GROUP - 6

CASE ANALYSIS:

Newell Company: Corporate Strategy

Newells growth strategy is based on Growth through Acquisition. Since inception the company has been on acquiring spree and with almost a century of acquisitions Newell has developed an unmatched expertise on acquisitions. The company has been able to implement its own processes like IT, Operations, Finance on the acquired companies quite smoothly, called Newellization. Newell has focused on the companies which manufacture brand-name staple products and which have significant market share/presence. The corporate level strategy of Newell is in sync with its mission statement. The basic strategy is merchandising multi-product offering of brand-name staple consumer products with an emphasis on excellent customer service. Being almost perfect at processing and delivering customer orders, Newell has some bargaining power which competitors lack. The 25-30-net-45 payment agreements, which are non-negotiable is an example of bargaining power of Newell and gives a competitive advantage. Newell has a robust corporate strategy, which make it efficient at handling different business units. The basic direction given to business units was for generating profits and divisions should not get deviated from this path. To ensure this corporate team and divisional teams used to meet each other. Approvals for discounts used to come from corporate office only. Business units are given authority to source raw materials but they cant add another product in their portfolio which is not in sync with their core competency. The good, better, best segregation of the products of same brand has added to the competitive advantage. The Calphalon acquisition has given the most sought after opportunity to Newell to enter into specialty stores without cannibalizing WearEver. Calphalon had good customer connections, good quality and price point strategy which are in sync with Newells competitive advantage. The Rubbermaid acquisition has opened another window for Newell to enter into global market, evident from the assumption that international sales revenue would be 25% of the total revenue. Rubbermaid has good brand equity and is known for product innovation but customers satisfaction is way below par. Also Newell focuses on non cyclical and staple consumer products which have permanent shelf space, so Rubbermaids innovative capability is of less importance to Newell. Wal-Mart, the major customer of Newell has huge bargaining power in terms of scheduling and delivery. Bringing Rubbermaid upto that level is a mammoth task for Newell. The ROA of Rubbermaid during 1992-194 has been higher than Newell with a CAGR of 3.9% as compared to Newells CAGR of -12.8% for the same period. In 1995 Rubbermaid went through a major revamp that cost $158 million, decreased the net income to -74.1% but in 1996 it increased 157%. Newell can increase Rubbermaids profit margins by cost cutting and streamlining the processes.

RECOMMENDATION:
The Rubbermaid acquisition should be seen with caution because of its very bad reputation in customer service which is a competitive advantage of Newell. A major revamp is imperative which would require huge investment. Newell should also find valid reasons other than assumptions of sharp decline in share prices after the merger. Rubbermaid is too big to be Newellized because in 1997 its revenue was 74% of Newells.

AnoopDev BikashRanjan Parthiban J Syed Mohammed