NEWELL COMPANY: CORPORATE STRATEGY

Submitted by: Group No. 3

Introduction
Broad range manufacturer of basic home and hardware products Two important acquisitions by CEO John McDonough Calphalon a privately held manufacturer of anodized aluminum cookware Rubbermaid a manufacturer of plastic consumer and commercial products with revenues of $2.4 billion vs Newells $3.2 billion

NEWELL HISTORY

ESTABLISHED Brass curtain rods

NATIONAL DISTRIBUTION.

FIRST ACQUISITION

PUBLICLY LISTED

1902

1917

1966

1972

1990

GROWTH AND DISTRIBUTION.

FURTHER EXPANSION OF BUSINESS LINE

ACQUIRED OVER 30 FIRMS

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Reasons for Acquisitions

Product diversification Increasing pricing power from customers (volume retailers) forced Newell to develop or buy strong brands. Need to grow as research showed that companies with over $10 billion commanded higher valuations

Roots of Strategy
E.A.Newell bought assets of bankrupt manufacturer of brass curtain rods in 1902 Drivers for early success Migration to cities Demand for extensive windows Initial consumers were small hardware stores, industrial builders, specialty retailers and later national chain stores Early problem identified was lack of differentiation in product. (Ex. Selling drapery hardware to all channels) Solution was to acquire a small window shade manufacturer.

build on what we do best philosophy

Identified trend toward consolidation in retail business Focus on making a low cost/high volume product and sell it to the large mass retailer Acquired first non drapery brand Mirra-Cote adding a new product line and a new relationship with discount retailer Zayre Possibility to leverage the relationship for selling other products too

Rationale behind the acquisition of specific companies

Acquiring value adding products Achieving synergy Diversify their portfolio of products Brand Equity Shelf Space targeted products ranked #1 or #2 in market share Focus only on products which cater to mass retailers Venturing in foreign markets

What is Newellization?
Process of streamlining Improving efficiency and profitability Time taken 18 months Comparing income statements

Newellization in Anchor Hocking

Anchor Hocking manufacturer of glassware and cabinet hardware Sales of $757 million in 1986 Profit margin 0.5 % Employee reduction Inventory control Abolishing loss making product lines and retail stores Centralization

Wm. E. Wright. Profit making? So what?

Home sewing products Solid sales and profit performance Market for home sewing skewed towards small retailers

Serving Mass Retailer

Three chains controlled 70 % retailer market Considerable advantage over price and scheduling
Greater efficiencies in warehouse and distribution systems

Serving Mass Retailer

Electronic Data Interchange

Nightly point of sales Data Cross Docking

Serving Mass Retailer

Single Goal- Furnishing product and service to mass retailers

Combination of line-fill and on-time delivery

Strategy- 21 separate divisions.

Why Calphalon? Does it add any value to Newell?

Reasons
Addition of Calphalon creates value by extending its reach into the non-mass merchandise market While most of Newells product offerings are utilitarian, Calphalons cookware products are considered to be an emotional purchase for the premium end user McDonough thought Calphalon could share its expertise in pull strategy and build strong connection with end consumer

Why Calphalon accepted the offer?

Reasons
Competitors like Meyers cost were 20% to 30% lower than that of Calphalon
Newellisation strategy can reduce their COGS and SG&A cost

Newell already has their own cookware products in the good, better and best categories in mass retail stores. Is there any need for adding more cookware products?

Analysis
Large retailers like Walmart still held considerable amount of power over Newell Exit of large retailers might make Newell vulnerable Calphalon acts as the bridge to Newell to expand its distribution channels in areas other than through volume

Concerns
Delicate balance between Newellization and protecting the integrity of the Calphalon brand If taken too far, Newellization may erode Calphalons premium service and destroy the barrier of entry for premium competitors at high end retailers

Why Rubbermaid?

"Rubbermaid and Newell are a strategic fit," said Newell Chief Executive John McDonough. "The Rubbermaid brands bring us further breadth of distribution, increased shelf space and an enhanced presence in Europe. - LATimes(22/10/1998)

Why Rubbermaid wanted the merger?

Reasons
Rising price of resin contributed to rising COGS, but competitors unwilling to hike price Problems with management and operations Lack of service as per customers Lack of volume growth and diminishing profit in 1997

Analysis of the merger

The acquisition happened within 14 days, so less time for analysis of pros and cons The sheer size of Rubbermaid (75% of Newells revenue in 1997) points to a longer Newellization process than normal Rubbermaid suffers from internal problems which might give additional headache

THANK YOU