INDIAN INSTITUE OF MANAGEMENT

TIRUCHIRAPPALLI

PRODUCT & BRAND MANAGEMENT

“BLACK & DECKER CORP.: SPACEMAKER PLUS COFFEEMAKER (A)”

Submitted To:
Prof. Suresh Paul Antony

Submitted By:
Team 01
Chetan Yadav (1701011)
Mayank Lal (1701034)
Satyam Verma (1701045)
Prabhangshu Adhyapak (1701153)
The Household Products Group, a subsidiary of Black and Decker was formed soon after its acquisition
of the General Electric Houseware Division. This division was later named as the Household Products
Group (HPG).

A brief introduction to the problem faced

A fire was reported in a Black & Decker Spacemaker Plus Coffeemaker, which was brought to notice
of the customer service department. This newly introduced product, was said to be a major product
highlight of 1988 and a "Key Introduction" for Black & Decker's Household Product Group (HPG).

Initially, in order to verify whether the cause of the fire was any external source or the unit itself, they
performed a prompt laboratory test and ruled out the possibility of external sources. This, in turn, left
them with the conclusion that all units could be considered potentially faulty and prone to fire hazards.
HPG was in a dilemma whether the product should be recalled and, if so, how the recall should be
implemented.

The motive behind the possible recall

As per the US Consumer Product Safety Act, a manufacturer was obligated to recall the product when
there was knowledge about a substantial product hazard. Moreover, there was some prospect of a
legal requirement to recall the coffeemaker.

Other than these statutory mandates, a brands reputation relies highly on its covenant. This issue
being a potential threat to the customers, should be treated with an iron fist. Considering the fact that
Spacemaker being a well-known name in the industry, a safety issue with the product can attract huge
repercussions. Therefore, the main motive behind the product recall would be to avoid these
repercussions and would be an effort to limit the ruination of the corporate image and also to limit
liability for corporate negligence, which can cause significant legal costs.

Heiner’s decision – Should he go for a recall of the Spacemaker plus Coffeemaker? If so, how?

Considering the gravity of the situation and the potential repercussions of the fire threat in the newly
introduced Spacemaker plus Coffeemaker, the decision of recall can be justified by a Risk Assessment.

• Identifying the hazard: Several complaints regarding the steaming problem of the product and
finally the fire call indicates a major concern about the product. Therefore, a laboratory test was
performed which showed the defect is with the product. There are ample probabilities of financial
losses of the customer and also likely chances of injury. This justifies a recall of the product owing
to safety concerns.
• Estimating the level of risk: It is highly desired from any brand that its products are risk-free. The
coffeemaker being a product of regular use, the chances of injury and other risks involved are
comparatively higher and therefore should attempt a full-scale recall to recover at least around
80% of the products.
Moreover, it is estimated that the recall cost is 4.3 million for a 25% recall rate but since the
company is looking for a 100% recall, we may assume that Black & Decker will be able to recall
80% through market strategies and distributor/retail support for which the total cost would be
around $7.18 million in case of a cash refund being offered to the customers on return. But, it
would cost $5.42 million in case of product replacement.
 Option 1 Option 2
(Replacement) (Cash Refund)
PDC 403 533334 1493334
PDC 401 200000 533334

Freight, labels administration 2125000 2125000

Retail 63400
Lost margin 1902000 1902000
Freight, refunds, promotions &
administration 500000 500000
Rework of returned units 634000 634000
Total Cost (approx.) 5424400 7187668

Therefore, considering product recall to be necessary and the risk involved in not recalling to be very
high it can be suggested that, in terms of cost the replacement option is a better option.

This in turn would help in retaining the current customer base, as well reducing the risk of a
considerable market share.

But the replacement option may not always be a feasible option as there isn’t a new product to replace
the defective one instantly. Based on their convenience, cash refund could be seen as a feasible
option. So, the decision is based on the context and a thorough assessment of the inventory and cost
benefit analysis would help them to come up to a conclusion.

Organizing the recall – A few steps that can be taken

• Informing the market surveillance authorities and complying to all government regulations
• Isolating stocks from the current batch and requesting a recall from the distributors
• Informing suppliers of any affected components
• Set up a communications program (TV, Print etc.) to contact and inform all the customers
• Setting up a hotline number for any addressing any product queries or recall queries.

Avoiding the recall and doing something differently

Considering the brand image and the covenant of the brand, recall seemed to be the most pertinent
option. For any brand to keep its image and customer base intact, it is expected that they value their
customers to the extent possible.

In case they wanted to avoid a complete recall and do something differently, one probable option
would be servicing the product and changing the part that was the root cause of the overheat and
eventually can lead to fire. Though servicing or part replacement is an alternate option, the most
viable question here is the scale. It seems to very difficult to go with this option for a huge number
and that too with a considerable percentage sold from the local appliance shops and departmental
stores. But for subsequent releases, they can go for programs such as TQM, safety audits etc. to avoid
such recalls in the future.

Conclusively it can be said that though they were a bit hesitant about the Recall owing to the fact that
it would be a disappointment to the president having no previous record of recall, it would be a better
option to recall, in order to live up to their promise of quality and safety and also to avoid losing
substantial market share.