Newell Case
1. Does Newell have a parenting advantage?
Yes, good handle on cost structure – how to make high volume low-cost products and relate to volume sellers; operational efficiency and profitability – Newellization, solve fundamentals of cost structures to bring operating margins to 15%
Also M&As, Centralized support processes, access to large retailers
• What does it mean to be a good corporate parent? (look at MGTO article)
• What is Newell’s corporate strategy? Why is each word included in the strategy statement?
Multi-product offering of brand name staple consumer products with an emphasis on excellent customer service
Manufacture and market products serving volume purchasers
Acquire companies that manufacture low-tech,
nonseasonal and nonfashionable products that would be stacked year-round, #1 or 2 in market – shelf space critical, acquire small businesses to consolidate capacity: the goal was efficiency (consolidate and rationalize) and not pricing power, exit any nonstrategic business, look for a company powerful enough by itself
Global strategy: Follow customers around the world – 25% of revenues international
Two prongs: Growth by acquisition + serving the mass retailer
“Good, better, best” – protect shelf space at each price point
“Critical mass” – Strong player and market leader in categories, presence at both price points, economies of scale and consolidation
Why each word: For clear communication to company – impose values on acquired businesses quickly so that there is no ambiguity, intent clear right from the negotiation stage 2. How does Newell create value?
• How does Newell enhance the competitive advantage of its businesses?
Same as parenting advantage answer
Leadership of president and controller from elsewhere 1) Integrated financial system 2) Sales and Order Processing System 3) Flexible manufacturing system. Corporate teams to centralize administration, accounting and customer-related financial aspects, consolidating it into a single system.
• When over the lifetime of a business does Newell add value?
Beginning- time of acquisition
Throughout: Review system, ‘good better best’, EDI and efficient operations
• Are turnarounds a major source of value creation?
Yes, 5% boost in operating margins
Anchor Hocking example $44 million impact 3. What kinds of products does Newell provide? low-tech, nonseasonal and nonfashionable products that would be stacked year-round, #1 or 2 in market – shelf space critical Home and hardware: Anodized aluminium, cookware, plastic consumer and commercial products;
9% Aluminium cookware and bakeware, 12% glassware and plasticware (children’s products), 5% hair accessories, 19% markers and writing instruments, 6% office storage/organization, 3% school supplies and stationery, 12% hardware and tools (bathroom hardware, shelving, paint applicators, torches, ignitors, wrenches, pliers), 17% window treatments (window shades, drapery, coverings), 11% picture frames, 5% home storage (scales, houseware, sewing) 4. What does Newell offer the volume retailer?
Newell invested heavily in Electronic Data Interchange (EDI) + strong logistics network
Retailers can maintain minimal stock levels
Solid base of performance: Shipping goods, getting them on the counter, hooks full
Cross-docking
Emphasis on divisional profits to drive customer service – first pass line fill 95% and 95% ontime delivery
“No problem supplier” – Do you ship as well as Newell
Report card as proof of compliance
• Does the volume retailer benefit on the cost or revenue side?
Revenue – avoids lost sales
Cost – Lower inventories
• Is the WalMart – Newell relationship a zero sum game?
No. Walmart gets exacting schedules, Newell can charge a premium of 5-10%
Yes, good handle on cost structure – how to make high volume low-cost products and relate to volume sellers; operational efficiency and profitability – Newellization, solve fundamentals of cost structures to bring operating margins to 15%
Also M&As, Centralized support processes, access to large retailers
• What does it mean to be a good corporate parent? (look at MGTO article)
• What is Newell’s corporate strategy? Why is each word included in the strategy statement?
Multi-product offering of brand name staple consumer products with an emphasis on excellent customer service
Manufacture and market products serving volume purchasers
Acquire companies that manufacture low-tech,
nonseasonal and nonfashionable products that would be stacked year-round, #1 or 2 in market – shelf space critical, acquire small businesses to consolidate capacity: the goal was efficiency (consolidate and rationalize) and not pricing power, exit any nonstrategic business, look for a company powerful enough by itself
Global strategy: Follow customers around the world – 25% of revenues international
Two prongs: Growth by acquisition + serving the mass retailer
“Good, better, best” – protect shelf space at each price point
“Critical mass” – Strong player and market leader in categories, presence at both price points, economies of scale and consolidation
Why each word: For clear communication to company – impose values on acquired businesses quickly so that there is no ambiguity, intent clear right from the negotiation stage 2. How does Newell create value?
• How does Newell enhance the competitive advantage of its businesses?
Same as parenting advantage answer
Leadership of president and controller from elsewhere 1) Integrated financial system 2) Sales and Order Processing System 3) Flexible manufacturing system. Corporate teams to centralize administration, accounting and customer-related financial aspects, consolidating it into a single system.
• When over the lifetime of a business does Newell add value?
Beginning- time of acquisition
Throughout: Review system, ‘good better best’, EDI and efficient operations
• Are turnarounds a major source of value creation?
Yes, 5% boost in operating margins
Anchor Hocking example $44 million impact 3. What kinds of products does Newell provide? low-tech, nonseasonal and nonfashionable products that would be stacked year-round, #1 or 2 in market – shelf space critical Home and hardware: Anodized aluminium, cookware, plastic consumer and commercial products;
9% Aluminium cookware and bakeware, 12% glassware and plasticware (children’s products), 5% hair accessories, 19% markers and writing instruments, 6% office storage/organization, 3% school supplies and stationery, 12% hardware and tools (bathroom hardware, shelving, paint applicators, torches, ignitors, wrenches, pliers), 17% window treatments (window shades, drapery, coverings), 11% picture frames, 5% home storage (scales, houseware, sewing) 4. What does Newell offer the volume retailer?
Newell invested heavily in Electronic Data Interchange (EDI) + strong logistics network
Retailers can maintain minimal stock levels
Solid base of performance: Shipping goods, getting them on the counter, hooks full
Cross-docking
Emphasis on divisional profits to drive customer service – first pass line fill 95% and 95% ontime delivery
“No problem supplier” – Do you ship as well as Newell
Report card as proof of compliance
• Does the volume retailer benefit on the cost or revenue side?
Revenue – avoids lost sales
Cost – Lower inventories
• Is the WalMart – Newell relationship a zero sum game?
No. Walmart gets exacting schedules, Newell can charge a premium of 5-10%