paraphrase 2

Value chain

Newell’s distinctive resources was Newellization, which was the profit improvement andproductivity enhancement process employed to bring a newly acquired business up to Newell’shigh standards of productivity and profit. This process was pursued through a series of broadlyapplicable steps such as the transfer of experienced Newell managers into the acquired company,simplification and focusing of the acquired business’s strategy and the implementation ofNewell’s established manufacturing and marketing know-how and programs, centralization ofkey administrative functions including data processing, accounting, EDI, and capital expenditureapproval, and inauguration of Newell’s rigorous, multi-measure, divisional operating control system. Their fundamental competitive strategy applied to all of their operations and was intendedto differentiate on the basis of superior service to their mass merchandise customers. The superi-or service Newell offered included industry-leading quick response and on-time, in-full delivery,the ability to implement sophisticated EDI tie-ins with its customers extending to vendor-man

They then became global and served many customers.Was seen as the “no problem” supplier in the industry as it focused its workforce on efficiencyCentralized administration within the company ensuring efficiencyEnsure that companies it acquired focused on to notch product delivery

Does Newell have a successful corporate-level strategy? Does the company add value tothe businesses within its portfolio?

They acquired companies that were leading suppliers and had important shelf space in the domesticmarketused a single force for selling all products31% return on investment instead of average 18%Newellization would take place= make more efficient business structure of acquisitions to make moremoney and cut costs, centralize administration, cut out unnecessary employess and product delivery time.

A) (3) What is Newell’s functional strategy? What is Newell’s generic strategy? What is Newell’s Organizational Structure.

Multi functional - Once these systems were in place, managers were able to control costs by limiting expenses to those previously budgeted. Administration, accounting, and customer-related financial accounting aspects of the acquired business were also consolidated into Newell’s corporate headquarters to further reduce and control costs. However, Newell compensated business managers well for performance. They were paid a bonus based on the profitability of their particular unit—in fact, the firm’s strategy was to achieve profits, not simply growth at the expense of profits. Newell managers could expect a base salary equal to the industry average but could earn bonuses ranging from 35% to 100% based on their rank and unit profitability.

Management stressed the goal of creating lean, efficient contributors

to the Newell strategy: “If you have an opportunity to make a product line into a profit unit, the

smaller you can make that unit, the more entrepreneurial drive you have.”13

Q2 Sa

http://deepakbusinessstrategy.blogspot.com/2011/02/newell-company-corporate-strategy.html

Give one example for each type of Newell’s control systems (personal, output, and behavioral).

Personal:

Given the potential for rewards, demand for positions at Newell was high. For management-level

hires the company sought people who would be motivated by success and a lucrative bonus system.

Applicants—mostly mid-level executives from other consumer goods companies—were screened for

these particular management traits with a personality test and put through an intensive application

process that only 1 in 10 passed. Each newly hired company employee underwent a two day training

This document is authorized for use only by Nabih Saaty in Spring 2014 BUS 612A-03 taught by Kamal from

February 2014 to August 2014.

799-139 Newell Company: Corporate Strategy

program in the Newell corporate culture. The so-called “Newell University” stressed product focus

and profit-orientation—the underpinnings of Newellization.

Output control:

Newell would bring in new leadership and install its own financial controller in the acquired unit. Then, three standard sets of controls were introduced: an integrated financial accounting system, a sales and order processing and tracking system, and a flexible manufacturing system. Once these systems were in place, managers were able to control costs by limiting expenses to those previously budgeted. Administration, accounting, and customer-related financial accounting aspects of the acquired business were also consolidated into Newell’s corporate headquarters to further reduce and control costs.

Behavioral:

As he said at the 1997 Annual

Meeting, “We [Newell] are not big enough to get attention.” With the Rubbermaid acquisition

Newell’s market value would cross the $10 billion threshold. Page 1 on the case

The bonuses were based on division

performance alone, and the culture encouraged competition by convening managers for award

ceremonies to honor top performers. Stock options, an additional form of incentive made available

when the company went public, were granted according to a formula based on salary and position.

Historically, the company’s system for evaluating yearly bonuses focused exclusively on pre-tax

ROA. The goals were high—beginning at 32.5% pre-tax ROA and reaching the maximum payout at

43.5%— and standard across all divisions.

Give three examples of Newell’s organizational culture.

early on it became clear that the two businesses were incompatible in terms of differing strategies and corresponding organizational cultures. Newell was a low-cost, high-volume supplier while Rubbermaid was a consumer-oriented innovator that offered premium products. After careful consideration, Newell decided to redefine the newly merged company culture. After two unsuccessful CEO attempts to turn things around, in 2001 Newell Rubbermaid hired Joseph Galli to run the company. He rethought the strategies of both companies and embraced the idea of changing the culture by hiring new kinds of people for a new kind of company. He cut 3,000 jobs throughout the company and made 141 changes at the executive level (vice presidents and above). He introduced new incentive plans and 6-week leadership boot camps to align employees around the new company culture and goals. Did his drastic changes pay off? Since this time and continuing under the new leadership of CEO Mark Ketchum, both revenues and profits are up, and in 2010, Fortune named Newell Rubbermaid the number 7 “Most Admired Company” in the home equipment and furnishings category. This indicates that while the changes he implemented were painful for employees at the time, they did seem to put them on the right track.