CMR Enterprises

Group 2

(Q1) What should CMR do about the Blackstone account?

Mikes Cabinet should stick with Blackstone Homes as it is their largest account and 25%
in their residential business
External
They should interact with Blackstone highlighting the importance of operational efficiency and
ensure that Blackstone is taking the required steps to fulfill all the requirements of customers
The new pricing model should be thoroughly discussed with Blackstone as changing the price
without informing the main account was a wrong step
Discuss with Blackstone the importance of coordinating the work of all subcontractors to avoid last
minute changes, which would be mutually beneficial
Beneficial for Blackstone: No delay from subcontractors
Beneficial for subcontractors: No extra cost
Internal
Train and mentor the project manager to update the Infocentral
Hire a Project Manager from the Industry who has experience in handling big accounts such as
Blackstone
Focus on residential business as much as on commercial business
Align the business processes and tools of Infocentral to suit the residential business

(Q2) How much profit is being generated by CMRs

commercial relative to its residential business? By the
Blackstone account?

Microsoft Excel
Worksheet

(Q3) Was CMRs decision to initiate a relationship with

Blackstone a good one?
Initially

The Blackstone proposal looked good and it was a huge opportunity for CMS to expand
into the residential space
The initial concerns about the contribution margins of 38% as compared to 48% in
commercial spaces were brushed away
Since Blackstone was on a growth spree, this meant growth for CMR as well
They would provide with huge volumes of work
But later

Blackstone's reputation of being hard on their subcontractors was not taken into account
CMR should have hold onto its policies rather than just giving in to Blackstone. They
shouldve spoken about competition in the cabinet industry beforehand
The two companies were not a fit for each other
The industry was price sensitive especially for the residential work

(Q4) What is the nature of CMRs business? How does it

differ across the two market segments?
Custom architectural millwork industry
Low capital investment
Proprietary companies operating the
business

Long business cycles, with payment in

the end
Commercial and residential space

Commercial

By the name of CMR Business

Very structured process
Involves bidding and contractorship
Due to low price negotiations, conversion ratio was just 20%
Deal with owner, architect and general contractor

Residential

By the name of Mikes cabinets

Residential carpentry: mainly cupboards cabinetry
Very less push strategy
Homeowners primary target
Operated on referrals and word of mouth

(Q5) How did the CMR-Blackstone relationship evolve

over time? Highlight important events and actions that
influenced this evolution
Who

Why

Blackstone Homes Residential Customer

One of the largest
homebuilders in the
area market
positioning as best
quality for lowest
pricing
3 subdivisions starter
homes ( $120,000) ,
family homes
( $120,000$150,000) , luxury
homes ( $150,000$200,000)
Unique Strategy :
Partner closely with
subcontractors and

Strategically aligned
and great fit
Residential market
seemed great
opportunity for a
scalable , replicable
business model
Aligning with one of the
biggest customers of
the area resulting in
direct increase in
market share
Standardize processes
into flexible cells
Blackstone ready to
pay full price

What
Blackstone agreed to
specify only CMRs
cabinets in its homes
and CMR to assign the
project manager who
had worked on
previous projects to
work exclusively with
Blackstone

(Q5) How did the CMR-Blackstone relationship evolve

over time? Highlight important events and actions that
influenced this evolution
YEAR
1

Blackstone directed all its customers to CMR and contributed to

25% of the residential business
At times changes were made by Blackstone and homeowners last
moments but no information was updated in the project
management system

YEAR
2

Two parties sat for discussion on pricing as Blackstone President

asked Marcus to reduce prices on account of increased operational
efficiency which Marcus felt they hadnt achieved
Companies agreed on cost reduction by limiting CMRs interaction
with the homeowners
However their attempt towards cost reduction did not work
Coordination problems were cropping up and often there were
conflicts regarding who pays for the mistakes
Other contactors started calling CMR instead of Blackstone to get
drawings

(Q5) How did the CMR-Blackstone relationship evolve

over time? Highlight important events and actions that
influenced this evolution

Problems
Blackstone homeowners were directly working with other
subcontractors
Project co-ordination problems
Marcus was concerned about asymmetry of information and
recommended Info Central for all future orders which was not
taken well due to standardization issues
Differences between estimated and actual cost of each project for
CMR
Contribution margins were 38% of sales in residential as opposed
to 48% for commercial
CMR raised prices by 7% and corrected prices for some individual
items that were mispriced that made Blackstone feel betrayed

(Q6) Why did CMR persist in the Blackstone

relationship? How would you remedy such a situation
Reasons for persisting in the relationship:
Blackstone had approached CMR due to its reputation in the community and good
experiences
Volume was compelling, seemed like a strategic fit
Biggest customer in the area huge opportunity for immediate market share
High growth plan
Steady revenues 25% of their business comes from Blackstone
Biggest account so far
Can play a major role in reaching the target sale of $70 million by 2007
Remedies for such a situation:
Greater involvement with Blackstone in terms of issues faced by them from the customers
Flow of information between CMR & Blackstone to be reworked
Updating the Info Central for all internal communications by the residential team
For easy analysis of customers and funds coming from customers
Explain the reasons & need for an increase in price by CMR