Newell Rubbermaid Newell 1966-1998: Describe Newell's Corporate Essay

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Newell Rubbermaid

Newell 1966-1998: Describe Newell's corporate strategy from 1966 through 1998 under Daniel Ferguson with a focus on explaining why the strategy was successful? Was the decision to acquire Caphelon and Burnes a good idea? Why or why not?

Newell, "a privately held curtain rod manufacturer" (Montgomery, C. September 2, 2005.) under the direction of CEO Daniel Ferguson, branched out "and assembled a stable of businesses via acquisition" (Montgomery, C. September 2, 2005. 1) which produced and sold "durable, staple consumer goods that stayed the same from year to year" (Montgomery, C. September 2, 2005. 2). The corporate strategy designed by Ferguson was to utilize the trend and significant growth of the discount retailers. "Rather than selling one product, curtain rods, to many channels, Newell would sell a variety of products to one channel- the discount retailers" (Montgomery, C. September 2, 2005. 1). The strategy depended several key factors: the timely acquisitions of existing manufacturers which produced high quality housewares items, a product line which consisted of "high quality, no frills, utilitarian goods that were reasonably priced" (Montgomery, C. September 2, 2005. 2), and an efficiency of operations which controlled selling, general, and administrative expenses.

These elements however, worked only in conjunction with the growth of the discount retailer. Newell did not have to concern itself with bringing new products to market, as their acquisition strategy handled that aspect of corporate growth; rather the company flourished because it could effectively manage their discount retailer relationships. "Newell's management interfaced with their customers- the discount retailers-at every level" (Montgomery, C. September 2, 2005. 3).

In riding the train of success of the discount retailers, Newell captured significant market share, "in all its product categories…and emerged as the single most important company in the housewares industry" (Montgomery, C. September 2, 2005. 4).

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Perhaps most impressive in their growth cycle was the "17-year record of acquiring ailing housewares and hardware producers" (Montgomery, C. September 2, 2005. 4), and the ability to "streamline and integrate these acquisitions" (Montgomery, C. September 2, 2005. 3) into the Newell family, a term "coined 'Newellization' (Montgomery, C. September 2, 2005. 3). The genius of the strategy was not on organic growth through product innovation and design, but the utility of using discount retailers to sell a plethora of products, acquired through company acquisitions, to a loyal customer base.

In this context the decision to acquire Calphalon, a "premium priced cookware" (Montgomery, C. September 2, 2005. 4) manufacturer, and Burnes of Boston, "a manufacturer of premium picture frames" (Montgomery, C. September 2, 2005. 4) was not apposite to the strategy of integration which had served the company so well. Rather than purchase companies with products already familiar to the discount retailers, the Calphalon and Burnes acquisitions were designed "to keep these brands out of the discount channels where they were beginning to threaten some of Newell's 'best' product offerings" (Montgomery, C. September 2, 2005. 4). These Newell acquisitions were a significant departure from their existing corporate strategy of growth through product offerings via acquisition.

Rubbermaid Acquisition: Comment on the wisdom of the Rubbermaid acquisition at the time the acquisition was completed. Do you think the acquisition was a good idea at the time it was completed? Why or why not?

"Newellization" (Montgomery, C. September 2, 2005. 3) had proved to be an enormously successful piece of Newell's corporate strategy, accounting for a" compound annual growth rate of 21%.....

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