How does the corporate office contribute towards Newel's performance or in other
words what value does the corporate office add?
Newell had adopted to develop its product line through key acquisitions rather than internal growth. All acquisitions are taken care at the corporate level so that the divisions are not diverted from their core function of generating profit. Potential target firms undergo an intense screening process. They have to be par with company’s existing performance criteria They bring up acquired companies by developing them to become cost efficient through operational strategies and creating profits within a period of 18 months. Some are done with a period of 6 months of time. Newell also have strict control for the time the customers pay, this is within 30-45 30- 45 days Corporate tightly controls the finances, yet it allows brand and division president autonomy to guide the performance of the business. Corporate office does a good job of seamless linking of its structure, system & processes (SSP) with its businesses and resources. The company attaches great importance to customer relations frequently inviting buyers for plant visits. The companies Newell acquires have potential but undervalued. These companies are suffering because they do not have major clients and there overhead costs are high. Newell focused on good communication within the company and had numerous meetings throughout the year in order for leadership le adership roles to remain informed about other aspects of the company. Division leaders convened several several times a year for presidents’ meetings as well as the ability for regular encounters at trade shows throughout the year. Other forms of communication were bracket meetings and the monthly collection of operating figures. Bracket meetings were implemented if there were too many variances within the budget. Salary was based on a uniform system across all divisions, which rewarded individuals on the basis basis of their positions positions and the size of their their divisions. All salaries for managers were equal to the industry average, and bonuses could range from 33% for the most junior manager of a division’s 20 -person executive team, to 100% for division presidents. The interviewing process was rigorous, once a potential employee was hired they attended a two-day training program at the so- called “Newell University.” University.” There were also frequent opportunities for transfers and promotions in less than 10 years and all job job openings were were publicized within the company. This kept the Newell knowledge within the company and the ability to acquire informed top management was a much easier process.
Q2. What was Newel trying to achieve achi eve by the acquisitions of Calphalon and Rubbermaid? Do you think these were good acquisitions?
Acquisitions of Calphalon:
Learn the expertise in developing pull strategies and building strong connections to the end consumer .
Broadened Newell’s access to the department and specialty store markets and extended the company’s cookware product line to the top of the market.
Newell decided to keep Calphalon lines in department and specialty stores. This enabled WearEver, to remain the number one mass merchandiser brand within the Newell lines.
Honor the Calphalon contract with Target which was to display specially designed fixtures
Although Calphalon acquisition will create value to Newell, it potentially can present considerable challenges. There is a delicate balance between “Newellization” and protecting the integrity of the Calphalon brand. The typical approach to “Newellization” has been one of absorption. Newell keeps the brand name of the target firm and discards the existing people and processes. Calphalon has built its brand equity, in large part, because of the efforts of its sales force and its focus on educating retailers and end users on the product. If taken too far, “Newellization” may erode Calphalon’s premium service and destroy the barrier of entry for premium competitors at high end retailers. Acquisitions of Rubbermaid: Newell believed that Rubbermaid and its brand names enhanced Newell’s
opportunities for globalization and internal growth.
In the face of increasing market power of Newell’s primary customers, a need to buy
or develop stronger brands as required.
Research showed that companies with market capitalization of $10 billion commanded higher price/earnings multiples. This is acquisition it was goal was nearer.
The degree to which this acquisition adds value depends on Newell’s ability to absorb
Rubbermaid into its existing corporate structure. The sheer size of Rubbermaid (75% of Newell’s revenue in 1997) points to a longer “Newellization” process than the standard 6 month period. If the “Newellization” process drags out, Newell will be forced to invest more of its time and resources into integrating Rubbermaid. This may leave less time to focus on new acquisitions. There is also a strong chance that absorbing Rubbermaid is the incorrect approach to integration. Newell will need to work with the majority Rubbermaid’s existing workforce and management team, there are simply too many to replace. If Newell were to absorb Rubbermaid, it could risk alienating the new work force and destroy the processes that promote new product development. Overall, we don’t think Rubbermaid is a smart acquisition.
