Assignment - 2: Plastics Industries, Inc

Assignment -2
Plastics Industries, Inc.

Manufacturer of Plastic Pipe—
The Role of Personal Selling in Creating a Market
Management of Plastics Industries, Inc., was faced with the problem of promoting
a new product to the market. The company had been organized in Beaumont,
Texas, to manufacture pipe. It was founded by a group of wealthy individuals
from the community, and total capitalization had been set with the expectation of
four years of operation at a loss. By the second half of the third year of
operation, the company had made a profit, and the room for future growth
looked very promising. Nevertheless, management believed that sales were not
increasing as rapidly as might be expected in light of the clear strengths of the
product. Plastics Industries manufactured plastic pipe by the extrusion process. Its
manufacturing plant was located on the outskirts of Beaumont. The major capital
investment consisted of an extruder, designed and specially built for the company
in Germany at a cost of $250,000. The extruder was almost completely
automated, so that only minimal training was needed to operate it. A staff of two
engineers was maintained to service the machine. Polypropylene, available from
major chemical companies, was used as the raw material, and it was available
in a pellet form ready for manufacture. The finished pipe was called Plylene pipe.
The number of manufacturers of plastic pipe in the United States was small but
growing. Several major companies, such as Dupont, Shell, and Hercules,
were manufacturing or had manufactured plastic pipe. Dupont, a major
supplier of the raw materials, had produced a plastic pipe under the Delrin
brand name but recently had ceased manufacture of pipe and was buying
Plylene pipe from Plastics Industries. The use of plastic pipe as a replacement
for other types of pipe was a relatively new development. A, first major product
was polyethylene pipe, which was first introduced on the market as a
nonpressure pipe suitable for mine-drainage operations. The chemical resistance
of polyethylene made it a natural for this application; lack of resistance to acid
mine waters had caused major corrosion problems with the steel pipe formerly used.
Since that successful first, the polyethylene and, subsequently, polypropylene pipe
industry had grown at a rapid rate. Some of the major oil companies began
manufacturing plastic pipe for use in their fields. However, Plastics Industries
quickly became a major sup plier in this industry and soon was supplying twelve
major oil companies.
Galloway, president of Plastics Industries, Inc., believed that the greatest single
problem for the company, as well as for other makers of plastic pipe, was the
setting of standards of quality. A number of laboratories were available for
product performance testing. Galloway had made use of the services of the
Battelle Memorial Institute in Columbus, Ohio, a leading researcher in the field of
thermal polymers, to test samples of its product. But, until specific performance
standards were established, no industry enforcement of quality levels was
possible. Certain grades of Plastics Industries’ pipe had been tested and
accepted by the Food and Drug Administration and the Department of Commerce.
Plastics Industries maintained a sales force of three sales engineers, plus one
factory representative to sell to major industrial users. These personnel were
located in Odessa, Texas; Houston, Texas; and Tulsa, Oklahoma—all major oil-
producing centers; they had concentrated their efforts almost exclusively on the
oil industry. All orders were shipped directly from the factory, but the very high
shipping costs indicated the need for distribution and warehousing points in the near
future.
In the opinion of Galloway; the really big market for plastic pipe was in the
home construction industry. He believed that this market was potentially at least
five times as large as the present market, but so far neither the users nor
middlemen were interested in the product. The image of plastic pipe was of a
product that would easily break and, therefore, would not last as long as
conventional pipe. The lack of quality standards in the industry had done nothing
to improve the image. In addition, the building codes in most cities would have
to be completely rewritten to permit the use of plastic pipe as a substitute for
metal or other materials. Furthermore, middlemen and users required instruction
in installation of plastic pipe. It was not a difficult process—sections were welded
together with heat but the methods of cutting and welding needed to be
explained to prospective users and distributors.
Galloway felt that a possible solution to the problem of selling the home
construction market lay in advertising to the general public and to builders. He
realized that Plastics Industries was too small to advertise in many major media,
but to some extent they could benefit from the advertising of their major
suppliers of raw material in trade magazines. He planned to reach the general public
and builders through cooperative advertising on a shared-cost basis by
suppliers. He was unsure as to the role of the sales force in pursuing this new
market.
Questions:
1. What should be the role of personal selling for a product such as this?
2. What kind or kinds of promotions would probably have been most
productive for Plastics Industries?
3. Should the company go after the home construction market?
4. Would the job of the salesperson be changed if entry is made into
the home construction market?
Full Marks: 20

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