IDENTIFICATION OF THE PROBLEM

Having captured 50% of the available market for oil well pumping motors, Dominion Motors
& Controls Ltd. was the largest oil company in Canada. However, a test conducted in the motor
industry by the largest oil company in Canada, Hamilton Oil Company, ranked Dominion
motors as the 3rd most preferable motor producer. Being a market leader, Hamilton’s stand
regarding DMC threatens the latter’s market share. The report gives upper hand to Spartan
motors and Universal Motor company, and puts Dominion’s 50% market share at risk.
Dominion needs to take immediate action before the release of the report and recognise how
to chart the consequent plan of action to maintain its dominant market share.

ANALYSIS OF THE SITUATION AND THE PROBLEM

DMC produces motor control and panel-board units, in addition to offering a line of motors.
By 1973, the company had acquired over 50% of the available market in North Canada. The
major problem that the company is facing is being ranked as the third best alternative by the
largest oil company - Hamilton. Post the two announcements made by power companies
serving the oil fields, which could affect the specifications of the oil well pumping motors, the
head of electrical engineering department at Hamilton, John Bridges initiated field tests on oil
well pumping motors, in order to recognise the specifications of a motor that could be used the
most economically. The tests were able to determine the horsepower that would be required to
lift the fluid as well as the maximum starting torque that would be required to start the pumping
units at low winter temperatures. The tests ranked Spartan 7.5-hp as the motor having the
highest torque, followed by Universal 7.5-hp and then DMC’s 7.5-hp motors. This is a point
of concern for DMC’s team as the market leader endorsing their competitors would threaten
their market share.

POSSIBLE SOLUTIONS IDENTIFIED BY THE COMPANY

1. Price Reduction of 10 hp motor

The 10 HP motor would be a far more appealing purchasing choice financially if its price were
reduced to that of a 7.5HP motor. Given the anticipated winter rise in demand and the fact that
customers are not overly concerned with power efficiency, this would be a plausible choice.
However it is understood that choosing this approach would reduce the company's profit
margins and might eventually result in price wars; but in the meantime, the choice would lessen
the impact of Hamilton's findings.

2. Reengineering the DMC's present 7 1⁄2-hp motor

Such a re-engineering of the product to match or surpass the Spartan offering, by increasing
the starting torque of the 7.5HP motor can be achieved in a couple of ways. Either by changing
the current motors while maintaining a similar frame size or increasing the frame size while
attempting to follow NEMA rules. On the downside of this solution, the executives were
concerned about igniting a rivalry that would erode margins and lead to subpar designs that
would harm the entire industry.

3. Definite motor design

Creating a motor design that is most suited for pumping oil wells would result in the DMC
gaining a competitive edge and growing its market share. This may be accomplished by
spending relatively little money and it would not require significant modifications to their plant
and machinery. The question was whether the product would be profitable in the long term and
if the business was large enough to support the manufacturing of such a unique design.

4. Persuade Bridges & Hamilton Executives

Using internal links, they can try to encourage Bridge to re-examine the results and come to a
different set of conclusions; however a move like that might have detrimental effects.

RECOMMENDATION

The DMC should choose a mix of the identified solutions 1 and 3. As proposed in solution 1,
the DMC should initially lower the costs of its 10 hp unit. The business can reduce the chance
of it temporarily losing market share by taking this action. On the other hand, DMC would
eventually need to spend money on research and development to create a better product with
higher horsepower and torque demands. The first mover advantage of providing the market
with a product that specifically addresses market demands would go to DMC if it created a 5
hp motor with enhanced starting torque. Additionally, a single-purpose motor for the oil well
pumping industry would enable DMC to create a whole new market segmentation and provide
them a competitive advantage.