Newell’s Strategy

(A) Newell’s strategy was totally aimed at low cost/ high volumes business – to increase its shelf space at each price point. Until 1965, it followed a product-line strategy and sold drapery hardware to all channels. To begin differentiation, it began acquiring different products starting from its first non hardware product- Mirra-Cote. After going public, it got access to capital markets and hence was able to acquire 30 different businesses in 20 years. The whole idea was to acquire businesses that enabled Newell to capture maximum volume and increase market share in different product segments. But, after acquiring 30 different businesses, adding a new one did not add value. So at this stage, it was more about Newell and not the acquisitions.

In summary, Newell began with ‘Portfolio management’, moved through a phase of Restructuring and reached a balance between Transfer of Skills and Sharing of Activities.

(B) Motivations to acquisitions:

 Low Cost/ High Volume - Newell acquired businesses that were under-performing due to high costs and could be improved through a streamlining process called Newellization in the case. He selected companies that manufactured low-technology, non-cyclical, non fashionable products that sold in large volumes. These companies were generally under-performing and had margins less than 10%. These companies manufactured branded staple products that ranked #1 or #2 in market share.

 International expansion and meet its vision of becoming a global mass supplier.

(C)

Dan Ferguson chose to diversify because:

 He had realised Newell’s strength – to become a low cost and high volume mass supplier that could be leveraged extensively. He could also build the IT systems that the new retail environment needed.

 He had realized the trend towards