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Industries:
Engineered Products
Division, 1990
Case Overview
Cumberland
the
largest
easier to change.
Furthermore, the growing concern over the health risks associated
Issues involved
How to price the product?
How to market the product and reach the
into the ground, 480 asbestos pads were used (Page 3). The costs
for a typical 11 inch pad set is at $50. Asbestos pads worth
$1000 were used (20 pad sets).
In contrast only 6 pads (= 1 set) of CMI were required. Hence the
from the asbestos pad. Obviously the CMI pad lasts about 80 times longer than
the asbestos one, but that advantage has been mentioned at the reference
value.
Speed factor: We see that CMIs pads work faster. Using the CMI pads, we can
drive 200ft./hr (with asbestos only 150ft./hr can be driven) which makes them
33% faster .
To do the job with asbestos pads, 400 mins were needed (20 set changes x 20
mins each).
In total 15000 ft. (=300 piles x 50 ft.) were driven into the ground. Using the
asbestos pads with it took them 100 hrs. i.e. 6000 mins (@150ft./hr) to do the
task. To sum this up it took about 6400 mins (=400+ 6000) to end the job.
In contrast the CMI pads only required 4 mins for one set change. Here also
15000 ft. were driven into the ground. But using CMI pads, it only took 75 hrs
i.e. 4500 mins (@ 200ft./hr). That makes a total work time of 4504 mins i.e.
1896 mins less (=6400-4504) which is equal to 31.6 hrs.
Assuming
$4360.80/6pads).
Consequentially the total economic exchange value
Pricing Decision
The
Conclusion
Regarding to the points already mentioned, the price should be between
considerably high priced cushion pad may deter the customers from buying
the new metal pads. To persuade them to buy CMIs pads, good marketing
tools and distribution channels will be necessary.
By this, all advantages even those non-monetary ones like health or the
This would keep competitors outside the market and a great market share
would be the result even if the pads are priced closer to the lower border
price (say $350/pad).
Influencers
Architectural/consulting engineers
Engineering/construction contractors
(Large construction projects)
because the overall rental time would be reduced thus reducing their
operating profits.
Rental agency could actually take advantage of the faster turnaround,
allowing them to supply the same number of contractors with fewer
pile drivers
Another group that may wish CMI to fail is organized labour since the
new pads reduce the time necessary for pile driving thus saving on
labour costs. May result in less frequent work for the construction
labour or more layoffs.
CMI should contact labour leaders and push the health benefits of their
pads over asbestos.
Recommendations
CMI should take advantage of the existing networks to distribute their
pads rather than start from scratch with their own direct distribution
The manufacturers' representatives should be trained by a small CMI
sales team on how to market the cushion pads. They should highlight
the following: Cost savings benefit of the curled metal pads
The potential dangers of the asbestos pads
The CMI brand
Thank You