Newell Company Corporate Strategy

Q1. How does the corporate office contribute towards Newel's performance or in other
words what value does the corporate office add?
Newell had adopted to develop its product line through key acquisitions rather than
internal growth. All acquisitions are taken care at the corporate level so that the
divisions are not diverted from their core function of generating profit.
Potential target firms undergo an intense screening process. They have to be par
with companys existing performance criteria
They bring up acquired companies by developing them to become cost efficient
through operational strategies and creating profits within a period of 18 months.
Some are done with a period of 6 months of time. Newell also have strict control for
the time the customers pay, this is within 30-45 days
Corporate tightly controls the finances, yet it allows brand and division president
autonomy to guide the performance of the business.
Corporate office does a good job of seamless linking of its structure, system &
processes (SSP) with its businesses and resources.
The company attaches great importance to customer relations frequently inviting
buyers for plant visits.
The companies Newell acquires have potential but undervalued. These companies
are suffering because they do not have major clients and there overhead costs are
high.
Newell focused on good communication within the company and had numerous
meetings throughout the year in order for leadership roles to remain informed about
other aspects of the company. Division leaders convened several times a year for
presidents meetings as well as the ability for regular encounters at trade shows
throughout the year.
Other forms of communication were bracket meetings and the monthly collection of
operating figures. Bracket meetings were implemented if there were too many
variances within the budget.
Salary was based on a uniform system across all divisions, which rewarded
individuals on the basis of their positions and the size of their divisions. All salaries
for managers were equal to the industry average, and bonuses could range from
33% for the most junior manager of a divisions 20-person executive team, to 100%
for division presidents.
The interviewing process was rigorous, once a potential employee was hired they
attended a two-day training program at the so-called Newell University. There
were also frequent opportunities for transfers and promotions in less than 10 years
and all job openings were publicized within the company. This kept the Newell
knowledge within the company and the ability to acquire informed top management
was a much easier process.



Q2. What was Newel trying to achieve by the acquisitions of Calphalon and Rubbermaid?
Do you think these were good acquisitions?

Acquisitions of Calphalon:
Learn the expertise in developing pull strategies and building strong connections to
the end consumer.
Broadened Newells access to the department and specialty store markets and
extended the companys cookware product line to the top of the market.
Newell decided to keep Calphalon lines in department and specialty stores. This
enabled WearEver, to remain the number one mass merchandiser brand within the
Newell lines.
Honor the Calphalon contract with Target which was to display specially designed
fixtures
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. 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. 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 Calphalons premium service and destroy the
barrier of entry for premium competitors at high end retailers.
Acquisitions of Rubbermaid:
Newell believed that Rubbermaid and its brand names enhanced Newells
opportunities for globalization and internal growth.
In the face of increasing market power of Newells primary customers, a need to buy
or develop stronger brands as required.
Research showed that companies with market capitalization of $10 billion
commanded higher price/earnings multiples. This is acquisition it was goal was
nearer.
The degree to which this acquisition adds value depends on Newells ability to absorb
Rubbermaid into its existing corporate structure. The sheer size of Rubbermaid (75% of
Newells revenue in 1997) points to a longer Newellization process than the standard 6
month period. If the Newellization process drags out, Newell will be forced to invest more
of its time and resources into integrating Rubbermaid. This may leave less time to focus on
new acquisitions. There is also a strong chance that absorbing Rubbermaid is the incorrect
approach to integration. Newell will need to work with the majority Rubbermaids existing
workforce and management team, there are simply too many to replace. If Newell were to
absorb Rubbermaid, it could risk alienating the new work force and destroy the processes
that promote new product development. Overall, we dont think Rubbermaid is a smart
acquisition.