Case | HBS Case Collection | March 1982 (Revised September 1985)
Sealed Air Corporation
by Robert J. Dolan
Market leadership and technological innovation have marked Sealed Air's participation in the U.S. protective packaging market. Several small regional producers have introduced products which are less effective than Sealed Air's 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. Raises product line management issues, particularly cannibalization, and affords the opportunity for the development of a marketing plan for any new product introduction. Software for this case is available (9-587-513).
Keywords: Product Marketing; Product; Technological Innovation; Supply and Industry; Competitive Advantage; Consumer Products Industry; United States;
Do, Ngoc Chau
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Other assets 12.6 5% 14.9 6% 17 7% 230.2 100% 257.3 100% 228.2 100%
: After WCM, the company
’s goals based on EPS was replaced by EBITDA,
inventory turnover, receivables and working capital. The managers now have to consider much more about cash flow and cash flow from operations become more important because they need to increase sales, decrease inventory, capital expenditures and boost the collections process.
Strategic change in management is necessary because Sealed Air former organization and operation revealed lots of problems: running out air cellular patent, competitive tension, underperformed factories, long inventory turnover, inadequate quality control
Regardless of their inefficient manufacture, they still have high margins because they priced their products based on customers
benefit instead of cost driving. And because their patents are innovative and widely used while there were not many rivals in the market, the benefit to customers seemed constantly high.
c, Internal changes:
- Changes at Packaging Products Division: increase in the productivity from 1 item/day to 8 items/day, no more unsold products. They use short production runs so that the process control is better but also it requires more expenditure in machinery maintenance to keep tracks with orders. - Changes at Food Packaging Division: Operators and employees are inspired and motivated with training, discussing and suggestion rewards leading optimistic changes in quality, productivity and employees
2, Free cash flow:
a, Free cash flow
(FCF) is cash flow generated by the firm in excess of that required to fund available positive net present value projects or the amount of cash that a company has left over after it has paid all of its expenses, including net capital expenditures. Net capital expenditures are what a company needs to spend annually to acquire or upgrade physical assets such as property and machinery to keep operating.
Free cash flow
= cash flow from operating activities - net capital expenditures (total capital expenditure - after-tax proceeds from sale of assets)
b, the organization problems
of FCF are the conflicts of interest between shareholders and managers especially when ample of FCF are generated. The shareholders goals are profit so they may want to use FCF to invest in risky projects while managers may invest it in low return