Signode Industries faces several problems including increased raw material prices and declining market share. It must decide whether to increase prices to offset costs, maintain prices, or implement a flex-pricing strategy. Maintaining prices would lead to losses while increasing prices could further reduce its market share against competitors offering discounts. A flex-pricing strategy allows selective discounting to meet competitors' prices while retaining large accounts. The recommended plan is to implement flex-pricing initially while monitoring discount levels and shifting focus to the value of Signode's services as steel strapping becomes a commodity.

1. “Case study
Of
sIGNOde INdustRIes INC.”
Group Members
•
•
•
•
•
Pooja Singh
(26NMP34)
Sankalp Garg
(26NMP46)
Satosh K Diwakar (26NMP47)
Shilpa Mahapatra (26NMP52)
Suhail Nasir
(26NMP55)

2. Problems:
• Raw material price had increased by 6.8%.
• Signode’s 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).
Challenges:
• Decision has to be taken, whether;
 Increase the price to counter the RM price increase.
 Maintain the same price.
 Go for “Flexi-Pricing” strategy.
Goals to be considered are Maintain Profitability, Halt Market
Share Erosion, Cash Flow, Sales Force Morale.

3. Leading Competitor’s Comparison
FACTOR
S
SIGNOD
E
ALPHA
SANFORD
BENTLEY
AMERICA
N METAL
JERSE
Y
STEEL
PLYMOUT
H
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
The major competitor’s of Signode are ALPHA, SANFORD & BENTLEY.
Signode’s USP over its competitor’s are
 Only player in the market for customised machines.
 Manufacture its own line of tools and machine.
 Excellent service provider or complete solution provider in the industry.
All these factors and market share of 40% makes Signode a “Market Leader”.

4. SIGNODE’S………….. …………..Brief
Description
Capacity Utilisation: 71%.
Distributer Problem: Their discounting made
Signode’s product 10% to 20% higher then its
competitor’s.
Market Segment: Signode segment
market on the basis of three factors:-
the
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.

5. Alternatives
Maintain
Alternative 1: Increase the price to counter Profitability
the
RM price increase.
Market share
Why ??
• Variable cost being high % of Total cost,
ideal situation is to maximize profit.
• Additional profits will help them to feed
R&D which will result in new offerings.
• Improve the health of industry.
Short Term (High);
Long Term (Uncertain)
Reduction
Cash Inflow
Low
Sales Force
Morale
Down
Why Not ??
• High Price Differential.
• Further reduction in Low and Mid
•Size customers.
Alternative 2 : Maintain the same
price.
Old Cost of Sales = $181,473,000
Maintain
New Cost of Sales = $193,812,000
Profitability
Loss to incur will be ($12,339,000).
Market share
Why Not ??
Cash Inflow
• Oligopolistic market. Will lead to price war.
• Cannot compete on pricing with companies having Sales Force
Morale
underutilized capacity (Sanford, American etc)
• Reduction in industry profit will hurt them maximum.
Short Term (Low);
Long Term (Low)
Increase
High
Up

6. Alternatives
Maintain
Alternative 3: Go for “Flexi-Pricing” strategy.
Profitability
Why ??
• Decision making in the hands of sales force.
• Small, Medium and Large accounts will
remain intact.
• Selective discounting would meet the
competitor’s price.
Don’t.
•Don’t discount every customer.
•Value offering to customer without doing costbenefit analysis.
•Avoid the conversion of flexi discount into
standard price.
Short Term (High);
Long Term (High)
Market share
Increase
Cash Inflow
High
Sales Force
Morale
Up

7. Recommended Detail Plan
•
Recognize the changing market Signode is operating in, where steel
strapping is becoming a commodity item.
•
Explain that Signode will always be undercut regarding price.
•
Start the process of evaluating how Signode can serve the smaller
customers through distributors.
•
Evaluate the economic value of the services offered and train the sales
force on this concept.
•
Implement the 'flex-pricing' plan, initially keeping a close eye on the level of
discounting.