Newell's Corporate Strategy And How It Adds Value To Its
Businesses
Newell's corporate strategy, inspired by Bob Katz, was in 1967 to describe "its focus as the market for hardware and do-it-yourself (DIY) products to volume merchandisers" (Montgomery 1999:2). The philosophy behind this strategy was Katz's -- and it prompted Dan Ferguson, CEO of Newell, to allow the company to "build" on what it knew how to do best. What Newell knew best was "how to relate to and sell to a large retail institution -- the large mass retailer," and so -- after going public with its stock in 1972 -- Newell began a policy of actively "adding new products by acquisition," which could then be sold in retail stores (Montgomery 1999:2). Newell's strategy was aggressive, centralized (initially -- later departmentalized), and functional, and allowed the company to become a billion dollar corporation by the 1990s. This paper will analyze Newell's corporate strategy and show how it added value to its businesses.
The Corporate Strategy
Key to Newell's early success was the acquisition of "companies that manufactured low-technology, nonseasonal, noncyclical, nonfashionable products that volume retailers would keep on the shelves year in and year out" (Montgomery 1999:2). The advantage to these sorts of acquisitions is evident in the product line: Newell would never be left holding bag; these were products continually in demand -- products, in other words, that would move.
What Newell did with these companies, which were usually underperforming -- what with "operating margins of less than 10%" -- was to streamline them through a kind of "Newellization" (Montgomery 1999:2). Newellization was the terminology used to describe the operational flipping of a company. Newell decreased costs by allowing the company to make products more efficiently and elevating margins to more than 15%.
However, Newell soon realized that its centralization process was not the best for sales. It began to reorganize and divide into sections. Newell's dynamic resolve to continually evolve and make itself just as streamlined and efficient as the companies it acquired was aided by the fact that the corporation still remained "centrally controlled by corporate-run administrative, legal, and treasury...
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