Newell Case Study Draft

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1. Introduction

1. Case Summary

Newell Company ultimately aims at building a highly profitable company, with superior Earnings per Share and enviable Returns on Investment to shareholders through various strategies. Through its growth via acquisition strategy, it has made two new acquisitions, the biggest in terms of size and finances till date – Calphalon and Rubbermaid.

Newell Company redefined its corporate strategy in 1967 to focus on the market for hardware and do-it-yourself (DIY) products to volume merchandisers. These led to a focus on the market for hardware, furnishings, office products and housewares.

Mission Statement

Newell is a manufacturer and full-service marketer of consumer products serving the needs of volume purchasers.

Basic Strategy

Merchandise a multi-product offering of brand-name staple consumer products, with an emphasis on excellent customer service, in order to achieve maximum results for stockholders.

Financial Objectives

1. Achieve sales and earnings per share growth averaging 15% per year
2. Maintain return on beginning equity at 20% or above
3. lncrease in dividend consistent with earnings growth
4. Maintain a prudent degree of leverage

1. Core issue of the case

Can Newell achieve a strategic fit between its current corporate strategies and that of the new acquisitions to enable them achieve their profitability vision, via superior Earnings per Share and Returns on Investment. Do they require a different strategy to be able to utilize the new acquisitions effectively?

1. Sub issues in the case

1. Who are Newell’s primary market, and what is important to them?
2. How is Newell strategically positioned to serve its primary market?
3. Asses the acquisition of Caphalon and Rubbermaid, in line with Newell’s existing positioning and strategies, how can Newell utilize the acquisitions to enhance their position?

1. The Primary Market- The Mass Retailer

The growth of the consumer oriented society, coupled with the accelerated expansion of the United States and European economies due to the industrial revolution, served as a catalyst that birthed the mass retail business. Mass retailers mainly operate with the model of reducing overheads, lean operations with smaller profit margins and sales on volumes .

What is important to the mass retailer?

1. Low-price goods with small profit margins
2. Volumes – Items that would sell in volumes
3. Fast moving products
4. Efficient operations to reduce overhead costs: Little to no inventory, Demands less order filling time by manufacturers and Efficient delivery via on time shipment

1. Newell’s Strategic and Competitive Positioning

1. Strategies

1. Corpororate

1. Organisation- Multi-divisional structure

Newell moved from a functional structure to a multi-divisional structure that enhances focus on core business by each acquired business and ensures control and oversight by main company.[pic 3]

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1. Each division handles its own design, manufacturing, marketing, sales, merchandizing and servicing
2. Each division is responsible for profit performance
3. Strict financial and operating reviews of divisions monthly
4. Management salary, based on performance
5. Internal growth rewarded

1. Newellization

Mainly a cost leadership advantage where:

1. Focus is strictly on acquired business’s core competencies and centralize key responsibilities of accounting, order  and data processing, legal
2. Efficiencies are enhanced by comparing income statements, finding cost structure problems, reducing operational costs and trimming excess costs
3. Operating margins are raised above 15%

1. Competitive

Their competitive advantage was in their Customer service and efficient supply chain management as follows:

1. Measure of stock available when order is received ranked between 80% to 100%
2. Efficient order receiving and processing, enhanced by information technology
3. On time shipping and delivery schedules in cross-docking system

1. Growth  

Main growth strategy was by acquisition. To acquire companies with products of longer shelf life and space

1. SWOT

Strengths- Competitive innovations