Q. Should Signode Industries implement price flex
The decision about what product features to offer and what price to charge is one that is faced by every firm and every marketer. This decision hinges on many factors the business environ, the anticipated reaction of competitors, the effect to your bottom line as well as the wants of the customer. In 1984 Signode industries was face to face with such a dilemma from being market leaders they were staring at an abyss which was pulling them down their market share was eroding and their profitability levels were sinking fast and they were finding it extremely difficult to remain competitive and maintain their position in the steel strapping industry. Background:
Over the years the competitors in the industry had stabilized their market position and relative price separation they were offering stiff competition with ruthless price cuts and aggressive growth strategies. Signode was able to maintain its leadership by offering more services than any of its competitors but it was doing this at a high cost to its profitability. Signode had the highest share and the highest average price in the industry, it differentiated itself from its competitors by offering special grade strapping and providing service which the competitors were not providing but times were changing and their was a paradigm shift in so much as the quality of strapping offered to the market was now equal for all competitors. The strategy of its competitors was to price their strapping at a consistent discount to Signode and although their products were undifferentiated they were soon breathing down heavily on Signode's neck because the change in the business environ was to appreciate price discounts above service. In this changing scenario Signode has to change itself or perish - the question is should it change its pricing or its product offering or a combination of the two in a two-dimensional, vertical differentiation model....
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