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Newell Group

Parul Relia C045


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Gunjan Saluja C047
Avani Sanghvi C048
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Manan Shah C053
About Newell Brands

Newell Brands is a leading global


consumer goods company with a
strong portfolio of well-known
brands. For hundreds of millions of
consumers, Newell Brands makes life
better every day, where they live,
learn, work and play.

1903 The company has 2016


grown over the
Purchase of a decades, often by
The combination of
struggling curtain acquiring brands
How Newell rod company in built by
Newell Rubbermaid
and Jarden
became Newell Ogdensburg, New entrepreneurs like
Corporation, created
York, by local Edgar Newell that
Brands businessman Edgar they now offer
a new company –
NEWELL BRANDS
A. Newell. various products to
consumers around
the world.
Strategic Intent
Mission Statement
Newell is a manufacturer and full-service marketer of consumer products
serving the needs of volume purchasers.

Their Portfolio includes many well-known


brands across a wide variety of categories.
By defining clear roles within their
portfolio, they invest disproportionately in
their biggest and best opportunities.
With purpose as their guide, Newell
Rubbermaid’s evolution as a global
company of Brands That Matter is driven
by an understanding of the constantly
changing needs of their consumers and
the ability to create products that win in
the market by delivering superior
performance, design and innovation.
Structure of the Company
Newell has a Divisional structure which is also called a Product structure because they are based on a certain
product or project.

Newell is highly centralized and this centralization compliments with its vertical structure to create a
Bureaucratic organization where everything runs in a very formal, organised and standardised manner.

Newell has a very high degree of Standardisation which is evident in its Corporate Strategy and Business
Strategy

Corporate Strategy Business Strategy


Top Financial
Responsibilities All the basic functions like  Only focus on profit
Finance, Legal and Taxes, maximisation through
CEO Credit and Collection, etc focus on core product
were to be taken care of by development. Eg: E-Z
the corporate headquarters Paintr
President  Design, Manufacture,
Eg: Top Financial Marketing, Servicing will
Responsibilities remain here.
Sr VP- Group  Not allowed to expand
VP- Finance Corporate or redefine themselves.
Presidents
Controller  Prior permission
required for everything.
Standardization
Strict credit terms to its customers, i.e., 2%-30-Net45. Companies used to allow their major customers 90 days
credit but Newell eliminated this practice. No company President had rights to allow unapproved cash
discount. This turned a lot of companies profitable whose margins were thin and money blocked in accounts
receivables.

Adhering to strict set of monthly financial reviews.


Financial Control System: Was tailored to the key success factors of businesses selling low tech, long life cycle
products to mass retailers.
Bracket Meetings: Variable budgeting method used to check expenses were in line with aggregate sales.
Variances were bracketed and too many variances would lead to a Bracket Meeting. Ensued intervention,
revision of budget and strict adherence to the adjusted level.

Set Process for Acquisitions also:


Acquire strategic businesses which will create synergy for the company and who would let them expand.
Streamline their operations to Newell’s way (called Newellization) and then managing them

Analysis:
Major success driver for According to me, what they did was: This discipline helped Newell in
Newell was that they were  Set strict targets acquiring low-cost leadership
very organised and had  Measure the results and check for because costs were kept tight
timely reviews of everything. deviations and payments were made on
“If you want it done, you  Identify the problems time, hence the margins
need to measure it”  Solve the problems improved
Newell Brands
Newell Newell Newell
Company Rubbermaid Brands

Merger of Rubbermaid
Subsidiary Merger where the company wants to retain the brand name. And Horizontal Merger where both operate in the
same industry.

 This was an acquisition ten times as big as the last biggest acquisition Newell had made before. This nearly doubled
the company's size, and significantly increased Newell's portfolio of brands.
 However, the merger was dubbed as the "merger from hell" by Businessweek magazine. Newell shareholders lost 50
percent of their value in the two years following the closing and Rubbermaid shareholders lost 35 percent.

Newell’s Game Plan


 Michael Polk (CEO) has a reputation as a turnaround
expert.
 He eliminated unprofitable brands, bought others, cut
costs, and turned the company into an earnings machine.
 Over the past five years, the stock has also been on a tear,
with Newell’s share price quadrupling.

The divestitures and acquisitions indicate a


tremendous progress on the company’s new growth
game plan that not only reflect Newell’s focus on
simplifying its operating structure, but also highlight
its commitment toward making prudent
investments in areas with higher growth potential.
Core competencies

Linking of its structure, system & processes (SSP) with


its businesses and resources.
Competence Valuable Rare Costly to imitate Non- Competitive
substitutable consequence
Diverse product Yes Somewhat Yes No Temporary
portfolio competitive
advantage
Delivery and Yes Yes Somewhat No Temporary
logistics competitive
infrastructure advantage
Acquisition Yes Yes Somewhat No Competitive parity
process
(Newellization)

Brand equity Yes Yes Yes Yes Sustained


competitive
advantage
Core products

Hardware/
Home
Office House
furnishings products wares
Window Markers and Aluminium
treatments(bli writing Cookware and
nds, shades, instruments Bakeware
coverings)

Hardware and Office storage


tools(DIYs, and Glassware
torches, paint Organisation
brushes, (office
fasteners) supplies,
desktop Hair
accessories, accessories
portable files,
Picture frames storage cases,
office
furniture and
Home computer
storage(wire accessories)
shelving,
modular
storage)
SWOT Analysis

• Process of Newellization • Problem faced by mass


• Meaningful acquisitions retailer to face multiple
• Combinaton of central and divisional head.
divisional processes. • Initially they were not
• Product for each price point differentiating their product
• Higher operating margin

• Explore emerging markets • Power of mass retailers


through retail and e- • Rising prices of resin
commerce routes
• Offshore manufacturing
Economic Scenario

The United States in the 1950s experienced marked economic growth – with an increase
in manufacturing and home construction amongst a post World-War II economic
expansion

Consumerism became a key The US federal government authorized


component of Western the Interstate Highway Act in June 1956,
society. People bought big and construction had begun by the fall of
houses in the new suburbs that same year. The originally planned set
and bought new time- of highways took decades to complete.
saving household
appliances
Consumer Products Sector
Analysis

• According to deloitte reports, the economic According to pwc reports , 5 trends are driving
fundamentals for consumer spending appear to the changes in consumer products business
be solid in 2017 due to 181000 jobs being added
every month in 2016 Brand entrants are more focused
• Technology has played a big role in growth of
Consumer products industry Stores shrink
• 7 opportunities for consumer products
companies to embrace the potential of enabling Giants personalize and localize
technologies
• “Frenemies” collaborate

Global brands embrace social issues

• Customization is very popular


Porter’s 5 forces for Consumer
Products Industry

• Continuous innovation leads to intense rivalry


• Homogeneity in product and low switching cost

• Highly capital intensive • Technology


• Major players have advancements
developed brand equity • Buyers have huge
• Brand loyalty is moderate propensity to substitute

• Product differentiation is • Use of Internet to get all


very low the information enables
• By changing the input, customers to be powerful
firms cannot drastically • Buyer’s switching cost is
differentiate on price very less
Emergence and tackling of mass
retailer in US

• Production
Planning • No problem
• Inventory supplier in • Industry
control the market average:80%
• Top 20 • Charged 5- • Newell’s target
customers 10% :95%
• 3 chains placed 90% premium
controlled 70% orders First line pass
discount through EDI
retailer market Service fill
in 1970s
Technology:
Electronic Data
Mass Interchange
Markets

By 1980;some
began to use
system called
cross-docking
Newell’s product strategy
 Build on what we do best philosophy
 High volume–low cost strategy
 Started DIY (Do it yourself) products
 Products were ranked #1 or #2 in their product category
 Each division manages own product furnishing and its service
 Each business unit permission to develop but not to expand its core product focus
 Newellization focused on operational efficiency and profitability of acquired businesses and their product lines
 Newell University imparted Newell corporate culture of stressing on product focus and profit maximization
 Offered products at 3 price points: Good, Better and Best

5 Generic Competitive Strategies Product Line


Category Product
Hardware/Home Hardware and Tools
Broad
Target
Furnishings Window Treatments
Picture Frames Home Storage
Office Products Office Storage/Organization Markers/
Narrow Writing Instruments
Target
Housewares Glassware
Aluminum Cookware/Bakeware Hair
Accessories
Cost Uniqueness
Newell’s Competitive
Advantage

Different brand for each price point arranged on display


accordingly. Gave huge importance to shelf space Competitive Dynamics

Recruitment of motived people by lucrative bonus systems Standard Life cycle Market

Strict monthly financial reviews having variable


budgeting
Inorganic Growth
Innovation but not at cost of core product focus
Separate divisions
Consistent high service quality and efficiency not on
pricing
Diversified products
Huge investments on technology innovation for ease of
customer order placing
Various price points
Exiting non profitable business and divesting businesses
deviating from core product line
Acquisitions
 First Acquisition
 First non-drapery  Going Public
 Renneman – Window
shades manufacturer rod Acquisition  To aggressively add
 Newell, primarily, was new products by
a curtain drapery rods
 Mirra-Cote- Bath acquisition
manufacturer hardware  New strategy – Add
 Due to lack of manufacturer 30 major businesses in
differentiation in the next 20 years
products, acquired  This opened up
Renneman relationship with  Acquired companies
 Inspired by Stanford Zayre, a discount that manufactured
Professor Bob Katz’s retailer  Low technology
words: “Build on what
you do the best”  Leveraged  Non-seasonal
 New vision: Selling Zayre’s  Non-cyclical
products to large mass relationships to  That mass retailers
retailers would keep in their
sell other shelves year in and
products year out
Newellization
 Why some companies had to sell?
 Underperformance due to high cost
 Less than 10% of operating margins
 When does Newellization begin?
 Begins immediately after a new acquisition
 Usually takes place in less than 18 months, and often in less than 6 months
 Typically under the leadership of a president and controller brought from
elsewhere in the company
 The company was reorganized into separate divisions
 Each division was individually responsible for manufacturing and marketing
 But was centrally controlled by corporate-run administrative, legal and
treasury systems
Newellization
Compare
income
statemen
ts

Profit
improvement & Cost
Increase Productivity structure
operating enhancement
processes to
problems
margins
integrate recogniti
above 15%
acquired on
product lines

Identify
ways to
reduce
costs
Further Acquisitions
 Anchor Hocking
 Manufacturer of glassware and cabinet hardware
 In 1986,  Attractive acquisitions
 Sales of Anchor Hocking = $757 mn Vs Sales of Newell Group =  Companies that produced branded
$350 mn products that ranked #1 and #2 in the
 Main rationale behind the takeover? market share
 Profit margin of:  Most important asset in new
 Anchor Hocking = 0.5% acquisition -> shelf space of the retailer
 Newell Group = 11%
 Exit and divestment
 How did Newell bring in more profit to Anchor Hocking?
 Exited business it deemed non-strategic
 Cost cutting  Even divesting business with healthy profit
 Dismissed high-level Anchor Hocking executives, including the margins if they were ill-suited to company’s
Chairman main focus
 Reduction of employees  Since it was concentrating more on mass
 Closed a glass factory retailers, it sold Wm.E.Wright company, a
 Company’s 25 retail stores manufacturer of ribbons and home sewing
products that it acquired in 1985, even though
 Slashed excess inventory
it had solid sales and profit performance, as the
 Money saved market for it was moving towards small
independent retailers
 $32.4 mn in costs
 $12 mn by centralizing Anchor Hocking’s administrative
and financial functions under one roof of Newell
Acquisition of Calphalon

 Commercial aluminium cookware company


 Sales process – Pull strategy
 “People who are passionate about food are just as passionate about cookware.” – Jeff
Cooley, President, Calphalon
 “Store within a store” format
 Chef endorsements
 Cooking classes
 In-store cooking demonstrations
 Along with Target, a mass merchandiser, Calphalon started manufacturing most-fashion
oriented cookware products for which the target audience was people of age between 25
and 35.
 Newell acquired Calphalon in 1998
 Key benefits of the acquisition
 Utilize pull strategy of Calphalon to build strong connections with end customers
 Build expertise in Pull Strategies
 Target youth audience
Acquisition of Rubbermaid

 Manufacturer of plastic products


 Famous for
 Brand equity
 Product innovation
 In 1993, it was the most admired company in America, as per Fortune
 Newell’s biggest acquisition back then
 Some wondered if this company is too big to be ‘Newellized’
 McDonough felt that in the long run the cost savings and synergy
between the companies would make it as good acquisition
 Key benefits of the acquisition
 Accessibility to large shelf-space
 Similar distribution channels
 Diversification of a lot of innovative products of Rubbermaid
 Demand around the world
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