Newell Company Case Write Up PDF

Preview

Summary

Newell Company Case Write Up...

Description

Ali Elsehety Strategic Management 7172 1204 Newell Company: Corporate Strategy

1. What kind of businesses did Newell acquire historically? Why? Newell Company, known as a broad-range manufacturer of basic home and hardware products, would acquire companies that manufactured low technology, nonseasonal, noncyclical, and nonfashionable products. These were products that could be stocked through the year, so that volume retailers could keep them stocked on the shelves year in and year out.

2. Does the company add value to the businesses within its portfolio? What are Newell’s corporate advantages? Newell were known to implement many different strategies to the newly acquired companies, one most famously called “Newellization”. This strategy aimed to raise profit margins above the 15% minimum which Newell expected from the businesses. This strategy would streamline newly acquired, yet unprofitable company’s operations and improve efficiencies. They would also maintain a prudent degree of leverage corporate experience through financial review to maintain a profit focus. Though the acquisitions were a broad range yet top market share leader of the industry, they added value by consolidating the amount of work which can be done through industry capacity, and centrally controlling corporate run, legal, and treasury teams. Through the various acquisitions, they were able to pass along best practices between acquired companies and bring them to becoming profitable.

3. Is Newell’s growth strategy based on acquisitions sustainable? What are ongoing concerns that Newell has? Newell’s growth strategy was based on acquiring under-performing businesses that the company believed it could turn a profit from. This financial strategy carries a lot of risk since Newell was known for its exceptional service. All it would take is one poor business to damage the reputation Newell was built on. It’s a very lean strategy that mainly focuses on profit at a mass retailer level, and with that comes a lot of challenges the company faces. An example would be where Newell took the WM E. Wright company which was a profitable company and exited the business because the market dwindled out of mass retail channels. Newell would acquire companies that were #1 or #2 in market share, and with that ideology, there wouldn’t be many targets for acquisition remaining. Another challenge faced would be the emergence and increasing power in mass retailers that could dictate quantity along with having leverage over pricing and scheduling, which made manufacturers must respond with greater efficiencies.

4. In this context, does the acquisition of Calphalon/Rubbermaid make sense? The acquisition of Calphalon/Rubbermaid did make sense to Newell, even though as we stated before that Newell was looking for volume-based relationships. Calphalon’s acquisition though made a little less sense. First, Calphalon’s sales process was a pull-strategy which curated a more specific target audience through the sales channel. While Newell was an expert in developing pull strategies, Calphalon was looking for a partner to that would more help build brand equity and support the brand, while Newell was more known for volume opportunity. The acquisition was a successful one really because of the timing of it all. This helped Newell build a presence in a new channel. They acquired the business in 1998, while the target line was still being developed. Honoring the Target contract and moving to specialty stores instead of other mass retailers helped Newell build a presence in those type of retailers. Rubbermaid on the other hand, made less sense to the company, given its failing reputation. I believe Rubbermaid would have made more sense and been a very profitable acquisition if it happened earlier when the company was in a healthier state. Rubbermaid was the largest acquisition of a company by Newell, so for the company to have acquired them when they were restructuring, and declining was a poor decision in the short term. This was apparent for Newell in its sharp decline of stock price postmerger. McDonough however, viewed this as a long-term opportunity to synergize the two companies and bring on “Newellization” strategies it was famous for....