Ashley Wilson - Anton Gladnikov - Chris Morrow - Zachary Stevens

1. Business Strategy Case Analysis May 30, 2007 Ashley Wilson - Anton Gladnikov - Chris Morrow - Zachary Stevens

2. Agenda 1. Delving into Newell Corp. 2. If you buy them, you will grow 4. “SWOT”in the world are you talking about?! 3. What is “Newellization” and how does it work? 5. The Rubbermaid Mesh 6. A Business Capstone’s 2-cents 7. Your time... If there is any.

3. Mission • Accomplish mission through its various strategies “Newell is a manufacturer and full service marketer of consumer products serving the needs of volume purchasers” Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

4. Newell Company Cycle Continued Growth Introduction Maturity Growth Decline Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion Newell continues to grow primarily through acquisitions of other companies. Time

5. History 1966 First Acquisition 1902 Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion Established when Edgar A. Newell bought the assets of a bankrupt manufacturer of brass curtain rods 1960’s 1917 Further expansion of business lines National distribution 1972 Newell went public The company grew and distributed its products through a variety of distribution channels 1972-1990’s Acquired over 30 firms

6. Product Lines Houseware Office Products Hardware Home Furnishings Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion Best Best Offering: Better Better products in all categories to appeal to a wide range of consumers Good

7. Serving the Mass Retailer • One of Newell’s Key strategies • Newell brands are in 5 of the top 15 retailers in the U.S. • Newell generates 15% of its revenue from Wal-Mart sales • Bargaining power of buyers (retailers) is significant in Newell’s industry • Newell has an excellent reputation with the mass retailers • Integration of newly acquired companies must be done efficiently and quickly so reputation is maintained Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

8. Competitive Multi-Divisional Structure Headquarters Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion Acquisitions Basic Functions Division Division Division Division Division

9. Company Structure • Each division handles its own design, manufacturing, marketing, sales, merchandizing, and service • Each division must adhere to the company strategy • Each division is responsible for its profit performance • Strict financial and operating reviews of divisions monthly • Management salary is based on performance • Internal growth is rewarded Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

10. SWOT Analysis Internal External • Diversity of products • Strong brand names • Horizontal acquisition strategy • Create market power and synergy • Divestiture and product line rationalization strategy • Growth and expansion with future acquisitions • 1997: Rubbermaid & Calphalon acquisitions provide potential expansion, growth, and success • International markets Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion + • Competition in the industry is high • Newell is large…reduces speed in response to events in external environment • Financial weaknesses (1992-97) • Declining profit margin • ROIC & ROA declining • Culture clash with new acquisitions • Integration difficulties can disrupt the company • Dependency on mass retailer • Threat of private labels • Lack of internal growth l

11. Growth Strategies Business Acquisitions Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion Primary Objectives Internal Globalization

12. Internal Strategy • Understanding Consumers • Demand Creation through Marketing • Commercializing innovative new products • Cross-selling existing product lines “Internal Growth is growth from continuing business owned more than one year.” Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

13. Acquisition Strategy - Dan Ferguson Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion “2 + 2 ≠ 4, if we do this right we get more than 4.”

14. Acquisition Strategy Criteria: • Existence of consumer meaningful brands that respond to differentiation and innovation • Shelf space • Good customer and channel dynamics • Strong margin and growth potential • Top rank of the market share • Synergy Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

15. Globalization Strategy • Global presence small in 1997, but growing • Selective international acquisitions • Growth of consumer brands economies in Eastern Europe, Asia, Mexico, and South America • Overseas sales: 2004: 24% 2005: 24% 2006: 26% of total sales • Target global consumer acceptance Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

16. Newellization? Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

17. “Newellization” – Well-established profit improvement and productivity enhancement process that is applied to integrate newly acquired product lines to the parent company. Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

18. Newellization Well-established profit improvement and productivity enhancement process that is applied to integrate newly acquired product lines to the parent company. Quickly compare Income Statements Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion Recognize cost structure problems Raise Operating Margins above 15% Find ways to reduce costs

19. Acquisition Strategy Newellization: “newellizing” acquired business into a Newell-like company. • Transition cycle: • Starts after 6 – 18 months • Led by brought-in president and controller • Focusing acquired business strictly on its core competencies Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

20. Acquisition Strategy Newellization: reducing corporate overhead through centralization of administrative functions and tightening financial controls. • Centralize responsibilities: • Centralize Accounting system • Expenditures Approval • Cash management, A/R, A/P • Order processing • Data processing operations Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

21. Acquisition Strategy Newellization: establishing more focused business strategy, improving manufacturing processes. • Enhancing efficiency • Eliminating non-productive lines • Reducing inventories • Increasing A/R turnover • Extending A/P terms • Trimming excess costs Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

22. Acquisition Strategy Tools: • Leverage One Newell Rubbermaid • Building one common culture of shared values • Integrating common functional capabilities – HR, IS, Finance, etc. • Consumer-meaningful branding • Focusing on pull-strategy • Investing in research • Creating demand around the world Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion

23. Flashback to 1997 • Hong Kong reverts to China after 156 years as a British Colony. Newell Corp. is looking to grow their company through two BIG acquisitions: • Britain's Princess Diana tragically killed in Paris car crash. • Iowa woman gives birth to septuplets; all survive. Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion • Increase the size of Newell dramatically • Name change to Newell Rubbermaid, Inc. • Expand global presence • Market value of Newell Rubbermaid will increase to over $10 billion • Less significant acquisition, but • important strategic move • Help Newell expand into upscale retailers channel • Bring discipline to financial, organizational, and manufacturing aspects of Calphalon

24. Rubbermaid • Stanley Gault, CEO • Introduced 100 new products every year • Annual profit increase of 14% Glory Days (1980 -1991) Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion Products in Retail Stores: Home Storage Commercial Infant Products

25. Rubbermaid’s Spiral Down Mismanagement • Wolfgang Schmitt, CEO • Continued product innovation • Restructuring to cut costs • Lackluster profit growth Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion Tug-o-War • Wall Street calls for unit volume growth • Rise of resin prices, uncontrollable costs • Undercut, losing market share Inability to Capitalize Stagnant International growth

26. The Acquisition Details Round Two • Year prior, discussions break down • Now, Rubbermaid needed “Newellization” Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion Revenues • Rubbermaid - $2.4 billion • Newell - $3.2 billion Purchase Price • $5 billion • 49% premium over Rubbermaid closing market price • Newell shares tumble 12%

27. The Motivators The ultimate “Newellization Test • Rubbermaid is the challenge • Increased costs, increased time to “Newellize” Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion Long-term Benefits The Vision Double Newell revenues, increase profit margins • Same distribution channels • Diversification of Newell • Increasing market share & new markets

28. Acquisition Aftermath Risky Acquisition Rubbermaid Overpaid Largest acquisition to date • Shares dropped 12% after announcement Difficulty Integrating Sluggish Sales Growth Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion • 1999 EPS reduced & failure to meet analyst estimates • Share price continued to decline for many years 10-year Famine is Ending

29. Recommendation • If its not broken, don’t fix it Overview History Products SWOT Strategy 1997 Acquisition Results Conclusion Small Businesses Internal Strategy Focused Growth Niche Markets

30. thank you