Case Scenario 2: Jewell Company. JewellCompany (JC) is a $2 billion diversified manufacturer and marketerof simple household items, cookware, and hardware. In theearly 1950s, JCs business consisted solely of manufactured curtainrods that were sold through hardware stores and retailers likeSears. Since the 1960s however, the company has diversifiedextensively through acquisition into such businesses aspaintbrushes, writing pens, pots and pans, and hairbrushes. Over 90 percent of its growth can be attributed to these many smallacquisitions, whose performance it improved tremendously throughaggressive restructuring and its corporate emphasis on cost-cuttingand cost controls. While JCs sixteen different lines ofbusiness may appear quite different, they all share the commoncharacteristics of being staple manufactured items and soldprimarily through volume retail channels like Wal-Mart, Target, andKmart. Because JC operates each line of business autonomously(separate manufacturing, R&D, and selling responsibilities foreach line), it is perhaps best described as pursuing a relatedlinked diversification strategy. The common linkages are bothinternal (accounting systems, product merchandising skills, andacquisition competency) and external (distribution channel ofvolume retailers). JC is presently contemplating theacquisition of Plastico, a $3 billion U.S.-based manufacturer offlexible plastic products like trash cans, reheatable and freezablefood containers, and a broad range of other plastic storagecontainers designed for home and office use. While Plasticohas been highly innovative (over 80% of its growth has come frominternal new product development), it has had difficultycontrolling costs and is losing ground against powerful customerslike Wal-Mart. JC believes that the market power it wields withretailers like Wal-Mart will help it turn Plasticos prospectsaround.
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