Newell’s Way:

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The Strategy Overview:

 Multi product offerings

 Exceptional customer service
 Manufacture volume merchandise for distribution to volume retailers

How is the company a differentiator?

 Acquired 30+ businesses in a span of 20 years and hence included cookware, office products,
plastic & glassware & many others
 In 1992, Newell was ranked 24th on the Fortune 500 list for highest total return to investors
over a ten-year period.
 In 1976, the company boosted its image as a supplier by adopting EDI transfer
 66% of its sales in 1992, i.e ~ $0.96 billion accounted from top 10 customers which are:

Sales % by Top 10 Customers

2% Office Depot
4% Costco
5% Price Co. 11% K mart

5% Payless Cashways

10% Wal-Mart Wal-Mart

5%Home Depot

7% Cotter 9% Target

8% Ace Hardware

Strategy elements:

 Focus on reducing turnaround times that included “Newellization” process spread over a
span of 6-18 months
 Shelf space as the most imp asset for new acquisitions hence targeted at brand names
ranking #1/#2in market share
 Takeover tactics: Begins owning an equity stake in a target company before making a
full bid or continuing with minority position as required
 Alignment with the company’s main focus: Acquisitions that did not contribute towards
mass retail channels were exited
 Prime focus on : national coverage, on-time delivery, the avoidance of stockouts,
computerized EDI and Quick Response inventory supply systems, and program
merchandising.
 Newell’s top 20 customers placed orders through EDI. Sales figures shown as below:
 Years Sales via EDI(In
millions)
1988 150

1989 250

1990 400

1991 650

 Aimed at increasing the number of Quick Response partnerships to boost market share

Corporate Strategy:

 Centralized admininistration handles basic functions (legal and tax issues, EDI, Credit
collection, etc)
 Every division to remain focused at profit generation
 Strict adherence to a specific strategy that allowed development but restricted
expansion
 Division presidents functioned as Chief marketing officers
 Maintaining Customer relations: paramount
 Payment agreements were non negotiable (2%-30-net-45 )
 Uniform system of management incentives across divisions:
Junior Managers: Base salary +Bonuses upto 33%
Division presidents: Base salary+ Bonuses upto 100%
 Standard expected rate for ROA across divisions of atleast 32%

 Frequent transfers & promotions : Top 250 managers witnessed yearly turnover rate of
above 10% with 1 person moving across as many as 5 divisions
 Conduction of presidents’ meetings, annual management meetings, monthly financial
reviews, brackets meetings, collection of monthly operating figures, etc ensured
successful functioning.

Newell, its businesses & Value Creation:

Drapery hardware carried the Newell brand name whereas all others were the product
of acquisition retaining the original brand name

 Hardware:
DIY products like profane torches, fasteners, fabricated wire products
Categories : “good”, “better” and “Best”
Expensive items placed at eye level ; add on sales through cross category merchandising
Local promotions

 Cookware:
 Accquisition of Mirro & Foley contributed towards 29% of $161 million aluminium
cookware market
In 1984, despite industry decline of 15%-17%, Mirro-Foley witnessed increase in sales
Acquisition of its biggest competitor, Enterprise Aluminium company made Newell the
leading cookware manufacturer
In store advertising and promotions of wide range of brands generated high inventory
turnover
Categories: : “good”, “better” and “Best”

 Glassware:
In 1987, Newell acquired Anchor Hocking Corporation,The maker of glassware,
hardware, plastic and packaging products.
Cost cutting measures include closing down of 25 retail stores, reduction in Anchor
employees, excess inventory slashed down, centralizing Anchor Hocking’s
administrative, financial & computer functions

 Power tools & Home products:

In 1991, Newell pursued a limited partnership with Black & Decker, another highly
respected brand name and manufacturer of power tools and home products that also
sold to the same retail channels as Newell.
The Black & Decker stock paid 11% per annum after-tax benefits and resulted in an
immediate boost to Newell’s EPS

 Office products:
Newell first entered the office products market in 1991 by acquireing two
small office supply companies, Keene Manufacturing Co. and W.T. Rogers.
The company also took an 18% stake in Stuart Hall, a $126 million manufacturer of paper
products for school and office.
It was becoming increasingly common for people to work out of their homes,
creating the need for office supplies to be sold in retail channels INSTEAD OF
office supply channels that served companies. Early in 1992, Ferguson had estimated
that there were already 17 million home offices, and that the number was growing.14
With that, a new retail trend was emerging: the so-called “office superstores”

Competitive advantage of the product line:

 Though the pricing( 5%-10% premium) wasn’t low in the industry, Newell retained
product value by offering exceptional service levels
 It exploited its size to provide national coverage, on-time delivery, the avoidance of
stockouts, computerized EDI and Quick Response inventory supply systems, and
program merchandising.
 The product line focused on profit growth rather than sales growth and exited any
businesses that were not aligned to the company’s primary focus of serving mass
retailers
 Newellization eliminates redundancies, focuses on the acquired company by installing
business systems
 The company eliminates competition by acquiring markets and hence increased power
 Moreover, the case also talks about profit maximization by means of aggressive cost
cutting measures by the company wherein Newell closed down various outlets ,
dismissed various employees , slashed excess inventory, reduced the average length of
processing customer’s request