Business Strategy
Case Analysis
May 30, 2007
Ashley Wilson - Anton Gladnikov - Chris Morrow - Zachary Stevens
Agenda
1. Delving into Newell Corp.
2. If you buy them, you will grow
4. “SWOT” in the world are you talking about?!
3. What is “Newellization” and how does it work?
5. The Rubbermaid Mesh
6. A Business Capstone’s 2-cents
7. Your time... If there is 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 Growth
Introduction
Growth
Maturity
Decline
Overview
History
Products
Newell continues to
grow primarily through
acquisitions of other
companies.
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Time
History
1966
History
Products
SWOT
Strategy
First Acquisition
1902
Overview
•Established
when
Edgar A. Newell
bought the assets of
a bankrupt
manufacturer of
brass curtain rods
1960’s
1917
•National
distribution
1997 Acquisition
1972
Newell went public
Results
•The
Conclusion
Further
expansion of
business
lines
company grew and distributed
its products through a variety of
distribution channels
1972-1990’s
Acquired over 30 firms
Product Lines
Houseware
Office
Products
Home
Furnishings
Hardware
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Offering:
Best
Best
Conclusion
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 Newell’s 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
Newell’s 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
•Diversity
Overview
History
+
•Strong
of products
brand names
•Horizontal
acquisition strategy
•Create
market power and
synergy
Products
•Divestiture
and product line
rationalization strategy
SWOT
Strategy
•Competition
1997 Acquisition
l
and expansion with future
acquisitions
•1997:
Rubbermaid & Calphalon
acquisitions provide potential
expansion, growth, and success
•International
markets
•Culture
•Newell
Conclusion
•Growth
in the industry is
high
Results
External
is large…reduces speed
in response to events in external
environment
•Financial
weaknesses (1992-97)
•Declining
•ROIC
profit margin
& ROA declining
clash with new
acquisitions
•Integration
difficulties can
disrupt the company
•Dependency
•Threat
•Lack
on mass retailer
of private labels
of internal growth
Growth Strategies
Business
Acquisitions
Overview
History
Primary Objectives
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Internal
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
“2 + 2 ≠ 4, if we do this right we get more than 4.”
Products
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?
“Newellization” –
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
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 compare
Income Statements
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Raise Operating
Margins above 15%
Recognize cost
structure problems
Find ways to
reduce 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
Results
Conclusion
•
Consumer-meaningful branding
•
•
•
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
•Less
Results
•
Conclusion
•
significant acquisition, but
important strategic move
Help Newell expand into upscale
retailers channel
•Bring
discipline to financial,
organizational, and manufacturing
aspects of Calphalon
•Increase
•Name
the size of Newell dramatically
change to Newell Rubbermaid, Inc.
•Expand
•Market
global presence
value of Newell Rubbermaid will
increase to over $10 billion
Rubbermaid
Glory Days (1980 -1991)
•
Overview
•
History
Products
•
Stanley Gault, CEO
Introduced 100 new products
every year
Annual profit increase of 14%
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Products in
Retail Stores:
Home Storage
Commercial
Infant Products
Rubbermaid’s Spiral Down
Mismanagement
•Wolfgang
Schmitt, CEO
•Continued
product innovation
•Restructuring
Overview
•Lackluster
to cut costs
profit growth
History
Tug-o-War
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
•Wall
Street calls for unit volume
growth
•Rise
of resin prices, uncontrollable
costs
•Undercut,
losing market share
Inability to Capitalize
•Stagnant
International growth
The Acquisition Details
Round Two
•Year
prior, discussions break
down
Overview
History
•Now,
Rubbermaid needed
“Newellization”
Products
Revenues
SWOT
Strategy
•Rubbermaid
1997 Acquisition
billion
Results
•Newell
Conclusion
- $2.4
- $3.2 billion
Purchase Price
•$5
billion
•49%
premium over Rubbermaid closing market price
•Newell
shares tumble 12%
The Motivators
The ultimate “Newellization Test
•Rubbermaid
•Increased
is the challenge
costs, increased time to “Newellize”
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Long-term Benefits
•Same
distribution channels
•Diversification
•Increasing
of Newell
market share & new markets
The Vision
•Double
Newell revenues, increase
profit margins
Acquisition Aftermath
Risky Acquisition
•Largest
acquisition to date
Difficulty Integrating
Rubbermaid Overpaid
•Shares
dropped 12% after announcement
Sluggish Sales Growth
Overview
History
Products
•1999
EPS reduced & failure to meet analyst estimates
•Share
price continued to decline for many years
SWOT
Strategy
1997 Acquisition
Results
Conclusion
10-year Famine is Ending
Recommendation
•
If its not broken, don’t fix it
Overview
History
Products
Small Businesses
Internal Strategy
SWOT
Strategy
1997 Acquisition
Focused Growth
Results
Conclusion
Niche Markets
thank you