Newell Strategy

Q1. Does Newell have a successful corporate-level strategy? Does the company add value to the businesses within its portfolio? If so, how?

An outstanding and successful corporate strategy is a carefully structured system of three interdependent parts – the firm’s resources, the businesses the firm competes in and the organization that will make it all come to life. Newell has done an outstanding job in each of these aspects and how they reinforce each other and therefore, Newell has a very successful corporate-level strategy. Newell’s relatedness across its businesses comes not from similarities in the products themselves but from the common resources they draw on. It has the right balance of resources and businesses as the firm’s corporate capabilities enhance the competitiveness of every businesses it owns. When it comes to organization, Newell achieves the benefits of coordination with modest organization costs as it understands the right combination of resources to capture synergies. Newell’s resources are the unifying thread that determines the businesses it should compete in and the design of Newell’s organization which showcases a successful corporate strategy.

Newell does add value to each of the businesses within its portfolio and this is clear from the fact that many of the companies that Newell acquired has seen a three-fold increase in margins under its ownership. At the time of acquisition, all firms were underperforming due to high costs and had operating margins of less than 10%. However, through ‘Newellization’ (a process through which companies were put through a process of streamlining, focusing on operational efficiency and profitability post acquisition), operating margins of these companies improved from sometimes less than 5% to over 15%.

Q2. What are the company’s distinctive resources?

Newell’s resources are neither exceedingly general nor specific but an attractive mixture of both. Newell knew how to make a high volume, low-cost product and they also knew how to relate to and sell to the large mass retailer. Other distinctive resources it possesses are relationships with discount retailers, efficient high-volume manufacturing and its superior service including national coverage, on-time delivery and program merchandising. Newell has also successfully improved its position in the market by capitalizing on internal strengths - partly done through acquiring new companies and partly through a strong divisional management structure that it built considering the number of new products that it added to the production line. In effect, Newell’s success can be attributed to the solid reputation, strong corporate structure and the advanced technology such as EDI it built over the years.