Case Study On Sealed Air Target Market Failure
Sealed Air Corporation was founded by Marc Chavannes and Al Fielding in the year 1960. Through a proven track record, Sealed Air created a Bubble Wrap product that would prove to be very successful since there was nothing like it on the market. A strength of Sealed Aire was their trademark Bubble Wrap that was engineered to reduce total packaging cost by using less material, reduce package size, and reduce loss from damage. Other strengths that Sealed Air had to rely on moving forward were the increasing e-commerce market that would drive demand for packaging, companies’ value in environmentally friendly processes, and growing possibilities in emerging markets. Additionally, in 2003, Sealed Air Corporation launched their new product, Video Tracking Identification (VTID), which would allow monitoring employees health and safety practices to prevent food contamination and reduce company liability. The product was favorable because it required low training and it was competitively priced to other existing products. Sealed Air was promoting their software product via a newly designed website, government lobbying, social media outreach, and specialized trade shows.
The goal of the company was to increase revenue and brand recognition with VTID. Competition is low in this space due to the lack of companies putting their efforts towards VTID. Sealed Air has the competitive advantage of being one of the first entrants into the surveillance and monitoring market. Threats to be aware of are technological giants that have the resources to create a VTID product line such as Amazon, Microsoft, Apple, and Google. A layer of protection that Sealed Air has created is placing a patent on their technology, providing them with sole proprietary rights on the software. Due to the competitive nature of technology, it is critical that Sealed Air becomes market share leaders in niche industries to avoid increased pressure from external companies down the road.
For Air Sealed to successfully compete against these powerhouses they should consider partnering with established surveillance companies that align with their services. Air Sealed could provide their proprietary technology while taking advantage of the infrastructure and client base the major surveillance companies have established. Air sealed primary goal at the moment is to get their product out into the market, generate brand awareness, and penetrate markets. Partnership with surveillance companies could be effective if they rent out their software per unit until they can be self-sustaining enough to have an established hardware unit across different markets. Advertising and marketing to obtain clients is an expensive investment that could be facilitated by onboarding existing customers from surveillance company partnerships.
Another viable option for collaborations would be to partner with major hardware suppliers such as Oracle and Cisco that are reputable companies. The benefits of this partnership would include cost savings on marketing and customer acquisitions. Using external hardware driven by the technology of Sealed Air VTID under contract would secure much-needed revenue while the Sealed Air’s executive team can continue to test their products in additional markets. Two contextual trends to be aware of are how financial and legal environments could alter their strategy. On financial terms, Sealed air’s financial planning is a weakness that deserves more attention because it is not being handled properly. The company is spending a substantial amount of their cash on research and development, but they have not delivered the desired results. Another weakness of Sealed Air is that they do not have competitive profitability ratios in the industry, so they must study revenue trends to capitalize on margins. Legal consideration to be aware of are the powerful legal teams’ larger companies have, allowing them to create their own proprietary technology compares to the services being offered by Sealed Air.
Another legal action being taken by the government that would help Sealed Air are the tighter federal regulation on food quality, required packing of these restaurants products was something only sealed air could fulfill at the time. The final legal forethought that is necessary is are compliance issues and government policies related to the use of raw materials. The company will need to be attentive and have the foresight necessary to avoid any federal violation that could cause substantial losses.
Segment analysis
After reviewing Sealed Air's revenue and stock performance from 2007 to 2009 it can be concluded that the drop in performance is due to sale revenues declining in 2009. The stock price dropped from $32 a share in 2007 to $9 a share just two years later. Management is to blame for this drop because they were not paying attention to the decline in food packing and food solutions revenue. They were too absorbed in developing new products they lost focus of their money maker. The Food industry in the U. S. made sales of roughly 80 billion dollars from the market. The fall in Sealed Air stock is simultaneous with a sharp decline in the food industry market, demonstrating the clear neglect by the company to their most valuable market. The food market segment has continuous growth due to globalization, but management is responsible for staying on top of market trends and not allowing another slip to occur like in 2009.
In the food preparation space, it is important to target restaurants that require a lot of manual hands-on food preparation for food such as sandwiches, pasta, or meat handling. The Food Safety and Inspection Service (FSIS) agency are strict and have the power to close down restaurants for unsanitary food handling and contamination. With the pressure exerted by the FSIS, restaurants have a large demand for monitoring and surveillance of their products. VTID is a great solution for this QRS market that fulfills the needs of ensuring employees are utilizing gloves and cooking food an adequate amount of time. In regard to employee surveillance, the food markets that should be targeted are large chains that endure substantial turnover but have the capital to invest in a long-term solution to this issue through Sealed Air’s software implementation. Turnover would decrease significantly since employees would not engage in misconduct when under surveillance.
Lastly, VTID identifies unsafe business practices and violations conducted by employees that could result in injury and large compensation packages. This software ultimately provides companies with liability protection. The meat processing and workers safety market compare to QSR in the sense that they have the same considerations to avoid food contamination. The QSR market problems originate from poor treatment of food. Quality of food is damaged due to hazardous storage temperatures. Improper cooking, and unsanitary handling practices by employees. Meat processing and workers safety markets suffer from dangerous equipment and slippery floors just like QSR markets. All markets are similar because they suffer the consequences of unmonitored employees diminishing the quality of goods sold or performing dangerous violations that can result in unsafe outcomes for the employee, the consumer, and the company.
Recommended target
Sealed Air failed to capitalize on their prior engagements with target markets due to a number of reasons. They missed out on profits due to them being a new company, having an insignificant reputation in the market, and for trying to sell a new technology that companies were not able to understand the utilization. Moving forward, Sealed Air will have more success as they are now a leader in packing service providers. They have an established reputation with a dedication for quality and sustainability that are appealing to potential customers. The segment in the QSR market that I recommend Sealed Air should pursue is the worker's safety segment. This segment will be profitable due to the substantial need companies have for reducing expenses in this area of business. Customers willingness to pay stems from VTID’s ability to identify employees who are a risk to the company. Employees who are not monitored are able to take advantage of compensation packages offered by companies. In 2004, $63 billion were spent on worker injury compensation claims, an astronomical expense to restaurants that could be avoided with VTID. The data provided specified that a large portion of injury claims turned out to be fraudulent. This is a huge problem for any company because if a worker if faking an injury or a disability, the company may need to onboard additional personnel while still paying off the “injured employee”. These incidents incur additional financial burden and a lack of productivity to companies.
Another impact to the company is that their insurance premium could be inflated as well, resulting in a long-term negative effect on the company even after employees leave the company. All of the scenarios could be avoided with an investment into VTID technology, making its cost to benefit value well worth the investment. Companies want to keep their insurance premiums low, maintain an efficient business and protect their reputation, there’s no better solution on the market than VTID.
