Topics: Electronic Data Interchange, Newell Rubbermaid, Customer service Pages: 7 (749 words) Published: November 2, 2014
Newell Company
Corporate Strategy Assignment
Case Analysis

Corporate Strategy
 Newell focuses on market for hardware and do-it-yourself (DIY) products to volume merchandisers
 Adhering to a strategy of acquisition, consolidation and centralization, the company built divisions with economies of scale across a broad range of price points in numerous product offerings.
 Based on “Build on what we do best” philosophy
 The strategy is to acquire companies that manufacture low-technology, non seasonal, noncyclical, non fashionable products that volume retailers would keep on the shelves year in and year out.
 Followed a program selling approach offering categories of “good” “better” “best” products.  Acquired businesses shared fundamental similarity
 The companies chosen for acquisition were underperforming due to high cost and the operating margins are less than 10% in general

 The acquired companies were put through a process of streamlining, focusing on operational efficiency and profitability
 Followed stringent approach of redirecting acquired business to focus on their core product and align them with Newell’s systems and processes.
 Three standard systems are introduced in the acquired company within 6 to 18 months after acquisition
 Integrated financial system
 Sales and order processing system
 Flexible manufacturing system

Centralized administration at corporate level is responsible for legal and tax issues, benefits, Electronic Data Interchange, credit and collection, financial control systems

 Each division is responsible to handle design, manufacturing, marketing, sales, and service as well as merchandising to the customer but centrally controlled by corporate-run administrative, legal, and treasury systems.

 Non negotiable payment agreement of 2%-30-net-45

Corporate Advantages

 Established process of integrating acquisitions and streamlining it with parent company practices and regulations
 Expertise in manufacturing , distribution, customer relations and customer service
 Economies of scale
 Centralized administration at corporate level
 Program selling approach is followed in all product categories by offering “good” “better “and ” best” which protects itself from new entrants at both the high and low price points
 All these are consistent advantages and not a one time advantage

Analysis as per Porters theories on
 How attractive is the industry? Not attractive
 Mass retailors are so giants as 80% of the discount retail industry is controlled by top three chains.
 Servicing a mass retailor is very difficult.
 High penalty on unfilled orders by retailors.
 Industry average for first-pass line-fill (the measure of stock available when an order was received)on 1970 itself was 80%
 Retailors are expecting cross-docking system through which they can eliminate inventory other than at the store level.
 What is the cost of entry? Low?
 Cost of entry is expected to be low as this industry expects only low technology, non fashionable items
 But in the case of acquisition of Rubbermaid, the cost of entry was really high as it worse affected share holders value (Fell from $49 to $43.8) which actually eaten up its expected returns from new business.

 Will the business be better-off? Yes
 Through the proven process of “Newellization”, both the acquired division and the parent is expected to enjoy all the benefits described earlier.

Analysis as per Porters theories on
 Portfolio management
 Based primarily on diversification through acquisition without integrating the acquisition to create any new strategic position
 Newell always addresses integration of acquired company to its own principles and standards of so called “Newellization”
 So we cannot say that they were following Portfolio management  Restructuring
 In this model the acquired company will undergo serious...
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