SIGNODE INC.

ABOUT THE COMPANY 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

PROBLEMS BEING FACED 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).

COMPETITION

FACTORS SIGNODE ALPHA SANFORD BENTLEY AMERICAN METAL

JERSEY STEEL

PLYMOUTH

Market Share

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

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

Tools (Power)

In-house Outsourced Outsourced Outsourced 1 own rest outsourced

No No

Services Yes Yes but Low No Outsourced No No No

SEGMENTATIONBased 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.

ALTERNATIVE 1: INCREASE THE PRICE TO COUNTER THE INCREASING RAW MATERIAL PRICESImpacts:

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.

ALTERNATIVE 2: MAINTAIN THE SAME PRICE

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

Stats:

Old Cost of Sales = $181,473,000

New Cost of Sales = $193,812,000

Loss to incur will be ($12,339,000).

ALTERNATIVE 3: GO FLEXI PRICINGImpacts:

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.

COMPARISON OF ALTERNATIVES

ALTERNATIVE 1 ALTERNATIVE 2 ALTERNATIVE 3

Maintain Profitability

Short Term (High); Long Term (Uncertain)

Short Term (Low); Long Term (Low)

Short Term (High); Long Term (High)

Market share Reduction Increase Increase

Cash Inflow Low High High

Sales Force Morale

Down Up Up

RECOMMENDATIONOut 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

THANK YOU!!