Newell Company: Corporate Strategy

Introduction

 Industry – consumer goods

 Founded in – 1903
 Founder – Edgar A. Newell
 Headquarters –Atlanta, Georgia, USA
 Broad range manufacturer of basic home and hardware products
 Two important acquisitions by CEO John McDonough
 Calphalon a privately held manufacturer of anodized aluminum
cookware
 Rubbermaid a maufacturer of plastic consumer and commercial
products with revenues of $2.4 billion vs Newells $3.2 billion
 Culture

 Very high level of customer satisfaction. "Do you ship as well as

Newell?"
 Growth-by-acquisition.
 Operational efficiency through EDI systems, etc.
 Profit focus
 Centralized administration at the corporate level
 Management incentives
 "The Newellization Process"

 After 1972, Newell thrived by following a disciplined and aggressive two-

pronged strategy, acquiring more than 30 major businesses in the next
20 years
 Criteria:
 Underperforming due to high costs
 Operation margins of less than 10%
 Post Acquisition:
 The companies were put through a process of streamlining, focusing on
operational efficiency and profitability
 Strategic Decision

 Was it the right decision to acquire Rubbermaid?

 Did Rubbermaid fit the Newellization criteria?
 Will it give them a greater global presence and broader product
offering?
 Industry

 In 1997, their was a change in the economy and a shift to mass retailers
 Retailers such as Wal-Mart had emerged to dominate the landscape in
the US, with end users increasingly looking to mass retailers for a
variety of product needs.
 Newell said they need to develop or buy stronger brands to keep up
 Rubbermaid

 Founded in 1930, Rubbermaid was based in Wooster, Ohio, and was

primarily a manufacturer of plastic products for the retail marketplace
 They were known for their brand equity and product innovation
 When resin prices rose in 1995, Rubbermaid was unable to pass along
the cost increases to retailers in the form of higher prices.
 They began developing a bad reputation. Customers complained that
Rubbermaid couldn't offer the service they require
 Alternatives

 Newell could forgo the acquisition

 This would allow them to focus on acquiring other companies
 In doing so, they wouldn't have to worry about Rubbermaid's
reputation and operation problems
Key Challenges in Acquiring Rubbermaid

 The sheer size of Rubbermaid is much larger than any other company
Newell has acquired
 This would make the Newellization process take longer, which would
take away focus from other activities.
 The reputation associated with Rubbermaid is poor and could transfer
to Newell if acquired
 The inefficient operations of Rubbermaid will impair the Newellization
process and could prove difficult to fix.
 Recommendations

 The deal is attractive for Newell but is not worth the risk that is
involved.
 Focuses should be on core business
 Acquired company’s strategy should align with mother company’s
 Newell should stick to their business principle and do what they have
done in the past, which is to acquire small to medium sized companies
and integrate them into the newellization process and create an
enormous amount of synergy.
Thank you