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Case study- Newell
- 1. Case study : Newell Company Presented by: Group 5 Romani Banerjee Pulkita Vyas Ashish Dhand Tanveer Ahmed Saurabh Kumar Shreyansh
- 2. Summary ● Edgar A. Newell started the Newell company in 1902 with the acquisiton of curtain rods manufacturer. ● It began by selling its products to small hardware stores, industrial builders and speciality retailers. ● In 1921, leonard Ferguson began his career at Newell,and soon became partner in 1937. ● In 1967, Ferguson wrote out his strategy for Newell, identifying its focus at market for hardware and do-it-yourself (DIY) products. ● Dan Ferguson crafted the growth by acquisition strategy ● 1983- Company enters into the cookware market ● 1987- acquisition of Anchor hocking ● 1990s- Acquisition of W.T.rogers, Stanford,levelor, goody, kirsch,rolodex etc.
- 3. The Case shares the acquisition strategy of Dan Ferguson, CEO Newell company, as he purchases wo key acquisitions, the Calphalon company and the rubbermaid company. The approach being not to maximize sales, but to maximize profits by acquisition, decentalizations and reducing inventory and delivery costs and providing timely deliveries. The idea was to acquire new products to expand he product line and attain a market capitalisation of $10 billion.
- 4. Q1-Does Newell have a successful corporate-level strategy? Does the company add value to the businesses with its portfolio? Ans- Yes, Newell does have a successful corporate strategy and it adds value to its portfolio. It can be summarized as the following ● · It manufactures low technology, high volume staple products in the categories hardware and home furnishings, office products as well as house wares and sells to large mark retailers ● · It mirrors the consolidation in the retail business and the related market power of volume merchandisers by continuous flow of acquisitions of companies, those are generally well known brands and often claim #1 or #2 positions in terms of market share but that on the other hand are poorly managed on the cost side. ● · Centralized training programs, comprehensive and frequent management meetings and regular transfer of mangers between divisions contribute largely
- 5. ● · Regarding its mass retail customers Newell aims at a solid reputation for its high service quality, commanding a premium price ● · It substantially increases its operating efficiency and profitability by introducing Newell financial system, IT based sales and order processing system and flexible manufacturing system ( Newellization) , by streamlining its processes.
- 6. Q2- What are Newell’s distinctive resources and capabilities? ● Newellization-Acquiring companies and redirecting acquired businesses to focus on their core product and align them Newell’s system and processes. Usually took 18 months but mostly less than 6 months ● Single corporate computer system- Centralized administration, accounting, customer related financial aspects consolidating the systems. Ex: Acquisition of Anchor ● Consolidate industry capacity by acquiring small businesses and maximize shelf space by acquiring big businesses houses ● Anticipate and divest businesses that it deemed non-strategic- Wm. E. Wright company ● Went Global as early as 1994 and become global suppliers to Walmart.
- 7. ● Electronic data interchange EDI- Company’s sophisticated electronic management system for transmitting purchase orders, invoices, and payments to and from its retail partners ● Single goal for each division- Furnishing product and service to mass retailers. ● Price- Not the lowest but consistent product and service quality ● Newell University- Every new recruit underwent a 2-day training program that stressed on products and profit orientation.
- 8. Q3-What challenges did the company face in the late 1990s? ● increase incustomer buying power ● By 1997, three mass retailer chains controlled roughly80% of the discount retailer market ● Newell improving its technology and introduced the EDI, Electronic Data Interchange ● during the 1990’s ,the acquisitions of Calphalon and Rubbermaid ● the speed at which both brands were acquired. ● With Calphalon in a different market, it required changes within the Newell Company itself because of a clashof views of products and competition.
- 9. Q4-Acquisition of Calphalon and Rubbermaid. Ans- Decision Evaluation – Acquisition of Calphalon- 1. Although Calphalon acquisition will create value to Newell, it potentially can present considerable challenges. There is a delicate balance between “Newellization” and protecting the integrity of the Calphalon brand. 2. The typical approach to “Newellization” has been one of absorption. Newell keeps the brand name of the target firm and discards the existing people and processes. 3. Calphalon has built its brand equity, in large part, because of the efforts of its sales force and its focus on educating retailers and end users on the product. If taken too far, “Newellization” may erode Calphalon’s premium service and destroy the barrier of entry for premium competitors at high end retailers.
- 10. Problems with acquisition of Rubbermaid- 1. The sheer size of Rubbermaid is larger than any company acquired by Newell, this would make the process of “Newellisation” long and tedious and take their focus away from other activities 2. Rubbermaid’s poor reputation could translate into that of Newell’s 3. Poor operations of Rubbermaid could impact Newell Alternatively: Newell shoild stick to its initial strategy of acquiring small and medium sized companies where transformation and Newellisation process is easier with lesser risk involved.