Case analysis: Signode Industries

Case facts:
 Signode is the market leader, but its market share declined from 50% to 40% from 1987 to 1993.
 Raw Material prices has increased by 6.8% which represents 70% of the cost of steel systems.
 Some of the competitors have already passed the price on to the customers.
 Signode offers higher level of service than its competitors and yet are not price sensitive (have a blanket
price).
 Selective cost cutting was being executed by Signode’s major competitors; hence price flex policy was being
proposed within SI.

Case analysis:
The case needs to be analyzed based on these criteria – Impact on profitability, market share, sales force and customers.
There are 4 possible combinations of the decision that Signode can take, all of which are analyzed below based on
above-mentioned criteria.

The 1st strategy wherein SI introduces price-flex policy and passes the price to customers, although impacts the
profitability to a larger extent but at the same time stands out positively on other parameters. Also, the contribution lost
can be to an extent recaptured by the increased market share.

Conclusion:
Signode’s decision to adopt flex pricing strategy is justifiable in view of price sensitivity of market where in the current
situation, customer retention is of high importance. The strategy will help the company achieve the desired growth in
market share. Again, the 6.8% hike in prices should be passed on to the market in continuation of the earlier trend. This
is because SI being a market leader, the pricing decision made by SI will be adopted by the competition as well, and will
impact industrial margins in the long run as customers will be expecting future price increase in raw material to be
absorbed by the processors.