Thursday, February 2, 2012

sealed air corp.

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Decision


Market leadership and technological innovation have been the key forces for Sealed Airs success in the U.S. protective packaging market. Several small regional producers have introduced products which are less effective than Sealed Airs but similar in appearance and cheaper. The company must determine its response to this new competition. Feasible options range from doing nothing to introducing a new product. Introduction of the new product i.e. the uncoated bubble raises big issues


• Product line management issues


• Development of a new marketing plan


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After reading the case we believe that Sealed Air Corporation is at an advantage if they continue with the coated bubble packaging market. This will lead to Specialization which will lead to better products and better services to customers. Following are the factors that have aided us in our analysis to arrive at this decision


S.W.O.T Analysis


From the S.W.O.T analysis (please refer to exhibit A), we have understood that Sealed Air will have to work on their weaknesses and further develop their strengths. Therefore; we would advise Sealed Air Corp. to concentrate on their marketing strategy especially educating their consumers about their products. For the first time, shippers could create just-in-time packaging. Instapak packaging also addressed issues of material cost, space savings, and efficient material handling, as well as, helping many companies control freight expenses.


Nature of demand for the product


From the case we understood that the consumers preferred coated packaging material, i.e. the quantity demanded was high. This can be clearly understood by the following facts


• In 180 Astro’s sales were approximately $10.5M compared to Aircap’s Cushioning’s $5.5M.


• Despite the high cost sealed air managed to capture 0% of the U.S. market share.


The company should take advantage of the high demand for its product in the coated bubble market instead of being “Jack of all, master of none!”


The following Financial Analysis will help us understand how the company will benefit with respect to its costs and profits if they continue to remain in the coated bubble market.


Financial Analysis


After looking at the financial statements alone, the figures suggest that staying in the coated bubble market would be the most profitable. Sealed Air Corporation has a market advantage in the coated market because of its experience and already established competitive advantage. The following chart shows that sales have increased steadily over the time period being studied. If they continue with their current market strategy, future sales will continue to rise.





Sealed Air corp. clearly has a market niche in the coated bubble industry. Studying their variable costs suggests that processes and procedures would have to be changed since costs will be lower for an uncoated bubble product. This can change the way fixed costs are utilized in a company. Preliminary estimates include that manufacturing of the uncoated product will take place in the same plant as the coated product. The following chart clearly illustrates that the variable costs of the two products are quite different.


Grade Sealed Air


(uncoated bubble)


Variable Costs


Sealed Air


(coated bubble) Variable Costs


SC � 10 (/16 in.) $1 $0.56


ST � 10 (5/16 in.) $0 $0.65


SD � 10 (1/ in.) $1 $6.1





Using the financial statements, fixed and variable cost analysis, and current trends and future predictions, Sealed Air Corporation’s original strategy seems to maximize profit and at the same time minimize risk. More detailed information about the competitor’s and Sealed Air’s uncoated bubble product would need to be available to give a more accurate decision. Sealed Air Corporation would have to be competitive in its uncoated bubble products to make sure it does not hurt the competitive advantage of the coated product before any further manufacturing decisions could be made.


Problems Sealed Air faced in the uncoated bubble market


• Competition


For the past ten years, Sealed Air has led the market in packaging materials. This will change as they unexpectedly face other competitors in the market (during the 180s), who are creating imitation products of Sealed Air’s patented AirCap packaging material at better rates.


• Inadequate Use Of Manufacturing Plant


In response to its uncoated bubble producing competitor, GAFCEL, Sealed Air operated machinery previously used for coated bubble manufacturing, to make non-coated bubble cushioning. By doing this, Sealed Air limited their output of their most successful product line�their coated bubble cushioning.


• Poor Channel Of Distribution


With all the competition entering the market, consumers are easily confused. Two problem areas for Sealed Air are as follows 1) the lack of training provided to sales reps, and ) the use of complex brochures as displayed in the case on pages 8-. It shows AirCap bubbles, but what about Instapak and lighter weighted packaging materials? The most direct way a potential customer would learn about Sealed Air would be through word-of-mouth, and the mailing of/handing out of a sales brochure by the sales rep (the internet wasn’t around). An effective brochure would display information to be sensitive to all types of potential consumers�not everyone wants to read scientific data such as “cushioning curves”. If I were a consumer, in addition to showing a side by side analysis of the bubble types, I would want a more simple-to-read chart, showing what it was that I wanted packaged. Also, Sealed Air needs to promote its quantity discount, which should appear in the brochure.


EXAMPLE OF BROCHURE


Recommended


Package Weight Package Type/Example Sealed Air Product Price


1-5 lbs 50 cassette tapes, light Flexible Wrap .40 / sq ft


office & medical supplies,


glassware


PLEASE INQUIRE ON OUR QUANTITY DISCOUNTS AVAILABLE!


• International Market Troubles


Sealed Air was losing its European coated market share to its alternative�the uncoated bubble cushioning�due to the cheaper cost of production. The attempt to go international deemed unsuccessful due to inability to differing needs of the consumer, failing machinery, and the realization that consumers were heavily price conscious. As the only manufacturing company selling a coated product overseas, a better market analysis should have been done to determine if coated products were in demand. In addition, the international sales team most likely also needed further training.





• Distribution


In each of its 15 first-line distributors, Sealed Air attempted to be the distributor of its entire product line. This appeared non-productive, especially since the largest 0 distributors carried a third of the business.


Strategic Recommendations


Our recommendations are to improve the problems within Sealed Air Corporation is to pursue an international diversification strategy that emphasizes marketing campaigns through advertising slogans which keeps the European coated market alive. The company does provide different product offerings, to an extent depending on location; however it is equally important to market toward cultural values and not concentrating solely on satisfying different tastes once patrons are already in the establishment. One way is Senior Level Management needs to train the International Sales Team to handle customers better. This will help to implement effective marketing strategies in their respective countries. Another way is to recruit International Sales Managers who can work and train their representatives so they can know the different product offerings. The third way is to educate the shipping companies because they are the ones to whom packaging makes a lot of difference. This would work as an indirect marketing strategy. Once the shipping companies understand the advantages of the coated packaging material they would “demand” the individual customers like FedEx and DHL to pack their products in coated material.


• How Sealed Air can be better than their competitors?


The way Sealed Air can be better through their competitors is through Advertising. Advertising is a great way where Sealed Air can be better than their competitors. If they advertise through radio, internet television, billboards, magazines, work on direct marketing, send out brochures, sales literature, and catalogs they will beat out their competition. An example of this is sending out a marketing research questionnaire out to individual customers such as packaging companies like FedEx and DHL. Following up on calls for the product is the best way. Another way is if their sales representatives make outbound calls to the customers to get a feedback of their products.


• How Sealed Air can effectively use their manufacturing plant?


We think that if Sealed Air produces coated as well as uncoated packaging material, it will not be able to do justice to both. As a result profits will get affected. It would be better to focus on one product which they are good at and make efficient use of their plant.


• How Sealed Air can improve their channels of distribution?


Either through a Direct Channel or an Indirect Channel (Please refer Exhibit B). Educating and motivating marketing intermediaries such as wholesalers, distributors, brokers and retailers is very important. Using a computer system module will help sales representatives understand the process better. An example of this is checking shipping inventory within a system. The computer system module will help determine patterns better and this will help salespeople perform better at all distribution levels.


Exhibit B


Channel Structures for Industrial Products


Producer Producer Producer Producer











Direct Distributor Agent/ Agent/


Channel Broker Broker/


Distributor


Agent/


Broker


Distributor Agent/


Broker Wholesaler


Distributor


Consumer Consumer Consumer Consumer


Conclusion


Based on our complete analysis of the situation facing Sealed Air Corporation we have concluded that Sealed Air is at an advantage if they continue with the coated bubble packaging market. We found that there is increased competition where competitors are creating imitation products of Sealed Air’s patented Aircap Packaging material at better rates. The channel of distribution needs a major face lift. A better market analysis needs to be done for international markets. Sealed Air should counter the inefficiency in these areas by adopting a feasible marketing strategy.





To ascertain their consumer’s needs Sealed Air should conduct a satisfaction survey (like a questionnaire) i.e. a postcard included in the shipment for the consumer to mail back. This will not only enable the company to learn the needs of the consumers but also help the company to mould or change its product as per their needs. This will help the product to remain at the peak stage of the product life cycle theory.





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