Paraphrasing

1. Does Newell have a successful Corporate Strategy? Does Newell add value to its businesses? (Hints: Porter’s Three Tests)

Calphalon Test

Attractiveness test

1. The threat of substitute products is high. Improving economy is connected growing demand for housing where small appliances also increase in demand. The cookware industry has experienced and recorded increased number of substitutes due to increase production, especially in the last five years prior to 2005. Currently, the threat of new substitutes in industry players, manufacturers and their products is currently high. Nevertheless, even this threat is high, decrease is expected due to presence of recession.

2. Threat of new entrants is low. Prior to 2005, there were approximately 80 manufacturers and most of them were excellent in their products and marketing strategy. Therefore, with this threat, new entrants are not expected but mergers and acquisitions had high probability. Mergers and acquisitions are great in achieving economies of scale.

3. The bargaining power of buyers is considered high. In this industry, the raw materials for manufacturing products are considered affordable. They do not require high level expensive technology hence giving evidence that the bargaining power of the suppliers is low.

4. Rivalry Among competitors is intense. In this industry, the competitive forces area causing increasing rivalry including the foreign competitors.

In this industry, the competitive forces area causing increasing rivalry including the foreign competitors. The Industry has favorable structures which are the following. First, Cost of Goods Sold and SG&A have different income from those of Newell or Rubbermaid in terms of % in sales. Second, SG&A lays high emphasis on average earning for a period of five years. Third, increase in revenue, which is above $100 annual revenue.

In addition, the target industry is made of the reduced SG&A expense and increased annual growth, which is approximately 2% and above.

The Better-Off Test

The firm is giving advantage to the unit. The firm continues to improve the operating efficiency, cost focus, and improved system. In regards to the unit and its advantages to the corporation, the unit offers the pull strategy & customer focus. The unit offers existing target which is deal to younger customer segment. Also, the high end product is without cannibalizing existing the high end product with aspects of mass distributors.

( The answer not complete you should use better off test to show opportunity of recourse sharing (value Chain) or resource transfer (VRIO))

The cost of Entry test

Here are some calculations on acquisitions. First, the annual revenue grow at an average of $3.5 million on average for a period of five years. The company’s annual growth is 13%, the return on investment is 9%. Second, the firm’s acquisition value is $87.5M.

2. What are Newell’s distinctive competencies?

Calphalon VRIO

	V	R	I	O
upscale retailers channel

Newell company acquires Calphalon to take advantage of its financial, manufacturing and organization aspects. Also, Newell wants to take advantage of this upscale retailers by using their expertise to develop strong strategies and good relation with the costumers.

Calphalon Value Chain

high

Value

Low

Low

Cost

high

Primary activates are missing here

3. In this context, does the acquisition of Calphalon?

Through a high value strategy, Calphalon acquisition will create value for Newell that is capable of presenting considerable challenges. “Newellization” and protecting the integrity of Calphalon brand are considered having a delicate relationship. “Newellization” is considered a typical approach to for market absorption. This company keeps the brand name and targets the firm while discarding the existing people and processes. Calphalon has already built its brand equity through its efforts of sales force and through a strategy of educating retailers and end users of the product. “Newellization” might erode Calphalon’s premium service and is capable of destroying the barriers of the entry for premium competitors and other high end retailers.