Newell Company Case Essay
Newell Company Case
Newell Company created corporate advantages by following the company’s mission and philosophy. The philosophy “Build on what we do best” was started by CEO Mr. Dan Ferguson. This philosophy can be described as Newell focus on selling multiproduct to large mass retailers with high-volume and low-cost. Their mission is “Newell is a manufacturer and full-service marketer of consumer products for serving the needs of volume purchasers.” The company’s philosophy and mission has a great influence on its strategies. Newell creates various strategies to accomplish the company mission. For example, one of Newell’s key strategies is serving the mass retailer. The strategy of acquisition helps to improve manufacturing processes in order to get high-volume and low cost product. Newell’s strategies align with its philosophy and mission. It can create corporate advantages in the industry. Moreover, the basic strategy of total Newell strategy is that “merchandise a multi-product offering of brand-name staple consumers products, with an emphasis on excellent customers service, in order to achieve maximum results for our stockholders”.
The acquisition Rubbermaid and Calphalon enhanced Newell’s strength in terms of merchandise multiproduct offering and rise Newell’s brand popularity. However, with negative feedback of Rubbermaid’s customers, Rubbermaid’s strategy of customer services could not alignment with Newell’s mission and basic strategy that lead to a negative influence on shareholder satisfactions. Even though Calphalon’s competitor Meyer have the lower price than Calphalon, Caphalon is for the younger and more fashion oriented market which is not efficient to use the low cost strategy for the high-end product, because Newell maybe unable to match the cost structure of the firm operating with less overhead and fewer product lines. According to the Newell acquision experience, Newell’s strategy is to acquire and integrate business which is nonfashion product, to acquire the company for the fashion ortiented market is Acquisition
Newell’s strategy was to grow and expand their product line. In our opinion, the company is focused on more acquisition strategy than organic growth which represents the true growth for the core of the company. This excludes any growth acquired from takeovers, acquisitions or mergers. Newell acquired different companies in the basics home and hardware products since 1996 (exhibit 3). According to Mergers and Acquisition article, acquisition benefits the company by increasing Company’s value and market power. Two companies together will generate synergy that improves revenue and cost saving of the company. Furthermore, acquisition can create shareholder value as well because two companies together are more valuable than two separate companies. Newell and acquiring companies benefit in many ways from the acquisition. such as, development capabilities.
The acquisitions allow Newell to add more products to its products line. It creates complement capabilities which two different abilities of the companies which fit well together. As the result, Newell is able to offer differentiated products of the same category to suit different customers. Moreover, in transferring its technologies to the acquiring companies, Newell has a technology advance such as EDI. The company is able to deliver products according to retailer’s request, making it more efficient, and improving its reputation as a “Good Shipper”. After acquisition, Newell transfers its technology to acquiring companies in order to deliver the products in an efficient way. Acquiring companies learn new technologies from Newell and they both are able to develop the innovation process. The company put acquiring companies through a process of streamline as known as “Newellization”. Growth through acquisition is very profitable to Newell’s corporate strategy. Corporate governance
Corporate governance is about managing company and defined as the distribution of power in the company. Corporate governance is the system of rules, practices and process by which a company is directed and controlled. Newell corporate structure is made to maintain the flexibility in relations between corporate centers. The corporate office control and coordinate different aspects of a huge corporation working together. For example, the top financial responsibilities were divided between two corporate executives who respectively take charge of the internal operation and external management.
The benefit of company is to make sure the integration for the financial. Normally, there is just one person who takes on the financial responsibility of the company which can lead to accounting fraud. At the same time, the two positions have responsibility to report to the CEO which enhances the supervision to the company’s financial situation. In Newell’s company structure, the group president is one level below the company president. This structure benefits Newell because it centralizes subsidiaries and their operations. This centralization structure forms a unique manage method known as “Newellization”. Newellization:
Newellizaiton is the process of streamlining focused on operational efficiency and profitability. Newell got the opportunity to gain market share through the distribution channel from subsidiaries. Acquisition of Corning’s housewares business in Europe, which is alignment with part of the company’s vision of globalization, effectively helped Newell to expand its distribution channels to gain greater the market share in the global market. According to the case article of “Newell Company”, there are three categories systems to implement Newellization. The first is the integrated financial system, the second is the sales and order processing system, the third is flexible manufacturing system.
Normally, Newell acquired subsidiaries to get more opportunities to gain greater access to distribution channels even though subsidiaries possess low-technology, non-seasonal, non-cyclical, and non-fashion products. Newellization was effectively integrated these companies by implementing systems to make the companies more efficiency and profitability. For example, the successful acquisition implement with Newellization is Anchor Hocking Company. Even though sales revenue of Newell was lower than Anchor Hocking’s sales revenue, but profit margin of Newell was higher than Anchor Hocking. Newellization improved the operational efficiency to manage the cost which is efficiency capability to the company.
Newell dismissed the high-level Anchor executive, employees, reduced the number of the retail stores, reduced the excess inventory and eliminated the product line. Also, the improved operational efficiency help Anchor Hocking reduced the average length of time needed to fill a customer order which is benefit to increase the competitive advantage of Anchor Hocking. For Rubbermaid, the Newellization can help the company to deal with the problem on the inefficiency of operation and management. Financial Objectives:
In the financial perspective, the first of financial objectives of Newell Company is achieved sales and earnings per share growth averaging 15% per year. However, most of companies were acquired by Newell company are regarded as inefficient on operating. Those acquired companies are manufactured low-technology, non-seasonal, non-seasonal, non-cyclical, non-fashionable products, which have more higher maintains cost in every individual company. Therefore, most of companies have high sales revenue but with high cost that resulting in the less 10% operating margins. After Newell Company made an acquisition, with the consolidation and centralization management, not only bring more profit for Newell Company but also saving more operation cost Also, it is the reason why Newellization is regarded as an efficient operating method by acquisition multiple products.
Therefore, the ultimate target is to achieve maximum earning per share (EPS) for Stockholders. Newellization bring a remarkable success for Newell Company, however, with the aggressive of Newellization, the negative business influence show up, such as, in the Exhibit 4, the newell company net sales decrease from 1992 to 1997. According to the article of “navigating a path to smart Growth”, there are two limits can restrict growth in order to gain maximum growth of company, including financial limits and managerial limits. According to course material of “merger and acquisition”, the benefit of acquisition for Newell Company is to gather other multiple product strength to increase profit. In details, Newell company can adjust acquainted company’s mislead cost structures in order to make all acquisition consistently with Newell efficient and effective management model.
For Newell, Calphalon has a good brand which is benefit for Newell to expand their distribution channel. However, Rubbermaid has the bad reputation on the customer service which will influence the reputation of the “no problem” supplier in the industry. At the same time, Putting both Calphalon and Rubbermaid under the same roof of Newell is a great risk for integrate the two companies, because it will be hard for Newell to impletment the Newellization which is the mature and experienced method to integrate the new company they acquired.
Resources and Capability
One of Newell crucial resources is collecting multiproduct from various industries including hardware, house ware, home furnishings, and office product. In addition, one of Newell’s capabilities comes from the acquisition of other companies. There are example is Newell reward system in 1990; Newell changed its bonus’s structure by adding a bonus for internal growth on the top of existing return on assets (ROA) goals which facilitated Newell is ability it’s to increase their accountability capability. The reason why Newell implemented the bonus structure is that new reward system more related to the performance of the company. The Newell University plays an important role for the company by helping which is benefit for the company to increase the strategic unity capability, learning capability and the leadership capability through training the Newell’s mangers to understanding corporate cultural, focus on core product and profit-orientation. At the same time, most of the mid-level executives from other customer goods companies would take the particular management traits before they were accepted by Newell which also build the good foundation for the leadership capacity.
Meanwhile, to leverage the resource, Newell deliberately moves managers across the business unites and from the business to the corporate level. This special character for Newell is benefit for the company to increase the efficiency of the resource by the collaboration capacity. Also, McDonough maintained the communication with their major customers to build the relationship which represent Newell’s strong customer connectivity capacity. According to the competitor for Calphalon of Meyer, Calphalon has the better customer service which is their competitive advantage. Meanwhile, after the acquisition, Newell can share the customer connectivity capability with Calphalon which enhance the Newell’s competitive advantage. For Newell to acquire Rubbermaid which has good brand equity, and the product innovation capabilityis benefit for adding the different kind of resource for Newell. Even though Rubbermaid have the innovation capabilitywhich is benefit for the Newell Company, the Rubbermaid products are more technologic than Newell products. This acquision might bring Newell high cost on the research and development.
Calphalon and Rubbermaid acquisition just partially align with corporate strategies. Newell’s mission is a core purpose of the company that influences to create resources, businesses and organization structure. Many acquisitions fit to corporate strategies enlarge and diversify range of products, but still focus on their core product that low technology, non-seasonal, non-cyclical, non-fashion products. Newellization has a profound influence on Newell growth in terms of managerial, operational, and financial effect, which gathers more capitals from shareholders.
1. To balance between “Newellization” and protecting the integrity of the Calphalon 2. Use the customer connectivity capabilityto create the good reputation for customer service of Rubbermaid 3. Use part of the Newellization to help Runnermaid to solve the problem of the inefficiency of operation and management 4. Organic growth instead of focuing on the expaning by acquision.