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Newell Strategy Essay

Yes, Newell does have a successful corporate strategy and it does add value to the businesses within its portfolio. Newell’s corporate strategy can be summarized as follows. Newell manufactures low-technology, high-volume staple products in the categories hardware/ home furnishings, office products as well as housewares and sells to large mass retailers. It mirrors the consolidation in the retail business and the related market power of volume merchandisers by a continuous flow of acquisitions of companies.

These companies are well-known brands and often claim a #1 or #2 position in terms of market share but that on the other hand are poorly managed on the cost side and hence financially underperforming. Newell substantially increases their operational efficiency and hence profitability by introducing Newell’s financial system, IT-based sales and order processing system and flexible manufacturing system (“Newellization”), i.e. by streamlining their processes.

Regarding its mass retail customers Newell aims at a solid reputation for its high service quality (e.g. use of EDI and POS data along with reliability of JIT delivery), commanding a price premium. This quality level is also established in the acquired companies. Moreover, by consolidating industry capacity at high and low price points Newell reduces price pressure in the market, creates economies of scale and entry barriers based on “critical mass”. Newell also capitalizes on economies of scope by leveraging relationships with discount retailers to get shelf space and favorable terms and conditions for products of other subsidiaries in its portfolio, too.

Centralized training programs, comprehensive and frequent management meetings and regular transfer of managers between divisions contribute to best practice sharing and knowledge transfer within the corporation. The corporate office provides its various product divisions with capital infusion when necessary and with financial, technological, operational and legal support.


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