The case, presented by Professor E. Raymond Corey, presents to the potential threat to a company, Dominion Motors, by a report brought up by John Bridges, a big name in the whole Oil Production domain. DMC was a large supplier of motors and control equipment in the Canadian market. Bridge’s report had placed Dominion’s motor at the third place in terms of preference, which shows their declining market share. Thus the managers got together, and were formulating a strategy for the same. DMC's potential loss of significant market share in the near and long term, of oil well pumping motors if DMC doesn't respond quickly and effectively to the expected change in motor specs for the industry.
Also DMC's perceived late discovery of the study has left them wondering about the actual significance of the report as a whole. Possible solutions suggested were: 1. Reduce the price of DMC’s 10 HP power to that of 7 and a half motor. 2. Reengineer DMC’s present motor.
3. Bring up a specific definite purpose motor for oil pumping market. 4. Persuade Bridges regarding the maximum torque.
1. What do we really know about this situation? 2. Is this just a ‘brush-fire’—or an important problem? 3. How profitable is each of the four alternatives suggested? 4. What other considerations are there in planning a product for this market? 5. What will the production people want to say this problem? the finance people? The engineers? The public relations people? 6. What should DMC’s program be for this coming selling season?
7. What other recommendations should be made toward improving DMC’s marketing program? The problem: DMC's potential loss of significant market share (in the near and the long term) of oil well pumping motors segment. If DMC doesn't respond quickly and effectively to the expected change in motor specsfor the industry, it might lose out in the race.
Causes of the problem:Hearsay concerning a study by the trend setting buyer in the market, which, if true, willpromote the motors of DMC competitors and relegate DMC to third choice in the oil pumpingmarket.Also DMC's perceived late discovery of the study (Other manufacturers don't seem to know soDMC may still be ahead of the others in information, but their machine is 3rd choice so timelyinformation is more critical to DMC).
Is this a brush fire or an important problem?1000 wells per year over the next 5 years (possibly more) means DMC has approximately 51%=510 per year=2550over 5yrs (plus whatever replacements). Now, 510/year at $1200= $612000/year.DMC thus couldlose brand image and reputation as a result of being downgraded in the industry.
This couldbe worse than lost dollars. In addition it could lose the industry by losing the tag of leader of theindustry. Although this market is a small slice of DMC's revenues, one cannot afford to easilylose market share. In addition, this could have spill over affects in its other markets when itcirculates that DMC was a "failure" in one market.In the end we consider this an important problem, not for the immediate dollars, but for thefuture dollars that could be lost with a "tarnished" image as well as losing market share.
The background to this problem arises from the fact that DMC's largest consumer of oil well pumping motors has ranked them the number III supplier, and not only could this impact purchasing from this customer (Hamilton), other smaller companies follow this large company for their purchasing decisions, so that they get the benefit of copying their R&D decisions.
What are the causes of the problem? Power companies implemented a graduated monthly base charge per HP at installation, to mitigate inefficiencies caused by over motoring in order to improve power factor. Upon the announcement of this change, the head of Hamilton's EE department conducted testing on motors from different manufactures and used starting torque as the deciding parameter, in order to define the specifications of a motor which could be used most economically. Situation Analysis
We have considered SWOT analysis in terms of matrices for analyzing the current situation of the company Dominion Motors.
1. Knowledgeable sales force backed by the understanding of the customer requirements. 2. Well established brand equity. 3. Proactive Management.
1. Selling an inferior product.
1. Their currently in the third position in the market so they have scope to reach the top spot.
1. The potential fallout of Hamilton's endorsement of the competitor's product on Dominion's market standing.
Plotting theOpportunity Matrix: 1 4 2 3 High Low High Low Attractiveness Success Probability
Given the opportunity is "the potential to reach the top spot" the matrix categorizes the above as a degree 2 opportunity. While it is certainly a very attractive opportunity for the company (degree 1) it may not be feasible, at least not immediately meaning that it does not come with a high probability of success (degree 2).
Plotting the Threat Matrix:
1 4 2 3 High Low High Low Seriousness Probability of Occurrence
Given the threat is "the potential fallout of Hamilton's endorsement" the matrix categorizes the above as a degree 1 threat. Any threat to a company’s market share qualifies as a problem with an elevated degree of seriousness (degree 1). Given the fact that the report also comes from a highly credible source within Hamilton, the probability of the threat crystallizing into a problem in the near future is also high (degree 1).
Identifying the problem
1. There is no actual problem as such that has surfaced yet but given the damaging inferences made by Jeff Bridges, the head of the Electric Engineering department of Hamilton, the management at Dominion Motors felt the need to be proactive and plan ahead. 2. Some of the questions posed in front of the management in this crucial juncture include: Should DMC now lead the Canadian motor industry into designing and producing special purpose motors?&How can they improve their advertising ratings?
1. Making inferences with the help of the BCG Matrix, Dominion Motors can be considered the "STARS" in their sector (high market growth rate and high relative market share) so they do not need to invest or harvest but sustain themselves in the market. 2. Attempt to persuade Bridges that conclusions based on his results unduly emphasize obtaining the maximum available starting torque, when it may not be necessary in the practical sense.
Initial orientation: Product concept was being followed because they had a specialized product package for the industry. Current orientation: Marketing concept, because Bridges had ranked Spartan's 7 and a half HP motor as the preferred unit and universal's 7 and a half as the second choice. So there was a need to develop a product according to consumer needs.
1) Reduce the price of DMC’s 10 HP motor to that of the 71/2. Such a price cut could be delayed until the results of bridges’ test became generally known and if they impacted DMC sales. Not a long-run solution, it could buy time until DMC could run its own tests and decide on a product-line change, if needed.
2) Reengineer the DMC 71/2 to give it a starting torque equal to or greater than that of the comparable Spartan motor. Such a motor would have to have a higher temperature rise than specified by NEMA standards, but special high temperature insulation could be used to avoid any safety hazards. But, given the fact that customers would rather go in for a larger motor than a motor which would possibly flout NEMA temperature standards, another alternative for the company is to produce larger dimensions of the DMC 7.5 motor to increase its performance numbers.
3) Design a 5 HP motor with the starting torque of a 10 HP unit. This motor would exceed NEMA specifications and could be priced below the 71/2 HP motor. This would seem to be exactly what Bridges wanted and probably other customers, as well. It would take five months, however, before production could begin, and by that time the selling season would be well over.
4) Attempt to persuade Bridges that conclusions based on test results unduly emphasized obtaining the maximum available starting torque. All 71/2 HP motors tested had starting torques in excess of 80 pounds-feet and would meet the most extreme temperature conditions. But, as one DMC executive noted, “All engineers love big margins whether they use them or not.” So, DMC can take efforts to persuade Bridges on the futility of making comparisons based purely on numbers, when they may be irrelevant in the long run.
While designing the alternate solution two main factors were taken into account: 1. Investments to be made. 2. Time taken for implementation.
Considering both factors, we have designed a two-step solution: First step would be to reduce the price of 10-hp motors to make it comparable to a 7½-hp motor. This plan could be implemented right away and no additional investment is required for the same. This would automatically attract more sales as it has been mentioned in the case report that oil companies prefer higher torque machines and also these prove to be better in operation in winter season. Also, power companies were not planning to impose any power rating restrictions or penalties in the near future. So this plan could work at least for the immediate future.
Second step is to simultaneously start with the design of the special purpose motor that would help the company regain effective product leadership. This step would require significant capital investment and at least 4-5 months for proper designing. This step is crucial for the company to become the leader in the market and is the effective way of countering the findings of the Hamilton report.A combination of both these solutions would help Dominion motors regain market strength and would also not hamper any sales figures in the immediate future.
REFERENCES: Articles from the internet: http://www.dominionmotors.com/ http://en.wikipedia.org/wiki/Dominion_Motors_Frontenac