Newell Corporation – A SWOT analysis and the Newell Rubbermaid Corporation Essay Sample

through extra degrees of variegation. These economic systems and market power are the chief beginnings of value creative activity when the house diversifies."

"Company History: Edgar A. Newell acquired a bankrupt drape rod manufacturing company in 1902. Newell started producing brass extension curtain rods and sold them to small hardware stores, industrial builders, and specialty retailers. In 1917, Newell became a supplier to Woolworth. By 1965"

Newell's curtain rod grosss amounted to $10 million. In 1966, Newell acquired a window-shade manufacturer as part of their strategy to stand out. Their focus was on acquiring companies that produced low-technology, non-seasonal, non-cyclical, and non-fashionable products. These acquired businesses were usually underperforming due to high costs and low profit margins.

Typically, the operating borders are kept below 10%. Newellization, a procedure focused on operational efficiency and profitability, aims to raise the operating borders to above 15%.

Prospective companies to be acquired typically produced cash cow products, but with narrow margins. See figure 2.

Figure 2: Newell's acquisition strategy focused on consolidation and centralization. Newell utilized a single sales staff to sell all of its products, which proved to be ineffective. Each business was assigned responsibility for manufacturing and marketing.

Despite administrative, legal, and exchequer systems remaining corporate maps, Newell Company supplied merchandises to Wal-Mart and Staples by 1997.

The Newell brand showed a mean return of 31% to investors, outperforming other mass merchants like Home Depot. The company's approach, known as Newellization, involves a competitive and unrelated diversification strategy. This competitiveness stems from the interdependence of its divisions.

The advantages of the competitive structure include flexibility, challenges to the status quo and inactivity, and motivation of efforts. These benefits are achieved through divisional competition. Newellization typically

occurs within 18 months of acquiring a company, with completion usually taking less than 6 months. The process involves an integrated financial system and sales and order processing system.

A unified and versatile fabrication system is implemented in Freeport, Illinois. Corporate squads manage disposal accounting and customer-related fiscal facets by consolidating them into a single corporate computing machine system. This centralization promotes a standardized response to changing client demands, ensuring strategic business continuity for product quality.

The focus of Newell Company shifted from manufacturing low-tech domestic products to becoming a mass retailer, with an emphasis on volume selling. This change in strategy led to supplying large retail chains like Woolworth, Kmart, and Wal-Mart. The importance of monetary value stability, supply and logistics, and public relations through selling can be seen in Figure 3.
Figure 3 Background

Staples, Home Depot, and other companies provided the necessary achievement for Newell to offer high-quality service. Newell initiated a plan to acquire struggling companies and implement successful corporate management strategies that Newell already had in place. Acquiring new companies is always a risk for Newell, as mergers often result in conflicts between corporate cultures.

Acquiring a variety of companies does not allow Newell to master the manufacturing processes of each product. Instead, Newell primarily focuses on integrating financial systems, sales and order processing systems, and flexible manufacturing systems. This strategy of acquiring such diverse, unstable businesses is very risky.

A significant aspect of Newellization involves achieving efficiencies through plant closures and workforce reductions. The reduction in employees results in a decrease in intangible resources, which are difficult to measure. The skills, experience, and expertise of workers often serve as

the primary sources of innovation within a company.

Plant closures can result in animosity towards the company, as seen with Macintosh in the 1980s when they laid off a significant portion of their workforce. Newell is known for being a reliable and timely provider, and they have implemented a "report card" system to monitor their own performance. Wal-Mart has adopted a similar performance measurement tool to evaluate all of its suppliers. Managing diverse businesses may be challenging for Newell due to its flat corporate structure. Any Newell business that fails to meet the expectations set by its suppliers damages the perception of the entire organization. Large retailers such as Wal-Mart and Home Depot are the main customers of Newell.

Wal-Mart alone accounts for 15% of Newell's business. Large retailers have the power to dictate prices and profits. In an effort to implement just-in-time strategies, they often require suppliers to stock and deliver products at specific times, often to the detriment of the suppliers.

The issue with big retail merchants buying from Newell is that Newell is not able to set its own prices. These high-volume retail merchants prioritize price over loyalty to suppliers, which means they may easily switch to another provider offering similar products and services at lower costs.

The loss of major clients can result in a significant decrease in revenue and surplus inventory. Newell often acquires companies for their brand recognition. Newell encourages its businesses to pursue growth but restricts them from redefining themselves or expanding their core product focus. This limitation hampers the businesses' flexibility and ability to adapt to changing market conditions and potential opportunities. Consequently, rivals can exploit niche markets, which may

provide advantageous conditions for premium revenue growth.

See figure 4. Newell rigidly enforces its 2 % -30-net-45 payment agreements with clients and extends these terms to newly acquired companies. This allows Newell to achieve significant cost savings in accounts receivables. However, these stricter payment terms can pose challenges for companies with different payment conditions.

Concerns regarding potential alterations in payment terms may negatively impact relationships with existing clients of the acquired company who may be unwilling to comply. Newell's management incentives are quite generous, with junior division managers eligible for bonuses up to 33% of their annual salary, while division presidents can receive bonuses up to 100% of their annual salary. These substantial bonuses for high-performing division managers encourage competition and foster growth.

The company experiences higher returns as a result. However, the significant bonuses given to directors could instead be used for employees or reinvested in the company. Newell often hires successful mid-level executives from other consumer goods companies and provides them with a two-day training seminar on the Newell corporate culture. However, external directors may not have the same level of knowledge about the complexities of each business as internal employees who have been promoted within the company. The two-day training seminars are not enough time to fully understand the history or direction of the company. Additionally, due to the numerous acquisitions, the average tenure for Newell managers in any position is less than 10 years.

When a manager leaves one business to join another, they bring with them years of knowledge, experience, and relationships. Managers who were successful in one business may exhibit poor performance in a different business. Each manager has their own unique management

approach.

Employees can perform well under one management style while struggling under a different style. Each change in style leads to a learning curve. Limiting changes would logically result in increased productivity for everyone. Newell's main objective in acquiring companies is to obtain shelf space in major retail chains. Newell's marketing approach offers "good" and "better" products.

Not all companies find the "best" and "top" products effective. Large retailers may prefer to sell a large quantity of one type of product instead of dividing shelf space among numerous variations of the same product. This strategy may not be beneficial for department stores that strive to carry as many products as possible. Offering similar products targeted at different market segments could also be advantageous. In self-serve department stores, sales representatives typically have little or no knowledge about the products they are selling. Consequently, opportunities to educate consumers about Newell's products are often missed during customer interactions. Providing more training for sales representatives could result in higher profits for the company and more loyal repeat customers for Newell's products.

Newell chooses to outsource many of its products to overseas manufacturers. This decision to reduce manufacturing costs may have a negative impact on Newell's reputation as a top-notch provider. The unpredictable and prolonged lead times make it challenging to maintain the same level of service that retailers have come to expect from Newell as their supplier.

SWOT Analysis

Newell constantly grows internally by continuously introducing new products, both in-store and out-of-store, as well as implementing marketing plans and

advertising proposals targeting consumers. This strategy is Newell's number one approach.

Merchandise development at Newell is a consumer-driven process that facilitates diversification in various market segments. By consistently employing this approach, Newell has achieved profitability and maintained their core values, resulting in a diverse product range being one of their key strengths. Globalization has also played a crucial role for Newell, enabling them to manufacture and distribute products through major retail outlets worldwide. Although this has been their strategy since the beginning, it is becoming increasingly important as their products are now available in a greater variety of local and foreign stores. Currently, their products can be found in discount stores and drug stores.

Food market shops, place centres, office superstores, and warehouse nines all sell a diverse range of Newell's products. This includes Rubbermaid family products, Calphalon cooking utensils, Rolodex office products, Little Tikes children's products, and Sharpie, PaperMate, and Parker pens.

Waterman composing instruments and Irwin power tool accoutrements. Customer Service. Another “key” strength and a manner in which Newell separates itself is through its client services. The company’s ability to provide enhanced client service is a result of its information engineering. This information engineering has enabled Newell’s marketing and selling plans to increase the sales and profitability of its clients and allow for consistent on-time delivery. Since Newell manufactures the majority of its products “in-house,” and with their extensive experience in high-volume cost-efficient manufacturing, delivery of products to customers has become increasingly important to client service practices. Shipping products directly from factories without the need for separate storage and/or distribution centers is a result of the high-volume nature and continuous product demand that Newell experiences.

Electronic

communication, investments in improved prediction systems, and enhanced fabrication and distribution capabilities all contribute to supporting Newell's "just-in-time" inventory strategy. Collaboration plays a vital role in Newell's approach, as it enables the sharing of "best" practices. The centralization of functions such as purchasing and distribution also helps in reducing costs through economies of scale.

Transit and transportation have led to an overall boost in purchasing power within the company. Additionally, a range of administrative functions, such as cash management, accounting systems, capital expenditures, and order processing, have also contributed to this increase.

In summary, charge, recognition histories, receivables, informations treating operations, and legal maps have also been centralized.

By centralizing certain maps, Newell has consolidated their skilled capabilities in one location, making it easier to oversee business trends and manage their ever-expanding concerns.

Failings

Company reorganization plans for streamlining the supply chain were affected as the company pursued a cost leadership initiative, as previously noted.

The company decided to reduce the number of employees in order to decrease overall overhead expenses over a three-year period. The expenses linked to the reduction in headcount significantly affected the revenue for a certain period. The layoffs were carried out across all levels of employees.

The cost-cutting initiatives affected multiple aspects of the business, including sales associates, support staff, and manufacturing. These measures aimed to achieve the promised operating margin. The three-year plan assumed certain environmental conditions that would impact variable costs, such as fluctuations in raw material expenses.

Organic Growth Deficiency

Newell did not prioritize achieving organic revenue growth.

As the company acquired and attempted to integrate these companies, it was unable to sustain a stable period of growth within the organizations.

This is a direct result of the realignment as part of the integration.

Inventory Rises
In 2001, the company witnessed improvement in inventory management; however, some analysts were skeptical that these numbers were initially exaggerated to offset the overhead charges. The main focus was to decrease obsolete inventory or slow-moving items. The savings resulting from these reductions were offset by employee layoffs and costs for plant shutdowns.

Opportunities
Strategic Account Management
During the transition with these companies, Newell started managing their accounts differently. President-level positions were established to support Newell's larger accounts.

This allowed Newell to support their customer service-focused strengths in meeting customer needs, with retailers such as Home Depot, Lowes, and Wal-Mart.

This is particularly important for Wal-Mart, which is known for its stringent cost cutting and high level of expected product quality. Developing partnerships is generally key to individual and company success. Establishing mutually beneficial agreements between Newell and its stakeholders can give their products a competitive edge in the market. Newell has examined value added programs for their marketing, focusing on quick and agile responses to changes in consumer demands. They have also utilized customization to create additional value for their stakeholders. A major threat to Newell is their reliance on a small number of large competitors. Newell primarily sells to mass retailers.

In 1997, Newell Company faced a significant threat as 40% of its gross revenues were generated by its top 10 clients. Among them, Wal-Mart alone accounted for 15% of the company's total revenue. The concern arose from the fact that Wal-Mart had considerable control over the flow of products and the types of merchandise to be sold. This raised the need for policy changes to mitigate

the risks associated with this dependency on a single client.

The text discusses the impact of purchasing determinations on the concern and highlights Wal-Mart's significant power over pricing and scheduling. Additionally, it mentions how the elimination of excess inventory in mass merchants has led to changes in Newell's shipping process, specifically with direct delivery from the loading dock to the truck.

Storing goods is necessary. This requires timely delivery, precise orders, and does not allow for late deliveries.

This can present a problem when orders are delayed, incorrect, or lost during travel. Retailers may hold providers responsible for lost deliveries. The size and variety of products offered can also pose risks for companies. With Newell acquiring multiple companies, the poor performance of one can impact the reputation of the entire company. To ensure consistency, Newell must communicate a standardized level of service.

Many sales teams also require companies, such as Wal-Mart, to deal with each product line individually.

Newell faces a potential threat with their single sales team as most retailers prefer to have a single point of contact rather than multiple contacts.

Seasonal Demand

Newell’s acquisitions mostly consist of low-tech manufacturing companies. However.

Retail merchants are seeking innovative products to sell, reducing entry barriers for competitors. Newell is also influenced by seasonal demands, where customers tend to buy more products during certain seasons, such as holidays or life events.

Office supplies are likely to be affected during the back-to-school season. Warm weather encourages consumers to complete home projects and make holiday purchases in the last few months of the year. The biggest risk is the dependence on a few major clients, as mentioned before. This

poses a significant risk to the overall business if there are changes in contractual terms.

Three years ago, Galli was brought in to save a struggling Newell Rubbermaid Inc. He implemented the same strategy he had used during his nineteen years at Black & Decker. At the age of 45, Galli strengthened research and hired additional sales representatives. His objective was to maintain premium prices through innovation across Newell's portfolio of over 100 brands, which includes Graco-Century baby products.

Both Paper Mate and Rubbermaid were hopeful that their product, a dustpan of exceptional quality, would justify a higher price to consumers. Investors were eagerly anticipating the successful performance of this innovative dustpan. The key is to ensure that this state-of-the-art dustpan brings joy to the customer.

Newell has been offered several schemes for their merchandise variegation needs through acquisition. These schemes include: Related Diversification corporate-level scheme, Related constrained variegation scheme, Related linked variegation corporate-level scheme, and Unrelated variegation corporate-level scheme. Newell decided to follow the Unrelated Diversification scheme by absorbing companies based on certain fiscal requirements. However, this approach did not address the challenges of intangible benefits that add value to the acquired companies. As a result, many companies have re-evaluated their unrelated variegation strategy due to this dilemma. Recently, Newell Rubbermaid Inc. has completed the sale of its Burnes Picture Frame as previously announced.

Anchor Glass and Mirro Cookware are part of Global Home Products, LLC. In 2003, these three concerns collectively generated approximately $695 million in gross revenues.

"We are pleased to have completed this sale sooner than anticipated," remarked Joseph Galli, CEO of Newell Rubbermaid. "With the majority of our portfolio transformation now finalized, our management

team can fully concentrate on implementing our strategic initiatives within our core portfolio." Figure 6 indicates that the Newell strategy offers limited risk in sharing operational expertise or corporate benchmarking methods to enhance strategic decision-making.

The acquisition of the house station is not only a challenge in terms of manpower and finances. The strategic approaches may not align with a specific set of operating principles. In 2002, Joe Galli, the head of Newell Rubbermaid, had a team of ambitious young college graduates known as "Galli's army" who were responsible for stocking shelves and setting up displays for the company's products. This year, the plan involves collaborating with Wal-Mart.

Newell's largest client recently ended their partnership due to declining sales of Newell Rubbermaid products (Wal-Mart declined to comment on the situation).

Interview questions:
Q: "Do you have a vision for the company?"
A: "Our goal is to transform the company in a way that increases profits through new products. Some may see this as a turnaround, but we are able to meet our financial obligations."

This company is not on the brink of bankruptcy. It is more of a transformation rather than a turnaround. In terms of the transition, what have you achieved so far? We have reconfigured the portfolio.

We sold over $850 million in low-margin concerns, a decision I regret not making in 2001 but rather in 2003. Subsequently, we acquired two companies.

Irwin and Lenox, which are worth $650 million, possess a high-margin business with renowned brands and a promising pipeline of new products. In regards to selling more businesses, they have an ongoing approach and are constantly exploring opportunities. As for the Paper Mate business, they

introduced six new products in 2002.

Four products have been discontinued, while nine new products generated only $15 million in sales in 2003. The reason for so many unsuccessful products is that we have not successfully converted our business into a new-product business. I am not satisfied with the return on investment in this area, which is affecting our overall performance.

"Q: Why did [former CEO] Bill Sovey resign as president in May? We hear that he was a vocal critic of yours." A: "That's not something I should comment on. It was a personal decision. I had nothing to do with it." Q: "What are you doing to keep the military personnel fired up?" A: "Ambiguity creates anxiety. People want to know where they stand."

As we continue with divestitures, there is growing worry among individuals regarding the possibility of their own concern being affected. To address these concerns, we have implemented a regular schedule of discussions with each division. These conversations occur approximately once a week across the globe.

Q: "Has all this been tough on you personally?"

A: "Yes. When I joined, I was extremely optimistic and did not realize the extent of restructuring that was required."

However, there is a feeling of anticipation when you make the correct decision and move forward. "Newell Rubbermaid Inc. plans to close a Mexican factory that produces rubber bath mats by June and start importing mats from China in order to save money. This closure is part of the Atlanta-based company's ongoing four-year restructuring plan."

Newell Rubbermaid has reduced costs by eliminating 84 facilities and laying off around 12,000 employees globally, according to Quentin Misenheimer, the vice president of human resources for

the company's Rubbermaid Foodservice Products division. Misenheimer stated that it was not logical to maintain that particular facility due to its high operational expenses. The facility in Tultitlan was included in the cost-cutting measures.

Just a short distance from Mexico City, the plant currently has approximately 150 employees. However, just three years ago, it had a workforce of 350-400 and was divided among multiple divisions. According to Misenheimer, this press release reaffirms the goals of Newell Company during Joe Galli's leadership in 2002.

The purpose of this portfolio approach is to obtain fiscal benefits by acquiring multiple houses that are different from each other. Through the acquisition of different houses, it is possible to create multiple portfolios that can be adjusted according to changing market conditions. This strategy acts as a safeguard against significant declines in any particular industry, enabling the owning company to avoid decreased revenue and adapt to changes in a broader range of cash flow.

In addition, partitioning these portfolios will highlight inefficiencies in specific countries. Analyzing financial capital will naturally emphasize the importance of allowing fiscal resources. To achieve this, several equities are strengthened and top management staff is changed. "Newell Rubbermaid Inc has envisioned a future with less plastic. The consumer products company, headquartered in Sandy Springs, Georgia, has been strategically discontinuing resin-intensive categories and is actively exploring alternative materials."

Paul Box, the vice president of planetary procurement fragility, expressed his thoughts at the CMAI World Petrochemical Conference in Houston on March 29-31. Being a company that is widely recognized as a leading injection molder and one of the only ones that bears an authentic family name, the company's executives acknowledge that the program's

concept may appear extremely radical.

"When people mention Rubbermaid, they immediately associate it with plastic, but our goal is to reduce our reliance on resin," Box stated as evidence.

The company is now producing wicker wash baskets and metal cupboard organizers. The high prices of resin are one of the reasons for this change. Newell rarely evaluated the intangible assets during the various diversification acquisitions. These evaluations lacked in the areas of administration and utilization of resources. Both tangible capital and, more importantly, human intangible capital were not properly assessed. Additionally, there was a breakdown in strategy in sharing core competences. The administration issue was present before the acquisition of Rubbermaid. The main problem occurred because they failed to recognize a demoralized and uncertain workforce.

The Newell management team may have prioritized personal gain over making the best decisions for the company. This is inherent but can be seen as a systematic breakdown rather than blaming an individual manager. A well-designed and implemented internal management system serves as a foundation for the diversification strategy.

The inquiries raised through variegation benchmarking and determinations must be examined by the acquisition's internal administration doctrine. This examination should consider what is value added currently and what could be improved in the future. It is possible that specific administration best known methods (BKM's) are part of the intangible value added add-ons from the acquired company. Management should be receptive to this concept. Secondly, resource use and capital deployment across the new entity after the acquisition may be the most important aspect of integration for the acquiring company.

Efficiency or inefficiency of capital deployment on the balance sheet can be observed. However, focusing attentively on the

availability and skill of intangible human resources may contribute the most value. Acquiring a company to broaden product offerings or reduce competition negatively impacts workforce productivity.

The lack of communication during times of uncertainty directly affects workforce productivity. In any job function, a lack of managerial communication causes the staff to react with disbelief. This is particularly evident in the ranks of blue collar manufacturing workers, who may not have the financial security of white collar professionals. As mentioned before, the managerial staff may make subjective decisions to advance company acquisitions or promote the consolidation of the organization. Lastly, it is important to note the impact of poor communication on overall productivity.

Newell Company regularly incorporated the acquired companies in order to implement what Newell considered to be a Best Known Method (BKM) called Newellization. However, even if Newellization proved to be financially successful (which it did not), it went against the goal of increasing profits through higher margins. Premium profits are a result of the actual value of the supplier; intangible offerings between the supplier and buyer in a relationship. As a stand-alone company with a culture and philosophy centered around meeting customer needs and, most importantly, customer specifications.

These relationships were ruined due to Newellization, which can bring about positive changes and concerns but may not be as positive as perceived by customers. Some of the companies Newell acquired were in a poor state, as was the case with Rubbermaid. The acquisition strategy employed here was the most nonsensical of all.

Already alienating their customers with poor transportation operations, the perception soon became a belief of total failure. By the time Newell acquired Rubbermaid, the issues had

already transferred to this failing belief at the core of Rubbermaid. Recently, Newell has been divesting its divisions as part of a return to business focus strategy. The concern for this consumer goods seller is that it may have lost whatever shine of core competence it developed in the previous generation of strong business growth, although this decline occurred over the past decade.

1. CEO Joe Galli's annual wage is $2.72 million, but there has been no increase in stockholder value over the past five years, which is in contrast to Newell's strategic mission. (Source: R.E. Hoskisson & M.A. Hitt, 1990.)
2. A review and critique of theoretical perspectives on ancestors and performance results of diversification can be found in Hitt's Journal of Management article, 16:498.

M.Ireland. R. Hoskisson. R.Strategic Management. Competitiveness andGlobalization: Concepts. 6th edition.

Thomson Southwest 2005.

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1. 1180.June 2004. New York. NY. World Wide Web. datamonitor. com“Joe Galli. ” ( cover narrative ) Business Week. 1/12/2004 issue 3865.

p74-74. 2/5p. 1c“Newell Rubbermaid Completes Sale of Businesses."

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• Strategic Management.

Competitiveness and Globalization: Concepts

6th edition

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