Curled Metal Inc.

Case Study

Question 1
WHAT SHOULD A CUSTOMER BE WILLING TO PAY FOR

ONE OF CURLED METAL INCORPORATEDS (CMI) NEW

CUSHION PADS? WHAT FACTORS ARE RELEVANT IN CALCULATING WILLINGNESS TO PAY IN THIS SITUATION?

Factors to be considered
1 2 3 4 5
Average Cost per hour Saving for Equipment , labor and overhead Downtime : If we also factor in the amount of time it takes to change asbestos sets, it contributes significantly to overall cost ( can be considered) Higher Efficiency of CMI product Longer lifetime of CMI over conventional How will it help CMI gain a dominant footing in the market by adding value to its product portfolio Is the model sustainable?

Question 2
WHAT PRICE SHOULD CMI SET FOR ONE OF ITS NEW CUSHION

PADS? WHY?

Manufacture costs vary from $444 to $1920 for the larger sizes, thus price needs to be balanced accordingly

Cost of Single conventional pad= $6 - $9

Pad type

No. of Changes X time per changes

Time reqd

Conventional
CMI

20 X 20 mins
1 X 4 mins

400 mins
4 mins

Pad type Conventional CMI

Total Feet / Feet driven per hour 15000 /150 15000/200

Total time 100 hours 75 hours

Total value of savings = $5400

Value based Price = $5400 If the reports from Professor McCormack proved the same assumptions in savings of time, then it would be easy for the company to prove value to the customer. CMI can charge ~$3000-$4000 per pad if it wants to start skimming the market and reduce price later on CMI can charge ~$1000 if it wishes to achieve a high market share overnight Company could price the 11.5 inch pad at a higher price and gain profits which could be compensated for the larger Market Based Price = products where production costs $10 are higher

Question 3

HOW BIG IS THE POTENTIAL

MARKET FOR THIS PRODUCT, AND

WHAT SHOULD BE CMIS STRATEGIC AND MARKETING OBJECTIVES IN INTRODUCING THIS PRODUCT?

Market Potential
Total requirement = 290 390 million feet of piles to be driven One set of curled metal pads 10,000 feet (One set of curled metal pads = 4 initially installed, plus two added) Market requirement = 29,000 39,000 sets of curled metal pads

i.e. 174,000 234,000 curled metal pads Market value = $121.8m $163.8m (@$700 per pad)

Strategic and Marketing objectives

Strategic Objectives
Price the product right to achieve high profit margins while establishing a dominant market share in the market Distribution, production and capital investment strategy Advertising, promotion and positioning of the product with respect to the existing cushion pads available in the market Protect IPR for this pad by filing patents if possible

Marketing Objectives
To convince the important influencers to endorse CMI cushion pads Architectural/ consulting engineers and soil consultants have a key influence in the buying decision (expert power) Engineering/ construction contractors (large value contracts) Independent pile-driving contractors (large volumes) Promote in industry magazines like Oklahoma Contractor and try and get a feature in the same Get Professor Stephen McCormack of Pennsylvania A&M University to officially endorse the product

Question 4.

4. ON PAGE 1 OF THE CASE, CMI VICE PRESIDENT JOSEPH FERNANDEZ SAYS, THE WAY WE PRICE THIS

COULD HAVE A SIGNIFICANT IMPACT ON EVERYTHING ELSE WE DO. AN INTEGRATED STRATEGIC OPTION

SPECIFIES THE BASIC TYPE OF ADVANTAGE A COMPANY WILL PURSUE (E.G., DIFFERENTIATION? LOW

COST? OTHER?), RELEVANT DECISIONS ABOUT CUSTOMER AND PRODUCT SCOPE, AND KEY CHOICES

THROUGHOUT THE COMPANYS VALUE CHAIN. DEVELOP AN INTEGRATED STRATEGIC OPTION FOR CMI

AN OPTION THAT SPECIFIES YOUR PRICE BUT ALSO SPECIFIES THE MANY OTHER CHOICES FACING CMI IN

FORMULATING A STRATEGY FOR ITS NEW CUSHION PADS (E.G., IN MARKETING, SALES, DISTRIBUTION,

PRODUCTION, FINANCE, AND OTHER FUNCTIONS).

Launch of CMI Pads

Promotional Strategy
Positioning the Product

Setting Prices for CMI Pads

Selecting a pricing strategy

Pricing Strategy

Price objectives: maximize quantity

and profit margin.

Price methods:

Cost-plus pricing set the price at the production cost plus a certain profit margin. Value Based Pricing

Demand Estimation
Annual demand estimated = 290 to 390 m feet Average no. of conventional pads required = 300m/ 28= 10.7m Average no. of CMI pads required= 290m/ 1666 = 174000 ( lower limit) Average no. of CMI pads required= 390m/ 1666 = 234000 ( upper limit) Annual capacity at 250/ month = 250 * 12 = 3000

Positioning

Points of Difference
Cost overall cost is low. Efficient more piles driven per set, energy used efficiently Ease easy to handle as temperature within 250 F Safe no hazardous material Savings

Point of Parity
Time Saving Reduces time for changeover

Distribution
Early Stage
Take advantage of the existing

After the market develops Create our own distribution network. Reach architectural and consulting engineers.

distribution networks:

Equipment Supply Houses Hammer Distribution Rental Companies

Direct channels as: Contribute high quantity and demand (50% of estimated market share) CMI has more control on education and monitoring Sell to hardware stores and wholesalers to cover small contractors

Marketing Strategy
Promotion to educate customers and awareness about the benefits
Seminar: Piletalks to make people aware Potential buyers: Independent Pile driving contractors Pile hammer distributing/renting companies Give free first set of pads
Sales Representative: To educate customers about cost saving of CMI pads and potential dangers of asbestos Creating brand name Important in promoting the diffusion of the product in marketplace

Marketing Strategy

Word of mouth: Key influencers to endorse the product

Pile hammer manufacturers To influence recommendations Professor Stephen McCormack would have a significant impact Department to study pile driving and was a respected authority

Advertisement [Magazine/Newspaper/TV ads]

Effective advertisement in business magazines to target undecided market Publish test results in magazine & Newspaper

THANK YOU