Scribd
Upload
160 views8 pages

Questions For Signode

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.

Uploaded by

Brijesh Gupta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
160 views8 pages

Questions For Signode

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.

Uploaded by

Brijesh Gupta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 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?

You might also like