Newell & Rubbermaid

Case Study Analysis

Submitted By:
Vinesh Motwani
Zain Ali
Affan Riaz
Faryal Arif
Nabil Nasir

6/23/2014









COMPANY BACKGROUND
Timeline
1903 Created in 1903 by the acquisition of curtain rods manufacturer by Edgar
Newell
1921 First acquisition of Barnwell Mfg. Co. and renamed to Western Newell
1965 Dan Ferguson named President who crafted the growth-by-acquisition
strategy
1983 onwards acquisitions of W.T Rogers, Sanford, Levelor, Goody, Kirsch,
Rolodex, Calphalon, Rubbermaid and others
Vision
Newell is a manufacturer and full service marketer of consumer products serving the
needs of volume purchasers
Offerings:
Best better good
Newellization
Well-established profit improvement and productivity enhancement process that is
applied to integrate newly acquired product lines to the parent company.
Newells key resources and capabilities are tailored around the companys needs for
growth and their customers need for diversity and efficient distribution. The companys
product range and depth (good, better, best) creates huge incentive for retailers to stock
product from only one supplier. Their logistics operation with nearly100% first-pass line
fill and expanding global presence help the company improve and expand with their
customers (mass-merchandisers). The process of Newellization is a valuable resource

to the company by which Newell acquire, convert, and integrate a new acquisition
(products) into their existing product lines within a short lead time. This process provides
them an opportunity to gain additional market share in key distribution channels. The
companys emphasis on firms (with high brand awareness and a low cost structure) after
Newellization creates an offering in the market which is difficult to imitate
Current Strategy
Acquisition of Calphalon
Acqusition of Rubbermind
Both were suffering from organizational issues and they were acquired with the aim to
achieve the aim of internal growth, globalization, financial rewards etc

PEST analysis
Political
Since Newell has a wide geographical spread, it can be effected by the policies and
regulations imposed by the governments of those countries in which it operates.
Moreover, it caters to extensive market segments with different product categories.
Regulations imposed by any regulating body can negatively affect the business.
Economical
The tax rate is a major concern which can hamper the smooth running of the
organization. The exhibit 4 shows the income taxes amount. Though the amount has
decreased over time but the percentage over sales has increased year on year. The rise in
taxes is a concern for the businessThe business has long term debts. The changes in the
market interest rate can adversely affect the business. The unexpected changes in the
currency values can result in significant changes in the cost and can lower the profit
margins.
Social
The raw materials that the company uses has an environmental concern
Technological
Technological advancements have aided the industry to boom with lower costs and a
more synchronized and centralized approach. Heavy reliance on technology or major
shut downs can break the continuous operations of the business.

Corporate Level Strategy
The Newell Corporate Level Strategy started as a product line strategy where Newell sold
their products of drapery hardware to all channels, but the product lines lacked differentiation.
In 1966, Newell bought a small window-shade manufacturer in attempts to conquer the
problem of differentiation. It was not until Dan Ferguson met Stanford Professor Bob Katz
and spoke about differentiation strategies that Newell really began to develop a build on
what we do best philosophy. After this discussion, Ferguson realized that Newells
competitive advantage was the knowledge of how to make a high-volume/low-cost product
and relate to and sell to the large mass retailer. In 1967, Ferguson identified a new strategy
for Newell, which focused a great deal on how to make Newell a better company both at the
time the strategy was written as well as in the future.
The Package Deal was introduced by Ferguson as a new corporate strategy for Newell,
based on their current monetary situation of approximately 10 million dollars, no long term
debt, and earnings which were substantial and growing. He focused on what could be
accomplished in the future based on the economic statistics of Newell in 1967.
Create a package of lines going to large retailers
Increases marketing impact more than individual lines
Increases economic impact on the financial community
Increases growth through performance and marketing leverage

This new strategy worked well for Newell because it addressed future expectations from the
company. In order to become a more global company it is necessary for Newell to increase
market impact which will, in effect, increase exposure to the global market. By sending a
package of lines to large retailers their brand name will be enhanced as well because of an
increase in products in the stores both domestically and internationally. It also exhibits that
Newell is a company that will continue to work hard for customers in order to maintain their
high customer approval rating.


Newells goal to enter the department and specialty stores will also be met because of the
increase in economic impact. As the economic stability of Newell and the products the
company provides are realized, Bloomingdales, Dillards, Macys, and other specialty stores
will become more interested in the company and become more likely to carry the Newell
brand.
After Newell decided to go public in 1972, Ferguson began adding new products by
acquisitions. In the next 20 years, Newell obtained more than 30 major businesses. Because
of the new acquisitions it was necessary to reorganize the company structure towards a
strategy of consolidation and centralization in order to achieve efficiencies. They moved
from a functional to a divisional organization and moved away from a single sales force to
sell all of its products. When they reorganized, each division was individually responsible for
manufacturing and marking, but it was still centrally controlled by corporate-run
administrative, legal, and treasure systems. This system became known as Newellization,
and each newly acquired company went through the process.
Value Added to Businesses in Newells Portfolio
This section focuses on Newells ability to enhance the companies in their portfolio. It is
necessary for Newell to continuously work with the various acquired companies in order to
maintain the level of quality the company wants their brand to portray to customers.
The whole is greater than the sum of the parts, is important to Newell because it
explains the Newell philosophy of Newellization. It is necessary for divisions to adhere to
a specific and disciplined strategy with permission to develop, but not to expand its core
products. This, essentially, allows the brand to be sold to customers and not the product,
which increases customer loyalty because the brand is known and individual products are not
lost to competitors.
Newellization normally takes place in less than 18 months after the acquisition of a new
business. It is essentially when the acquired company is taught the systems and processes of
Newell. This creates camaraderie between all entities of Newell so that the company, as a
whole, is more efficient in all aspect of the business. It also enables Newell to become a
market leader in nearly all divisions due to the ability to work together in all sectors of all
businesses because all top management is taught the same basic principles.
Competitive Advantage is enhanced by Newell because of their good, better, best
separation of products. This gives the customers of different financial backgrounds the
ability to purchase similar products, but within range of their monetary means. It also protects
Newell brands from competitors due to the increased amount of shelf spaced used in the store.
By following this philosophy, Newell becomes a strong player in each category it competes in
because of greater brand presence.
Newell focuses on making sure that all acquisitions, consolidations, and integrations reach
economies of scale across a broad range of price points in various product offerings.
Newells competition is maintained and orderly due to the protection from new entrants at
low and high price points, which is also known as achieving critical mass. This enhances
Newells competitive advantage because it requires high competition from other companies to
enter the market and to gain an advantage over the Newell brand.
Another competitive advantage Newell maintained was their 2%-30-net-45 payment
agreements. These were non-negotiable which Newell executives said was a matter of
discipline. By requiring these inflexible payment agreements it defended Newell against the
protestations of smaller retailers such as hardware stores. This gave Newell the ability to
price products consistently for all customers, from the local hardware store to mass retailers
such as Home Depot.
Newells corporate office added value to the companys in their portfolio in that they
focused on a centralized administration. Acquisitions and all the basic functions of the
business were in the hands of the corporate level administration so that the divisions would
not be distracted from their main goal of generating profit. The top financial responsibilities
were divided between the Vice President of Finance and the Senior Vice President. Both of
these vice presidents reported directly to the company president, who answered to the CEO.
This created an efficient management team because it eliminated a lot of movement and
discussion between divisions. The CEO also maintained close relations with the top
management at major customer offices to decrease the amount of time to reach a decision if a
problem arose.
Newell also focused on good communication within the company and had numerous
meetings throughout the year in order for leadership roles to remain informed about other
aspects of the company. Division leaders convened several times a year for presidents
meetings as well as the ability for regular encounters at trade shows throughout the year.
Annual management meetings were important as well because they brought together all
members of management to discuss the company as well as the ability for a two-day
conference within each group which featured presentations and programs aimed at
transferring learning. Monthly financial reviews were also important to maintain Newells
profit focus.
Other forms of communication were bracket meetings and the monthly collection of
operating figures. Bracket meetings were implemented if there were too many variances
within the budget. They were not meant to be pleasant for the division presidents, but
directed at identifying and solving problems within the budget. It was necessary to hold
bracket meetings if the flexed cost numbers showed an unfavorable variance even if sales
were above budget. Operating figures were collected monthly because of Newells
disciplined approach derived from senior managements convictions that if each piece is
done right, the whole will look after itself. Because of the strictness of budgets it was
necessary for corporate management to meet with divisional managers regularly throughout
the year, with two meetings devoted to budget setting, and at least two focusing on strategic
planning.
Finally, the corporate office added value to Newells businesses in their portfolio because of
the high demand for positions. Any time that there is a high demand for positions within a
company, something has to be working well. Salary was based on a uniform system across
all divisions, which rewarded individuals on the basis of their positions and the size of their
divisions. All salaries for managers were equal to the industry average, and bonuses could
range from 33% for the most junior manager of a divisions 20-person executive team, to
100% for division presidents. Obviously, Newell had a good payment plan for employees
which greatly increased the interest to work for the company. Although, the interviewing
process was rigorous, once a potential employee was hired they attended a two-day training
program at the so-called Newell University. There were also frequent opportunities for
transfers and promotions in less than 10 years and all job openings were publicized within the
company. This kept the Newell knowledge within the company and the ability to acquire
informed top management was a much easier process.
Challenges in the late 1990s
One of the main challenges in the late 1990s was the increase in customer buying power. By
1997, three mass retailer chains controlled 80% of the discount retailer market. This allowed
retailers to obtain significant leverage over price and scheduling. It was necessary for
manufacturers, such as Newell, to increase efficiencies in their warehouse and distribution
systems. Newell decided it was time to improve technology and introduced the Electronic
Data Interchange (EDI), which was the companys electronic management system for
transmitting purchase orders, invoices, and payments to and from its retail partners. The
divisions were able to use the data obtained from the EDI to schedule their own production
and deliveries which allowed retailers to maintain minimal stock levels in line with actual
sales. Technology eventually increased even more so merchandisers could provide Newell
with nightly point-of-sale data on every product sold the previous day. This data aided
reducing inventory other than at the store level and eventually became known as cross
docking.
Another challenge in the 1990s was the acquisitions of Calphalon and Rubbermaid. These
were both major stepping stones for Newell in that both companies will bring greater brand
recognition to the Newell brand. It was a challenge because of the speed in which the
companies were acquired and the short amount of time between the two acquisitions. At the
time, Calphalon was in a different market, and Newell wanted to enter the department and
specialty store competition. This required changes within the Newell Company because of a
different view of products and competition. Rubbermaid was a difficult acquisition because
of the vastness of the company in general. Some industry observers worried that this target
would be too large to be Newellized. Both acquisitions will be discussed further in the next
section.


Calphalon Acquisition
The Calphalon acquisition was a good decision because it accomplished what Newell was
searching for. Before the opportunity came to acquire Calphalon, Newell was looking for a
company that would give them the needed connection to enter into department and specialty
stores, while maintaining WearEver as Newells best, mass merchandiser brand. By
acquiring Calphalon, Newell entered the department and specialty store market and decided
to honor the Calphalon contract with Target which was to display specially designed fixtures
exclusive to Caphalon, Kitchen Essentials by Calphalon. Other than introducing Calphalon
to Target, Newell decided to keep Calphalon lines in department and specialty stores. This
enabled WearEver, to remain the number one mass merchandiser brand within the Newell
lines.
Calphalon fits well with the Newell company strategy in that they have good customer
connections. The company president of Calphalon said, Upper-end cookware is bough on
emotion. People who are passionate about great food are just as passionate about their
cookware. This comment makes it known to other companies such as Newell that
Calphalon holds quality as a main ingredient in customer satisfaction, which complies with
Newells strategy to maintain high customer loyalty. Calphalon also has a range of higher
end products which coincides with Newells price point strategy to deter competitors. By
having products at a range of prices it makes it more difficult for other companies to enter the
market and compete. Calphalon sells their product to retailers that will add value to the
company which also increases brand equity, another key component in Newells strategy.
Finally, Calphalon sells the brand and not the product. It is important to Calphalon to offer a
store within a store. Newell promoted the name more than the individual products, because
they focus on the whole is greater than the sum of the parts. Both companies look for the
ability to make their brand name stronger and not just individual pieces of the pie, it is
important for the whole pie to be full of good ideas to make a company a better competitor.
I would recommend that Newell use Calphalons strategy of store within a store with other
acquisitions and divisions. It might be a good idea to introduce this idea with WearEver in
order to better portray this brand as a top brand within the mass merchandiser stores. By
introducing chef endorsements, cooking classes, and book signings to the WearEver brand,
people that cannot afford higher priced brands such as Calphalon, will still have the sense that
they are buying a better product than others sold at mass merchandise stores. It would also be
beneficial to Newell to enter into other department and specialty stores with other products,
possibly a better quality of WearEver products. This will allow Newell products to reach
more demographics and increase brand name.

Rubbermaid Acquisition
I believe that the Rubbermaid acquisition was also a good decision for Newell because it
allows Newell to increase brand name and enter the global market with more market
influence. Rubbermaid has such a variety of products and they are sold around the world, by
acquiring this company, it allows Newell to increase their demographics to an even wider
range of customers.
Although, I think the acquisition was a good idea, I do not think that Rubbermaid corresponds
with the Newell strategy. Although Rubbermaid is known for brand equity and product
innovation it does not have good reviews when it comes to customer satisfaction. Customers
complained of a bad distribution line and expensive products. Some industry observers
wondered if Rubbermaid is too big to be Newallized, but I believe that as long as the two
companies work together for the betterment of Rubbermaid, Newallization will increase
Rubbermaids customer satisfaction a great deal. At the time of the acquisition Rubbermaid
realized that changed needed to be made and should work well with Newell in order to
maintain their brand equity.
I recommend that Newell definitely revamp Rubbermaid. Initially, it will be necessary to
break Rubbermaid into separate divisions, similar to what Newell did after it went public in
1972. This will aid Rubbermaid in focusing on different aspects of the company so that it can
then focus on a better distribution system which will, in effect, increase customer satisfaction.
By Newallizing Rubbermaid, we should see a similar effect to what we saw when Newell
reorganized into separate divisions. I also think Newell should use the Rubbermaid
innovation to increase technology and products with other acquisitions and divisions. This
will aid Newell in becoming a more aggressive competitor with all price points of products.

SWOT ANALYSIS:
STRENGTHS:
Diversity of products
Strong brand names
Horizontal acquisition strategy
Create market power and synergy
Divestiture and product line rationalization strategy.

WEAKNESSES:
Operational inefficiency (high cost of key materials, supply chain is in need of
restructuring)

THREATS:
Culture clash with new acquisitions
Integration difficulties can disrupt the company
Dependency on mass retailer
Threat of private labels
Lack of internal growth








Product issues (products with minimal profitability)
People concerns(employee turnover transition results in loss of knowledge)

OPPORTUNI TI ES:
Growth and expansion with future acquisitions
Rubbermaid & Calphalon acquisitions provide potential expansion, growth, and
success
International markets