Signode Industries Inc. - Providing Packaging Solutions Executive Summary SIGNODE INDUSTRY: DILEMMA AT HAND: Mr. Gary Reed, President of Signode Industries packaging division, is in a dilemma as what he should be his course of action to meet the 6.8% increase in price of cold rolled steel- the raw material used in manufacture of Signode’s primary product, steel strapping. There are few options given in the case: Increase Signode’s strapping prices to offset the increased price of cold – rolled steel. Maintain Signode’s current book prices as increasing prices would affect sales force morale. Introduce price-flex model as proposed by Jack Davis i.e. a kind of selective discounting or premium charging for customized services. Recommendations Reason: (All data in accordance to 1983) In accordance to Exhibit 1: Sales of Packaging Division of the company = $285,950 In accordance to Table A: Sales of Apex = 33.3% of $285,950 Sales of BBM = 26.8% of $285,950 Sales of HDM = 33.4% of $285,950 Sales of Customized Products = 6.5% of $285,950 In accordance to Exhibit 4: Similarly, For Apex: As it has a capacity utilization of 71% now, Suppose a sale is $100. Then contribution is $39.15 Therefore variable cost is $60.85. Now if we increase the capacity utilization to 100%, Sales becomes $ 141 since production increases by [(100-71)/71] * 100 = 41% Variable Cost = 141% of 60.85 = $85.8 Fixed Cost = 69.38% * 12.3 = $8.53 Total Cost = 85.8+8.53 = $94.33 EBIT = Sales – Variable cost – Fixed Cost = $46.67 % of EBIT = [(46.67/141) * 100] = 33.09% Suppose the company sales 100x units, the total cost was 69.38. Thus per unit cost was .6938. Now the company sells 141x units, the total cost... ... middle of paper ... ...ales Force optimization. Outsourcing customized machinery based products. Importing raw material rather than using domestic steel. Promoting plastic strapping as a way to the future. Adopting price flex strategy so as to incorporate cost leadership and umbrella pricing. Strategically reducing number of customized products so as to reduce costs. Capitalize on the Services aspect strapping and packaging industry. Maintain and regain its lost customers by identifying their needs more effectively. Empowering sales force on account of increase in contribution margins. So to meet firm’s objective of increased profits, Signode should stimulate further volume growth by taking actions to convert nonusers into users, to increase use frequency among current users, or to expand into untapped or underdeveloped markets.
We have cumulated a profit of $206 million over this period, second of the industry. Our goal of escalating profit has advised us to increase automation level and for cutting costs, which enabled us to have the margins of all products above 30% in 2019 and an average margin of 53.4% in 2024. Additionally, we invested to keep our products updated to the market trend with an attention to customer buying criteria. Moreover, starting from recent years, we run our full capacity with second shifts whenever the market need has a possibility to accommodate our production. To achieve a greater profit, we based our pricing strategy on the market movements in general by decreasing our price by $0.50 every year except for our Low End product-Acre.
Colerick has requested pricing so that they can purchase and use our pads on other job sites. Colerick has been told CMI will give them pricing information by the end of the week. Price is the first priority which will be analyzed by cost savings to company, manufacturing costs, and break-even volume. Marketing options will also be analyzed based on the market share, market size, and sales force size.
When any increase occurred in per unit cost of fixed sweetening and packaging materials, directly that will lead to a raise in per unit cost of the finished product (coke cane or bottle). That could strongly affect the company by reduction of the total number of products sold and may lead to losing the market competition against other less expensive products, so on the contribution margin will decline immediately (even if the variable costs remain constant). An increase in fixed costs adds to overall cost. This would reduce how much the company earns from operations if the contribution margin is low. Such a small contribution ratio means that a company sh...
The sales director proposed that if the firm were to reduce the price of Item 345 to FF15.00/m, they would be able to increase sales to 175,000 units (or 25% of industry volume). But if they were to keep the price at the current value of FF20.00/m, they would be able to sell not less than 75,000 units (or 11% of industry volume).
For instance, if the company has set aside the target of producing 2,500 units with fixed cost amounting $30,000 and variable cost of $70,000. The total budgeted cost for producing the 2,500 units is $100,000 ($30,000 fixed costs + $70,000 variable cost). In this case, of Ferguson & Son manufacturing company will just look into the actual costs incurred for the production and will be compared with the budgeted costs. In this case, the quantity produced will be ignored for comparison, if in case the total cost incurred is $110,000 but produced 2,900 units, the company will mention that the ...
Huntington Ingalls Industries (Ingalls) is a Fortune 500 company that specializes in ship building predominately for the United States Navy and United States Coast Guard. It is the largest company that builds military vessels. Although the company’s lineage is full of acquisitions, mergers, and restructure, it has a 76 year history in its Pascagoula, MS shipyard and a 129 year history at its New Port News, VA location. However, Ingalls did not become the leader in shipbuilding overnight. Ingalls, at Pascagoula, has a structured hierarchy of administration, focused on learning, which leads to mastery of Drucker’s eight objectives.
The business I choose to start is a piggy bank designing company. My company makes over 100 different styles and textures of piggy banks. To produce our most popular, style the matte black stainless steel piggy bank, it cost $5 to acquire all the material it will take to make it. The market value set for a single piggy bank is set at $11. My total fixed cost including rent and utilities for my business is $4,000 per month. My cost function is C(x)= 4,000+11x. In order to get the linear cost function, I take the equation C =mx+b. There is an option to buy a piggy bank deluxe box which includes 100 piggy banks for $650. This would place the marginal cost at $5, C is equal to the total cost and x is the number of items. The slope m is the marginal cost and b is the fixed cost, ending with the equation C(x)= 5x+150.
1. Strategy in the second half of the 1980s: Having innovative, high-quality products and being a reliable, responsive supplier.
Flexible budgets make use of standard costs (based on past records or managerial judgment) for different revenue forecasts. It allows the sales manager to continuously monitor financial performance in terms of standard cost ratios. For example, the standard cost for promotion materials (brochure, display samples etc. might be Rs.5 for every Rs.100 sales or a ratio of 0.05. After nine months Rs. 400 has been spent on promotional materials while Rs. 2400 worth of revenue has been generated. The sales manager observed that the ratio has risen to 0.166. In this case expenditure on promotional materials need to cut back reasonably. In the past use of flexible budgeting was limited to large sized companies, but now small companies also are adopting flexible budgeting
In our first year we initially decided to follow a cost-leadership strategy. The principle behind this strategy is to reduce costs and we did this in four ways. Firstly we changed the supplier so the components were cheaper and we had 2 months credit. This proved very beneficial to our business as it allowed us to improve our cash flow which allowed for more investment early on into advertisement. Advertisement was also crucial in reducing our costs by economies of scale. This meant spreading our cost over an increased rate of output. E. Pertusa-Ortega, J. Molina-Azorín and E. Claver-Cortés (2008) proposed that experience is a source of efficiency so we trained ourselves in production in order to reduce these costs and effort expended . Lastly and most importantly was the product design and this is where we changed our strategy once more to focus on a particular market segment. Porter argued that strategies based on market segments needed to keep customer needs firmly in mind for long term success .
We use this strategy to set the right price for our product EasyToast in order to sell in the market. The selling price of the toaster will be RM200 per unit, it is stated that a company charge the price for the product could send a crucial message to their target market or consumers. The selling price of RM200 set by our company is determined by forecasting that what customers are willing to pay for our product EasyToast under cost-based pricing strategy. Moreover, our company could be able to maximize profit and also retaining a positive relationship with our consumers by using this
Jing T-shirt Printing Company is a young company operating in the business of supplying printed T-shirts based on customer orders and designs. In its three years of business, Jing has managed to grow its customer base and they have seen that on average, sales have increased by approximately five percent each year. For the past three years, Jing’s main customers have included sports teams, primary schools, small companies and carnival bands. Jing believes that they have become better at organizing and managing their orders and have decided to implement a strategic plan aimed at increasing sales by ten percent each year for the next three years. Jing also has plans to expand their service to include office supplies and drinkware and would like to explore the feasibility of this option over the next three years.
However, an increase in the price per unit of the product is usually not sufficient. For that reason, financial managers need to complement the approach with other strategies such as decreasing unit cost and concurrently increasing fixed cost utilization. The decreasing un...
Consumers wants, industry demands; all organizations are faced with the having to create the best new product or service to stay competitive. In the quest for the perfect products, there are a lot of issues and risks that an organization must consider. One of those is how the product or service will impact the operations and supply chain. Throughout this paper the author will show how the design of the product impacts the operations and the supply chain, the importance of design process, the connection and relationship to the production process, the strategic options, and the differences between products and services.
The outlook of the Company seems to be very progressive. The management of the Company is seriously engaged in the task of reducing overheads and other costs. Company has a vision to consolidate its position as leader in metal packaging segment.