Halle Hunter

Moesel
March 8th

Illinois Tool Works Case Outline

1. Two most important issues/challenges:

a. ITW will have to learn how to grow the company organically rather than through
acquisitions

b. ITW had changed its acquisition strategy from numerous small acquisitions to “needle-
moving” large acquisitions.

Making this adjustment as a company can either be very beneficial or very harmful to the company. They
will need to do research and train their employees on their new methods in order to be successful. For
many years, the company and it’s employees have been used to operating in a certain way and it will take
time for everyone to adjust. When the company was decentralized, every employee was an expert at what
they did. This will no longer be the case for ITW. I think if they can transition quickly and successfully,
they will get the outcome they are looking for.

2. Symptoms:
a. Lagging returns with a decentralized strategy with the recession hit in 2007
b. It would have been difficult to continuously improve margins through cost cutting and
operational improvements
c. Competing companies were able to grow and ITW fell behind in the competition
d. Negative revenue

3. Recommended solution:
a. In order for ITW to be successful and grow organically, they need to focus on researching
their competitors. This will help them to be at the forefront of the market and to increase
profits. By doing research, they will be able to see what other companies are charging
and what money is being spent on marketing and advertising. This will help them to grow
organically. By focusing on these things, ITW will be very intune with what the market is
doing and will allow them to be one of the top competitors.

b. I think the current strategy they have with large acquisitions is the way to go. They have
already seen success. One thing they could do is consolidate even more. This will help
them reduce even more costs that are unneeded. 60 percent of ITW’s businesses achieved
ready-to-grow status and 45 per cent grew organic revenue at an average of 6 per cent,
which I think should be used to invest back in the company, their employees, and their
sales and promo budgets.
4. Action Steps:
a. Dominating the Market
i. Focus on the sales and promotions budget. This will help the brand’s awareness
in the market and will help them raise profits. Determine what your top products
are and focus on those products.
ii. Strategic pricing is important. This is similar to Capsim. Look at what your
competitors are charging and be just right under what they’re charging
customers. Do this strategically to where your products still seem worth buying
with a low enough price that still attracts customers.
iii. A training program needs to be put in place in order to stay current with trends.
This will ensure that all employees are up to date with what is going on in the
market allowing them to perform at their highest potential. HR will need to invest
in training programs for this to happen.
b. Large acquisitions:
i. Consolidate the business even more. This will help to reduce costs and optimize
profits.
ii. Use the ready-to-go status to their advantage and invest back in the company and
other areas.