, 2003Iskra - Ljubljana / Slovenia11 ISKRA POWER TOOLS - POSITION Key Success Factors Small power tool manufacturers: Small power tool manufacturers: Makita, Skil, Niche players Niche Products Price Competitiveness Quality Large power tool manufacturers: Large power tool manufacturers: Black & Decker, Bosch Numerous and innovative products Low costs Strengthening of their presence in foreign markets

January 25th, 2003Iskra - Ljubljana / Slovenia12 STRATEGIC RECOMMENDATIONS MANUFACTURING RECOMMENDATIONS The simplification of the manufacturing chain: The simplification of the manufacturing chain: Fluidity of the process The implementation of the Just In Time (JIT), The implementation of the Just In Time (JIT), which allows a best management of stocks. Difficulties in delivery delays. The new organization must be more flexible The new organization must be more flexible to adapt itself to the products demand. New investments are indispensable in machines and computers New investments are indispensable in machines and computers (especially for the design department) to reach a high level Too high indirect costs for the production volume. Too high indirect costs for the production volume. The motivation of the employees (internal promotion and training).

January 25th, 2003Iskra - Ljubljana / Slovenia13 STRATEGIC RECOMMENDATIONS MANUFACTURING RECOMMENDATIONS Improve the internal relationship between different departments, Improve the internal relationship between different departments, in particular between design and manufacturing It’s necessary to hire young designers It’s necessary to hire young designers to increase the creativity of the department and to create new tools A better performance improves the fluidity of information. A better performance improves the fluidity of information. A better circulation of information Iskra must find new suppliers, Iskra must find new suppliers, who respond to Iskra’s quality checklists To establish a system to harmonize the payment To establish a system to harmonize the payment of the customers and the suppliers

January 25th, 2003Iskra - Ljubljana / Slovenia14 STRATEGIC RECOMMENDATIONS THE IMPLEMENTATION OF THE MANUFACTURING STRATEGY Evaluate and study the problems, Evaluate and study the problems, then to invest in new technology (JIT, Computer-Aided Design, …) The fluidity of the communication The fluidity of the communication will increase the productivity. Try to improve the circulation of information in the firm. With more creativity, With more creativity, the engineers can create new products to raise the line of products which is too limited. Better order the premises Better order the premises for a best result in terms of competitiveness and production process.

January 25th, 2003Iskra - Ljubljana / Slovenia15 STRATEGIC RECOMMENDATIONS Manufacturing Options: Niche player Focus on European Markets: Focus on European Markets: France and Italy Specialize on company’s expertise: Specialize on company’s expertise: Angle grinders and drills Strengthen ties with volume players: Strengthen ties with volume players: Skil

January 25th, 2003Iskra - Ljubljana / Slovenia16 STRATEGIC RECOMMENDATIONS Manufacturing Options: OEM player Focus on Eastern and Western Europe Focus on Eastern and Western Europe Sell in both Professional and DIY segments Sell in both Professional and DIY segments Apply a low costs strategy Apply a low costs strategy Agreements with volume manufacturers on distribution channels Agreements with volume manufacturers on distribution channels

January 25th, 2003Iskra - Ljubljana / Slovenia17 STRATEGIC RECOMMENDATIONS Investment Opportunities Negotiate agreements with volume manufacturers: Negotiate agreements with volume manufacturers: Distribution channels Reorganize the production process: Reorganize the production process: New machines, standardization of tasks, … Invest in Research & Development and Design Invest in Research & Development and Design Innovation, creativity

January 25th, 2003Iskra - Ljubljana / Slovenia18 STRATEGIC RECOMMENDATIONS MARKET STRATEGY Before deciding to “conquer” the Western Europe: Make a Market Study Make a Market Study to know and to test our capacities to enter the Western Europe Restructure and improve firm’s internal capacities: Restructure and improve firm’s internal capacities: this will determine our success on new markets Perform the marketing and the distribution network: Perform the marketing and the distribution network: the case of Iskra Commerce Improve the Brand and Quality Image: Improve the Brand and Quality Image: to be known

January 25th, 2003Iskra - Ljubljana / Slovenia19 STRATEGIC RECOMMENDATIONS MARKET STRATEGY Establishing an external strategy: Choose a market and segments: Choose a market and segments: Eastern or Western Europe, Professional or DIY? Plan a Joint-Ventures and cooperation plan: Plan a Joint-Ventures and cooperation plan: throughout Perles, with larger players Establish a network in Western Europe: Establish a network in Western Europe: A central office, an After-Sales Service, etc … Develop direct sales method: Develop direct sales method: in Professional segment

January 25th, 2003Iskra - Ljubljana / Slovenia20 STRATEGIC RECOMMENDATIONS MARKET STRATEGY - PRIORITIES Establishing an external strategy: 1. Reinforce Perles presence in Western Europe 2.Concentrate our efforts on France and Italy, in Professional and DIY segments 3. Serve as a Niche Player 4. Serve as an OEM Player if investment is made 5. Study opportunities in Russia and Eastern Europe