Case Scenario 2: Plasco. Plasco is a $3billion U.S.-based manufacturer of flexible plastic products liketrash cans, reheatable and freezable food containers, and a broadrange of other plastic storage containers designed for home andoffice use. Historically, Plasco has been the category killerfor most of its products and has devoted tremendous resources tonew product development on an ongoing basis¾this research intensityhas allowed the company to release, on average, a new product everyday over the past five years. Despite its past strength andhigh brand awareness, Plasco’s profitability has been eroded bydramatic increases in the cost of plastic resin, the primary inputinto its plastic products. Moreover, the retail channel hasexperienced rapid consolidation resulting in a shift in the balanceof power from branded manufacturers like Plasco, to strongretailers like Wal-Mart, who in turn have been unwilling to helpPlasco absorb the higher resin costs. Enhancing Wal-Mart’s power isthe fact that it can always turn to alternative high-volume sourcesof consumer plastic products like Sterlite. Further hamperingPlasco’s recovery is the emergence of feisty little foreigncompetitors like Zig Industries, a $250 million Israeli firm thathas begun to take part of Plasco’s market share in plastictoolboxes. Ironically, Plasco was the first company to offerplastic toolboxes some 20 years ago. This innovation changedthe market dramatically and Plasco’s first mover strategy rewardedit with a rapidly growing new segment and a dominant marketposition. Today, Plasco’s toolboxes are viewed as rather boring,while Zig’s products are ingeniously designed to catch thecustomer’s eye in the aisle (better merchandising the product) andcapture their interest (and pocketbook) with many new and novelfeatures. Zig is also able to provide this new line oftoolboxes at between 10% and 15% less than Plasco.
ScholarMatic: Explanation & Answer
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