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Klein Tools: Six generations of success

By Bridget McCrea

Klein Tools’ three-pronged growth strategy is focused on new countries, new customer segments, and new acquisition targets.

It’s not often that a company can brag that it has successfully persevered through six generations of ownership by the same family, but Klein Tools, Inc., falls squarely into that category. Headquartered in Lincolnshire, Ill., the hand tool manufacturer has focused on making quality products since 1857, the year the Klein family opened the doors to the company. Today, the family’s fifth and sixth generations run the firm, which caters to professional tradesmen.

Klein Tools, which has a market share of 80 to 85 percent in most of the professional trades it serves, has thrived under its family ownership. For example, Mark Klein, vice president of domestic sales, says the 1,600-employee firm – which has 10 locations worldwide – is more agile than many of its competitors. “Because we’re family owned and operated, we can make decisions a lot faster than a publicly-owned or larger manufacturer can,” says Klein. “We can make decisions on the fly, rapidly change manufacturing processes, and maintain a large inventory.”

The latter attribute has proven particularly beneficial during the most recent economic downturn, when many firms opted to scale back on inventory, much to the dismay of their distributors and end users. “Ninety-nine percent of our products ship the next day,” says Klein. “We don’t have to answer to shareholders about why we maintain such a large inventory; we can just go ahead and stock the item so that customers get their orders in a day or two.”

To reach those and other customer segments, Klein Tools relies heavily on an established distribution base. “General distribution plays a huge role in our business,” says Klein. “We’re selling impulse-item products at retail, so we work closely with our distribution partners and support them every way we can. That’s a big part of what we do to gain market share and grow the company.”

Growth By Acquisition

Klein Tools has also grown through acquisition. In 2010, for example, the manufacturer added Mumme Tools to its portfolio. The 82-year-old Australian firm makes steel-forged hand tools and sells them to distributors worldwide. Mumme Tools also supplies Australia and Oceania with Klein Tools’ products and accessories such as wire strippers, pliers, gloves, and insulated tools. The manufacturer’s primary end users include workers in mining, heavy industry, and municipalities, along with defense contractors, tradesmen, and handymen.

Mumme Tools helped Klein Tools achieve the international expansion that it has been vying for since the domestic and European economies slowed. Klein says more acquisitions and international expansion could be announced in 2012-13. “We’re looking at countries worldwide where there is still good opportunity – places that might have been untouched by everything that’s going on,” says Klein, who sees the Middle East, Australia, and Canada as three good potential targets.  “Here in the U.S. we have 80-85 percent brand preference among our customers. We’d like to mimic that in Canada, where the business climate is similar.”

Other business strategies that have helped Klein Tools grow over the last few years include intensive market segmentation analysis, a “splitting out” of the most viable channels, and the hiring of new product managers to help develop new offerings for each of those channels. One of its newest additions, for example, is the test and measurement line. Designed with the electrician in mind, the line includes professional multimeters, clamp meters, electrical testers, and accessories.

As it ferrets out new product development, acquisition, and international opportunities, Klein Tools faces many of the same challenges that other American manufacturers are grappling with. Rising labor costs continue to plague the company, according to Klein, as does the general uncertainty surrounding the domestic economy. “Tools are kind of like cars. Eventually you have to replace them,” says Klein. “Many of our end users held off on replacing them during the recession, but now they’re being forced to purchase products again.”

The Future Looks Bright

As Klein Tools waits patiently for that revelation to strike its well-established customer bases, the manufacturer will continue to hone its business strategies and rely on its long-time, family-centric philosophies to keep it in growth mode. “We take a lot of pride in our family atmosphere and the fact that we personally know our employees and their families,” says Klein, who is frequently invited by members of the staff to attend weddings, baptisms, and other important events. “Having that close touch across our entire company is a vital part of our corporate culture.”

Looking to the future, Klein says the picture looks bright for the manufacturer, which has survived and thrived through numerous economic cycles since its inception in 1857. The company will be announcing more products and also innovating its existing offerings to meet its customers’ needs. “We’ll also be seeking out and targeting different market segmentations where we don’t have a presence yet,” says Klein, “and growing through both acquisitions and increased international exposure.”

McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

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