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 maufacturer of plastic

consumer and commercial products with revenues of $2.4 billion vs Newells $3.2 billion

1902 1917 1966 1972 1990

ESTABLISHEDBrass curtain rods

NATIONAL DISTRIBUTION.

FIRST ACQUISITION

PUBLICLY LISTED

GROWTH AND DISTRIBUTION.

FURTHER EXPANSION OF BUSINESS LINE

ACQUIRED OVER 30 FIRMS

This is an example text. Go ahead and replace it with your own text. It is meant to give you a feeling of how the designs looks including text.

NEWELL HISTORY

Reasons for Acquisitions

• “Course correction” part of next phase of Newells strategy

• 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

Growth Strategy

Acquisition• Should add value to existing product

portfolio• Make Newell more important supplier to

retailers• 2+2 ≥4• Be brand name staple product with #1 or #2

in market share• Compliment existing product line but focus

on efficiency rather than pricing power as powerful customers encourage d competition if one supplier got too strong

• Lead to market rationalization as sick competitors could distort market

• Help in globalization as even customers were becoming global

• Exit any non strategic business even if it is profit making. Ex. Home Sewing Products

Serving Mass Retailer• Emergence of large scale mass retailers in

1970• By 1992 three retailers controlled 70%

of market• Ability to dictate the quality and quantity

shipped as well as the pricing• Led to increase in efficiency from the

suppliers and heavy investment in IT• “Cross Docking” allowed retailers to

eliminate any inventory other than that at the stores. The suppliers were sent directly to the stores and any arising loss due to missing shipment was to be incurred by the supplier

• Newell vied to be the industry standard for suppliers

• Rather than being the cheapest supplier it chose to focus on service and quality

This is an example text. Go ahead and replace it with your own text. It is meant to give you a feeling of how the designs looks including text.

NEWELLIZATION

SMALL BUSINESS

NICHE MARKETS

INTERNAL STRATEGY

FOCUSSED GROWTH

1

2

3

4

Recognise Cost structure Problems

Quickly compare Income Statements

Find ways to reduce costs

Raise Operating Margins above 15%

NEWELLIZATION

Newellization

• The process of giving new acquisitions integrated –Sales & order processing system–Financial System–Flexible manufacturing SystemExample: Anchor Hocking a manufacturer of

glassware and cabinet hardware. Though bigger than Newell in terms of revenue it had far lower profit margins.

The Corporate Role• Basic Functions with the Newell headquarter

– Legal and Tax issues– Benefits– Credit, collection and financial system

• Corporate charge to the division – 2% of sales• Clear mandate while considering acquisitions was to generate

profits• Each business unit adhered to a specific and disciplined

strategy with permission to develop but not expand its core product focus

Less significant acquisition, but important strategic move

BUSINESS STRATEGY

Help Newell expand into upscale retailers channel

Bring discipline to financial, organizational, and manufacturing aspects of Calphalon

Largest acquisition to date

Increase the size of Newell dramatically

BUSINESS STRATEGY

Name change to Newell Rubbermaid, Inc.

Expand global presence

Market value of Newell Rubbermaid will increase to over $10 billion

THANK YOU