1) What was the reasoning behind Newell acquiring Rubbermaid

In 1999, Newell acquired Rubbermaid, with intent to acquire new capabilities. Rubbermaid, the
highly regarded company had a stable of well-known brands, an established new product
development process, and a strong international presence.
In 1994 and 1995 Fortune magazine had named Rubbermaid the nations most admired company.
The same year, it also took them to task for operational deficiencies. The reason was the significant
increase in price of resin in the spring of 1994, which already contributed 30% to Rubbermaids
total product cost. So, it could not absorb the price hike themselves, and thus passed it on to the
buyers, unlike its competitors. To do this, they needed to reduce operational cost.
Even though resin prices leveled out in 1996, Rubbermaids net income fell although its sales
increased at a CAGR of 5.4% from 1993 to 1998. Rubbermaids management began spending
more on marketing and advertising, hoping to leverage the brands reputation for quality and
ruggedness. As a result, SG&A rose, outstripping revenue.
The two companies were complementing each other in many ways
1. Newell excelled in operations efficiency, service and delivery, while Rubbermaid faltered.
Rubbermaid laggard in more mundane areas such as modernizing machinery, eliminating
unnecessary jobs, and making deliveries on time. Rubbermaid was also plagued by a
reputation for poor customer service. Retailers complained that the company often wasnt
able to meet demand for highly sought after products. , they had to fix the service and
delivery issues which were a mess.
2. Rubbermaid excelled in merchandising. Merchandising was very important to Newell.
3. It has a strong history of internal growth and spent about 14% per year on research and
development excelling in creativity, while Newell didnt even have an R&D organization.
4. Newell wanted to re-invigorate the product development process and leveraging
Rubbermaids great brand
5. Rubbermaid marshaled strong consumer brands and a well-recognized reputation for
product quality, while Newell lacked both of these end-users advantages, but was very well
regarded by the large discount retailers.
6. Further, Rubbermaids durable, non-cyclical products shared many similarities with
Newells and were sold through the same channels.
2) What were the key actions Joseph Galli took to get Newell Rubbermaid back into
growth and profitability?
Galli reviewed the situation at Newell Rubbermaid, the fierce price competition from low-cost
imports, and the increasing market power of the large discount retailers and considering that the
wave of innovation had slowed considerably, he concluded that the company needs new strategy.

Newell Rubbermaid markets branded, value-added products through a broad network of retailers
and distributors. After assessment of the companys profitability by channel and customer, the
decision to pursue consumer and commercial products, users, and channels was taken.
Galli also noted that commercial users generally demanded products of high quality and
reliability, attributes that were valued by high-end retail customers who were willing to pay
premium prices for top-of-the-line goods. To implement this strategy, Galli outlined Six Strategic
Initiatives that targeted efficiency enhancement and revenue growth.
A. Efficiency
The intensely competitive discount retailing environment put increased pressure on
suppliers. The goal was to ensure that the companys costs would be competitive with the best in
the business, anywhere in the world. Efficiency initiatives included: Productivity, Collaboration,
and Streamlining.
1. Productivity
The cost of goods sold would be minimized by cutting manufacturing costs five percent per year.
This would involve reducing overhead, finding and eliminating inefficiencies, and improving
purchasing procedures.
2. Streamlining
SG&A would be reduced by eliminating excess procedures, programs, and layers of
management. An example of streamlining was reducing the number of brands that the company
offered by a factor of 10.
3. Collaboration
This initiative served the dual purposes of efficiency and growth. It involved the sharing of
manufacturing, training, administrative, and marketing knowledge across all divisions of the
company. For example, managers in one division would share information about a customer or
opportunity with another division, or one division would help another trouble shoot a problem in
manufacturing or service.
B. Revenue Growth
While Galli viewed cost control as necessary for the long-run health of the company, he believed
that the companys critical differentiators would be on the revenue side. These drivers would
increase customers willingness to pay and, in turn, boost the companys gross margins. To
describe these revenue enhancers, Galli coined the term special sauce- something that a company
does that no other company can quite get. Its something that sets a company apart
The three strategic initiatives to support revenue growth were: New Product Development,
Marketing, and Strategic Account Management.
4. New Product Development

Galli believed that higher margins could be achieved on new products in the early stages of their
life cycles. This made innovation and new product introductions essential through manufacturing
(in house or out) and delivery. To do so, the company would recruit some engineering and
management talent from other companies, and involve both the end user and the retailer in the
development process to assure that the new products would appeal to consumers.
5. Marketing
Galli believed that three elements of creative differentiation were necessary to maintain a price
premium: the product must be innovative; the brand must matter to consumers; and the company
must invest in the brand through demonstrations, advertising, or other marketing activities.
Shedding its traditional low profile, Newell Rubbermaid would invest in power brands and add
value through advertising, creative merchandising and special promotions.
6. Strategic Account Management
Historically, each of Newell Rubbermaids businesses called on retail buyers individually.
While preserving these relationships, Galli appointed President-level sales managers for three
strategic accountsWal-Mart, Home Depot, and Lowes. These account managers would share
responsibility with the division presidents for sales to these retailers, join division presidents at
sales calls, and nurture and maintain the overall relationship between Newell Rubbermaid and the
retailer.
Accountability
Going forward, the company would measure its progress by using five key metrics .Internal sales
growth, Operating income by percentage of sales, Five quarter average of accounts receivables
plus inventory, net of accounts payable, divided by sales, Cash flow provided by operations, net of
dividends and capital expenditures, After-tax operating income excluding charges divided by a five
quarter average of debt and equity.
Marketing Momentum
Galli launched Phoenix, a new field-based sales and merchandising program. The company
hired energetic and bright recent college graduates who worked in teams to merchandise products
at Newell Rubbermaids major accounts. Galli was optimistic that the program would help the
company regain lost shelf space and customer goodwill, and create excitement about the
companys brands. In addition to serving as a recruiting vehicle, Phoenix functioned as a training
vehicle, allowing the company to develop young managers from within and give them extensive
exposure to the companys businesses.
Galli also noted that it would be nearly impossible for competitors to duplicate the program, since
its economic viability depended on both the scale and scope of products Newell Rubbermaid sold
through the discount retailing channel.

Grass-roots marketing efforts also got off to a fast start. The company began to sponsor
community events where employees created excitement around a brand by demonstrating products
and explaining their benefits
Breakthrough Leadership
The company started an in-house executive education program called Breakthrough Leadership.
The purpose of the program was to establish company standards and to disseminate that
knowledge throughout the organization.
When the business environment had proven even fiercer than expected, forcing internal changes at
an even faster pace, Management Reaffirms Strategy. Galli stressed the following points:
Only differentiated products with true brand value will be able to command premium prices.
Businesses or product lines that do not fit with this strategy will be sold.
Even with strong brands, operational excellence will always be important. A company
cannot afford to be disadvantaged on cost. Efforts to restructure the companys supply chain
remain a high priority.
As the year ended, the company announced that it would close Rubbermaids production
operations in Wooster, Ohio, where that company was founded in 1920. The company also
announced that it would be exiting low-margin product lines and divesting businesses that had
been identified as non-strategic.