Signode Industries

Signode Industies

1. They sell steel strapping and plastic strapping

2. They have 3 divisions – International Division, Fastners and Industrial products and packaging divisions

3. Leverage Buyout – Taking debt to buyback own shares. In Signode case, because of recession, share price got reduced and some competitor was planning to buy their shares at lower cost

4. Sales person were in fear of getting fired (235 to 180 sales force reduction)

5. Cannibalizing – Encourage from steel to plastic strappings because:

a. Plastic is growing market

b. Plastic strappings are non interchangeable once broken

c. Cost is less with plastic strapping

6. Bigger customer are extremely service sensitive, small customer are price sensitive

7. Never design an organization based on product – products of same company starts competing with each other. One person from the company should deal for selling different product – giving one solution from his company. Organization structure should be based on regions and then on sectors.

8. Bundling of services to regain & maintain the customers in higher priced region

9. ITW (Illinois tool work) acquired Signode as company went bankrupt

10. Only 12 strapping contributed from a total of 510 (170 strappings * 3 grades)

Should Signode go for Price-Flex

1. Signode needs segmentation to drive the discounting model (managing customers and profitability at the same time). Price flex will allow signode to charge premium prices to the service oriented customers while low prices to customers who purchased on commodity basis. This will help signode maintain market share.

2. Post 1982 recession, Signode continued losing significant market share in comparison to its competitors as it did not offer any selective or general discounts. Its competitors Alpha and Sanford, Jersey stell and Plymouth, Bently and American Metal provided selective discounts of 5% to 10%, 10% to 15% and 15% to 20% respectively. Hence, an increase in price along with the implementation of “Price Flex” would ensure market share. Also, the increase in price would accommodate the increasing market prices of raw materials

3. Quadrant analysis of price paid Vs cost to serve provides the reasons for Signode to g ofor price flex

a. In a situation where cost to serve and price paid are either both high or low, a price increase needs to be implemented

b. In a situation where cost to serve is very high and price paid is very low, an immediate price increase is needed

c. Only the quadrant where price paid is high and cost to serve is low, no price increase should be done