Business Strategy Case Analysis May 30 2007 Ashley

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 Capstone’s 2 -cents 7. Your time. . . If there is any.

Mission Overview History Products “Newell is a manufacturer and full service marketer of consumer products serving the needs of volume purchasers” SWOT Strategy 1997 Acquisition Results Conclusion • Accomplish mission through its various strategies

Newell Company Cycle Continued Growth Introduction Growth Maturity Decline Overview History Products Newell continues to grow primarily through acquisitions of other companies. SWOT Strategy 1997 Acquisition Results Conclusion Time

History 1966 History Products SWOT Strategy First Acquisition 1902 Overview • Established when Edgar A. Newell bought the assets of a bankrupt manufacturer of brass curtain rods 1960’s 1917 • National distribution 1997 Acquisition Results Conclusion Further expansion of business lines 1972 Newell went public • The company grew and distributed its products through a variety of distribution channels 1972 -1990’s Acquired over 30 firms

Product Lines Houseware Office Products Home Furnishings Hardware Overview History Products SWOT Strategy 1997 Acquisition Results Offering: Best Conclusion 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 Newell’s 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 Newell’s 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 Acquisitions Basic Functions Strategy 1997 Acquisition Results Conclusion 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 • Diversity Overview History + • Strong of products brand names • Horizontal acquisition strategy • Create market power and synergy Products • Divestiture and product line rationalization strategy SWOT Strategy • Competition 1997 Acquisition l and expansion with future acquisitions • 1997: Rubbermaid & Calphalon acquisitions provide potential expansion, growth, and success • International markets • Culture • Newell Conclusion • Growth in the industry is high Results External is large…reduces speed in response to events in external environment • Financial weaknesses (1992 -97) • Declining • ROIC profit margin & ROA declining clash with new acquisitions • Integration difficulties can disrupt the company • Dependency • Threat • Lack on mass retailer of private labels of internal growth

Growth Strategies Business Acquisitions Overview History Primary Objectives Products SWOT Strategy 1997 Acquisition Results Conclusion 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 “ 2 + 2 ≠ 4, if we do this right we get more than 4. ” Products SWOT Strategy 1997 Acquisition Results Conclusion - Dan Ferguson

Acquisition Strategy Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion 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

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 Overview History Well-established profit improvement and productivity enhancement process that is applied to integrate newly acquired product lines to the parent company. Quickly compare Income Statements Products SWOT Strategy 1997 Acquisition Results Conclusion Raise Operating Margins above 15% Recognize cost structure problems Find ways to reduce costs

Acquisition Strategy Newellization: “newellizing” acquired business into a Newelllike company. • Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion 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: establishing more focused business strategy, improving manufacturing processes. • Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion 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 Building one common culture of shared values Integrating common functional capabilities – HR, IS, Finance, etc. Strategy 1997 Acquisition Results Conclusion • 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. Newell Corp. is looking to grow their company through two BIG acquisitions: Overview History Products SWOT Strategy 1997 Acquisition • Less Results • Conclusion • significant acquisition, but important strategic move Help Newell expand into upscale retailers channel • Bring discipline to financial, organizational, and manufacturing aspects of Calphalon • Increase • Name the size of Newell dramatically change to Newell Rubbermaid, Inc. • Expand • Market global presence value of Newell Rubbermaid will increase to over $10 billion

Rubbermaid Glory Days (1980 -1991) • Overview • History Products • Stanley Gault, CEO Introduced 100 new products every year Annual profit increase of 14% SWOT Strategy 1997 Acquisition Results Conclusion Products in Retail Stores: Home Storage Commercial Infant Products

Rubbermaid’s Spiral Down Mismanagement • Wolfgang Schmitt, CEO • Continued product innovation • Restructuring Overview • Lackluster to cut costs profit growth History Tug-o-War Products SWOT Strategy 1997 Acquisition Results Conclusion • Wall Street calls for unit volume growth • Rise of resin prices, uncontrollable costs • Undercut, losing market share Inability to Capitalize • Stagnant International growth

The Acquisition Details Round Two • Year prior, discussions break down Overview History • Now, Rubbermaid needed “Newellization” Products Revenues SWOT Strategy • Rubbermaid 1997 Acquisition billion Results • Newell Conclusion Purchase Price • $5 - $2. 4 - $3. 2 billion • 49% premium over Rubbermaid closing market price • 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 distribution channels • Diversification • Increasing of Newell market share & new markets The Vision • Double Newell revenues, increase profit margins

Acquisition Aftermath Risky Acquisition • Largest acquisition to date Difficulty Integrating Overview History Products • 1999 Rubbermaid Overpaid • Shares dropped 12% after announcement Sluggish Sales Growth EPS reduced & failure to meet analyst estimates • Share price continued to decline for many years SWOT Strategy 1997 Acquisition Results Conclusion 10 -year Famine is Ending

Recommendation • If its not broken, don’t fix it Overview History Products Internal Strategy SWOT Strategy 1997 Acquisition Focused Growth Results Conclusion Niche Markets Small Businesses

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