Seneca Paper Company

Group A-5
Ashish Chetan Minz, B Sekhar Anand,
Praneeth Doguparthy Kanika Orea,
Sanket Sunand Dash Sounak Sarkar,
 Industry Analysis: Porter 5 Forces
• Supplier: Most major players were integrated firms
supplying their own raw materials. No evidence of high
supplier pressure.
• Consumer: Consumers were highly price-sensitive and
responded positively to brand advertising and promotion.
• Threat of new products: No evidence available
• Threat of new players: The entry barriers to the industry
were low and hence this was a significant factor
• Market competition: Market competition was high with the
sector plagued by low capacity utilization and price wars.
Market leader has only 15% market share
 Pricing models
Type of Pricing Circumstances where applicable

Cost –based pricing The firms add a pre-defined margin

to the cost base
Value-based pricing The product is highly valued by
customers who is ready to pay a
premium
Competitor-based pricing Pursued in a highly competitive
market; usually the cost is set by
market leader
 Product and firm characteristics
• Low differentiation among different players
with near uniform prices
• Product sold in three segments:
– Third grade
– Standard
– Super-standard
• Seneca is a major player in the market and
introduced third-grade tape
 Seneca’s current situation
• Announced a 60 cents price increase across all
segments to boost lowering profit margins
• Price increase was deferred by 60 days. Phoenix,
Fletcher and some small and medium players in East
reciprocated the move
• Phoenix medium sized competitors in the Midwest
region removed the third grade product without
revising prices of other products
• Compton discontinued an unbranded product. Started
selling its Atlas product at Seneca’s revised third grade
price and introduced Guardian at Seneca’s standard
grade price
 Pricing History
• Market leader Phoenix reduced prices twice,
in November 1995 and March 1996, to
respond to competitor pricing pressures
• Industry followed Phoenix moves
• Industry uses cost-plus pricing and
competitor-based pricing
• Pricing pressure is due to excess capacity that
reduces the incremental cost of additional
production
 Future Trends
• Due to overcapacity and the presence of