Case Study: Cumberland

Submitted by: Group 2

Adarsh Srivastava (2021188)
Kenneth Mascarenhas (2021217)
Praveen Thankasala (2021226)
Riya Sanghavi (2021229)
Vaishnavi Shreya (2021243)

1. What’s your price for the curled metal pads? Why?

Work Hour Saved

Colerick Fazio
No. of Piles Required 300 300
Feet/Pile 50 40
Total Feets 15000 12000
Asbestos CMI Asbestos CMI
Piles/Set 15 300 6 300
Sets Required 20 1 50 1
Pads/Set 24 6 12 5
Cost/Set $50 $0 $40 $0
Job cost for Pads $1,000 $0 $2,000 $0

No. of set changes 20 1 50 1

Minutes/Set change 20 Mins 4 Mins 20 Mins 4 Mins
Total Minutes for set change 400 4 1000 4
Total Hours for set change 6.667 0.067 16.667 0.067
Feet Driven per driving hour 150 200 160 200
Pile driving hours 100 75 75 60
Total Hours Required 106.667 75.067 91.667 60.067
Work Hour saved per job 31.6 31.6

Colerick Fazio
Leased Equipment Owned Leased Equipment Owned
(25%) (75%) (25%) (75%)
Eqiupments
Diesel Hammer $34 $0 $34 $0
Crane $52 $0 $52 $0
Leads $8 $0 $8 $0
Labor
Laborers $21 $21 $21 $21
Crane Operator $10 $10 $10 $10
Foreman $13 $13 $13 $13
Overhead $100 $100 $100 $100

Cost per hour $238 $144 $238 $144

Hours saved with CMI 31.6 31.6 31.6 31.6
Savings/Job 7521 4,550 7,521 4,550
Savings per CMI Pad 1253.5 758.3333333 1504.2 910

Average savings 882.125 1058.55

Value added / Savings due to

$970.34
switch to CMI

Estimation per Pad with existing equipment

Variable Costs
Material $15.64
Labor $28.80
Total Variable $44.44
Fixed Factory overhead (360% of Direct Labour) $103.68
Total Production Cost $148.12

Contribution Margin(50%) $74.06

Factory Cost $222.18

Selling and Distribution Cost

Advertisement & Promotion Cost (2%) $4.44
Distributor profit margin (35%) $77.76

Sales Price $304.39

We propose offer price of $650. This is calculated by considering the savings due to the
switch (as given in the table) to CMI pads as compared to available Asbestos pads. This price
can be a market disruptor considering the cost of using asbestos pads for drilling 2000ft is
$240 & the allied jobs to complete the process costs $970. So we can charge a premium price
for the value that our product will create which will still be below the total cost of using
asbestos pads.
The following factors will create value which is the basis for the price:
1. Product Innovation
2. Better product for the same utility
3. Convenient to use & cost saving
4. Reduced Heat & wear and tear
5. Brand Value of the company
6. Increased Efficiency

Also, currently, the capacity of production is 250 pads, which yearly comes up to 3000 units.
In case, the company decides to increase the capacity then every permanent tooling or
installation will increase the cost by $25 assuming that the company would look at the yearly
recovery of the one-time cost of installation.
We recommend that the company must install equipment worth $15,00,000 additionally to
increase the production capacity which will increase the market share from the current 0.63%
to approximately 15%.

2. How big is the market? What kind of opportunity does it give us?

Particulars Highest Lowest Average

Total Hammers 26,000 19,500 22,750.00
weeks operated/ year 25 25 25
Hours/week 30 30 30
feets driven/ hour 20 20 20
Feet per year 390000000 290000000 341250000
Feet/asbestos pad 31.25 20 25.63
Total asbestos pads required in a year 12,480,000 14,500,000 13,317,073
Market Size $/year 37,440,000.00 43,500,000.00 39,951,219.51
Feet/CMI pad 2,000.00 1,666.67 1,818.18
Total CMI pads in a year 195,000 174,000 187,688
Potential Market Size $121,996,875.00

According to CMI, the company has a product that might increase revenue by twofold. CMI
has first mover advantage with this cutting-edge product.
It is crucial to communicate to potential customers & influencers the value that the product
offers. Also, We recommend that the company must install equipment worth $15,00,000
additionally to increase the production capacity which will increase the market share from the
current 0.63% to approximately 15%. These untapped markets may experience a sudden
increase in the demand which in case not catered to will create a disadvantage for the
company. The product, in case copied by the competitors before CMI captures a considerable
market share will deteriorate the company’s position in the market.

3. What are you going to say to Colerick Foundation?

Since the Colerick Foundation has seen the test results & is eager to purchase the product
from us, the corporation will not be offering any discounts to the foundation. The "Test
phase" has yielded very positive results for Colerick, thus the corporation is being drawn to it
and no strategy is required to promote the product.
Cumberland Metal Industries will accept orders at $650 because they are the only company in
the market that makes such a cutting-edge product.