1. How does Newell try to create corporate advantage? Newell tries to create corporate advantage by introducing a “build on what we do best” philosophy started by Daniel Ferguson, the CEO. Ferguson describes this philosophy in more detail in the case by stating “We realized we knew how to make a high-volume, low-cost product, and we knew how to relate to and sell to the large mass retailer. ” This role for Newell was the foundation for how they would obtain their corporate advantage in the industry.
Ferguson identified his focus for Newell as a market for do-it-yourself products and hardware. In order to gain access to new discount outlets for Newells existing products, they acquired Mirra-Cote, a producer of bath hardware. By acquiring Mirra-Cote along with several other sub-par businesses, Newell find a way to develop corporate advantage by “manufacturing and distributing volume merchandise lines to the volume merchandisers. ” By doing this Newell would have more marketing impact with retailers and later down the line develop leverage.
Newell knew that in order to have corporate advantage they must create and explain a vision on how their resources would differentiate from its competitors across all business lines. After creating the vision, it must be executed correctly and used at all times. 2. What is the logic that underlies Newell’s combination of businesses? The logic that Newell had for acquiring several businesses was to bring added value and improve marketing leverage to the world’s largest retailers.
In addition, the business must be deemed strategic and remain suited to the company’s main focus. The logic behind all of these acquisitions was to ultimately increase Newell’s “profit growth not sales growth” and target products that were in high demand that would allow maximum “shelf space” as one Newell executive notes. For example, Montgomery mentions that “Calphalon broadened Newell’s access to the department and specialty store markets and extended the company’s cookware product line to the top of the market”.
In addition, Montgomery also says that after acquiring Rubbermaid, Newell “would have a greater global presence and broader product offering than Newell alone”. Globalization was the long term goal for combining business for Newell since the majority of their customers were starting to become global. Montgomery also mentions that Newell acquired small businesses to “round out its existing product lines and consolidate industry capacity” so they would not have to worry about customers supporting their major competitors and giving them an opportunity to compete. 3.
Which of the two recent acquisitions, Calphalon or Rubbermaid was the better acquisition for Newell to make? Explain the criteria you used and the logic underlying your conclusion. Rubbermaid was the better acquisition to make in my opinion just for the overall benefit to Newell globally. When looking at exhibits 11 and 13 of the case, although Calphalon and Rubbermaid increased net sales between 1992 and 1997, their costs also increased with result that their net income did not change drastically so it would difficult to measure the two by financial information.
I also feel between the two, Calphalon faced stiffer competition in the cookware industry because they had not established brand equity and product innovation unlike Rubbermaid. In addition, even though Rubbermaid was a much larger company, it seems to be Calphalon was a much harder to “Newellize” since a lot of Calphalon’s business was not discipline. The financial, organization, and manufacturing aspect was not in the best shape and their ability to focus on profit was lacking.