Business Strategy

Case Analysis
May 30, 2007

Ashley Wilson
Stevens

- Anton Gladnikov - Chris Morrow - Zachary

Agenda
1.1.Delving
Delvinginto
intoNewell
NewellCorp.
Corp.
2.2.IfIfyou
youbuy
buythem,
them,you
youwill
willgrow
grow
4.4.SWOT
SWOTin
inthe
theworld
worldare
areyou
youtalking
talkingabout?!
about?!
3.3.What
WhatisisNewellization
Newellizationand
andhow
howdoes
doesititwork?
work?
5.5.The
TheRubbermaid
RubbermaidMesh
Mesh
6.6.AABusiness
BusinessCapstones
Capstones2-cents
2-cents
7.7.Your
Yourtime...
time...IfIfthere
thereis
isany.
any.

Mission

Overview
History
Products

Newell is a manufacturer and full service

marketer of consumer products serving the
needs of volume purchasers

SWOT
Strategy
1997
Acquisition
Results
Conclusion

Accomplish mission through its various

strategies

Newell Company Cycle

Continued
Continued Growth
Growth
Introduction
Introduction
Overview

Growth
Growth

Maturity
Maturity

Decline
Decline

History
Products

Newell continues to
grow primarily
through acquisitions
of other companies.

SWOT
Strategy
1997
Acquisition
Results
Conclusion

Time

History

1966
Overview
History
Products
SWOT
Strategy

First Acquisition

1902
Established

when
Edgar A. Newell
bought the assets
of a bankrupt
manufacturer of
brass curtain rods

1960s

1917
National

distribution

1997
Acquisition
Results
Conclusion

Further
expansion
of business
lines

1972
Newell went public

The

company grew and

distributed its products through
a variety of distribution
channels

1972-1990s
Acquired over 30 firms

Product Lines

Office
Office
Products
Products

Houseware
Houseware

Home
Home
Furnishings
Furnishings

Hardware
Hardware

Overview
History
Products
SWOT
Strategy
1997
Acquisition
Results
Conclusion

Offering:
Best
Best
Better
Better
Good

products in all
categories to appeal
to a wide range of
consumers

Serving the Mass Retailer

Overview
History
Products

SWOT
Strategy
1997
Acquisition
Results
Conclusion

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

Competitive Multi-Divisional
Structure

Headquarters
Overview
History
Products
SWOT

Acquisitions

Basic Functions

Strategy
1997
Acquisition
Results
Conclusion

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
Internal
Diversity

Overview
History

Strong

brand names

Horizontal

acquisition

strategy
Create

market power
and synergy

Products
SWOT

1997
Acquisition

ll

and expansion with

future acquisitions
1997:

Rubbermaid &
Calphalon acquisitions provide
potential expansion, growth,
and success
International

is high

Culture

Newell

Results

Growth

Divestiture

and product line

rationalization
Competition instrategy
the industry

Strategy

Conclusion

of products

External
External

is largereduces
speed in response to events
in external environment
Financial

weaknesses (1992-

97)
Declining
ROIC

profit margin

& ROA declining

markets

clash with new

acquisitions
Integration

difficulties can
disrupt the company
Dependency

on mass

retailer
Threat
Lack

of private labels

of internal growth

Growth Strategies
Business
Business
Acquisitions
Acquisitions
Overview
History

Primary Objectives

Products
SWOT
Strategy
1997
Acquisition
Results
Conclusion

Internal
Internal

Globalization
Globalization

Internal Strategy
Internal Growth is growth from continuing
business owned more than one year.
Overview
History
Products

SWOT

Strategy
1997
Acquisition
Results
Conclusion

Understanding Consumers
Demand Creation through Marketing
Commercializing innovative new products
Cross-selling existing product lines

Acquisition Strategy

Overview
History
Products

2 + 2 4, if we do this right we get

more than 4.

SWOT
Strategy
1997
Acquisition
Results
Conclusion

- Dan Ferguson

Acquisition Strategy

Overview
History
Products
SWOT
Strategy
1997
Acquisition
Results
Conclusion

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

Overview
History
Products
SWOT
Strategy
1997
Acquisition
Results
Conclusion

Newellization?

Overview
History
Products
SWOT
Strategy
1997
Acquisition
Results
Conclusion

Newellization
Well-established profit improvement
and
productivity enhancement process that
is
applied to integrate newly acquired
product
lines to the parent company.

Newellization

Overview
History

Well-established profit
improvement and productivity
enhancement process that is
applied to integrate newly
acquired product lines to the
parent company.

Quickly
Quickly compare
compare
Income
Income Statements
Statements

Products
SWOT
Strategy
1997
Acquisition
Results

Raise
Raise Operating
Operating
Margins
Margins above
above 15%
15%

Recognize
Recognize cost
cost
structure
structure problems
problems

Conclusion

Find
Find ways
ways to
to
reduce
reduce costs
costs

Acquisition Strategy
Newellization:

newellizing acquired business into a

Newell-like company.

Overview
History
Products
SWOT
Strategy
1997
Acquisition
Results
Conclusion

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.

Overview
History
Products
SWOT
Strategy
1997
Acquisition
Results
Conclusion

Centralize responsibilities:
Centralize Accounting system
Expenditures Approval
Cash management, A/R, A/P
Order processing
Data processing operations

Acquisition Strategy
Newellization:

establishing more focused business

strategy, improving manufacturing processes.

Overview
History
Products
SWOT
Strategy
1997
Acquisition
Results
Conclusion

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

Overview
History

Products
SWOT

Building one common culture of

shared values
Integrating common functional
capabilities HR, IS, Finance, etc.

Strategy
1997
Acquisition

Consumer-meaningful branding

Results

Conclusion

Focusing on pull-strategy
Investing in research
Creating demand around the world

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:

Overview
History
Products
SWOT
Strategy
1997
Acquisition
Results
Conclusion

Less

significant acquisition, but

important strategic move

Increase

the size of Newell

dramatically

Help Newell expand into

upscale retailers channel

Name

Bring

Expand

discipline to financial,
organizational, and
manufacturing aspects of
Calphalon

change to Newell Rubbermaid,

Inc.
Market

global presence

value of Newell Rubbermaid

will increase to over $10 billion

Rubbermaid
Glory
Glory Days
Days (1980
(1980 -1991)
-1991)

Overview

History
Products

Stanley Gault, CEO

Introduced 100 new products
every year
Annual profit increase of 14%

SWOT
Strategy
1997
Acquisition
Results

Products in

Conclusion

Retail Stores:

Home
Home Storage
Storage

Commercial
Commercial

Infant
Infant Products
Products

Rubbermaids Spiral Down

Mismanagement
Mismanagement
Wolfgang

Schmitt, CEO

Continued

product innovation

Restructuring

Overview

Lackluster

to cut costs

profit growth

History

Tug-o-War
Tug-o-War

Products
SWOT
Strategy

Street calls for unit volume

growth

1997
Acquisition

Rise

Results
Conclusion

Wall

of resin prices,
uncontrollable costs
Undercut,

losing market share

Inability
Inability to
to Capitalize
Capitalize
Stagnant

International growth

The Acquisition Details

Round
Round Two
Two
Year

prior, discussions break

down
Overview
History

Now,

Rubbermaid needed
Newellization

Products

Revenues
Revenues

SWOT
Strategy
1997
Acquisition
Results
Conclusion

Rubbermaid

- $2.4

billion
Newell

- $3.2

billion

Purchase
Purchase Price
Price

$5

billion

49%

premium over Rubbermaid closing market

price
Newell

shares tumble 12%

The Motivators
The
The ultimate
ultimate Newellization
Newellization Test
Test
Rubbermaid

is the challenge

Increased

costs, increased time to

Newellize
Overview
History
Products
SWOT
Strategy
1997
Acquisition
Results
Conclusion

Long-term
Long-term Benefits
Benefits
Same

distribution channels

Diversification
Increasing

of Newell

market share & new

The
The Vision
Vision
Double

Newell revenues, increase

profit margins

Acquisition Aftermath
Risky
Risky Acquisition
Acquisition
Largest

acquisition to date

Difficulty
Difficulty Integrating
Integrating
Overview
History
Products

1999

Rubbermaid
Rubbermaid Overpaid
Overpaid
Shares

dropped 12% after

announcement

Sluggish
Sluggish Sales
Sales Growth
Growth

EPS reduced & failure to meet analyst estimates

Share

price continued to decline for many years

SWOT
Strategy
1997
Acquisition
Results
Conclusion

10-year
10-year Famine
Famine is
is Ending
Ending

Recommendation

If its not broken, dont fix it

Overview
History
Products

Internal
Internal Strategy
Strategy

SWOT
Strategy
1997
Acquisition

Focused Growth

Results
Conclusion

Niche
Niche Markets
Markets

Small
Small Businesses
Businesses

thank you