Newell Company: Corporate Strategy

Newell Company: Corporate Strategy

1.What kind of businesses did Newell acquire? Why?

According to the case, after Newell was established as a manufacturer of brass curtain rods, the first business it had acquired was Renneman a small window-shade manufacturer in 1966. At that time, Newell had a single product line and no articulated strategy for the future. Dan Ferguson as CEO got control of Newell’s drapery rod business and sold it to all channels, but he knew this business still lacking of diversity. After that, Newell was not a single product line brand anymore.

In 1969 Newell acquired Mirra-Cote bath hardware. After meeting with Stanford Professor Bob Katz, Dan realized they need to build on what they do best and wrote out strategy for Newell. The acquisition of Mirra-Cote helped Newell add another product line and open up a relationship with Zayre. Newell hoped to sell other products relied on this discount retailer.

After this, Newell acquired about 40 businesses in next 30 years (according to Exhibit 3). Which contains paint applicators, cookware, window treatments, writing instruments, storage products, office products, home sewing, and so on. Most of these businesses manufactured low-technology, nonseasonal, noncyclical, nonfashionable products that hard to sell out in volume retailer stores. Newell acquired those certain kind of businesses because Newell got plenty experience on lowering cost and rising operation margin, and Newell was good at this very much. Newell purchased two of the largest frame manufacturers in the U.S., Intercraft and Decore. In 1996, Newell purchased Holson-Burnes and pushed it back to upscale market. Newell wanted it new product line maintained as “best” and high profit margin.

2.Does the company add value to the businesses within its portfolio? What was Newell’s strategic rationale in managing its portfolio of businesses (e.g., serving mass retailers)?

I really think Newell added value to most of its portfolio businesses, but I cannot say all of them. After Newell’s first several acquisition, the following acquired businesses could get Newell’s good reputation, wider distribution, more retail channels, and the most directly-more revenue. In managing its portfolio businesses, Newell originally adhered to a strategy of consolidation and centralization in order to achieve efficiencies. After its organizational transformation, company was reorganized into separate divisions. One major “thing” would happen which was known as Newellization”. Newell would use a very short time to take over the new acquired business and three standard systems were introduced. Newell’s goal for small businesses was efficiency instead of pricing power. After the acquisition of Corning’s housewares, Newell brought company into global market. Beginning in the1970s, retail industry changed with the emergence of largescale mass retailers which relied on information technology. To address the pressure from those mass retailers, Newell invested heavily in the necessary computer and communications hardware, and focused each division on furnishing product and service to mass retailers. Newell also request all its businesses products to fit a certain price point and delivered consistently, in both product and service quality.  Newell followed mass retailer’s developing steps and made itself an important manufacturer to those retailers. In conclusion, Newell’s rationale is “go global and be a VIP to mass retailers”.