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    Sign Ode

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    Parsva Saikia
    The document discusses options for Signode Industries given rising raw material costs and competitive pricing pressures. Option 3, adopting a "flex-price" proposal that allows pricing below standard discounts, is identified as the best approach. It would help Signode stem decreases in small and medium customer segments and allow the sales force more pricing flexibility. Close monitoring is still needed initially to control discount levels. The conclusion is that a flex-price approach along with focusing on premium customized offerings and importing materials is the way forward.

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    Download as PPTX, PDF, TXT or read online from Scribd

    Sign Ode

    Uploaded by

    Parsva Saikia
    231 views8 pages
    The document discusses options for Signode Industries given rising raw material costs and competitive pricing pressures. Option 3, adopting a "flex-price" proposal that allows pricing below standard discounts, is identified as the best approach. It would help Signode stem decreases in small and medium customer segments and allow the sales force more pricing flexibility. Close monitoring is still needed initially to control discount levels. The conclusion is that a flex-price approach along with focusing on premium customized offerings and importing materials is the way forward.

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    The document discusses options for Signode Industries given rising raw material costs and competitive pricing pressures. Option 3, adopting a "flex-price" proposal that allows pricing below standard discounts, is identified as the best approach. It would help Signode stem decreases in small and medium customer segments and allow the sales force more pricing flexibility. Close monitoring is still needed initially to control discount levels. The conclusion is that a flex-price approach along with focusing on premium customized offerings and importing materials is the way forward.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    231 views8 pages

    Sign Ode

    Uploaded by

    Parsva Saikia
    The document discusses options for Signode Industries given rising raw material costs and competitive pricing pressures. Option 3, adopting a "flex-price" proposal that allows pricing below standard discounts, is identified as the best approach. It would help Signode stem decreases in small and medium customer segments and allow the sales force more pricing flexibility. Close monitoring is still needed initially to control discount levels. The conclusion is that a flex-price approach along with focusing on premium customized offerings and importing materials is the way forward.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
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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

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