'L...... 4o PARKER PEN CO. (A) 549 .. ..r...... " , ..

Parker Pen Co. (A) International Marketing Strategy Review

It is circumstance and proper timing that give an action its character and make it either good or bad. -AGESILAUS group. He spent 11 years at. the advertising agency BBDO and was an expert on marketing planning and theory. Jack INTRODUCTION Marks was head of writing instruments advertising. Marks The meeting at sunny Palm Beach concluded with nary a came to Parker from Gillette, where, among other things, whimper of dissent from its partiCipants. After years of he assisted in the worldwide marketing of Paper Mate being run as a completely decentralized company whose pens. Rounding out the team was Carlos Del Nero, managers in all corners of the world enjoyed a high manager of global marketing planning, who brought with degree of flexibility, Parker Pen Co., of Janesville, him considerable international experience at Fisher-Price. Wisconsin, was forced to reexamine itself. The company Each of these men was convinced that Parker would right had enjoyed decade after decade of success until the early itself by following the plan they unveiled at Palm Beach. 1980s. By this time, Parker faced strong competitive threats and a deteriorating internal situation. A new A BRIEF HISTORY OF PARKER PEN The management team was brought in from outside the "Rolls Royce" of the Pen Industry company-an unprecedented step for what had been until The Parker name has been identified with pens since 1888 then an essentially family-run business. At the March 1984 when George S. Parker delighted ink-splotched pen users Palm Beach meeting, this new group of decision makers would everywhere by introducing a leakproof fountain model outline a course of action that would hopefully set Parker called the Parker Lucky Curve. Parker Pen would eventu- back on a path to success. ally blossom into America's, if not the world's, largest and The men behind the new strategy were supremely confident best-known pen maker. Parker's products, which would of its chances for success-and with good reason. Each was eventually include ballpoint pens, felt-tip pens, desk sets, recognized as a highly skilled practitioner of international mechanical pencils, inks, leads, erasers, and, of course, the business and their combined extensive experi fountain pen, were also known for their high price tags. In ence gave them an air of invincibility. They had been 1921, for example, Parker introduced the Duofold pen. recruited from larger companies, had left high-paying, re- The Duofold, even though it was comparable to other $3 warding jobs, and each had come to Janesville with a grand pens on the market, was extravagantly priced at $7. Parker sense of purpose. For decades, Parker had been a dominant was able to charge a premium price because of its player in the pen industry. In the early 19808, however, the reputation for quality and style, and its skill in positioning company had seen its market share dwindle to a mere 6 percent products in the top price segment. and, in 1982, net income plunged a whopping 60 percent. Parker's position as America's leading pen maker was To reverse this decline, Parker recruited James Peterson, an solidified during the years when the pen was mainly executive vice president at R. 1. Reynolds, as the new president viewed as a gift item. High school and college graduates and CEO. Peterson hired Manville Smith !is president of the in the 19408 and 19508, for example, were quite likely to writing instruments group at Parker. Smith, who was born in receive a Parker "51" fountain pen (priced at $12.50) Ecuador and had a broad international background, came from commemorating their achievement. Indeed, it was with a 3M where he had been appointed "51" that General Douglas MacArthur signed the Japanese division president at the tender age of 30. Richard Swart was Peace Treaty in 1945. Parker's stylish products and high vice president/marketing of the writing instruments profile name would keep it at the top of the pen market until the late sixties when American competitors A.T. Cross and Sheaffer, as well as a few foreign brands, Cases (A), (B), and (C) were prepared by Charles J. Anderer, research knocked them out of first associate, under the supervision of Warren J. Keegan, Professor of place once and for all. . International Business and Marketing, as part of the International Of course, Parker would not have lost its hold on the Business Case Study Project, Center for International market had it not made some oversights along the way. In Business Studies, Pace University. This project was funded in part addition to a more competitive environment, Parker failed by a grant from the United States Department of Education. @ 1986 by the Board of Trustees, Pace University. to come to terms with a fundamental change in the pen 550 PART VI Managing the Global Marketing Program market-the development of the disposable, ballpoint U.S. dollars. At its peak, Parker accounted for half of all market. When Parker unveiled the $25 "75" pen in 1963, U.S. exports of writing instruments and 80 percent of its total it showed that it remained committed to supplying high- sales came from 154 foreign countries. Parker was es. pecially priced pens to the upper end of the market. As the 19605 strong in Europe, most particularly in the United Kingdom. wore on, a clear trend toward cheap ballpoint and soft-tip When sales in the strong European currencies were translated pens developed. Meanwhile, Parker's only ultimately suc- into dollars, Parker earned huge profits. cessful addition to its product range in the late sixties was The downside of a weak dollar, however, was that it the "75" Classic line, yet another high-priced pen. gave Parker the illusion that it was a well-run company. In A Brief Flirtation with Low-Priced Pens fact, throughout the 19705, Parker was a model of ineffi. ciency. Manufacturing facilities were dated and inefficient. Parker did, however, make an effort to compete in the Production was so erratic that the marketing department lower price segment ofthe market in the late 19605 only to often had no idea what type of pens they would be selling from see it fail. In an attempt to capitalize on the trend toward year to year or even month to month. Under the lead. ership of inexpensive pens, Parker introduced the T-Ball Jotter, George Parker, nothing was done by company headquarters priced at $1.98. The success of the Jotter led it to move to update these facilities or to develop new pro' ducts. As a even further down the price ladder when it acquired result, subsidiaries and distributors around the world saw fit to Eversharp. Whereas the Jotter had given Parker reason to develop their own products. By the end of George Parker's believe it could make the shift from pricy pens to cheap reign, the company's product line in. cluded 500 writing pens with little or no difficulty, the Eversharp experience instruments. proved to be different. George Parker, a grandnephew of That distant subsidiaries would have the leeway to make the company's founder and president of Parker at the time, such decisions was not at all unusual at Parker, for it had long stated the reasons for the Eversharp failure, as well.as its been known as one of the most globally de. centralized consequences: companies in the world. Decentralizati<;>n, in All the market research surveys said go lower, go fact, was something that Parker took pride in and consid. ered lower, go lower, that's where the business is. So I said, to be vital to its success as a multinational. Yet it was this very 'Go lower? Fine. But we don't know how.' We bought concept that Peterson and his new management team would Eversharp and tried to run it ourselves, and we hold to be responsible for much of what ailed Parker Peri. couldn't do it. Our people just couldn't think in terms of big units, and they didn't know how to sell peopl~ PARKER'S GLOBAL OPERATIONS BEFO'RE on the lower-priced end of the business-grocers, PETERSON supermarkets, rack jobbers. The result was, Bic and In addition to having a hand in manufacturing and product. line Paper Mate were cleaning up in the lower-priced end, decisions, Parker's subsidiaries developed their own marketing Cross in the high, and Parker was getting squeezed in strategies. More than 40 different advertising agencies the middle. Volume was going up, but our costs went promoted Parker pens in all the comers of the globe. When up faster, and Peterson came to Parker, he was proudly in. formed that the our profits were squeezed.l company was a "federation" of autonomous geographical units. The downside to the "federation" con. cept, Peterson The 19705: The Illusion of Success thought, was that home country management oftep lacked Despite the difficulties Parker encountered when it left its the information needed to make and coordi. nate basic business niche in the upper end of the pen market, the company ex- decisions. Control was so completely decentralized that Parker perienced a healthy period of growth and profitability for dido't even know how many pens it was selling by the time most of the 19705. Demand for its products remained Peterson and his group arrived. strong, and its worldwide markets expanded significantly On the other hand, decentralization obviously had its due to a rise in consumer income and increasing literacy positive aspects, most noticeably in the field of advertising. rates in much of the Third World. Parker also chose to di- Pens mean different things to different people. Whereas Eu- versify during this decade, and its most noteworthy acqui- ropeans are more likely to choose a pen based on its style and sition, Manpower, Inc., proved to be a very strong asset. feel, a consumer .from a lesser-developed country in the In seventies viewed the pen as nothing less than a badge of lit. 1975, when it acquired Manpower, a temporary-help firm, eracy. In addition, tastes varied widely from country to country. Parker was the slightly more profitable of the two. With The French, for example, remained attached to the fountain the pen. Scandinavians, for their part, showed a marked preference boom in temporary services in the late seventies and early for the ballpoint. The logic behind having so many different eighties, however, Manpower eclipsed Parker in sales and advertising agencies was that, even if it appeared to be earnings and eventually subsidized its parent company ~omewhat inefficient, in th~ end the company was better off during down periods. from a sales standpoint. Why did Parker fall from its position of leadership in the writing instrument market? There were many reasons, and one of the most important was the weakening of the

1 Forbes, 1 October 1973. PARKER PEN CO. (8) 551 Although the Parker UK. division was a success, however, the Some of the individual advertising agencies were able to company's general inefficiencies, loss of market share, and lack of devise excellent, imaginative camp'aigns that struck a responsive strategic direction were finally revealed in the early 1980s with the chord among their local audiences. One example was the Lowe rise of the US. dollar. Parker's financial decline was even more Howard-Spink agency in London. The Parker UK. division became precipitous than' the dollar's increase. When the huge 1982 losses the company's most profitable during the tenure of the Lowe were registered, Peterson was brought in from R. J. Reynolds to try agency. An example of its creativity is an ad entitled '~Rediscover and turn things around for Parker. He decided that every aspect of the lost art of the insult." Gracing the ad is a picture of a dead the company needed to be closely examined, not the least of which plumber, on his back, with a giant Parker pen protruding from his was Parker's decentralization of global operations. heart. Part of the text is as follows: DISCUSSION QUESTIONS (A) L What would you do if you were in Do you know plumbers who never turn up? Hairdressers James Peterson's shoes in January 1982? who missed their vocations as butchers? 2. What changes, if any, would you make in Parker's Drycleaners who make your stains disappear-and marketing strategy? your clothes with them? 3. Which aspects of Parker's structure would you dis card? Which would you keep? Today, we at Parker give you the chance to get your 4. Assume that you are James Peterson and you have just hired a own back. new management team composed of highly qualified executives from outside companies. You and your new team Not only are we offering a beautiful new pen called the are convinced that you have the solution to Parker's problems Laque which owes its deep lustre to a Chinese technique 2000 but there are many holdovers who disagree with you. How years old, but we are attempting to revive something that went would you implement your plan? To what. extent would you out when the telephone came in. incorporate the views of Parker management into your plan?

The well-armed, witty, malicious dart.2

2 Ad Age, 2 June 1986......

Parker Pen Co. (B) Parker Goes Global I . I I We will be creating more news in the next two years than we have in the past ten. -JAMES PETERSON i July 1982

James Peterson relished the chance to be the top man at Parker Pen. mean standardized product and promotion strategies the whole He spent 24 years at Pillsbury and had a taste of what it was like to be at world over. This view made him unalterably opposed to the loose the helm of a corporation when he rose to the rank of president, the structure that had characterized Parker Pen before his arrival. In the number two power spot in the company. At R. 1. Reynolds, he was an opinion of Peterson, there was absolutely no way that any company executive vice president-an influential position, to be sure, but not one operating in the modern world would be able to survive such that afforded him the freedom of movement that he would have liked. disarray. That a subsidiary thousands of miles away could decide When he was brought (0 Parker in January 1982, Peterson, then 54, had not only what products it would manufactur~ but also how they finally had the chance to run a company. All the theories he held to be would market them ran counter to everything Peterson believed. true would be tested. All the lessons he had learned after some 30 Peterson quickly moved to remold Parker Pen in his own years of practical business experience-much of it in international image. In addition to too much decentralization, Peterson thought operations-would now be applied. Parker lacked "a good enunciation of business philosophy." His years at R. 1. Reynolds had convinced him of the superiority of According to Peterson, "every good company has to have one." In global marketing, which he understood to order to correct this problem, Peterson devised an eight-point statement of his management 552 PART VI Managing the Global Marketing Program

ticipate in a segment that was responsible for 65 percent of all philosophy imd had it translated into more than 40 languages and sent sales of pens in the world-that is, pens that sold for less than $3. in letter form to Parker managers all over the world. The statement The new management team wanted to make Parkcrr more contained such 'phrases as, "There is no substitute for quality," and, than just a fictitious number-one company. In order to recapture "Like most managers, I don't like surprises." The letters. concluded by market share, Parker would have to participate in the lower end saying: "As I get to meet each of you in the months ahead, I will be dis- of the market-the same area that George Parker himself had so cussing this business philosophy with you and asking you how you have hastily abandoned in the late 1960s. A new $15 million state-of- used it."! the-art plant would be built whose main function would be to manufacture the Vector, a roller-ball pen selling for $2.98. The THE DISMANTLING OF DECENTRALIZATION: FROM 40 Vector was Manville Smith's pet project. Using a new AGENCIES TO 1 automated line at Parker's new plant, Smith calculated that the Vector could be produced for 27 cents per unit and therefore The core of Peterson's revitalization efforts would be directed at generate huge profits for the company. After the Vector,Smith dismantling the geographical organization that Parker had planned to plunge even deeper into the low-price market with evolved into over the years. He slashed the product line from the ltala, an even cheaper model that would be Parker's first 500 to the 100 most profitable items. The manufacturing disposable pen. function was consolidated, greatly reducing the number of units produced overseas. As for what products would be manufactured; that was to be strictly decided by the THE FIRST RUMBLINGS OF DISSENT: management team at the Janesville headquarters. Of course, the GEORGE PARKER manufacturing facilities themselves would have to be updated, Although George Parker was still formally the chairman of for no longer could the production department be allowed to Parker Pen, he was expected to lead a quiet, charmed life in dictate to marketing executives exactly what kind of products it Marco Island, Florida, and never to be heard from again. In would be selling. None of these measures in and of themselves fact, George Parker was paying very close attention to the new was startling-each addressed problems that needed to be developments in the company that bore his name, and he was corrected. However, when Peterson decided to get rid of none too happy. As his earlier remarks might suggest, he was Parker's 4O-0dd advertising agencies in favor of one "world- scornful of a strict market research approach to the pen class agency," more than a few eyebrows were raised. business. He also took pride in Parker Pen's autonomous The logic behind the decision to go with one advertising federation system that provided a high degree of flexibility to agency (Ogilvy & Mather) was consistent with Peterson's desire the company's many subsidiaries. Even more disturbing to him to make Parker Pen a global marketing corporation. With one was the planned foray into the lower depths of the marketplace, agency instead of 40, not only could money be saved, but as he might put it. Cheap pens were beneath Parker Pen, in his strategies could be coordinated on a global scale. One problem, opinion, and nothing could be more disgraceful than a however, was that formerly productive agencies such as Lowe disposable pen bearing his name. What were they Howard-Spink in London were fired. This had a devastating manufacturing anyway, garbage bags? effect on morale at Parker u.K., the company's most profitable Compounding George Parker's displeasure, was his sincere subsidiary which had in effect been subsidizing the same dislike for James Peterson, whom he dubbed "motormouth." To American division that was now telling it how to advertise. him, Peterson was the embodiment of everything that was wrong with the new Parker Pen. The grandnephew of the "THE WORLD'S NO. 1 PEN COMPANY" company's founder still had many well-placed friends in the Even though Parker had experienced many problems before company, and his constant criti. cism of the new management Peterson arrived, the company was still very proud of its team probably did little to tradition as a leading producer of "quality writing instruments." aid their cause. Of course, this pride was sometimes translated into overblown statements such as, "Parker is the world's No.1 pen PROBLEMS: FINANCIAL LOSSES, SMITH GETS FIRED, company."This indeed was the party line at Parker even though ONE WORLD MARKETING FAILS it was paid little more than lip service. When Manville Smith Despite all the complaints from George Parker, Peterson's major arrived in 1982, he commissioned a study to see just how problems lay elsewhere. The strong dollar that had exposed so many important Parker was. His findings shocked him: Parker had of his company's weaknesses got even stronger. Recession was a only a 6 percent share of the global pen market and it didn't worldwide plague. The costs of new plant development were not even attempt to par absorbed by profits and the company lost $13.6 million in fiscal 1983 (as shown in Exhibit 1). Still, Peterson had the luxury of time on his ! Ad Age, 26 July 1982. side, PARKER PEN CO. (8) ,55 'c:ss .. Year Ended Revenues Net Income Dividends Feb. 28 (Millions) Earnings (Per Share) Range 1985 $843,7 $5.4 $0.32 $0.52 21-13 1984 708.8 11.8 0.70 0.52 21-12 1983 635.3 d13.6 dO.80 0.52 17-11 1982 679.1 15.7 0.92 0.50 24-14 1981 723.2 37.7 2.23 0.44 26-14 d = Deficit. Balance sheet as of June 30, 1985: Current assets: $284.5 million Current liabilities: $239.5 million Current ratio: 1.1-to-l Long-term debt: $27.1 million Common shares: 17,635,000 Book value: $7.65 Source: Annual reports. matio.n issued fro.m the Janesville o.ffice and sent acro.ss the glQbe headquarters stated that: "Advertising fQr Parker pens since he had little mQre than Qne full year under his belt. One [no. matter mQdel o.r mQde] will be based o.n a co.mmQn mQre year like 1983, hQwever, and he was gQne. creative strategy and positio.ning. . . . The WQrldwide In PetersQn's QpiniQn, Qnly a full-fledged glQbal mar- advertising theme, 'Make yo.ur mark with a Parker,' has been keting effQrt eQuid save Parker. At the March 1984 Palm Beach ado.pted. . . . [It] will utilize similar graphic layo.ut and meeting, it was decided that Parker WQuid participate "in every pho.to.graphy. It will utilize an agreed-upo.n typeface. It will viable segment Qf the writing instrument business." In additiQn, utilize the appro.ved Parker IQgQ/graphic design. It will be it was declared that, "The cQncept Qf marketing by centralized adapted fro.m centrally supplied materials." directiQn has been discussed and consensus was reached."The The new advertising campaign was indeed rigidly CQn- management team,filled with a sense Qf purpQse, then set Qut tro.lIed. Subsidiaries were sent their materials and tQld to. get to' achieve its IQfty gQalS. o.n with it. Managers abro.ad were seen as simple implementers There remained Qne majQr problem: Parker's new plant Qf the glQbal marketing strategy with little Qr no. input. The problem was proving to' be a failure. The plant was nQt functio.nal fQr was that many Qf them realized right away that the new the 1983 Christmas seaSQn, cQsting the co.mpany millio.ns Qf advertising campaign wQuldn't wQrk in their markets. In fact, dQlIars in sales. Even as PetersQn arid his grQUP were the campaign really didn't wo.rk anywhere.Jack Marks WQuld wQrking round-the-cIo.ck to' see its strategy thrQugh, the later qualify it as "IQwest CQmmQn denQminatQr advertising" cQmputer-autQmated plant which was suppo.sed to. spearhead that "tried to. say sQmething to. everybo.dy, and didn't say Parker's drive into. the Io.wer end Qf the market, broke dQwn anything to. anybo.dy." repeatedly. With autQmatiQn having failed, the co.mpany was The last to. admit failure was PetersQn himself, who. ig- fo.rced to. hire labQr again and its CQsts sky nQred all evidence and tried to. mQve fo.rward with a seco.nd rocketed. Manville Smith, who. had placed his name next to. wave Qf glo.bal advertising in January o.f 1985, this time fo.r the fully autQmated Vector pro.ject, was ftred by Peterson as a the Vecto.r, which had finally made it o.ff the productiQn line. result. By this time, ho.wever, Peterso.n's po.sitio.n was terminally Smith's departure was impQrtant because he was the !>nly weakened. PrQductiQn prQblems persisted, mQrale was Io.w, member Qf the management team that held Qut fQr local resentment Qf the management team was high and reactio.n to. advertising flexibility. Smith had WQrked cIo.sely with Ogilvy yet ano.ther generic campaign was so. negative that Peterso.n & Mather (0 & M) o.n Parker's first wo.rldwide advertising felt co.mpelled to. resign. campaign. At Smith's urging 0 & M devised a campaign that allQwed fo.r SQme degree Qf Io.cal.flexibility. When Smith left, ho.wever, Peterso.n to.Qk o.ver the advertising reins and POSTSCRIPT: "GLOBAL MARKETING IS pushed very hard fQr "o.ne-IQo.k" advertising and the results DEAD" were disastrQus. The succeSSQr to. Peterso.n as CEO was Mitchell Fro.mstein, The fashio.n in which Peterso.n promQted his advertising president o.f what Q~ce was Parker's Manpo.wer subsidiary. PQlicy was enQugh to. alienate o.nce and fQr all tho.se remaining managers that sUPPQrted his effo.rts. A pro.cIa - ---

554 PART VI Managing the Global Marketing Program Janesville and told them: "Global marketing is dead. You're free Since it was purchased in 1975 by Parker, Manpower continued to again.,,2 grow to the point where it was far more profitable than its parent and, indeed, subsidized it for several years. Manpower would DISCUSSION QUESTIONS (8) wind up taking over Parker, finally selling it to a group of British 1. Why did Peterson's global strategy fail? investors in 1986. 2. What lessons can be drawn from the decline and fall Fromstein was an implacable foe of Peterson's. Manpower of Parker Pen? was as international as Parker Pen, and Fromstein had his own views as to how an international business should be run. When he assumed control of Parker in January 1985, he gathered the 2 Ad Age, 2 June 1986. company's country managers in r......