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Business Strategy

Case AnalysisMay 30, 2007

Ashley Wilson - Anton Gladnikov - Chris Morrow - Zachary Stevens

Agenda1. 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 CycleContinued Growth IntroductionOverview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Growth

Maturity

Decline

Newell continues to grow primarily through acquisitions of other companies.

Time

History

1966Overview History Products SWOT Strategy 1997 Acquisition ResultsThe

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

First Acquisition

1917National

1960sdistribution Further expansion of business lines

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

Conclusion

1972-1990sAcquired 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

HeadquartersOverview 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 AnalysisInternal External

Diversity Strong

of products acquisition strategy market power and

Growth

brand names

and expansion with future acquisitions1997:

+

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Horizontal

Create

synergyDivestiture

Rubbermaid & Calphalon acquisitions provide potential expansion, growth, and successInternational

and product line rationalization strategyCompetition

markets

in the industry isCulture

highNewell

is largereduces speed in response to events in external environmentFinancial

clash with new acquisitionsIntegration

difficulties can disrupt the companyDependency Threat Lack

l

weaknesses (1992-97) profit margin & ROA declining

on mass retailer

Declining ROIC

of private labels

of internal growth

Growth StrategiesBusiness AcquisitionsOverview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Primary ObjectivesInternal Globalization

Internal StrategyInternal 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 StrategyCriteria: 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.

NewellizationWell-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 StrategyNewellization: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 StrategyNewellization: reducing corporate overhead through centralizationof 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 StrategyNewellization: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 StrategyTools: Leverage One Newell RubbermaidOverview 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 1997Hong 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 channelBring

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 StorageCommercial Infant Products

Rubbermaids Spiral DownMismanagementWolfgang

Schmitt, CEO

Continued

product innovationto cut costs profit growth

Restructuring

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Lackluster

Tug-o-WarWall

Street calls for unit volume growthRise

of resin prices, uncontrollablelosing market share

costsUndercut,

Inability to CapitalizeStagnant

International growth

The Acquisition DetailsRound TwoYear

prior, discussions break

downOverview History Products SWOT Strategy 1997 Acquisition Results ConclusionRubbermaid Now,

Rubbermaid needed Newellization

Revenues- $2.4

billionNewell

- $3.2 billion

Purchase Price$5

billion premium over Rubbermaid closing market price

49%

Newell

shares tumble 12%

The MotivatorsThe ultimate Newellization TestRubbermaid Increased

is the challenge

costs, increased time to Newellize

Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

Long-term BenefitsSame

The VisionDouble

distribution channels of Newell market share & new