Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e
Back Matter Cases © The McGraw−Hill
Companies, 2002Competitors and buyers agree that PlastiForm is the top-
quality producer in the industry. Its machines have generally
been somewhat superior to others in terms of reliability, dura-
bility, and productive capacity. The difference, however,
usually has not been great enough to justify a higher price—
because the others are able to do the necessary job—unless a
PlastiForm sales rep convinces the customer that the extra
quality will improve the customer’s product and lead to fewer
production line breakdowns. The sales rep also tries to sell the
advantages of PlastiForm’s better sales engineers and technical
service people—and sometimes is successful. But if a buyer is
mainly interested in comparing delivered prices for basic
machines—the usual case—PlastiForm’s price must be com-
petitive to get the business. In short, if such a buyer has a
choice between PlastiForm’s and another machine at the same
price,PlastiForm will usually win the business in its part of the
West Coast market. But it’s clear that PlastiForm’s price has to
be at least competitive in such cases.
The average plastic forming machine sells for about
$220,000, F.O.B. shipping point. Shipping costs within any of
the three major regions average about $4,000—but another
$3,000 must be added on shipments between the West Coast
and the Midwest (either way) and another $3,000 between the
Midwest and the East.
Will Houston is thinking about expanding sales by absorb-
ing the extra $3,000 to $6,000 in freight cost that occurs if a
midwestern or eastern customer buys from his West Coast
location. By doing this, he would not actually be cutting price
in those markets but rather reducing his net return. He thinks
that his competitors would not see this as price competition
and therefore would not resort to cutting prices themselves.
David Houston, the marketing manager, disagrees. David
thinks that the proposed freight absorption plan would stimu-
late price competition in the Midwest and East and perhaps on
the West Coast. He proposes instead that PlastiForm hire
some sales reps to work the Midwest and Eastern regions—
selling quality—rather than relying on the manufacturers’
agents. He argues that two additional sales reps in each of
these regions would not increase costs too much and might
greatly increase the sales from these markets over that brought
in by the agents. With this plan, there would be no need to ab-
sorb the freight and risk disrupting the status quo. Adding
more of PlastiForm’s own sales reps is especially important, he
argues, because competition in the Midwest and East is some-
what hotter than on the West Coast—due to the number of
competitors (including foreign competitors) in those regions.
A lot of expensive entertaining, for example, seems to be re-
quired just to be considered as a potential supplier. In contrast,
the situation has been rather quiet in the West—because only
two firms are sharing this market and each is working harder
near its home base. The eastern and midwestern competitors
don’t send any sales reps to the West Coast—and if they have
any manufacturers’ agents, they haven’t gotten any business in
recent years.
Will Houston agrees that his son has a point, but industry
sales are leveling off and Will wants to increase sales. Further,
he thinks the competitive situation may change drastically in
the near future anyway, as global competitors get more aggres-
sive and some possible new production methods and machines
become more competitive with existing ones. He would ratherbe a leader in anything that is likely to happen rather than a
follower. But he is impressed with David’s comments about the
greater competitiveness in the other markets and therefore is
unsure about what to do.
Evaluate PlastiForm’s current strategies. Given Will Houston’s
sales objective, what should PlastiForm Mfg. do? Explain.Rainbow Packers, Inc.Hans Fleming, president of Rainbow Packers, Inc., is not
sure what he should propose to the board of directors. His re-
cent strategy change isn’t working. And Niels Sondergaard,
Rainbow’s only sales rep (and a board member), is so frustrated
that he refuses to continue his discouraging sales efforts. Son-
dergaard wants Hans Fleming to hire a sales force or do
something.
Rainbow Packers, Inc., is a long-time processor in the
highly seasonal vegetable canning industry. Rainbow packs
and sells canned beans, peas, carrots, corn, peas and carrots
mixed, and kidney beans. It sells mainly through food brokers
to merchant wholesalers, supermarket chains (such as Kroger,
Safeway, A&P, and Jewel), cooperatives, and other outlets—
mostly in the Midwest. Of less importance, by volume, are
sales to local institutions, grocery stores, and supermarkets—
and sales of dented canned goods at low prices to walk-in
customers.
Rainbow is located in Wisconsin’s Devil’s River Valley. The
company has more than $28 million in sales annually (exact
sales data is not published by the closely held corporation).
Plants are located in strategic places along the valley—with
main offices in Riverside. The Rainbow brand is used only on
canned goods sold in the local market. Most of the goods are
sold and shipped under a retailer’s label or a broker’s/whole-
saler’s label.
Rainbow is well known for the consistent quality of its
product offerings. And it’s always willing to offer competitive
prices. Strong channel relations were built by Rainbow’s for-
mer chairman of the board and chief executive officer Dane
Christian. Christian—who owns controlling interest in the
firm—worked the Chicago area as the company’s sales rep in
its earlier years, before he took over from his father as presi-
dent in 1972. Christian was an ambitious and hard-working
top manager—the firm prospered under his direction. He be-
came well known within the canned food processing industry
for technical/product innovations.
During the off-canning season, Christian traveled widely. In
the course of his travels, he arranged several important business
deals. His 1986 and 1997 trips resulted in the following two
events: (1) inexpensive pineapple was imported from Formosa
and sold by Rainbow, primarily to expand the product line, and
(2) a technically advanced continuous process cooker (65 feet
high) was imported from England and installed at one of the
Rainbow plants. It was the first of its kind in the United States
and cut processing time sharply while improving quality.
Christian retired in 2001 and named his son-in-law, 35-
year-old Hans Fleming, as his successor. Fleming is intelligent
and hard-working. He was concerned primarily with the com-
pany’s financial matters and only recently with marketing
problems. During his seven years as financial director, the firm26Cases 735