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Case Analysis
May 30, 2007
Agenda
1. Delving into Newell Corp. 2. If you buy them, you will grow 4. SWOT in the world are you talking about?!
Mission
Newell is a manufacturer and full service marketer of consumer products serving the needs of volume purchasers
Growth
Maturity
Decline
Time
History
1966
Overview History Products SWOT Strategy 1997 Acquisition Results
The
1902
when Edgar A. Newell bought the assets of a bankrupt manufacturer of brass curtain rods
Established
First Acquisition
1917
National
1960s
distribution Further expansion of business lines
1972
Newell went public company grew and distributed its products through a variety of distribution channels
Conclusion
1972-1990s
Acquired over 30 firms
Product Lines
Houseware
Office Products
Home Furnishings
Hardware
Offering:
Best Best Better Better Good products in all categories to appeal to a wide range of consumers
One of Newells Key strategies Newell brands are in 5 of the top 15 retailers in the U.S. Newell generates 15% of its revenue from Wal-Mart sales Bargaining power of buyers (retailers) is significant in Newells industry Newell has an excellent reputation with the mass retailers Integration of newly acquired companies must be done efficiently and quickly so reputation is maintained
Headquarters
Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion
Basic Functions
Acquisitions
Division
Division
Division
Division
Division
Company Structure
Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion
Each division handles its own design, manufacturing, marketing, sales, merchandizing, and service Each division must adhere to the company strategy Each division is responsible for its profit performance Strict financial and operating reviews of divisions monthly Management salary is based on performance Internal growth is rewarded
SWOT Analysis
Internal External
Diversity Strong
Growth
brand names
Horizontal
Create
synergy
Divestiture
Rubbermaid & Calphalon acquisitions provide potential expansion, growth, and success
International
markets
in the industry is
Culture
high
Newell
on mass retailer
Declining ROIC
of private labels
of internal growth
Growth Strategies
Business Acquisitions
Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion
Primary Objectives
Internal Globalization
Internal Strategy
Internal Growth is growth from continuing business owned more than one year.
Understanding Consumers Demand Creation through Marketing Commercializing innovative new products Cross-selling existing product lines
Acquisition Strategy
- Dan Ferguson
Acquisition Strategy
Criteria: Existence of consumer meaningful brands that respond to differentiation and innovation Shelf space Good customer and channel dynamics Strong margin and growth potential Top rank of the market share Synergy
Globalization Strategy
Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion
Global presence small in 1997, but growing Selective international acquisitions Growth of consumer brands economies in Eastern Europe, Asia, Mexico, and South America Overseas sales: 2004: 24% 2005: 24% 2006: 26% of total sales Target global consumer acceptance
Newellization?
Newellization
Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion
Well-established profit improvement and productivity enhancement process that is applied to integrate newly acquired product lines to the parent company.
Newellization
Well-established profit improvement and productivity enhancement process that is applied to integrate newly acquired product lines to the parent company.
Acquisition Strategy
Newellization:
like company.
Transition cycle: Starts after 6 18 months Led by brought-in president and controller Focusing acquired business strictly on its core competencies
Acquisition Strategy
Newellization: reducing corporate overhead through centralization
of administrative functions and tightening financial controls.
Centralize responsibilities: Centralize Accounting system Expenditures Approval Cash management, A/R, A/P Order processing Data processing operations
Acquisition Strategy
Newellization:
Enhancing efficiency Eliminating non-productive lines Reducing inventories Increasing A/R turnover Extending A/P terms Trimming excess costs
Acquisition Strategy
Tools: Leverage One Newell Rubbermaid
Building one common culture of shared values Integrating common functional capabilities HR, IS, Finance, etc.
Consumer-meaningful branding
Flashback to 1997
Hong Kong reverts to China after 156 years as a British Colony. Britain's Princess Diana tragically killed in Paris car crash. Iowa woman gives birth to septuplets; all survive.
Newell Corp. is looking to grow their company through two BIG acquisitions:
Less
Increase Name
Expand Market
Rubbermaid
Stanley Gault, CEO Introduced 100 new products every year Annual profit increase of 14%
Schmitt, CEO
Continued
product innovation
to cut costs profit growth
Restructuring
Lackluster
Tug-o-War
Wall
costs
Undercut,
Inability to Capitalize
Stagnant
International growth
down
Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion
Rubbermaid Now,
Revenues
- $2.4
billion
Newell
- $3.2 billion
Purchase Price
$5
49%
Newell
The Motivators
The ultimate Newellization Test
Rubbermaid Increased
is the challenge
Long-term Benefits
Same
The Vision
Double
Diversification Increasing
Acquisition Aftermath
Risky Acquisition
Largest
Rubbermaid Overpaid
Shares
acquisition to date
Difficulty Integrating
Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion
1999
Share
Recommendation
Focused Growth
Niche Markets
thank you