1. Based on the case and the paper "Creating Corporate Advantage" characterize the previous corporate strategy of Newell (before 2001) in terms of: Corporate Resources
; Businesses; Functions of Corporate Office Before Daniel Ferguson became Newell´s CEO, as an old-line manufacturer of brass curtain rods, the company´s main effort was in offering curtain rods through a big array of channels. In the absence of a defined composition of strategy with a specific target and as to build a corporate advantage, Ferguson recognized that there many elements within the company could be aligned with one another. He foresaw the market trend and announced Newell´s consolidation in the retail business. Based on “build on what we do best”, Newell started to focus on manufacturing and distributing sized merchandise lines to the volume merchandiser. Over the next three decades, through the acquisition of businesses that fit its strategy, Newell acquired 75 different sized companies. What made Newell´s strategy so special? To answer this question, there are three elements that contributed positively to the success of Newell’s corporate strategy: corporate resources, businesses and functions of Corporate Office. Starting with the nature of the resources owned by Newell, which include its assets, skills and capabilities, we could not say whether it is specific or general; Newell is responsible for owning a large diversified portfolio with different business units. This outstanding portfolio included everything from propane torches to hair barrettes and office products, all perceived as high quality with reasonable price, and conferred them the ability to fulfill their goal of operating as the biggest market distributor only to the discount retailer-unilateral target. Newell proceeded to the composition of its portfolio not based on similarities between products but rather on the way how they share the knowledge of its high-volume manufacturing process, its superior service and sales methodologies that include the area of coverage, precise delivery approaches, electronic order through EDI system and its merchandising programs. The group concluded that although Newell´s resources used by each product division cannot be shared - private goods, due to its different end-uses, they can still be easily transferred without incremental cost across businesses due to the merchandising practice as well as the brand influence, the so-called public goods. In terms of business scope, Newell was neither narrow nor wide. Believing in the synergies that could be extracted by having a large portfolio and recognizing the need for fit between its resources and its businesses, Newell´s business strategy consisted in the “production of what they do best to those who most perceive them”. Therefore the selection of business areas in which Newell intended to operate in was based on total independence of the several processes: design, manufacturing, sales, distribution and service. Newell believed its focus on the product level divisions could lead to a maximization of efficiency. Moreover, in order to overcome its constrained internal growth, Newellization was highlighted and, based on this new business strategy, Newell became an active acquirer of companies that fit and could contribute positively to its business model. Newell used this as a tool to enlarge its presence in the retail industries, purchasing wellknow product lines, eliminating the business that was not significant and finally integrating them into Newell´s existing networks. The role of the corporate office is distinguished from how it plays in the coordination and control of Newell´s business. In this sense, the overall company was trying to pursue the best way to manage its diversified business unit. Newell was aware that sharing the same sales force or other independent forces among the various business units was not possible, due to their private good nature, and would only result in them being more difficult to manage and raise the possibility of conflicts. Therefore, all operational activities were the responsibility of Newell’s 20 independent divisions: for instance, they were responsible for their own sales. The little transfer of skills only occurred at the know-how and experience levels: examples include the management of human resources and Newell’s annual meetings where best practices were transferred across divisions. Regarding Newell’s control system, in contrast to the fact that the activities were strategically

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independent from one another, there was a single operating control system adapted to all the businesses: for example, a high degree of control over 30 budget items in the manufacturing and sales processes was to be respected by each division and when a variance occurred, “a bracket meeting” would be held. The same happened with division managers, which were in charge of interfacing and building good relationships with their customers. Moreover, having a single compensation scheme facilitated the skill transferring process. Newell had a deep understanding about which were its resources and how to fit them into its businesses, combining this with the corporate capability that each organization office offered. Essentially, the success of Newell was in doing the things that it was capable of doing, never exceeding its limits. 2. Why did Newell have to change its corporate strategy? Justify Newell’s strategy in 1967 was “manufacturing and distributing volume merchandise lines to the volume merchandisers”. The company worked hard to maintain products with high quality at low prices and offer a good service to its customers. Those were the “key elements” of the company. Along the years the company became an active acquirer of companies that fit its strategy and benefited from being part of its business model. Thus, the term “Newellization” appeared as the process of purchasing, streamlining and integrating acquisitions. Between 1968 and 1998 Newell had made over 75 acquisitions, as previously mentioned. By the 1990s, Newell was an important player in all its products categories and market leader in most. In 1999 Newell merged with Rubbermaid, which had a very high market value, “only” 1$ billion lower than Newell’s and there were great expectations regarding Rubbermaid. Rubbermaid and Newell seemed to be the “perfect match”: what one lacked the other one was very good at. Newell was good in selling high quality products at low prices and offering a good service to its customers while Rubbermaid had a poor customer service. While Rubbermaid excelled in creativity, product and merchandising, Newell did not even have an R&D division. Rubbermaid had strong brand recognition for quality while Newell was very well known regarding large discounts retailers. They would be learning with each other and acquiring the better of each one. The merger did not have the best results, however: both companies already had several issues before that the merger was not able to overcome and, instead of learning from each other, they were being infected by each other’s problems which resulted in a deterioration of their financial performance. The group’s opinion is that one of the main reasons for this failure was that the fact that Newell was too “cocky” and did not really understand the consequences of acquiring a company that had such a large size and high market value. Newell was used to acquire small brands which they then simply “Newellized” but with Rubbermaid this was not happening. Instead, it seemed that Newell was being “Rubbermaided”, which is perhaps a sign that their vision was not clear. Newell’s businesses were oriented towards discount retailers while Rubbermaid’s businesses produced innovative and creative products. Thus, the company needed to understand what its corporate advantage really was and what created value for the company, the low prices for the discount retailers or the innovative and creative products. It seemed that the organization was being asked for too much. Other issues were related to the fact that Newell had a huge number of brands alongside the near absence of any marketing efforts. The acquisitions were seen as an ordinary practice, not with the objective of being a strategic action of taking advantage and acquiring knowledge for its businesses, but for convenience. Some of the brands were even bought not to increase the value of the company but not to risk having them become strong competitors. Thus, Newell ended up with too many brands and no marketing. It was clear that something had to be done. The business was getting too confusing and lacked a strategic orientation. Besides the problems directly connected with the merger, the business landscape was also changing. The price of some raw materials like resin was ever-increasing, WalMart was becoming a

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strong competitor, and an aggressive one in pricing, and private labels had attractively packaged, high quality goods offered at lower prices. The market was also very unstable: some companies had declared bankruptcy and foreign manufacturers costs were often lower than domestic suppliers. Newell was not able to perceive how much was the external environment was changing. With both the Newell and the Rubbermaid sides of the new company deteriorating and considering the situation in the U.S. market, Newell Rubbermaid had to change its corporate strategy. Its products were not organized and lacked a marketing strategy. 3.How would you characterize the new corporate strategy? Is it very different from the previous one? Do you think that the corporate resources were the same to implement the strategy successfully? Which should be the new resources? With his background in Black & Decker and Amazon.com, Galli brought a fresh perspective to Newell-Rubbermaid. To address what had become a highly problematic merger of two strategically incompatible companies, Galli could either separate the companies or rethink and redefine the strategy for the entire company. Galli was confident that turning Rubbermaid around was possible and what he proposed to do was to try and modify what was originally a company that grew through acquisitions and focused on commodity-oriented products into a company that focused on internal growth, which had not previously been a priority, through product development and brand marketing. This meant making Newell’s approach more similar to that of Rubbermaid, almost doing a “rubberization” after the “newellization” process that the previous CEO had started, and having the combined entity be a consumer-oriented company. The Rubbermaid brand itself was for Galli a very important resource. The challenge was building the kind of capabilities necessary within the company for it to achieve this new vision and tailor the organizational structures and systems to its needs. Newell’s resources did not allow it to compete effectively in highly technological, seasonal or trendy products nor in businesses whose main distribution channel was other than discount retailing. The managers that had come from Newell did not have the right background in terms of marketing and product-development to manage Rubbermaid and a lot of talent had left Rubbermaid before and as a consequence of the merger. For the purpose of accomplishing his new strategy, Galli launched a thorough restructuring program in which some priorities were stressed: hiring new people and providing training to both them and the already existing employees, restructuring the company's supply chain in order to achieve operational excellence, selling businesses and product lines that were either non-strategic or low-margin and innovating and adding differentiated products with true value as to be able to command premium prices. Through this he expected to achieve tightened financial controls, reduced corporate overhead, reduced costs and improved customer service levels. Galli recruited new people from companies that had proven to be very accomplished in mass-market innovation (including Black & Decker) and created both in-house executive education programs, in order to improve operations excellence and develop power brands, and a recruitment program, Phoenix. This program was meant for the fresh hires from colleges and its objectives were to provide them with a retail-store view of the company's products, while also trying to regain lost shelf space and customer goodwill and create excitement about the company's brands. In terms of the company's supply chain, the focus was on cutting operating costs and shifting from commodity products such as resin totes to more value-added goods like Sharpies, which translated into the consolidation of existing manufacturing facilities and the shift of some manufacturing to international lower-cost locations, with 80000 SKUs being discontinued, 78 facilities being closed and 10300 employees being laid off in the space of three years. Another major organizational change was the company’s restructuring into four strategic groups: Rubbermaid, Calphalon, Irwin and Sharpie. Besides this, a Key Account Program for three of the company’s largest customers, Wal-Mart, The Home Depot and Lowe’s Companies was established. Moreover, there was an effort to divest in underperforming operations in order to reduce the

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company’s high debt levels, which were the result of the acquisitions made in the 90s, and no major acquisitions were done in 2001 but in 2002/3 two companies for "premium price franchises", American Saw & Manufacturing Company and American Tool Companies were acquired. The savings achieved with this whole restructuring process were to be invested in marketing and new product development initiatives, which included a television advertising campaign and sports marketing campaign through the sponsorship of Nascar drivers and races. More products were introduced in 2002 than in the sum of the previous three years. 4.Analyzing the financials (2001, 2002, 2003), share price and other information would you expect a successful strategy for the future? Why? Sales for 2002 were $7,453.9 million, representing an increase of $544.6 million, or 7.9%, from $6,909.3 million in 2001. In 2003 sales reach $7,750 million. This increase primarily resulted from an internal sales growth of 3.3% and sales contribution from American Tool Companies, acquired in 2002. However, the primary reasons for the overall sales increase were sales gains in strategic accounts and new product introductions. Selling, general and administrative expenses ("SG&A") in 2002 were 17.5% of net sales, or $1,300 million, versus 16.9%, or $1,156 million, in 2001. In 2003 SG&A raise a little bit to $1,353 million. SG&A includes charges relating to integration costs of recent acquisitions of $7.4 million and $12.0 million in 2002 and 2001, respectively. The increase in SG&A is, once again a result of the American Tool Companies, Inc. acquisition and planned investments in marketing initiatives. Net income before income taxes and the cumulative effect of accounting for 2002 was $312 million, an increase of $47 million, or 6.8%, from $265 million in 2001. The increase is primarily related to productivity improvements and increased margin for new products, partially offset by product price reductions and continued investments in divisional growth initiatives, including costs related to new product development and product launches, primarily television advertising for featured items. However, in 2003, net income dramatically decreases and was $20 million a $448 million decrease from $469 million in 2002. The decrease relates primarily to the increased restructuring costs and the impairment charge noted above. Net income in 2002 was 4,2% of sales, versus 3,8% of sales, in 2001. The increase in operating margins was primarily due to improvement in gross margin. However, in 2003 net income was -0,6% of sales. If we now take a look of company´s ROIC, recognizing the huge capital spending had been incurred over the year, the corporation started to departure to closing its facilities in North America and Western Europe, by 2003, 75 facilities were closed. Therefore, ROIC operated registered an increase respectively to 10,5% and 9,5% during 2002 and 2003, versus 7,9% of 2001, this results highlighted the more efficiency on capital managing, by reducing working capital as well as fixed capital. Regarding the stock prices operated by firm during 2001 to 2003, it is notable that, due to the consequences generated by Rubbermaid acquisition, as well as September 11, 2001´s impact, since 2000, in which company failed to meet several earning targets, the same situation has been kept inevitably for the 2002 and 2003´s stock price. Stock price between 2002 and 2003 decrease from $35,5 in the middle of 2002 to $23 in the end of 2003. As a conclusion, until 2003, the company still faced overall strategic changing process with Galli as new CEO of the firm since January 2001, therefore some instabilities were verified, such as company´s net income, SG&A as well as stock prices. However, as we can see from the results, there was also some sales growth during 2001 to 2003. Believing on the new strategy of Galli and also the ever better adaptation of the overall organization with this new strategy, NWL will expect to improve operating excellence, and develop power brands. 5. Have a look at present times and analyze the period 2004-2011, what are your main conclusions? As we seen before, Newell made the most significant acquisition of its history by purchasing Rubbermaid and this deal doubled the size of the company and changed its name to Newell

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Rubbermaid. In 2004, Newell recorded a loss for fiscal-year of $19.1 million and a sales drop of 2.2%. After Joe Galli quit the CEO post in 2005, having failed to deliver better earnings and under pressure from difficult business conditions, namely the ever-high price of raw materials, Mark Ketchum was named President and CEO to lead the restructuring process Newell Rubbermaid would be going through. That year, Newell Rubbermaid acquired Dymo, a global leader in ondemand labeling solutions. The company expanded its presence in this market with the 2006 purchases of CardScan business card scanners and Mimio interactive whiteboard products along with the 2007 acquisition of postage leader Endicia and its Picture-it-Postage brand. In 2008, the company continued its acquisition strategy, adding Technical Concepts, a leader in the away-from-home restroom market; ApricaKassai, a Japanese maker of strollers, car seats and other children's products; and BebeSounds prenatal monitors to its portfolio of global brands. Newell Rubbermaid's new global headquarters building opened in Atlanta in the summer of 2008. In 2011, Headsprout, an innovative provider of adaptive instructional content that adjusts automatically to each student’s learning pace, was acquired to complement the Dymo│Mimio interactive teaching technologies business. Finally, in the last year, after Mark Ketchum’s retirement, Michael B. Polk joined Newell Rubbermaid in July as president and CEO. He is building on Newell Rubbermaid’s successful transformation to accelerate global growth. He has been a member of the company’s Board of Directors since 2009. During these years the company suffered a lot of changes, mainly in its strategy. The new Strategy would be consumer and brand-focused, “Investing in consumer understanding, innovation and successful product commercialization.” The tag line "Brands That Matter™" was added to the company logo to emphasize this change of focus. Therefore, now the focus is not serving mass retailers, the audience is now much broader – the final consumer. Also now, there is not only a focus on efficiency but also in investment, for instance R&D, patents or trademarks. Newell’sVision now is “to be a global company of Brands That Matter™ and great people, known for best-in-class results.” This is a new Newell Rubbermaid, having successfully transformed the business model to generate sustainable growth through consumer-driven innovation, branding and marketing. It is focused on understanding their target consumers and their needs. The markets in which they operate has increased as well as it is no longer staple consumer goods, but rather Brands – whichever the industry or product class they decide to go into, they will be a recognized brand name, no longer a low-cost product. Newell Rubbermaid has been transforming into a global, consumer-centric company by investing in research that helps it better understand their target consumers and their needs. However, acquisitions and “Newellization” still play a major role as we may see from the company’s history since they have been acquiring many renowned brands. Regarding Newell Rubbermaid’s businesses units it has three business areas/product categories, being these Home & Family Group, Office Products Group, and Tools, Hardware & Commercial Products Group. Inside each product category it has different business units/brands. The stock price increased over time since 2005, when the change in strategy took place. The whole S&P companies felt the shock in 2009 but it has been recovering ever since. Additionally, after the drop in stock price due to the acquisition from Rubbermaid, Newell quickly recovered. More focus on R&D, research and development costs relating to both future and current products are charged to selling, general and administrative expenses as incurred. Previous President and CEO Mark Ketchum declared before retirement that the company is a new Newell Rubbermaid, having successfully transformed the business model to generate sustainable growth through consumer-driven innovation, branding and marketing.

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