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Newell Case Analysis

In: Business and Management

Submitted By poppinpilz
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Diversification:
Newell Co used a “related linked” diversification approach. Newell is organized into three business categories: Hardware/Home Furnishings, Office Products, and Housewares. These three business categories share distribution channels, such as supermarkets (Wal-Mart) and office supply stores (Staples). The products are sold under different brands and do not generally share any technology.

Prior Diversification Efforts:
According to the case, immediately after a new acquisition, “Newellization” typically took place in less than 18 months. In that time, three categories of standard Newell systems were introduced: an integrated financial system, a sales and order processing system, and a flexible manufacturing system. Corporate teams, composed of a few company executives, were assembled to centralize administration, accounting, and customer-related financial aspects, consolidating the systems into a single corporate computer system.

Rubbermaid Acquisition:
Rubbermaid had excellent skill with its ability to develop products, however, it struggled bringing that skill to the bottom line. For Rubbermaid, it will be a chance for a company to deliver its brand equity to the bottom line. While Newell has had much experience with acquisitions of smaller companies, Rubbermaid might be too large to digest. Rubbermaid had to restructure its operations twice, as well as customers complained that Rubbermaid could not provide the service that they required. These motives were typically not value enhancing. Also, shares of Newell have declined over 20% since the acquisition of Rubbermaid.

Value Extraction:
Newell needs to integrate Rubbermaid into its company by fixing its cost issues, as well as its shipping problems. Rubbermaid needs to be more responsible with timely shipping, fill rates, and product cost. Newell has to meet the needs of the customers,...

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