GROUP 8

CMR enterprises
Q.1 What should CMR do about the Blackstone account ?

Problem areas :
Miscommunication and lack of coordination
Reluctance from Blackstone to share their information
Less focus on the Residential business than the commercial
business(InfoCentral)

Three alternative ideas of 3 camps :

Current problems are not unusual and it’s a matter of time and it will be
sorted out
There are some problems but they are fixable. Focus on the residential
business is needed as it is on the commercial business . Lack of proper
implementation of InfoCentral . Reluctance of Blackstone team to change
Termination or at least a significant restructure.
Which way should CMR go ?
 CMR should not loose Blackstone by any means because Blackstone is
one of the biggest source of earning for the CMR & CMR needs
growth to pay its debt & fund expansion efforts.
 CMR should try to maintain a healthy relationship with Blackstone
through continuous talk & sharing of information.CMR should tell the
importance of the InfoCentral system and persuade it to share their data
so that the process could be streamlined.
 InfoCentral has been made keeping in mind the commercial business
only, So it should be made compatible to the Residential business also.
 Also they should communicate that for mutual benefit the homeowners
should not be made to contact them directly
 They can offer the product at lower prices only if one final
communication is made from the contractor side and not from
homeowners
 By this we hope that Blackstone will understand and try to co-act for
value creation in the transaction
Q.2 How much profit is being generated by
CMR’s commercial relative to its residential
business? By the Blackstone account?
 Commercial:
Sales = 1
Contribution margin- 0.48 => variable cost=0.52
COGS = 0.34
Other variable overhead = 0.18
 Residential work:
Sales = 1
Contribution margin = 0.38 => variable cost = 0.62
COGS = 0.26
Other variable overheads = 0.36
 The variable overheads are double that of commercial. The reason
is quite simple. They have to invest extra time (90 mins)and also
the conversion efficiency is less.
 If this is reduced to half i.e. the original value the contribution
margin rises to 0.56 which is higher than commercial.
 Also COGS of 0.26 are sold at 1. So if the COGS of 0.34 is sold
will be sold at 1.3
 So we are already selling at higher price. The higher price is due to
the extra time spent.
 Although a fully aware customer will be ready to pay higher price.
But here, its not possible to explain the situation. (this is also the
reason of conflict with Blackstone)
 So clearly price increase is not a viable strategy in this case.
3. Was CMR’s decision to initiate a relationship with
Blackstone a good one?
 Positives Negatives
• Residential market • Consolidated
was a great Market
opportunity • Inability of
• Blackstone was the InfoCentral
biggest customer in • Were tough on the
the area sub contractors
• Immediate market • Overstaffing
share and volume
• Willing to pay full
price
• Stability
Q4) What is the nature of CMR’s Business? How does it
differ across the two market segments?
 Custom Architectural millwork industry
 Installed woodwork, cabinetry, and furnishing for businesses &high end homes
 $ 6.8 Million Annual Sales in 1997, top 5 % in industry

• Customize cabinets(Kitchen and

bathroom) , Millwork for new and

Residential
remodelled homes
• Only 15 % home builders contracted
for custom cabinetry for high end
homes
• $ 4.8 B in US in 1996

• Executive suites and lobbies for office

Commerci buildings
• Customized wood interior components
for banks and doctors offices
al • $ 5 Billion US, 1996
Commercial

Owner Designer General

• Paid for jobs • Designed and Contractors
developed detailed • Plan to finished
drawings project
• Solicited bids from
subcontractors such
as CMR
• No salespeople but
have plan rooms
Residential

Home Owners

Designer/ Architect Contractor

Subcontractor(Mik
e’s Cabinet)
Continued..
Continued to sell under Mike’s Cabinets name
Increase in residential sales
Maintained showrooms where homeowners could
view options for cabinets
Contractor gives allowance of $6000 for cabinets
– kitchen and bathrooms
Homeowner visits showrooms and decides on
cabinets
Price is above allowance, customer pays the
difference
5. How did the CMR-Blackstone relationship evolve
over time? Highlight important events and actions that
influenced this evolution
Year 1 Year 2

Blackstone offered chance to be the only Faced problems with communication &
subcontractor coordination

Monopoly enabled CMR to gain 25% of its Increased prices by 7% resulting in overall
residential revenues from Blackstone increase of 15-20% for customers of
customers Blackstone

Last minute changes affected operations Lot of issues with Blackstone

Increasing Conerns
InfoCentral
Lack of accountability
Least contribution from Blackstone
Growing clout of Blackstone – Catch 22 situation for
Marcus
6. Why did CMR persist in the Blackstone
relationship? How would you remedy such a 
situation?
Blackstone provided stability
Friction was caused due to Blackstone’s internal issues
Team facing Blackstone was experienced
Tweak InfoCentral to suit Blackstone
Raise the bar by leveraging experience with
Blackstone
Any Questions?