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![About Newell
Manufacture Volume Merchandise and Distribute
to Volume Retailers
12/08/18 IIMK-EPGP(PT) 3
Strategy:
•Multi-product offerings
•Brand-name staple consumer products
•Excellent customer service
•[ Acquired companies to provide full line of products to fill
entire shelf space]
Top 10 customers accounted
For 40% of sales](https://image.slidesharecdn.com/newellajal-180812174359/85/Newell-ajal-3-320.jpg)
Uploaded byAJAL A J
Newell ajal
Newell's corporate strategy focuses on manufacturing and distributing a variety of low-tech, high-volume consumer products through acquisitions and consolidation aimed at large retailers. The company emphasized its competitive advantage through brand offerings, strong customer service, and centralized operational controls, while aiming for growth via a systematic acquisition process termed 'newellization.' Evaluations of potential acquisitions, such as Calphalon and Rubbermaid, highlight strategic alignments and financial considerations to maintain market leadership and operational efficiency.
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- 1. Corporate Strategy About Newell 12/08/18IIMK-EPGP(PT) 1
- 2. Corporate Strategy By AJALJOSE AKKARA mentorajal@mail.com 12/08/18 2
- 3. About Newell Manufacture VolumeMerchandise and Distribute to Volume Retailers 12/08/18 IIMK-EPGP(PT) 3 Strategy: •Multi-product offerings •Brand-name staple consumer products •Excellent customer service •[ Acquired companies to provide full line of products to fill entire shelf space] Top 10 customers accounted For 40% of sales
- 4. About Newell • CompanyStatement – Manufacturing and Distributing VOLUME merchandize lines to VOLUME merchandizers. – Growth through the performance and marketing leverage provided by its combination of lines going to large retailers. – Use its tremendous marketing base, goodwill, and expertise in dealing with LARGE merchandizers for building its growth and earnings 12/08/18 IIMK-EPGP(PT) 4
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- 6. 12/08/18 IIMK-EPGP(PT) 6 Newellization- Timeline • Newell started as Curtain rod manufacturer in 1902 • 1917 – Supplier to Woolworth stores • 1921 – Leonard Ferguson at Newell, Owner in 1937 • 1950 – Dan Ferguson (son of Leonard and Stanford MBA) as CEO. Revenue 10 mln • 1967 – First Strategy for Newell – Focus as market for hardware and do-it-yourself products to volume merchandisers • 1969 – First non-drapery hardware acquisition • 1972 - Public Company – Funding for new products by acquisition • Two-Pronged Strategy • Manufacture low-technology, nonseasonal, noncyclical, nonfaschionable products for volume retailers by acquisition and then streamlining, focussing and making the division profitable, increasing operating margins > 15% • Strategy for consolidation and centralization to achieve effectivess • Changed strategy for individual divisions responsible for manufacturing and marketing but was centrally controlled by admin, legal and treasury systems • 1997 – Revenues of 3.23 billion. Clients like Walmart which gave 15% of business, top 10 clients accounting for 40% business • Through 1997, 10 year average return to investors 31% (Vs S&P 500 only 18%)
- 7. EPS rapidly increasing Income 12/08/18IIMK-EPGP(PT) 7 Financials
- 8. Salient Features • Experiencewith large retailers and manufacture of high volume merchandize – competitive advantage. • Products are highly varied but have the common feature of being high- volume products that are low-tech and have long life cycles. • Corporate level control of operations by monitoring 30 operating variables. This provides for a quantitative assessment of each division of the company. • All operational activities including sales are handled by each division separately. Corporate level managers were responsible only for monitoring divisions and identifying acquisitions. • Despite product diversity in terms of use, they share a common production methodology, hence managers could be transferred across functional divisions. • Experience in identifying firms that can be ‘Newellized’ through a process of operational and financial streamlining and add value to the entire corporation. 12/08/18 IIMK-EPGP(PT) 8
- 9. Growth 12/08/18 IIMK-EPGP(PT) 9 Growth by Acquisition 2 + 2 is greater than 4 Newellization: •6-18 months •By president and controller from within Newell •Integrated Financial System •Sales and Order Processing system •Flexible manufacturing system •Centralized admin, accounting and customer related financial aspects on a single corporate computer system Acquisition Targets: •Brand name staple products •#1 or#2 in market share •Small businesses to round of existing product line •Competition who are cash constrained •Become a global supplier Divest if non- strategic
- 10. Corporate Strategy 12/08/18 IIMK-EPGP(PT)10 OrganizationOrganization Resources Resources Businesses Businesses Retail Expertise, Experience with High Volume for Large Merchandizers Retail Expertise, Experience with High Volume for Large Merchandizers Corporate monitoring and ‘brackets’ meetings - tight coordination Corporate monitoring and ‘brackets’ meetings - tight coordination Operational Controls, Incentives and Controls helps low SG&A and high Return Operational Controls, Incentives and Controls helps low SG&A and high Return Competitive advantage Coordination Control CORPORATE STRATEGY TRIANGLE
- 11. 12/08/18 IIMK-EPGP(PT) 11 ResourceContinuum Resources Products Volume Market Specialized Generic Premium Mass Control Process Corporate Office Coordination Niche Sharing Financial Large N e w e ll Small Transferring Operating
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- 15. 12/08/18 IIMK-EPGP(PT) 15 Controls Financial Controls 2% of sales Divisions cannot expand product focus Monthly financial reviews Administered by divisional controllers Geared for low-tech long life cycle products Variances lead to bracket meetings Two meetings for budget settings Two meetings for strategic planning VP Finance SVP Controller President CEO Bracket Meetings At head office Administered by senior corporate officers Extensive operational , customer and cross divisional experience Tough Identify and solve problems
- 16. 12/08/18 IIMK-EPGP(PT) 16 CoreCompetence
- 17. 12/08/18 IIMK-EPGP(PT) 17 •Threatof Entry - Moderate •Buyer Power – High •Supplier Power – Low •Substitutes – Moderate •Rivalry - High 5 Forces – Industry Analysis
- 18. Activity Diagram 12/08/18 IIMK-EPGP(PT)18 NewellizationNewellization Acquisitions (small and large) Acquisitions (small and large) Acquired and manufactured – low technology, non seasonal, non cyclical, non fashionable products Acquired and manufactured – low technology, non seasonal, non cyclical, non fashionable products Raising operating margins Raising operating margins Gaining national distribution & National Stores were focused Gaining national distribution & National Stores were focused Stronger brands – for more bargaining power Stronger brands – for more bargaining power Extensive product line (Product Line Strategy) Extensive product line (Product Line Strategy) Mass merchandisers Focused Mass merchandisers Focused Intelligent acquisitions – aggressively adding products Intelligent acquisitions – aggressively adding products Improve Operational efficiency and profitability Improve Operational efficiency and profitability Flexible manufacturing systems Flexible manufacturing systems Integrated finance + Sales + ordering systems Integrated finance + Sales + ordering systems Total Organizational makeover in Shorter Span (incl. monthly reviews) Total Organizational makeover in Shorter Span (incl. monthly reviews) IT infrastructure (eg. EDI - Ordering) IT infrastructure (eg. EDI - Ordering) Entered foreign markets through acquisitions – globalization motive Entered foreign markets through acquisitions – globalization motiveExited any business which was non- strategic Exited any business which was non- strategic Earned “No Problem Supplier” tag Earned “No Problem Supplier” tag Centralized administration at Corp level Centralized administration at Corp level Salary based on uniform system Salary based on uniform system Employees can chart their own career paths Employees can chart their own career paths Lucrative Incentives and Stock options based on position Lucrative Incentives and Stock options based on position Protect shelf space of the companies Protect shelf space of the companies Good, better, best products at Moderate Prices Good, better, best products at Moderate Prices Human Resources Human Resources Single sales force to sell all of its products Single sales force to sell all of its products Newell Company Activity System
- 19. Newell-Wal*Mart 12/08/18 IIMK-EPGP(PT) 19 WALMARTNEWELL Largest Retailer Offers lowest prices to customers Dictates quantity, price and schedule Threatens to introduce competition Cross Docking Store-only inventory Best Supplier Keep the hooks full Top customers placed 90% EDI orders Goal: furnish products and services to mass retailers Goal: 95% line-fill 95% on-time delivery Plans manufacturing and shipping based on overnight POS data WIN WIN
- 20. 12/08/18 IIMK-EPGP(PT) -Group J 20
- 21. 12/08/18 IIMK-EPGP(PT) -Group J 21
- 22. Calphalon 12/08/18 IIMK-EPGP(PT) 22 •Attractiveness: – Product line is high-end cookware stocked in department/specialty stores • Newell’s core competence is experience with mass retailers. • Newell already has WearEver as a high-quality product with mass retailers. Calphalon products do not bring in anything new to the Newell product line. • Acquisition may not contribute to achieving ‘critical mass’. • Prevent Calphalon products from entering mass-retail market and cannibalize Newell products. • Has experience in high-volume manufacturing.
- 23. 12/08/18 IIMK-EPGP(PT) 23 Calphalon •Cost of Entry – Increasing sales but low profits due to high SG&A. Newell may not have the requisite capability to turn around high SG&A as it does not have experience with department/specialty stores. – High COGS. Newell could use its expertise in high volume manufacturing to turn around this cost. Newell must check if expected returns may be impacted due to above reasons and hence determine feasibility of acquisition. • Will Newell be better off with acquisition of Calphalon? – Newell can help reduce Calphalon’s COGS and increase their profits. – Threat posed by possible introduction of Calphalon products into mass-retail market can be eliminated. – Issue of high SG&A would still remain due to lack of specialty/department store expertise. – Against formulated company strategy of catering to only mass- retailers.
- 24. Rubbermaid 12/08/18 IIMK-EPGP(PT) 24 •Attractiveness: – Product line includes home storage and commercial products, infant juvenile products. • High-volume products that are sold to mass retailers – aligned with Newell’s core competence. • High brand equity and innovative products. • High COGS (66% to 73% in 92-97 period) and high SG&A(between 16% and 18% in 92-97 period) and bad reputation as suppliers – Ideal for Newellization. • Home Storage is one of the smallest contributors of revenue for Newell ($200 million). Rubbermaid product line can help achieve ‘critical mass’ for Newell in Home Storage segment. • Cost of entry – Revenue of $2.4 billion compared to Newell’s $3.2 billion. • Acquisition would cost $5 billion. • Newellization of all divisions in their line might be a long and tedious process that would slow investment recovery. • Some of the product lines that are not in line with Newell strategy may be sold off to recover investment cost.
- 25. Rubbermaid • Will Newellbe better off with acquisition of Rubbermaid? – When revenue size is not considered Rubbermaid is an ideal acquisition target for Newell. – Rubbermaid has considerable brand value which has two aspects: 1. -ve perception of mass retailers –> Can be corrected through Newellization 2. +ve perception in consumers. – Aligned with formulated company strategy of catering to only mass-retailers. 12/08/18 IIMK-EPGP(PT) 25
- 26. 12/08/18 26IIMK-EPGP(PT) Acquisition ofCalphalon - Evaluation 1. Enhance the common resources ? NO 2. Enhance the brand equity “Newell” ? YES 3. Consistent with strategy of volume merchandizing? NO 4. Does it provide opportunity for “Newelization” ? NO 5. Product cannibalization ? YES 6. Add Shelf Space ? NO 7. Opportunity for Global expansion? NO 8. Fashionable or Staple ? FASHIONABLE
- 27. 12/08/18 27IIMK-EPGP(PT) Acquisition ofRubbermaid - Evaluation 1. Enhance the common resources ? YES 2. Enhance the brand equity “Newell” ? YES 3. Consistent with strategy of volume merchandizing? YES 4. Does it provide opportunity for “Newelization” ? YES 5. Product cannibalization ?NO 6. Add Shelf Space ? YES 7. Opportunity for Global expansion? YES 8. Fashionable or Staple ? STAPLE
- 28. 12/08/18 IIMK-EPGP(PT) 28 Synergy- Calphalon Advantages: •Pull Strategy expertise •Connections with consumers Conflicts •Niche Market •Customers are not merchandisers •Resources • Specialized • Not easily transferrable •High SG&A • Different culture Does not fit
- 29. 12/08/18 IIMK-EPGP(PT) 29 Rubbermaid Brandequity and product innovation 33% of revenue from new products Increasing revenue, decreasing profits Lousy shippers, high cost, terrible fill rates Large – as big as Newell
- 30. 12/08/18 IIMK-EPGP(PT) 30 AcquireCalphalon? BAD GOOD OKAY Buy Meter
- 31. 12/08/18 IIMK-EPGP(PT) 31 AcquireRubbermaid? BAD GOOD OKAY Buy Meter
- 32. Thank You ! 12/08/18IIMK-EPGP(PT) 32