Professional Documents
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Introduction
Broad range manufacturer of basic home and hardware products Two important acquisitions by CEO John McDonough Calphalon a privately held manufacturer of anodized aluminum cookware Rubbermaid a manufacturer of plastic consumer and commercial products with revenues of $2.4 billion vs Newells $3.2 billion
NEWELL HISTORY
NATIONAL DISTRIBUTION.
FIRST ACQUISITION
PUBLICLY LISTED
1902
1917
1966
1972
1990
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Roots of Strategy
E.A.Newell bought assets of bankrupt manufacturer of brass curtain rods in 1902 Drivers for early success Migration to cities Demand for extensive windows Initial consumers were small hardware stores, industrial builders, specialty retailers and later national chain stores Early problem identified was lack of differentiation in product. (Ex. Selling drapery hardware to all channels) Solution was to acquire a small window shade manufacturer.
What is Newellization?
Process of streamlining Improving efficiency and profitability Time taken 18 months Comparing income statements
Reasons
Addition of Calphalon creates value by extending its reach into the non-mass merchandise market While most of Newells product offerings are utilitarian, Calphalons cookware products are considered to be an emotional purchase for the premium end user McDonough thought Calphalon could share its expertise in pull strategy and build strong connection with end consumer
Reasons
Competitors like Meyers cost were 20% to 30% lower than that of Calphalon
Newellisation strategy can reduce their COGS and SG&A cost
Newell already has their own cookware products in the good, better and best categories in mass retail stores. Is there any need for adding more cookware products?
Analysis
Large retailers like Walmart still held considerable amount of power over Newell Exit of large retailers might make Newell vulnerable Calphalon acts as the bridge to Newell to expand its distribution channels in areas other than through volume
Concerns
Delicate balance between Newellization and protecting the integrity of the Calphalon brand If taken too far, Newellization may erode Calphalons premium service and destroy the barrier of entry for premium competitors at high end retailers
Why Rubbermaid?
"Rubbermaid and Newell are a strategic fit," said Newell Chief Executive John McDonough. "The Rubbermaid brands bring us further breadth of distribution, increased shelf space and an enhanced presence in Europe. - LATimes(22/10/1998)
Reasons
Rising price of resin contributed to rising COGS, but competitors unwilling to hike price Problems with management and operations Lack of service as per customers Lack of volume growth and diminishing profit in 1997
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