Analysis of Dominion Motor Company Case Study

Summary :

Dominion Motors and Control Limited is a leading company that produces a line of
motors, motor control units and panel board units for mine pumping engines. They have
acquired over 50% of the market in northern Canada in 1973. DMC serving its services to
business to business model encountered a hurdle in 1985 when it was threatened with the
loss of market because of tests performed by the Hamilton Oil Company (largest oil
company active in Canada) concluding that DMC was the third preference behind those
of Spartans Motors Ltd and the Universal Motor Company of Canada. The Hamilton Oil
Company report had an objective which was to define the specifications of a motor which
could be used most economically. The tests were used to define 1) the horsepower
required to lift the fluid and 2) the maximum starting torque required to start the pumping
units at low winter temperatures. DMC personnel were concerned regarding the Hamilton
Oil Company report and wanted to respond to the Hamilton’s challenge.

Some of the alternatives are listed below:

1. Reduce the price of DMC’s 10-hp motor to that of the 7.5-hp motor.
2. Reengineer DMC’s present 7.5-hp motor to make its starting torque at least equal to that
of the Spartan 7.5-hp unit.
3. Undertake design of the definite purpose motor for the oil well pumping market. This
ideally would be a basic 5-hp motor with the starting torque of the 10-hp unit.
4. Attempt to persuade Bridges and Hamilton executives that the conclusions reached from
their test results unduly emphasized obtaining the maximum starting torque available.
 

Evaluation of alternatives :
Alternative 1 
The total cost for 7.5-hp units is $714 and they have listed their price to $1940.
So profit margin would be 171.71% and profit margin to the large users would be 68.06%
 The total cost for 10-hp units is $907.8 and they have listed their price to $2550.
So profit margin would be 180.90% and to the large users it would be 74.04%.
 
Now if DMC starts selling its 10-hp units at the price of 7.5-hp units it would be lead to less
profit margins to the firm as to the large users it would fell from 74.04% to 68.06% that is 5.98%
percentage points. Reducing the price of the motor will be a feasible option only for a short
period since the companies in the industry want more of the starting torque. So it would suffice
 until the report is out.  Industrialists who demanded 10 horse power will also get an advantage
since they can procure the 10 HP motors at a lesser price.
 
Alternative 2
Reengineering DMC’s present 7.5-hp motor to make its starting torque at least equal to that of
the Spartan 7.5-hp unit. This move of DMC would be detrimental to the company as well as to
the whole oil industry since this could lead to a torque war, which could lead to unbalanced
motor designs. DMC has a policy to adhere to the NEMA standards and by following the
alternative 2 would lead to non-compliance to the NEMA standards.
 
Alternative 3
Undertaking design of the definite purpose motor for the oil well pumping market which ideally
would be a basic 5-hp motor with the starting torque of the 10-hp unit. It would be good move
for DMC to choose this alternative as DMC would be offering exactly what the consumer
wanted. In addition they will have the first mover advantage as they will be the first
manufacturer to offer a definite purpose motor, tailored to the needs of the market and it could
last for a long time. The drawback of this alternative was only that it would take approximately
four to five months for production to start.                      
Alternative 4
Attempting to persuade Bridges and Hamilton executives that the conclusions reached from their
test results unduly emphasized obtaining the maximum starting torque available would be
considered it is the need for the hour to contact and ask Hamilton to test its reports again since
they have not produced data sufficient enough to define oil pumping requirements. Since many
DMC personnel personally know Hamilton vice president, it would be easier for them to contact
them and acknowledge them regarding the reports.

Conclusion: 

After the evaluation of the alternatives, the following conclusions can be made-
 Alternative 3 should be the one to be used. It is a long-term strategy that will help
the customers of DMC to avoid the fine for over motoring and meet the NEMA
standards. 
 It would be the ideal solution since it addresses the need of a superior product in
terms of horse power as well as torque requirement as per the requirements in
perspective of industry standards, definite-purpose motors would also help DMC
to develop brand new market segmentation on oil well pumping industry. 
 Alternative 4 is also a good option i.e., persuading the Hamilton executives as it
does not provide accurate results of the test.
 DMC can also perform its own test and publish reports if any of the above
alternatives do not work out.
 Therefore, a combination of these three alternatives might help DMC to reaffirm
customer belief and ensure that they are buying from the best. 

Name: Abhijeet Pande

SAP ID: 80303190097