Corrugated Box Industry
CASE STUDY: EDMUNDS CORRUGATED PARTS AND SERVICES. Larry Edmunds grimaced as he tossed his company’s latest quarterly earnings onto his desk. When Virginia-based Edmunds Corrugated Parts & Service Company’s sales surged past the $10 million mark a while back, he was certain the company was well positioned for steady growth. Today, the company, which provided precision machine parts and service to the domestic corrugated box industry, still enjoys a dominant market share and is showing profit, although not quite the profit seen in years past.
However, it is no longer possible to ignore the fact that revenues were beginning to show clear signs of stagnation. More than two decades ago, Larry’s grandfather loaned him the money to start the business and then handed over the barn on what has been the family’s Shenandoah Valley farm to serve as his first factory. Today, he operates from a 50,000 square-foot factory located near I-81 just a few miles from that old barn. The business allowed him to realize what had once seemed an almost impossible goal: He was making a good living without having to leave his close-knit extended family and rural roots.
He also felt a sense of satisfaction at employing about 100 people, many of them neighbors. They were among the most hard-working, loyal workers you’d find anywhere. However, many of his original employees were now nearing retirement. Replacing those skilled workers was going to be difficult, he realized from experience. The area’s brightest and best young people were much more likely to move away in search of employment than their parents had been. Those who remained behind just didn’t seem to have the work ethic Larry had come to expect in his employees.
He didn’t feel pressured by the emergence of any new direct competitors. After slipping slightly a couple years ago, Edmunds’s formidable market share – based on its reputation for reliability and exceptional, personalized service – was holding steady at 75 percent. He did feel plagued, however, by higher raw material costs resulting from the steep increase in steel prices. But the main source of concern stemmed from changes in the box industry itself. The industry had never been particularly recession resistant, with demand fluctuating with manufacturing output.
Now alternative shipping products were beginning to make their appearance, mostly flexible plastic films and reusable plastic containers. It remained to be seen how much of a dent they’d make in the demand for boxes. More worrying, consolidation in the paper industry had wiped out hundreds of the U. S. plants that Edmunds once served, with many of the survivors either opening overseas facilities or entering into joint ventures abroad. The surviving manufacturers were investing in higher quality machines that broke down less frequently, thus requiring fewer of Edmund’s parts.
Still, he had to admit that although the highly fragmented U. S. corrugated box industry certainly qualified as a mature one, no one seriously expected U. S. manufacturers to be dislodged from their position as major producers for both the domestic and export markets. Edmunds was clearly at a crossroads. If Larry wanted that steady growth he’d assumed he could count on not so long ago, he suspect that business as usual wasn’t going to work. But if he wanted the company to grow, what was the best way to achieve that goal?
All he knew for sure was that once he decided where to take the company from here, he would sleep better. QUESTIONS 1. What would the SWOT analysis look like for this company? 2. What role do you expect the Internet to play in the corrugated box industry? What are some ways that Edmunds could better use the Internet to foster growth? 3. Which of Porter’s competitive strategies would you recommend that Edmunds follow? Which of the strategies do you think would be least likely to succeed?