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Innovative tools, direct sales approach forge to form a Fortune 500 operation

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An innovative concept in socket wrench design developed by a young, new manager with a tool-production company did not generate any interest among company officials 83 years ago, but automobile mechanics bought into the idea immediately.

And they have continued buying.

Today, Snap-on Inc., the direct descendant of the tool manufacturer that Joseph Johnson founded in 1920 to transform his idea into a handy tool for professional mechanics, is a Fortune 500 company with more than $2 billion in annual sales.

Through 14,000 employees, 120 legal entities, physical locations in 29 countries and nearly 4,700 franchise dealers and their fleet of Snap-on vans worldwide, the company reaches professional tool technicians in 150 countries. Snap-on estimates that its auto technician customers service 40% of the world's vehicles.

Agricultural, construction, electrical, education, government, industrial and transportation industry technicians also use Snap-on products and services.

Snap-on offers all of those technicians a variety of hand and power tools, diagnostic equipment and software, shop equipment, tool storage products and equipment servicing.

Mr. Johnson was 25 years old in 1919 and had just been appointed manager of a Milwaukee-based manufacturer's socket wrench division when he questioned why auto technicians had to purchase socket wrenches with permanently affixed handles. Technicians had to purchase several socket wrenches of the same size to obtain the different handle configurations they needed for different jobs.

Mr. Johnson reasoned that a more-practical tool would allow technicians to interchange numerous socket heads among a limited number of handles.

His bosses rejected the idea, but the concept fascinated co-worker William Seidemann. The pair fashioned a set of 10 interchangeable sockets that snapped onto five handles of various configurations and tested the Wisconsin-area market with the aid of two tire salesmen. The salesmen, using the slogan "Five Do the Work of Fifty," generated more than 500 orders.

The success of the test-marketing campaign convinced Messrs. Johnson and Seidemann to form their own socket wrench manufacturing company. They formed Snap-on Wrench Co. in 1920 and moved their operations into a rented building in Milwaukee.

In exploring how to best sell their new type of wrenches, the Snap-on co-founders ran an ad in Chicago newspapers. The ad attracted Stanton Palmer, a factory sales representative, who proposed taking the tools directly to potential customers-demonstrating the tools' advantages and taking orders at auto technicians' shops.

As the sales workload mounted, Mr. Palmer engaged Newton Tarble, a lithography salesman, to join the new venture. Their sales approach of taking the tools directly to the customer was so successful that they formed a distribution company, Motor Tool Specialty Co., which became the sole sales agent for Snap-on. Messrs. Palmer and Tarble also purchased a financial stake in Snap-on, joining the company's co-founders as the sole shareholders in the company.

Snap-on's sales arrangement with Motor Tool allowed Messrs. Johnson and Seidemann to concentrate solely on tool production to keep up with demand. Production as well as company headquarters was moved to Kenosha, Wis., in 1929. Company headquarters moved to nearby Pleasant Prairie in 1995.

Snap-on acquired Motor Tools in 1931 but continued and broadened its sales strategy.

In 1935, the company began extending credit to customers to keep sales coming in during the Great Depression and to promote goodwill.

In 1940, salesmen began visiting their customers at least monthly, rather than every six to eight weeks. Five years later, all salesmen began carrying stock so they could deliver orders immediately.

By the early 1960s, salesmen were visiting customers biweekly or even weekly.

In 1991, Snap-on switched from an independent contractor system to a franchised dealer system to sell a significant portion its products. Dealers now generate about half of Snap-on's more than $2 billion of annual revenue.

Snap-on began operating internationally in 1927, when it opened a sales office in Montreal. Four years later, it formed its first international subsidiary, Snap-on Tools of Canada Ltd.

Snap-on expanded into Mexico, the United Kingdom and Australia over the next several decades, but its international as well as domestic operations exploded during the 1990s through a series of acquisitions.

Snap-on went public in 1941, when, after a couple of name changes, it was known as Snap-on Tools Corp. Snap-on first was listed on the New York Stock Exchange in 1978 and achieved the distinction as a Fortune 500 company four years later. Annual sales first topped $1 billion in 1993.

The company changed its name to Snap-on Inc. a year later.

Along with its operational expansion in the 1990s, Snap-on's collection of 90 U.S. and several non-U.S. patents ballooned tenfold to more than 1,000 patents today. In addition, Snap-on has applied for or has pending approximately 650 more patents.

Snap-on in the 1990s also garnered numerous awards from business magazines, which recognized the company for its financial strength, as a leader among franchise businesses and as one of the top corporate users of information technology.