The case involves Sealed Air Corporation that offers protective packaging to heavy materials and also lighter materials. The Sealed Air is registered as AirCap in the protective packaging market. Sealed air tends to be facing tough competition from those companies manufacturing uncoated packaging bubbles and those selling them at a much lower price as compared to AirCap.
The major problem that Sealed Air Corporation is facing is whether it should commence manufacturing uncoated bubble operations so as to counter the new competition or whether it should continue with its strategy through emphasizing the benefits of the coated bubble technology. The solution for the problem is Sealed Air to consider introducing uncoated bubble. The rationale for this solution is that Sealed Air does have the most trained and educated sales representatives who can sell the product. Sealed Air also enjoys a status of market leader in the US, and they also have easily available resources such as investment and machines.
Based on the case study, it is clear that the customers are willing to switch between products for even a small change in price. Because of the high price sensitivity in the industry, it does provide the customers with power and not the suppliers. In the industry, when competing firms are offering similar products, the willingness of customers to switch may result from even a small price difference. Therefore, the company should succeed in offering customers with additional benefits that separate it from the competitors. Customers do create demands, and in the case of Sealed Air, they do want a cheaper substitute; thus, they decided to go to its competitors to get the cheap product. In the case of the European market, price tends to be given more importance over quality, therefore, Sealed Air must consider the best solution so as to retain its market share and also reduce any further losses.
Sealed Air is a company that is operating in a market where customers do have large amounts of bargaining power over the companies. The market segment that the company is operating is one that cares a lot about the price of products and may consider a substitute product so that to avoid the expensive products. Therefore, when Sealed Air is making its decision, it must ensure that it focuses on this market segment to determine what the appropriate decision is for the company. The two segments include uncoated bubble and coated bubble. Sealed Air faces the threat of the growth of uncoated bubble segment that tends to outstrip the coated bubble in Europe and the US.
The strengths of Sealed Air lie in its technological leadership that includes several manufacturing process patents. The company does have strong global presences and it the only marketer of uncoated bubbles in France. It has a consumer orientation, loyal distributors, knowledgeable commission-based sales force that does specialize in consultative selling, and strong sales. Some of the weaknesses that are facing Sealed Air include the product portfolio that does exclude the uncoated bubble and the fact that it overburdens its sales people. However, considering the market, Sealed Air does have a major opportunity in the market through leveraging its strength so as to enter the uncoated bubble segment. The uncoated bubble segment does prove to be a major opportunity for Sealed Air that it can explore to help profit the organization.
Sealed Air does face direct and indirect competition in the market. Astro packaging tends to be the only other producer of the coated bubbles in the US and also serves the low-end of the markets for the uncoated bubbles. GAFCEL started manufacturing uncoated bubbles in the eastern US, and it has been able to gain access to several of AirCap distributors. In the European market, Sansetsu has $6 million of sales for its high-quality uncoated products. The three competitors offering uncoated bubbles at a lower price tend to have weaknesses that put them in a vulnerable situation to a strategic attack by the Sealed Air if it enters the uncoated bubble market. GAFCEL tend to lack regional presence beyond New York, and Sansetsu lacks the financial resources and the global reach that Sealed Air have. Astro tends to be limited by the idea that Sealed Air is its license and manufactures an inferior product. The indirect competition for the company does originate from the paper-based products and forms. In the case of the Sealed Air, the company tends to be facing tough competition from the companies that are manufacturing uncoated packaging bubbles and then selling them at a lower price as compared to AirCap.
Economic value to customers
The economic value to customers works in the aspect that to get the customers to switch from other product to yours, you must give them at least as much value beyond the price that they are paying. The goal of economic value to the customer is to quantify the additional value that a product brings to customer above what they already have from their present suppliers. When considering the situation that Sealed Air is facing, it is recommended that Sealed should consider manufacturing uncoated bubble so as to be able to retain its customers and maintain its market share. Based on the values of GAFCEL presented in the case study, the price for the uncoated bubble of the height 1000 sq ft for ½ is $56. However, the preliminary estimate for Sealed Air uncoated bubble is $21 per 1,000sq ft for ½. Therefore, when Sealed Air decides to start selling uncoated bubble, it means that it will offer the same product that its competitors are selling to customers at a lower price. In this case, the economic value to customers will be $56-$21= $35. That means that by the customer purchasing Sealed Air uncoated bubble; he will enjoy $35 in added benefits. The customer will enjoy the economic value because Sealed Air does have the necessary infrastructure for manufacturing the uncoated bubble, which, means that it will not incur a lot of cost in making the product and marketing the product will not be expensive. Hence, the price for the uncoated bubble is expected to reduce; thus, selling at a much lower price when compared to GAFCEL.
The best strategy for the organization is to consider introducing a different future product. The future product that Sealed Air should focus on so as to continue being competitive in this market is to start manufacturing uncoated bubble. Sealed Air needs to address the threat that it presented because of the growth in the uncoated bubble segment. Most customers are shifting to the uncoated bubble because it is cheap. Serving the lower end of the market tends to be consistent with the firm’s customer-focused market leaders; thus, introducing uncoated bubble will see the company achieving its objective. Introducing the uncoated bubble is a good strategy that will help Sealed Air ward off the threats from uncoated manufactures. It is also a good plan because the uncoated bubble market tends to be in its budding stage; thus, it will be easier for SA to catch up with the competition. The promotion of the new product that SA will introduce must be marketed under the brand of Sealed Air so that the people can be able to relate the product with SA. Therefore having a cheaper substitute of cushioning material that comes from the same brand that did give customers the dependable coated bubble will be very welcome.
From the case study, it is clear that Sealed Air is confused on whether to enter the uncoated bubble market or to consider other reaction to its competitors. However, considering the company analysis and its strengths, the best strategy for Sealed Air is to enter the uncoated bubble market. Although entering the uncoated bubble market will shift the focus of the company to a lower margin product, it will help SA maintain its competitive position in the market as it continues to market and improve its products. There are more European suppliers who are moving to the uncoated bubble market; therefore, if Sealed Air fails to take this move, the company is going to miss the lucrative market opportunity.
Dolan, R (2016). Sealed Air Corporation. Harvard Business School.