Morningstar | New Markets and Product Offerings Facilitate Snap-on's Expansion Efforts
We think Snap-on is well positioned to benefit from growth in the vehicle repair market, thanks to the aging vehicle fleet, increased vehicle complexity, and new vehicle technologies that require the development of innovative tools. Expansion into adjacent markets should support additional top-line gains. The company typically generates more revenue per customer in independent repair shops because its tools enable independents to service a wider variety of vehicle makes and models.Snap-on is the largest manufacturer and distributor of premium hand and power tools. We estimate the company captures a leading share of the automotive professional tool market--greater than Stanley Black & Decker's Mac Tools and Danaher's Matco--through its superior product quality and innovation, service-focused distribution strategy, and brand power.Management is targeting the Chinese market for future growth, although the country's young vehicle fleet may limit demand in the near term, considering that most new vehicles feature dealer service programs. Snap-on is also trying to expand its product offerings outside the vehicle service market to critical industries such as aerospace, aviation, oil and gas, and power generation. Adjacent markets include those where the costs and penalties of a failure to perform can be exorbitant, particularly natural resources, aerospace and aviation, government and defense, energy and power generation, as well as vocational and technical education.The repair systems and information business (about one third of sales) has slightly more than half the market of independent repair shops and should continue to benefit from increased vehicle complexity. The segment focuses on sales to shop owners and general managers. The company's products include diagnostics, vehicle service information, business management systems, electronic parts catalogs, and other solutions for vehicle service. Certain of Snap-on's repair systems and information products provide details explaining the best method for repairing a problem, making them especially popular among independent repair shops.Snap-on is a manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions. Products and services include hand and power tools, tool storage, diagnostics software, handheld and PC-based diagnostic products, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers, as well as for customers in industries, such as aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education. The company also provides financing programs designed to facilitate the sales of its products and support its franchise business.
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