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1.

Introduction
1.1. Case Summary
Newell Company ultimately aims at building a highly profitable company, with superior
Earnings per Share and enviable Returns on Investment to shareholders through various
strategies. Through its growth via acquisition strategy, it has made two new acquisitions, the
biggest in terms of size and finances till date Calphalon and Rubbermaid.
Newell Company redefined its corporate strategy in 1967 to focus on the market for
hardware and do-it-yourself (DIY) products to volume merchandisers. These led to a focus
on the market for hardware, furnishings, office products and housewares.
Mission Statement
Newell is a manufacturer and full-service marketer of consumer products serving the needs
of volume purchasers.
Basic Strategy
Merchandise a multi-product offering of brand-name staple consumer products, with an
emphasis on excellent customer service, in order to achieve maximum results for
stockholders.
Financial Objectives
i. Achieve sales and earnings per share growth averaging 15% per year
ii. Maintain return on beginning equity at 20% or above
iii.
lncrease in dividend consistent with earnings growth
iv. Maintain a prudent degree of leverage
1.2. Core issue of the case
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Can Newell achieve a strategic fit between its current corporate strategies and that of the
new acquisitions to enable them achieve their profitability vision, via superior Earnings
per Share and Returns on Investment. Do they require a different strategy to be able to
utilize the new acquisitions effectively?
1.3. Sub issues in the case
i.
Who are Newells primary market, and what is important to them?
ii.
How is Newell strategically positioned to serve its primary market?
iii.
Asses the acquisition of Caphalon and Rubbermaid, in line with Newells existing
positioning and strategies, how can Newell utilize the acquisitions to enhance their
position?

2. The Primary Market- The Mass Retailer


The growth of the consumer oriented society, coupled with the accelerated expansion of the
United States and European economies due to the industrial revolution, served as a catalyst that
birthed the mass retail business. Mass retailers mainly operate with the model of reducing
overheads, lean operations with smaller profit margins and sales on volumes .
What is important to the mass retailer?
1.
2.
3.
4.

Low-price goods with small profit margins


Volumes Items that would sell in volumes
Fast moving products
Efficient operations to reduce overhead costs: Little to no inventory, Demands less order
filling time by manufacturers and Efficient delivery via on time shipment

3. Newells Strategic and Competitive Positioning


3.1. Strategies
3.1.1. Corpororate
3.1.1.1.
Organisation- Multi-divisional structure
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Newell moved from a functional structure to a multi-divisional structure that enhances focus
on core business by each acquired business and ensures control and oversight by main
company.
Headquarter
s
Basic
Functio
ns

Acquisitions

i.

Each division handles its own design, manufacturing, marketing, sales,


Division
Division
Division
merchandizing
and servicing
ii.
Each division is responsible for profit performance
iii.
Strict financial and operating reviews of divisions monthly
iv. Management salary, based on performance
v. Internal growth rewarded
3.1.1.2.
Newellization
Mainly a cost leadership advantage where:
i.

Focus is strictly on acquired businesss core competencies and


centralize key responsibilities of accounting, order and data

ii.

processing, legal
Efficiencies are enhanced by comparing income statements, finding
cost structure problems, reducing operational costs and trimming

iii.

excess costs
Operating margins are raised above 15%

3.1.2. Competitive
Their competitive advantage was in their Customer service and efficient
supply chain management as follows:

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i.

Measure of stock available when order is received ranked between

ii.

80% to 100%
Efficient order receiving and processing, enhanced by information

iii.

technology
On time shipping and delivery schedules in cross-docking system

3.1.3. Growth
Main growth strategy was by acquisition. To acquire companies with products of
longer shelf life and space
3.2. SWOT
Strengths- Competitive innovations
Expertise in integration of acquired businesses, manufacturing, distribution, customer relation
and customer service.
1. Strong Technology based manufacturing system
2. Highly innovative and motivated staff
3. Customer orientation Commitment to high product and service quality
4. Integrated financial system, sales and order processing system and flexible manufacturing
system
5. Benefits from economies of scale.
6. Strong negotiation power based on its brand equity and differentiation.
7. Robust and reliable processes and systems
8. Robust but flexible organizational structure.

Weaknesses
1. Newell Company seems to focus on its strength and expertise in pursuing its growth
strategy. Competitors in the long-run could imitate the Companys production efficiencies
through advanced technologies.
2. Relying on lean operations may not be embraced by political authorities in Countries
where unemployment is high.
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3. Strict implementation of credit policy across board the group may hurt certain brands due
to competition.
4. Limitation of financial and administration powers to management at headquarters may
contribute to bottlenecks which could negatively impact decision making at the divisional
level.
5. Strong bargaining power of buyers
6. Underinvestment and holdup by input suppliers could be fatal to the Companys
divisions customer service.

Opportunities
1. Access to financial the financial market Newells sheer size and reputation makes it
attractive to financiers.
2. Backward integration to assure the Company of reliable supply of raw materials

Threats
1. Newells size and influence may attract attention of regulators and industry watchers.
This becomes apparent due to command over pricing by powerful Companies.
2. Environmental issues Due to the Companys nature of operations it would be affected
by green policies and environmental impact assessment reports which sometimes lead to
strict policies and taxation.
3. Competition from mass merchandisers who may undertake integration as part of its
growth strategy
4. Newell operates from various Countries with different cultures and political systems.
Political instability and social unrest in such countries would jeopardize the Companys
customer service quality and may lose shelve space to competitors.
4. The New Acquisitions ; Strategic fit and High profitability

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