Curled Metal Inc.—Finding the Perfect Price Brief Description of Company and the Situation Curled Metal Inc. (CMI) specializes in selling metal-based products to various markets. With over $55 million in annual sales (FY 2007, Exhibit A), they’ve managed to capture 80% of the automobile industry’s market share by developing and selling a highly specialized product, Slip Seal, designed just for auto manufacturers. They’ve seen a recent slip in sales (a loss of nearly 10% from 2006 to 2007, Exhibit 2), and the pressure is on them to diversify their product line and decrease dependence on the auto industry. They’ve recently developed a new product that aims to revolutionize the pile-driving industry. The introduction of the CMI Cushion …show more content…
The savings for the customer, however, comes from the savings in labor costs. Estimating a total of $714 labor costs/hour (Exhibit A), the approximate labor savings totals $5.08/foot driven (using Sanwal’s conservative estimates of 292,000,000 feet driven per year, page 5). Comparatively, CMI pads result in only $3.57/foot driven. On a job of 15,000 feet, the difference in value is $22,650 in saved labor costs alone. Consequently, a customer should be willing to pay $5.28/foot driven for the CMI Cushion Pads (see Figure 4). With this value-added, CMI can charge up to $2,837 for one pad, which would make the price exactly as much as the cheapest competitor (including labor costs). With that price, CMI would only have to sell 21,854 pads (which would service approximately 12% of the market, a feasible goal for CMI’s entrance) to make $62,000,000.00 (VP Joseph Fernandez’s approximate sales goal). The recommended CMI price, however, is $1986.34 (which is the value-capturing price of $2,837 with a 30% reduction). With an estimated 292,000,000-390,000,000 driven feet per year, the pile-driving
industry is large enough for many sellers. CMI’s foray into this industry is new, however; in order to develop clientele, CMI should cultivate several segments (namely, the large engineering contractors, consulting engineers, and independent contractors), in addition to a media blitz
The Decisions the company needs to take are what price should be charged for it, and how to market it to the costumers (channels).
The Mace Group Ltd was formed in 1990 by a small team of construction professionals in London, United Kingdom. It has over 4,000 employees. The company has three strategic sectors serving clients in the private, public and infrastructure sectors and five strategic hubs in Europe, Middle East & North Africa, the Americas, Asia Pacific and Sub-Sahara Africa that service over 70 countries. By the end of 2013, there were 214 operations directors, 82 directors and yearly turnover was 2.5 billion dollars. Today Mace is an international consultancy and construction company, offering integrated services across the full property and infrastructure life cycle. In North America area, Mace provides project management, cost consultancy and facilities management services across the country. It has regional hubs in New York, Newark, Atlanta, Chicago and San Francisco. In Engineering News Record’s Top 250 Global Contractors List for 2014, Mace has been ranked 10th in the list of top 20 non-U.S firms in international construction management and programme management fees, 9th in the list of the top 20 non-U.S. firms in total global construction management and programme management fees and 166th in the overall list of top 250 international contractors.
Even though it does not look very important part of the driving pile, the new cushion pad of Curled Metal Incorporated (CMI) can provide remarkably advanced performance in all its aspects. Its durability allows the equipment to finish the job which required 20 sets of conventional pads with only one set of CMI pads. It also allows the pile to drive much faster with less weight and less heated. In order to set an appropriate price of the product, I have considered the minimum price that is calculated from CMI’s cost, and the maximum price that is calculated from customer’s willingness to pay (WTP).
Those group of customers are the ones with the highest value received and a premium pricing should be done. The cons for that strategy will be the hesitation of renting companies who are willing to increase the rental period and may also offer pads included renting to prevent the usage of the CMI pads.
Prepared by: Emma Ryks, Harprit Aujla, Kevin Wong, Patrick Moez Bokhari Optimus Consulting: We Transform Your Business
Situation analysis: CMI is looking to diversify its portfolio. It wants to introduce a new high performing cushion pad into the pile-driving market. CMI will initially target small engineering/construction and independent pile-driving contractors. CMI will have the first-to-market advantage, as there are currently no direct competitors for metal pads. In terms of channels, CMI would distribute its pads through manufacturing representative.
Curled Metal Inc (CMI) is a company whose strategy evolves selling products that used certain types of metal as a raw material. CMI rapidly grow in the last decade due to Slip-Seal, a product that meet the demanding specification of the automaker imposed by US strict environment legislation. In order to diversify offer from auto industry, CMI’s management decided to examine a new application for curled metal technology.
CMI was first manufacturer for CM pads, there was no direct competition and no available selling price in the market that CMI can take reference to. In view of that, CMI could use two test results of Kendrick and Corey to determine the economic value of CM pads. According to the Appendix I, the average economic value of CMI pad was 3,304. This value had taken into account of less CM pads required per job and the cost saving in equipment and labor . But the value to the customer should be higher due to some intangible advantage, for examples, lower accident claim as fewer set changes required for CM pads. Besides, lower health claim as CM pad contained non-toxic material. In order to gain the market share for this new product, we would recommend CMI to set the price of CMI pad around 85% of economic value, saying 2,805, promote to the market that it was much cheaper to use CM pads with superior performance and cost efficiency. Besides, different discounts can be granted to the customers depend on the length of the contracts signed and volume of the pads purchased, ranging from 10% to 25%.
Cumberland Metals Industries developed a new type of cushion pad for pile drivers made of curled metal. The 11.5 inch “Cumber-Coil” was tested by two different companies on two different projects and was found to far exceed the performance of the existing market-dominant product, the asbestos pad. The Cumber-Coil weighed half what the asbestos pad did and boasted a 33% faster driving time, 60% reduction in heat generated, and 400% less time wasted changing pads.
The Roofing Contractors industry has a “low level of market share concentration, with the top four operators accounting for 6.9% of total industry revenue. While the largest industry operator, Flynn Canada, Limited commands 5.4% of the market, typical businesses account for under 1.0% of total revenue. According to Statistics Canada, most roofing contractors (51.1%) employ fewer than five people, while an estimated 97.1% have fewer than 50 workers” (Roofing contractors in Canada: Market research report, 2016, para 3).
The value of CMI may be evaluated positively but not all share the same estimate of value. At first, customers will be positive because their EVC is $1,904.16. Channel members would also be positive. They can get more margins because CMI pad is much more expensive than asbestos pad. Also architectural/soil consultant can construct fast and easily because CMI pad 's quailty and safety is better. In place of Engineering/construction contractors and independent pile-driving contractors, it will be estimated positively because they want to construct safely and fast. However, Pile-hammer distributing/renting companies make profits from rental fee. So when constructors reduce construction times using CMI Pad, their profits also be removed. So they are going to estimate negatively on CMI pad 's
Consulting covers an extremely broad range of topics, businesses, clients and fields. However, Bremmer has somewhat of a bias towards writing this article; he is a consultant trying to sell his services to others by making these “new rules” seem more complicated than they truly are.
In construction projects, mostly the firms (in this case the firms become client) do not have the skills or develop skills inside the firms to undertake the projects due to amount of the projects should be conducted or the complexity of the projects (Reve and Levitt, 1984). Therefore, the economic decision to conduct the projects is to procure them to third parties. However, more commonly the client agonize the final quality of the projects will meet standard requirements. Thus, impacts to involvement of complex contracts of construction procurement.
Automotive Builders, Inc. (ABI) is a company that consistently changed its production lines and strategic goals relative to the needs of the times, starting out producing diesel engine parts for tractors in the 1940’s, switching over to the production of parts for military vehicles during World War II, and then, after the war, settling into its current placement in both the automobile and tractor industry. Due to the downturn in the economy and stiff and superior competition in both quality and price rising up from the Japanese who had recently entered into the industry, ABI is trying to find productive and innovative ways to improve sales and guarantee placement as the number one company in its
Since our dependent variable (buyer contract) is a binary variable, we estimate a logit model with robust standard errors (Equation 3). is the latent utility a buyer i infers from project j. captures the effect of BPD on the buyer’s contract decisions. is a vector of the average freelancer’s characteristics like average experience, mean quality rating (control variables that affect the DV), and quality dispersion (potential confounding factor that affects both the DV and BPD). The freelancer’s average experience and mean quality rating represents the average quality of the freelancers that a project attracts. A buyer would have more high-quality freelancers to choose from with a higher average experience and mean rating, which may facilitate the buyer’s contracting decision. Freelancer quality dispersion is measured as the standard deviation of all freelancers’ rating (or experience), which represents the diversity of choices a buyer has; thus, it is