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 Capstones 2-cents 7. Your time... If there is any.

Mission

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Newell is a manufacturer and full service marketer of consumer products serving the needs of volume purchasers

Accomplish mission through its various strategies

Newell Company Cycle

Continued Growth Introduction
Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Growth

Maturity

Decline

Newell continues to grow primarily through acquisitions of other companies.

Time

History

1966
Overview History Products SWOT Strategy 1997 Acquisition Results
The

1902
when Edgar A. Newell bought the assets of a bankrupt manufacturer of brass curtain rods
Established

First Acquisition

1917
National

1960s
distribution Further expansion of business lines

1972
Newell went public company grew and distributed its products through a variety of distribution channels

Conclusion

1972-1990s
Acquired over 30 firms

Product Lines

Houseware

Office Products

Home Furnishings

Hardware

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Offering:
Best Best 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 Newells 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 Newells 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 Strategy 1997 Acquisition Results Conclusion

Basic Functions

Acquisitions

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 External

Diversity Strong

of products acquisition strategy market power and

Growth

brand names

and expansion with future acquisitions

1997:

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Horizontal

Create

synergy
Divestiture

Rubbermaid & Calphalon acquisitions provide potential expansion, growth, and success
International

and product line rationalization strategy

Competition

markets

in the industry is
Culture

high
Newell

is largereduces speed in response to events in external environment

Financial

clash with new acquisitions

Integration

difficulties can disrupt the company

Dependency Threat Lack

weaknesses (1992-97) profit margin & ROA declining

on mass retailer

Declining ROIC

of private labels

of internal growth

Growth Strategies
Business Acquisitions
Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Primary Objectives
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 Products SWOT Strategy 1997 Acquisition Results Conclusion

2 + 2 4, if we do this right we get more than 4.

- Dan Ferguson

Acquisition Strategy
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

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

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
Well-established profit improvement and productivity enhancement process that is applied to integrate newly acquired product lines to the parent company.

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Quickly compare Income Statements

Raise Operating Margins above 15%

Recognize cost structure problems

Find ways to reduce costs

Acquisition Strategy
Newellization:
like company.

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

newellizing acquired business into a Newell-

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:

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

establishing more focused business strategy, improving manufacturing processes.

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 Strategy 1997 Acquisition Results Conclusion

Building one common culture of shared values Integrating common functional capabilities HR, IS, Finance, etc.

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.

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Newell Corp. is looking to grow their company through two BIG acquisitions:

Less

significant acquisition, but

Increase Name

the size of Newell dramatically

important strategic move

change to Newell Rubbermaid, Inc. global presence

Help Newell expand into upscale retailers channel

Bring

Expand Market

discipline to financial, organizational, and manufacturing aspects of Calphalon

value of Newell Rubbermaid will increase to over $10 billion

Rubbermaid

Glory Days (1980 -1991)

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Stanley Gault, CEO Introduced 100 new products every year Annual profit increase of 14%

Products in Retail Stores:

Home Storage
Commercial Infant Products

Rubbermaids Spiral Down

Mismanagement
Wolfgang

Schmitt, CEO

Continued

product innovation
to cut costs profit growth

Restructuring

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Lackluster

Tug-o-War
Wall

Street calls for unit volume growth

Rise

of resin prices, uncontrollable

losing market share

costs
Undercut,

Inability to Capitalize
Stagnant

International growth

The Acquisition Details

Round Two
Year

prior, discussions break

down
Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion
Rubbermaid Now,

Rubbermaid needed Newellization

Revenues
- $2.4

billion
Newell

- $3.2 billion

Purchase Price
$5

billion premium over Rubbermaid closing market price

49%

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

The Vision
Double

distribution channels of Newell market share & new markets

Diversification Increasing

Newell revenues, increase profit margins

Acquisition Aftermath
Risky Acquisition
Largest

Rubbermaid Overpaid
Shares

acquisition to date

dropped 12% after announcement

Difficulty Integrating
Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion
1999

Sluggish Sales Growth

EPS reduced & failure to meet analyst estimates

Share

price continued to decline for many years

10-year Famine is Ending

Recommendation

If its not broken, dont fix it

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Small Businesses Internal Strategy

Focused Growth

Niche Markets

thank you