Problem Statement

In what ways can Peak Sealing Technologies overcome the recent threat
posed to its product line by new entrants in the economy grade segment
of the sealing tape market

Background
Peak Sealing Technologies is one of the leading firms in the adhesive
industry who was recognized as a leader in quality, performance and
technological innovation. Its K2-Tape product line was known for its
patented adhesive technology and high quality materials, providing the
best sealing solutions to its customers. The product characteristics
included more durability, holding force and higher heat/cold resistance for
more challenging sealing applications. Even though it was relatively
costlier than other alternatives in the market, its value proposition
focussed on the lowest overall cost to the end user through superior
performance. End-users were mainly in packing, retail and manufacturing
businesses, with speciality customers in military supply and hazardous
materials.
There were many competitive tape products in the market. Two of its
competitors were:
Ipack: Manufactured low quality BOPP backed product. End user pricing
was often 25-35% below K2-Tape
Tensile: Manufactured economy BOPP film backed carton sealing tape.
They entered the Boston metropolitan market with great success

Issues
Even though PSTs K2-Tape offered the most advanced adhesive
technology, it still had to compete against inferior, economy grade
products such as those of Ipack. The Ipack tapes lacked K2-Tapes
strength and consistent performance, but its prices were 25-35% below
K2-Tape. Another new entrant called Tensile also posed potential threat
to K2-Tape line after its great success in Boston metropolitan market.
There were also signs of other small regional firms coming up with similar
economy tape operations.
Another issue was that, since the acquisition of a packaging systems firm
in 2009, PST realigned its sales force, shifting its initial focus from K2-Tape
products to all their current products. Due to this, some distributors
complained that PST sales team were too busy with other products and
did not spend much time servicing existing K2-Tape customers and
developing new business.
Analysing the position of PST through Porters 5 forces model:
Bargaining Power of Suppliers: It is generally low, since the supply
materials are fairly simple and easily available.

Bargaining Power of Buyers: Moderate. Sealing tape market does not

have a loyal customer base. There are many different options available.
However, PST is known for its advance technology and high quality
products and some customers value this the most because sealing tapes
are an important component in packaging and manufacturing sectors.
Threat of New Entrants: High. Barriers to entry in very low. Technology
to create packing tape is fairly simple
Threat of Substitutes: High. Even though the quality of PSTs products
is superior, there are many other options in the market for customers who
dont require the best of quality
Competitive Rivalry: High. Even though PST is a reputed company,
factors such as low prices allow rivals to break into the market easily

Management Dilemma
Because of the above issues, PST had to decide whether to stay the
course with advanced technology, high quality products or enter the
economy grade segment.

Alternatives
1. Design a new product in the economy grade segment:
This new product would utilize a simpler, non-patented formulation
with BOPP backing and would be a direct alternative to the available
economy grade products like those of Ipack and Tensile. The
production wouldnt require any major capital investment and can
be set up with minimal start-up expenses. But for a company known
as a technology leader in high quality premium grade products,
there is a chance of dilution of brand equity. Also, PST would have to
put in a lot of time and effort to position it as a good quality
economy product. There is also a chance of cannibalization of its
own product line since many customers who would buy from PST for
general purpose uses because of the brand value would move to its
cheaper alternative in the same line.

2. Stay course with advanced technology, high quality products:

The quality of products of closest competitors in the economy
segment - Ipack and Tensile were not at all up to PSTs standards.
Initial test results proved that Ipack was vastly inferior while Tensile
proved to be halfway decent for uncomplicated, regular duty
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applications. Both the products were expected to deteriorate

significantly for anything beyond undemanding regular duty
applications. Hence, K2-Tapes seem to be sitting quite well above
both the products and there may not be any implications for not
introducing a new product in the economy segment for PST.

3. Reduce the prices of existing product range:

As can be seen from Table C in the case, the margin for PST is quite
high for all its products. Hence, they could cut some margins from
the products such as RD-48 and RDS-72, which are closest to the
competitors products in terms of specs, in order to make them
more economical

Recommendations
PST should not move into the economy grade segment and continue in its
course with advanced technology and high quality products because they
are known as a premium brand and moving into the economy segment
would dilute the brand equity drastically. Moreover, its closest competitors
in the economy segment are not even close to PSTs quality standards. So,
the ideal solution would be to reduce the margins of products like RD-48
and RDS-72 a little bit and educate the customers about the ill effects of
poor quality sealing solutions through the distributors.

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