Environmental Analysis
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NewellRubbermaid operates in the consumer products manufacturing industry. This industry is defined as companies that design, manufacture, and/or market apparel ,cleaning products, hand and power tools, home furniture, housewares, linens, and consumer electronics and appliances. NewellRubbermaid is comprised of many well known brand names that are a basic part of society. There are many competitors in this industry and NewellRubbermaid needs to distinguish its brand from many others.
Key macroeconomic variables that affect the consumer product industry include gross domestic product (GDP), industrial output, interest rates, disposable income, prices and employment. Two of these variables will be discussed below and their impact described in terms of how they affect NewellRubbermaid specifically. The two variables are as follows: prices and industrial output.
Price a very important variable in that it determines the cost of materials and ultimately what is passed on to the consumer. Industrial output is also very significant in that the market can be flooded and demand decreases, while demand for raw materials can increase as more product is produced.
Plastics are derived from oil, so prices can fluctuate uncontrollably on a daily basis. The first figure shows a very detailed trend of consumer prices in general. It is very easy to see there is a constant increase from year to year. This is perhaps due to inflation or supply and demand influences.
Table 1(inflationdata, 2007)
Current Consumer Price Index
198.3
198.7
199.8
201.5
202.5
202.9
203.5
203.9
202.9
201.8
201.5
201.8
201.6
190.7
191.8
193.3
194.6
194.4
194.5
195.4
196.4
198.8
199.2
197.6
196.8
195.3
185.2
186.2
187.4
188.0
189.1
189.7
189.4
189.5
189.9
190.9
191.0
190.3
188.9
181.7
183.1
184.2
183.8
183.5
183.7
183.9
184.6
185.2
185.0
184.5
184.3
183.96
177.1
177.8
178.8
179.8
179.8
179.9
180.1
180.7
181.0
181.3
181.3
180.9
179.88
175.1
175.8
176.2
176.9
177.7
178.0
177.5
177.5
178.3
177.7
177.4
176.7
177.07
168.8
169.8
171.2
171.3
171.5
172.4
172.8
172.8
173.7
174.0
174.1
174.0
172.2
This chart parallels the change in cost of raw materials needed for production and shows the general trend of prices. This is a major macroeconomic factor that will determine the selling price of the products produced.
Table 2 illustrates the cost of HDPE. High Density Polyethylene is a product used by NewellRubbermaid to produce goods and the cost can vary as the price of oil changes daily. This figure follows the general trend of increase represented in the figure above. HDPE falls in the middle of graph below aluminum and above newspaper and glass. There is a huge market for this type of material and demand will only continue to increase which could drive prices for this raw material higher and manifest as higher prices for consumers.
Table 2 (Stein, 2006)
The second macroeconomic variable that will be discussed involves industrial output. Table 3 shows a more detailed history but the general trend of increase continues. As mentioned above, increasing production leads to increased demand for raw materials which can drive prices higher. These higher prices will be passed onto consumers. According to Gale Reference team, “Injection molded plastics demand in the US is projected to grow 2.8 percent annually to almost 16 billion pounds in 2010, valued at $14.7 billion (resin content only). Resins will account for 40 percent of total injection molded product costs of $36.8 billion. Advances will reflect injection moldings diverse applications and cost efficiency, as well as rebounding markets.” (Gale, 2007).
Inflation is a key component of this scenario that plays a part in the overall pricing