CASE REPORT - SIGNODE INDUSTRIES
• Prices of cold rolled steel, the raw material for Signode’s main product is (steel strapping) increasing at the rate of 6.8%
• Pressure from competitors in not passing on the raised prices to the customers exists
• There has been a 10% decline in Market share in the last 10 years
• Sales force’s want of the Price-Flex model while there were Financial constraints
• Existing plans for growth and acquisitions, which would cost money
• Low product differentiation, Experienced specialists
1) What should Gary Reed do?
Gary Reed should opt for alternative 3 because (Referring Exhibit 7):-
• There are both the types of customers - Inexperienced generalists and Experienced specialists
• He should Increase the price by 6.8% for all the customers in the high cost to serve and low price realized quadrant
• He can also increase the price by a small amount for all customers who are in the low cost to serve and low price realized quadrant. The same should be done for all customers in the high cost to serve and high price realized quadrant
• There should be no change in price for all customers who are in the low cost to serve and high price realized quadrant
• Besides, Gary Reed should increase his focus on the plastic business by increasing the volume of production as well as the price since Signode is under so much Debt
2) How will Signode’s sales force, customers, competitors, investors react to these decisions?
• Sales force – The experienced sales force wants the Price – Flex option. In fact they have promised immediate growth with this option.
• Customers – Since Signode will vary prices and services across the different customers, the customers’ needs and wants would be taken care of and they’ll be happy.
• Competitors – The competitors have historically reduced their price with every discount that Signode gave. So initially they might give some additional discount but cannot go further as this will hurt their...