Option 2 would be to further expand PST’s product line to include an economy grade tape that would meet a more basic demand and target those in a price sensitive demographic. Extensive research has been conducted on production requirements and cost estimates that the head of manufacturing confirmed would be doable in their Atlanta plant. There is suitable equipment, and not only does it have the capacity to support the new product, but could “ramp” up fairly quickly. They even estimated a variable cost of the potential product being $80.75 per 50m, 36-roll case as a competitor to Tensile’s Ecoslim tape and $107.95 for a competitor to Ecoplus Wide. It could provide a potential threat for Tensile due to its similar price comparison but PST’s version having a simpler, non-patented adhesive formulation with BOPP backing. This could still be risky due to the potential ramifications of tape failure from the excessive heat or cold which could result in tape brittleness, shrinkage, adhesive decomposition, and other degradation of sealing properties. Not only would this hurt the company in sales, but also cause customer dissatisfaction, which could hurt their reputation as an industry leader.Recommendations and Implementations: After analyzing the situation in the case, it seems that Option 1 would be the mostbeneficial in providing the most foreseeable outcome to benefit Peak Sealing Technologies. Financially speaking, they are generally well off as is with their K2-Tap products generating $15,894,849.90 in sales. This was determined by multiplying each grade, January-June 2012 Case Sales by the PST Dollar Margin, and then summed the 2
totals together. For example, by taking the GP-48 grade case sale of $12,929 and multiplying it by the PST dollar margin of $25.45, you would get a total of $329,043. This was done again for all the other grade of tapes and added together to generate the total. Alternatively to producing the economy grade product, I believe there are still things that can be done to increase PST’s sales and generate an even greater profit for the company. These are some recommendations I would suggest: 1.Centralize their marketing strategy by focusing in on one tape that could substantially impact sales: GP-48 Tape. a.Implement: GP-48 tape is a general-purpose tape that PST uses as a more price competitive option for those customers with less demanding needs.
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- Spring '14