哈佛案例Signode-Industries586059p2

HarvardBusinessSchool9-586-059Rev.April15,1990ResearchAssistantDavidMayandResearchAssociateGordonSwartzpreparedthisnoteunderthesupervisionofProfessorRowlandT.Moriarty,Jr.,asthebasisforclassdiscussionratherthantoillustrateeithereffectiveorineffectivehandlingofanadministrativesituation.Thedatainthiscasehavebeenmodifiedandarenotusefulforresearchpurposes.Copyright©1985bythePresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-800-545-7685,writeHarvardBusinessSchoolPublishing,Boston,MA02163,orgoto—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.1SignodeIndustries,Inc.(A)InearlyJanuary1984,GaryReed,presidentofSignodeIndustries’PackagingDivision,waspreparinghispresentationforthenationalsalesmeetinglaterthatmonth.OneimportantelementofhispresentationwouldbeSignode’sresponsetochangingsteelprices.Justtwomonthsbefore,themajorU.S.steelcompanieshadannounceda6.8%increaseinthepriceofcoldrolledsteel—therawmaterialusedinthemanufactureofSignode’sprimaryproduct,steelstrapping.Historically,thesteelstrappingindustryhadpassedthesepriceincreasesdirectlytothecustomer.Signode’ssalesforce,however,hadrespondedtotheannouncementwithemphaticcomplaintsaboutcontinuedpricecutsbycompetitorsandaboutthecompany’ssignificantpricedifferentials.Signode’smajorcompetitor,AlphaCorporation,hadalreadyannouncedanincreaseinitsbookpricesby6.8%fora“selectgroupofcustomers.”Thesalesforce,however,fearedthatactualpriceswouldremainconstant,asAlphawasselectivelycuttingpricesinanattempttogainshare.Worriedbythecontinuedpricecutting,ReedhadvisitedeachofthethreeregionalsalesofficesduringDecember.Inthegreatmajorityofhismeetings,ReedfoundSignode’spowerfulandrespectedsalesforceclamoringfornopriceincreaseandtheauthoritytocutpricesselectively.Atonemeeting,JackDavis,oneoftheregionalmanagers,hadpresentedanideahecalled“price-flex,”whichwasdesignedtoallowsalesrepresentativestoselectivelydiscountthebookpriceforsteelstrappingconsumablesbyasmuchas7%inordertomeetcompetition.Davismaintainedthatprice-flexwouldallowSignodetocontinuechargingpremiumpricestoservice-orientedcustomers,whileloweringpricesforthosecustomerswhopurchasedonacommoditybasis.Davisalsoarguedthatignoringprice-flexoranothercompetitivepricingplanwoulddestineSignodetofurthermarketsharelosses.ReedknewthatDavishadapoint.Thoughthecompanyhadbeenthemarketleaderinthesteelstrappingbusinessfor25years,thepastdecadehadseenSignode’smarketsharedeclinefrom50%in1977toitscurrent40%.Fromthisperspective,theproposalwasveryappealing:withprice-flextomeetcompetitiveconditions,Davisandthesalesforcepromiseda5%to10%increaseinSignode’smarketshare.However,Reed’sresponsetotheprice-flexproposalwasalsoconstrainedbycorporatefinancialneeds.Signodehadrecentlyundergonealeveragedbuyoutthathadincreaseditslong-termdebtby$300million.Inaddition,thecompanyhadaggressiveplansfor586-059SignodeIndustries,Inc.(A)2acquiringandgrowingnewbusinessesintothe1990s.Withhighdebtandnoaccesstopublicequitymarkets,SignodeneededthedomesticPackagingDivisiontogenerateasmuchcapitalaspossible.Reedplannedtousetheannualsalesmeetingtoaddressthesalesforce’sconcernsaboutcompetitivediscountingandmarketshareerosion.HealsowantedtoannounceSignode’sreactiontosteelpriceincreasesandhisdecisiononpricingpolicy.CorporateBackgroundIn1983SignodeCorporationhadsalesof$658,737,000andwas,asnoted,themarketleaderinthesteelstrappingindustry.(SeeExhibit1forcorporateandpackagingdivisionfinancialinformation.)Thecorporationhadstartedin1914astheSealandFastenerCompany,producingandmarketingpatentedsteelstrapjointsandapplicationtools.Inanattempttoestablishstrongbrandrecognition,thecompanychangeditsnametoSignode,fromtheLatinsignus,meaningseal,andnodum,meaningjoint.SignodepurchasedfinishedsteelstrappingfromsteelmillsandthensolditdirectundertheSignodename.ThoughthesteelstrappingindustryhadaverydifficulttimeduringtheGreatDepression,Signoderespondedtothedifficultbusinessenvironmentbyincreasingtechnicalassistancetoitscustomers.WiththeendofWorldWarIIandthroughthe1950s,Signoderegisteredstronggrowth.Itreducedcostsbybackwardintegrating.Whereasitoncehadpurchasedthefinishedstrapping,Signodebeganpurchasingtherolledsteel,thenslitandfinishedthestrappingitself.Signodeincreaseditsresearchanddevelopmentefforts,developingautomatedandair-poweredstrappingtools.Itopenednewregionalsteelstrappingplantsandsalesofficestoimprovecustomerservice.Inconjunctionwiththesedevelopments,Signodealsodoubledthesizeofitssalesforceandbecamethemarketleader.Duringthe1960sthecompany’sprosperitywasbased,inpart,onthegrowthofthecottonandbrickindustries.In1962Signodeaddedplasticstrappingtoitsproductline.Throughthatdecadeandintothe1970s,Signodegrewthroughacquisitionandtheconsolidationofitsoverseasmarkets.Duringthe1982recession,withitsstockpriceundervalued,SignodeattractedtheattentionoffamedtakeoverspecialistVictorPosner.De