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 Market leader in the steel strapping industry.

 Packaging division products include:


 Steel strapping
 Plastic strapping

 Specialized Tools and Equipment


 59% packaging divisions revenue - Steel strapping
 41% packaging divisions revenue - plastic strapping

 In steel strapping division–


 79% sales revenue from- steel strapping consumables
 5% sales revenue from- machines
 7% sales revenue from- hand tools
 9% sales revenue from- other goods
 Raw material price had increased by 6.8%.
 Market share declined from 50% to 40% from 1987-93.
 Steel strapping market has become price sensitive and competitors are selling their
products at discounted prices (5 to 10% less then signode).
FACTORS SIGNODE ALPHA SANFORD BENTLEY AMERICAN JERSEY PLYMOUTH
METAL STEEL

Market 40% 21% 9% 10% 5% 4% 2.9%


Share

Book Price 100% 95% 93% 95% 90% 93% 90%

Tools In-house Outsourced Outsourced Outsourced 1 own rest No No


(Power) outsourced

Services Yes Yes but Low No Outsourced No No No


Based on three factors-

By Account : National, Large, Mid & Small.

By Industry : Primary Metals, Forest Products, Paper, Metal Services, Synthetic


Fibers, Cotton, Brick & Transportation.

Price & Service: Relative Price Paid and Service Consumed.


Impacts:
Inability to maintain cash flow.
Additional profits will help them to feed R&D
Improve the health of industry.
High Price Differential.
Market share erosion: Further reduction in Low and Mid Size customers.
Stats:
Old Cost of Sales = $181,473,000
New Cost of Sales = $193,812,000
Loss to incur will be ($12,339,000).

Impacts:
Reduction in industry profit will hurt them maximum.
Satisfy the wishes of the sales force by enabling them to be more competitive.
Although market share would be retained still it would incur losses
Impacts:
Varied range of pricing for diverse service offerings.
Increased decision making in the hands of sales force.
Small, Medium and Large accounts will remain intact.
Selective discounting would meet the competitor’s price.
Will aid Signode in gaining market share and higher profitability.
ALTERNATIVE 1 ALTERNATIVE 2 ALTERNATIVE 3

Maintain Short Term (High); Long Short Term (Low); Long Short Term (High); Long
Profitability Term (Uncertain) Term (Low) Term (High)

Market share Reduction Increase Increase

Cash Inflow Low High High

Sales Force Morale Down Up Up


Out of the three alternatives, Implementing Flexi Pricing seems to be the most
beneficial alternative as it addresses the issues of:
Increasing raw material costs
Decreasing market share
Reduced sales force morale
Reduced profitability
Uncertain cash flow

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