Curled Metal Inc. Case Study

GROUP 5

Arnav Gera A020Ashish Jain D019 Harshit Upreti D065Jay Doshi D013Maitri Shah D049Pratik Jain C024Priyadarshi Mishra D041

Curled Metal Inc. Case StudyWhat 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? Question 1Factors to be consideredWhat price should CMI set for one of its new cushion pads? Why?Question 2Pad typeNo. of Changes X time per changesTime reqdConventional20 X 20 mins400 minsCMI1 X 4 mins4 minsCost of Single conventional pad= $6 - $9Pad typeTotal Feet / Feet driven per hourTotal timeConventional 15000 /150100 hoursCMI15000/20075 hoursManufacture costs vary from $444 to $1920 for the larger sizes, thus price needs to be balanced accordingly5

Total value of savings = $3400Value based Price = $3400Market Based Price = $10CMI can charge ~$1500-2000 per pad This pricing can be justified if we are able to position the product properly

CMI can charge ~$1000 if it wishes to achieve a high market share8How big is the potential market for this product, and what should be CMIs strategic and marketing objectives in introducing this product?Question 3Market PotentialTotal requirement = 290 390 million feet of piles to be drivenOne 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 padsi.e. 174,000 234,000 curled metal padsMarket value = $121.8m $163.8m (@$700 per pad)Strategic and Marketing objectives4. 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 CMIan 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).Question 4.Launch of CMI PadsPricing StrategyPrice 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 EstimationAnnual estimated demand = 290 to 390 million units (data as assumed by Sanwal)

In Kendrick Foundations case, feet driven = 15000 ft. No. of conventional pads used = 480Avg depth the piles driven/ pad = 15000/ 480 = 31 ftIn Corey Constructions case, feet driven = 16000 ft. No. of conventional pads used = 600Avg depth the piles driven/ pad = 16000/ 600 = 26.67 ft

Taking the average number of feet the conventional pad lasts as 28 feet, (average of above 2 values) Avg number of conventional pads required = 300m/ 28 = 10.7 million annually (approx)

Data as assumed by Sanwal in the case, a set of 6 pads lasts for 10000 feet. Therefore, the average depth the CMI lasts for = 10000/6 = 1666 feet Avg number of CMI pads required at 290m= 290m/ 1666 = 174000 annually (lower limit) At 390m = 390/1666 = 234000 annually (upper limit)

Annual capacity of the plant = 250 * 12 = 3000Market penetration achieved at 3000 units = 3000/ 174000= 1.7%At 234000= 1.28%(The value 174000 and 234000 was arrived at assuming all the demand comes for CMI pads)

Demand Estimation:Annual estimated demand = 290 to 390 million units (data as assumed by Sanwal)

In Kendrick Foundations case, feet driven = 15000 ft. No. of conventional pads used = 480Avg depth the piles driven/ pad = 15000/ 480 = 31 ftIn Corey Constructions case, feet driven = 16000 ft. No. of conventional pads used = 600Avg depth the piles driven/ pad = 16000/ 600 = 26.67 ft

Taking the average number of feet the conventional pad lasts as 28 feet, (average of above 2 values)Avg number of conventional pads required = 300m/ 28 = 10.7 million annually (approx)

Data as assumed by Sanwal in the case, a set of 6 pads lasts for 10000 feet.Therefore, the average depth the CMI lasts for = 10000/6 = 1666 feetAvg number of CMI pads required at 290m= 290m/ 1666 = 174000 annually (lower limit)At 390m = 390/1666 = 234000 annually (upper limit)

Annual capacity of the plant = 250 * 12 = 3000Market penetration achieved at 3000 units = 3000/ 174000= 1.7%At 234000= 1.28%(The value 174000 and 234000 was arrived at assuming all the demand comes for CMI pads)15PositioningPoints of DifferenceCost overall cost is low.Efficient more piles driven per set, energy used efficientlyEase easy to handle as temperature within 250 FSafe no hazardous materialSavingsPoint of ParityTime Saving Reduces time for changeover

Efficient CMI pads are highly efficient as piles driven per set of pads is 6 for conventional pads whereas it is 300 for CMI pads. Also, lesser energy dissipation through heat adds to the efficiency.

Ease Easy to handle as temperature never went above 250F so pads could be handled immediately with protective gloves. Also saves on downtime, compared with conventional pads, while waiting for the pads to cool down.

Safe No hazardous material used.

Time Saving - As CMI Pads lasted the entire job, it eliminated downtime required for change.

Time required to change sets in Kendrick Foundations caseConventional pads= 20 * 20 min = 400 minutesCMI pads = 1 * 4 min = 4 minutes

Time required to change sets in Corey Constructions caseConventional pads= 50 * 20 min = 1000 minutesCMI pads = 1 * 4 min = 4 minutes

16DistributionEarly Stage

Takeadvantageof theexisting distribution networks:

Equipment Supply HousesHammer Distribution Rental Companies

After the market develops

Create our own distribution network.

Reach architecturaland consulting engineers.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 contractorsMarketing StrategyPromotion to educate customers and awareness about the benefits

Seminar: Piletalks to make people awarePotential buyers:Independent Pile driving contractors Pile hammer distributing/renting companiesGive free first set of pads

Sales Representative: To educate customers about cost saving of CMI pads and potential dangers of asbestosCreating brand name Important in promoting the diffusion of the product in marketplace

Marketing StrategyWord of mouth: Key influencers to endorse the productPile hammer manufacturers To influence recommendationsProfessor Stephen McCormack would have a significant impactDepartment to study pile driving and was a respected authority

Advertisement [Magazine/Newspaper/TV ads]Effective advertisement in business magazines to target undecided marketPublish test results in magazine & Newspaper

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