American Box Company Case Analysis
EXECUTIVE SUMMARY
ABC is into the manufacture and sales of corrugated cardboards and has witnessed losses for 5 years in a row. The company is looking for a solution to increase its profits and make the business sustainable. Profitability is high in the direct sales but company makes losses in the sales through representatives due to high commissions and high transportation costs. The growth of the cardboard market is stagnated and the packaging industry is moving towards a substitute for cardboards. It is recommended that only direct sales should be continued along with diversifying into the manufacture of plastic products for packaging.
(TOTAL WORDS: 100)
SITUATIONAL ANALYSIS
The American Box Company (ABC), Boston, headed and inherited by Bob Hamilton, dealt with manufacturing and sales of corrugated cardboards and cardboard boxes and had witnessed a drop in its revenues for at least 5 years in a row. ABC’s market share in the corrugated cardboard segment of the cardboard market which also included the pressboards segment increased insignificantly from 7.28% in 1988 to 8.18% in 1992 (EXHIBIT 1). Concentration of the industry was also witnessed as one of the largest competitors increased its share from 8% in 1983 to 21% in 1991 via acquisitions. ABC’s distribution chain included direct forces for sales within Boston and independent representatives for sales outside Boston. The cardboard market as a whole showed stagnant sales revenues for the period from 1988 to 1992.
PROBLEM STATEMENT
ABC’s revenues and profits are declining year after year and it will be difficult to sustain the profitability of the business. Within the cardboard industry, the pressboard is replacing corrugated boards where as the cardboard industry as a whole is being replaced by substitutive products in the packaging industry.
CAUSES
The decline is revenues are attributed to the falling size of the cardboard industry but the significant fall in profits are a result of the high
ABC is into the manufacture and sales of corrugated cardboards and has witnessed losses for 5 years in a row. The company is looking for a solution to increase its profits and make the business sustainable. Profitability is high in the direct sales but company makes losses in the sales through representatives due to high commissions and high transportation costs. The growth of the cardboard market is stagnated and the packaging industry is moving towards a substitute for cardboards. It is recommended that only direct sales should be continued along with diversifying into the manufacture of plastic products for packaging.
(TOTAL WORDS: 100)
SITUATIONAL ANALYSIS
The American Box Company (ABC), Boston, headed and inherited by Bob Hamilton, dealt with manufacturing and sales of corrugated cardboards and cardboard boxes and had witnessed a drop in its revenues for at least 5 years in a row. ABC’s market share in the corrugated cardboard segment of the cardboard market which also included the pressboards segment increased insignificantly from 7.28% in 1988 to 8.18% in 1992 (EXHIBIT 1). Concentration of the industry was also witnessed as one of the largest competitors increased its share from 8% in 1983 to 21% in 1991 via acquisitions. ABC’s distribution chain included direct forces for sales within Boston and independent representatives for sales outside Boston. The cardboard market as a whole showed stagnant sales revenues for the period from 1988 to 1992.
PROBLEM STATEMENT
ABC’s revenues and profits are declining year after year and it will be difficult to sustain the profitability of the business. Within the cardboard industry, the pressboard is replacing corrugated boards where as the cardboard industry as a whole is being replaced by substitutive products in the packaging industry.
CAUSES
The decline is revenues are attributed to the falling size of the cardboard industry but the significant fall in profits are a result of the high