MSL 711: Strategic Management: Newell Case Study Analysis

MSL 711: Strategic Management
NEWELL CASE STUDY ANALYSIS
Submitted to: Professor Sanjay Dhir

Submitted by: Ajay Kale
Enrollment no: 2019SMF6551
Q1) Does Newell have a successful corporate-level strategy? Does the company add value to the
businesses within its portfolio?
Newell basically follows an aggressive acquisition based corporate level strategy. The company has
acquired several companies since its inception and has successfully brought them under the
umbrella of Newell. The basic strategy of Newell was to acquire companies that were having strong
brand presence but were performing poor financially. They identified such under performing
companies and introduced their disciplined approach in order to make the business profitable.
Moreover, they have also had firm belief in profit making and were not hesitant in selling off
businesses which were not aligned with their way of conducting business. Hence, Newell had a clear
and effective corporate level strategy which was well structured and well planned. Newell surely
added value to the organizations it acquired. Newell followed aggressive tactics like reducing
employee strength, selling off factories and retail stores, laying off higher executives of acquired firm
and streamlined the processes of the firm in order to make it profitable. It streamlined the
businesses of the acquired companies through its IT-based sales and flexible manufacturing system.
Hence, it introduced the acquired firms with latest technologies and knowledge on effective ways to
carry out business. Newell focused extensively on improving operational efficiencies and thus helped
organizations to improve their manufacturing systems and solve problems. Newell had focussed on
large retailers only and had some power of negotiation against them as seen in case of payment
terms. Hence, organizations which earlier were giving 90 days credit to retailers now were in a
position to ask cash receipts due to strict policies of Newell, which improved their financial position
and cash flow cycle. Acquired organizations were also benefitted by various knowledge transfer
sessions and job rotation of high-level executives among several business units. One of the most
critical benefit that an organization gets by associating itself with Newell is that Newell has the
power to negotiate terms of shelf space with large retailers.
Hence, Newell followed a dynamic growth structure and focussed on profit making rather than sales
with a focus on discipline and strict management policies. This philosophy helped Newell as well as
the firms that it acquired to perform better. Thus, Newell surely added value to the businesses it
acquired and helped them to achieve better profits and function more effectively.
Q3) Does the acquisition of Calphalon make sense?
At an initial glance, the acquisition seems a bit of a dicey decision as the way of carrying out
business by Calphalon differs significantly from that of Newell. Newell focussed on selling
generalized standard products to mass retailers whereas Calphalon followed a store in a store
format and used special workforce to sell their products. Despite the differences in way of working,
when we have a closer look, we find that the acquisition might be beneficial to both organizations.
From Newell’s perspective, they were able to get an organization which has significant brand value
and sold premium products which had emotional appeal. This acquisition helped Newell to enter
non mass merchandise market. Newell generally sold standardized products and this acquisition
would help them in gaining knowledge on different marketing technique used by Calphalon.
Moreover, it is easier for organizations to earn profits on premium products if the product is of right
quality and customers are attached to the product. Hence, by improving operational efficiencies in
manufacturing system of Calphalon, Newell could enjoy better profits than Calphalon’s existing
financial performance. Newell already had a cookware company in its profile but because
Calphalon was placed under premium cookware segment, it did not cannibalise the existing
cookware business of Newell. Calphalon can share its expertise with Newel in developing pull
strategies and building strong connection with distribution channels and customers.
From Calphalon’s perspective, the acquisition would help them to reach out to a larger
consumer base through large retail stores like Target. The acquisition would also help to reduce
the Calphalon selling, general and administrative expense which is 25% per year. Besides this
Newell management can bring discipline to Calphalon business in areas of financial, organization
and manufacturing.
Hence, after critically analysing the pros and cons, the acquisition of Calphalon does make sense
as it opens up new doors for Newell to learn and grow. Newell gets to acquire a brand with
strong market presence and customer connect. It would help Newell to know intricacies of
selling premium products and this expertise might prove beneficial while acquiring other
premium brands. Moreover, this acquisition also improves the brand image of Newell and it
might help in having a positive spillover effect as products of Newell would be viewed as high
quality products by customers.

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MSL 711: Strategic Management

NEWELL CASE STUDY ANALYSIS

Submitted to: Professor Sanjay Dhir

Q3) Does the acquisition of Calphalon make sense?

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