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Ashley Wilson - Anton Gladnikov - Chris Morrow - Zachary Stevens
Business Strategy
Case AnalysisMay 30, 2007
Agenda
2. If you buy them, you will grow 2. If you buy them, you will grow
3. What is “Newellization” and how does it work? 3. What is “Newellization” and how does it work?
4. “SWOT” in the world are you talking about?!4. “SWOT” in the world are you talking about?!
5. The Rubbermaid Mesh 5. The Rubbermaid Mesh
6. A Business Capstone’s 2-cents6. A Business Capstone’s 2-cents
7. Your time... If there is any.7. Your time... If there is any.
1. Delving into Newell Corp.1. Delving into Newell Corp.
Mission
• Accomplish mission through its various strategies
“Newell is a manufacturer and full service marketer of consumer products serving the needs of volume purchasers”
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Newell Company Cycle
IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline
Time
Continued GrowthContinued Growth
Newell continues to grow primarily
through acquisitions of other companies.
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
History
1902
•Established when Edgar A. Newell
bought the assets of a bankrupt
manufacturer of brass curtain rods
1917•National distribution
1966First Acquisition
1960’sFurther
expansion of business
lines
1972Newell went public
Acquired over 30 firms
1972-1990’s
•The company grew and distributed its products through
a variety of distribution channels
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Best
Better
Product Lines
HardwareHardwareHome Furnishings
Home FurnishingsHousewareHouseware Office
Products
Office Products
Offering:
Good
Better
Best
products in all categories to appeal to a wide range of consumers
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Serving the Mass Retailer
• 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
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Competitive Multi-Divisional Structure
Headquarters
Basic Functions Acquisitions
Division Division Division Division Division
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Company Structure
• 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
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
SWOT Analysis
•Culture clash with new acquisitions
•Integration difficulties can disrupt the company
•Dependency on mass retailer
•Threat of private labels
•Lack of internal growth
•Growth and expansion with future acquisitions
•1997: Rubbermaid & Calphalon acquisitions provide potential expansion, growth, and success
•International markets
•Competition in the industry is high
•Newell is large…reduces speed in response to events in external environment
•Financial weaknesses (1992-97)
•Declining profit margin
•ROIC & ROA declining
•Diversity of products
•Strong brand names
•Horizontal acquisition strategy
•Create market power and synergy
•Divestiture and product line rationalization strategy
InternalInternal ExternalExternal
++ll
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Growth Strategies
InternalInternal GlobalizationGlobalization
Business Acquisitions
Business Acquisitions
Primary ObjectivesOverview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Internal Strategy
• Understanding Consumers• Demand Creation through Marketing• Commercializing innovative new products• Cross-selling existing product lines
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
“Internal Growth is growth from continuing business owned more than one year.”
Acquisition Strategy
- Dan Ferguson
“2 + 2 ≠ 4, if we do this right we get more than 4.”
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Acquisition Strategy
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
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Globalization Strategy
• 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?
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
“Newellization” – Well-established profit improvement
andproductivity enhancement process that
isapplied to integrate newly acquired
productlines to the parent company.
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Newellization
Well-established profit improvement and
productivity enhancement process that is applied to integrate newly acquired
product lines to the parent company.
Recognize cost structure problems
Recognize cost structure problems
Quickly compare Income Statements
Quickly compare Income Statements
Find ways to reduce costs
Find ways to reduce costs
Raise Operating Margins above 15%
Raise Operating Margins above 15%
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Acquisition Strategy
Newellization: “newellizing” acquired business into a Newell-like company.
• Transition cycle:• Starts after 6 – 18 months • Led by brought-in president and controller• Focusing acquired business strictly on its core
competencies
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Acquisition Strategy
Newellization: reducing corporate overhead through centralization of administrative functions and tightening financial controls.
• Centralize responsibilities:• Centralize Accounting system• Expenditures Approval• Cash management, A/R, A/P• Order processing• Data processing operations
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Acquisition Strategy
Newellization: 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
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Acquisition Strategy
Tools:• Leverage One Newell Rubbermaid
• 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
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Flashback to 1997
Newell Corp. is looking to grow their company through
two BIG acquisitions:Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
•Increase the size of Newell dramatically
•Name change to Newell Rubbermaid, Inc.
•Expand global presence
•Market value of Newell Rubbermaid will increase to over $10 billion
•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.
•Less significant acquisition, but
• important strategic move
• Help Newell expand into upscale retailers channel
•Bring discipline to financial, organizational, and manufacturing aspects of Calphalon
• Stanley Gault, CEO• Introduced 100 new
products every year• Annual profit increase of
14%
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Rubbermaid
Infant ProductsInfant ProductsHome StorageHome Storage CommercialCommercialProducts in
Retail Stores:
Glory Days (1980 -1991)Glory Days (1980 -1991)
Rubbermaid’s Spiral Down
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
MismanagementMismanagement
Tug-o-WarTug-o-War
•Wall Street calls for unit volume growth
•Rise of resin prices, uncontrollable costs
•Undercut, losing market share
Inability to CapitalizeInability to Capitalize
•Stagnant International growth
•Wolfgang Schmitt, CEO
•Continued product innovation
•Restructuring to cut costs
•Lackluster profit growth
The Acquisition Details
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Round TwoRound Two
RevenuesRevenues
Purchase PricePurchase Price
•Year prior, discussions break down
•Now, Rubbermaid needed “Newellization”
•$5 billion
•49% premium over Rubbermaid closing market price
•Newell shares tumble 12%
•Rubbermaid - $2.4 billion
•Newell - $3.2 billion
The Motivators
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
The ultimate “Newellization TestThe ultimate “Newellization Test
Long-term BenefitsLong-term Benefits The VisionThe Vision
•Same distribution channels
•Diversification of Newell
•Increasing market share & new markets
•Rubbermaid is the challenge
•Increased costs, increased time to “Newellize”
•Double Newell revenues, increase profit margins
Acquisition Aftermath
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
Risky AcquisitionRisky Acquisition Rubbermaid OverpaidRubbermaid Overpaid
Difficulty IntegratingDifficulty Integrating Sluggish Sales GrowthSluggish Sales Growth
•Largest acquisition to date •Shares dropped 12% after announcement
•1999 EPS reduced & failure to meet analyst estimates
•Share price continued to decline for many years
10-year Famine is Ending10-year Famine is Ending
Recommendation
• If its not broken, don’t fix it
Small BusinessesSmall Businesses
Niche MarketsNiche Markets
Internal StrategyInternal Strategy
Focused Growth
Overview
History
Products
SWOT
Strategy
1997 Acquisition
Results
Conclusion
thank you