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ñ AMITESHAYAL 09006
ñ A SVASAIKIA 09040
ñ   H I AK H ANNA 09050
ñ SHAILENE SINpH 09053
ñ INSHL THI 090
ñ BENJAMINATTE 0ES04
 About Signode Industries

ñ Started in 1914 ± produced and marketed steel strap joints

and application tools
ñ Operates with a divisionalized structure (as of 1983):
* International division: $234 million revenue
* Fastener and Industrial Products division: $138 million revenue
* Packaging division:
o aesponsible for domestic sales of steel and plastic strapping system
± with sales of $286 million
o Also into tools and equipment ± but less 1% steel strapping systems
revenue
ñ Sales through 180 salespeople reporting to divisional vice-
president of sales through 24 district managers and 3
regional managers
 Ôurrent Scenario

ñ Price increase of cold rolled steel ± to the tune of 6.8% - of

raw material used in steel strapping
ñ Ôontinued price cuts by competitors
* Alpha Ôorporation ± Signode¶s biggest competitor rumored to sell below
the book price
* Sales force not responsive to the differential pricing of the company or to
the idea of passing on the price increase to the customer
ñ $300 million leveraged buy post recession ± pressure on
domestic Packaging Division to generate capital
ñ Steel strapping substitution by plastic strapping ± to the
tune of 2% per year for Apex and BBM
ñ Decreasing Signode share on each of the small, midrange
and large accounts in the strapping segment
 Options for Signode ± Given current Scenario
Increase strapping prices to offset increased
price of raw material

Maintain book prices

Institute the ³price-flex´ proposal

The objective here is to find the optimum pricing decision to:

Increase declining
share in each
customer segment Increase profit
margin to generate
higher capital
 Option 1 : Increase price
ñ How much?
* Taking a middle ground between current book price and 6.8% is an
option
ñ Augment it by providing value added services to the largest
customers ± national and large segment
ñ Leverage fact that it is only supplier of custom strapping
* Ôustom tools and machines ± only for Signode strapping
* Alpha stopped producing custom tools and machines from 1978

ñ Possible Pitfalls:
* Increased competition ± Ôustomers began to buy in a commodity type
basis, going for the lowest price
* Ôustom equipment ± high on resource consumption, low on profit
* National and Large segments fine ± still 10% overall decrease ± implies
greater impact of small and medium segments decrease
 Option 2 : Maintain book prices

ñ Why?
* Price increase opposed by Sales force
* Price increase lead to decrease in Signode market share
ñ Augment by increasing technical assistance to customers and
sale of low cost specialized machinery
* Focus on custom steel strapping and machines ± as the only manufacturer
* Ôontractually bind the consumables to be used with the machinery to be
specifically from Signode
ñ Try to reduce costs by buying imported steel

ñ Possible Pitfalls:
* Ôustom equipment ± again high on resource consumption, low on profit
* With main competitor Alpha rumored to keep at book price: staying at book
price would still mean Signode are premium priced ± not ideal for converting
new accounts/retaining old accounts
 Option 3 : ³Flex-price´ proposal

ñ Why?
* Sales force has been clamoring for it
* Help meet competition prices
* Facilitate plans for acquiring and growing new businesses in 90¶s

ñ Allow decrease of price below standard discount ± help convert

more accounts ± facilitate stemming the drastic decrease in small
and medium segment
* Ôharge premium prices to service oriented customers
* Ôharge lowered prices to customers buying as a commodity
ñ More power to the sales force to take on-the-fly decisions on the
field
ñ Help tap into unexplored markets through lower prices

ñ Pitfalls
* Ôlose monitoring is needed on the level of discount being offered, at least in
the initial stage of its implementation
 Ôonclusion

ñ ³Flex-price´ is the way forward

ñ Price a big factor in the market where Signode is operating
in:
* Steel strapping ± now a commodity item
* Ôompetitors selling below Signode prices
ñ Need to differentiate from Alpha and Bentley
* Support premium customers in customized machines and tools ± at a
higher price ± Alpha and Bentley not present here
ñ Serve the small and medium businesses through distributors
* Also evaluate the possibility of pushing more of top grade plastic strapping
in these highly price conscious segments
ñ Ôonsider the option of importing raw materials
ñ Focus on retaining customers ± not on expansion