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    Questions For Signode

    Uploaded by

    Brijesh Gupta
    The document discusses a dilemma faced by the president of Signode Corporation, Gary Reed, regarding whether to pass on or absorb a 6.8% steel price increase and whether to accept flexible pricing that allows discounts of up to 7%. It notes Signode has a mature market, lacks product differentiation, and is the market leader, so competitors often match its pricing. Maintaining market share and cash flow are important considerations for Reed.

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    Questions For Signode

    Uploaded by

    Brijesh Gupta
    120 views8 pages
    The document discusses a dilemma faced by the president of Signode Corporation, Gary Reed, regarding whether to pass on or absorb a 6.8% steel price increase and whether to accept flexible pricing that allows discounts of up to 7%. It notes Signode has a mature market, lacks product differentiation, and is the market leader, so competitors often match its pricing. Maintaining market share and cash flow are important considerations for Reed.

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    Signode Case study

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    Questions for Signode

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    The document discusses a dilemma faced by the president of Signode Corporation, Gary Reed, regarding whether to pass on or absorb a 6.8% steel price increase and whether to accept flexible pricing that allows discounts of up to 7%. It notes Signode has a mature market, lacks product differentiation, and is the market leader, so competitors often match its pricing. Maintaining market share and cash flow are important considerations for Reed.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    120 views8 pages

    Questions For Signode

    Uploaded by

    Brijesh Gupta
    The document discusses a dilemma faced by the president of Signode Corporation, Gary Reed, regarding whether to pass on or absorb a 6.8% steel price increase and whether to accept flexible pricing that allows discounts of up to 7%. It notes Signode has a mature market, lacks product differentiation, and is the market leader, so competitors often match its pricing. Maintaining market share and cash flow are important considerations for Reed.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 8

    Signode -- The Problem

    • Mr. Gary Reed, president of SI, must decide


    • Whether to pass on or absorb a 6.8% increase in the price of cold rolling steel
    • Whether to accept the flexible pricing policy (‘Price-flex”) that will authorise
    SI salespeople to discount the book price as much as 7%
    A typical dilemma faced by many Corporate
    • Mature Market—so market share protection is key
    • No major Product differentiation—leading to customers buying on
    price
    • SI is the leader, so competitors give discount on SI’s price
    • SI is the leader, its action will dictate the future of the market
    • And most importantly, this division is the “cash cow” to fund
    expansions of the mother company, so cash is important!
    Reed’s immediate Pricing Decisons
    • Two major decisions and Four combos
    • Accept or reject salespeople’s request for “price-flex” upto 7%
    • Pass or absorb the increase in raw material costs of 6.8%

    What Should Mr. Reed Do?


    Four Combos

    Pass Steel-Price Increase to customers


    Not Pass III IV

    Pass I II

    No Price-Flex Price-Flex

    Institute the Price Flex programme


    Hints:
    1. Product Sales of Signode
    Signode
    Corporation
    $658.7

    Ind. Prod.
    International Packaging
    &Fasteners
    $234 $ 286
    $ 138

    Steel (59%) Plastic (41%)


    $169 $117

    Consumables Hand Tools


    Machines (5%) Others (9%)
    (79%) (7%)
    $8 $15
    $134 $12
    2. Contribution
    • 36% (Exhibit 4; 4th row, last column)
    3. Process of Analysis
    • What is the financial impact of the decisions?
    • How will Sales Force React?
    • How will Competitor React?
    • How will Customers React?

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