 CHANDANA L.

 GARIMA TAMUDIA
 KRITI SINGHAL
 POOJA BERIA
 S. MADHULA
 RAJASURYA
 The leading manufacturer Dominion motors
in Canada having aquired 50% of the available
market for oil pumping motors is threatened
by a loss of market share in oilfield pumping
motors because the Hamilton Oil Company,
having tested several competing motor
brands, finds the competitor Spartan Motor’s
motor to be superior.
 1Reduce the price of DMC’s 10hp motor to
that of the 7 ½ -hp motor,
 2 Reengineer DMC’s present 71/2 hp motor
to make its starting torque atleast equal to
that of spartan’s 7 ½ hp unit,
 3 Undertake design offer definite purpose
motor for the oil well pumping market.
 4Attempt to persuade Bridges and
Hamilton executives that another set of
conclusions could be drawn from the test
results.
 Hamilton is the largest producer with 30% share
on oil producing wells.
 80% of the Dominion market is large business

users.
 Estimation that 1000 new wells per year would

come up in the next 5 years.

 The season of highest sales is between April

and September.
 Many small oil operators follow large companies

for purchasing policy and equipment choice.

 Reduce the price of DMC’s 10 hp motor to that of 71/2 motor.
 Actual Price of 10-hp motor= $1580
 New Reduced price = $ 1200
 Suppose considering per unit sales:
Scenario Cost Sales + Total Cost Selling Profit
incurred Transport Price
Cost

current 907.80 158 1065.8 1580 514.20

Future 907.80 120 1027.80 1200 172.20

 Profits get reduced by $342 / unit.

 PROS:
 This is a quick initial way to meet the problem requirements.
 The company sales would not be affected for the current season.
 They get more time to analyze Bridge’s test and derive their own
conclusions
 Cons:
 Reduced profits.
 Extra expense for user.
For 71/2 hp motor, the electrical consumption = $21.5 *7½
=$161.5
For 10 hp motor, the electrical consumption = $20 * 10=$200
Therefore extra expense of $38.5 for the user.
 This is not a long run solution.
 If the power companies start penalizing for overmotoring, the
customers would be at risk.
 Two ways of Reengineering 71/2 hp motor.
 1. Increasing torque with increase in temperature.
 2. Increasing torque with increase in frame size.

options Manufactur Fixed cost Sales Total cost Selling Profit

ing cost commissio Price
n(8%) +
transport
cost(2%)

1. 790 50.49 120 960.49 1200 239.51

2. 867 50.40 120 1037.49 1200 162.51
current 663.51 50.49 120 834 1200 366

 Going by this alternative would violate NEMA standards and would

lead to unbalanced motor design.
 Even the cost analysis shows a reduced profit, hence this alternative
is not feasible.
 PROS:
 No additional investment in plant and equipment is required.
 Required Torque capacity is achieved.

 CONS:
 Reduced profits.
 Equipment set up time is 3 months.
 Will start torque war which would be detrimental to the motor
industry.
 Customer reaction to the new product is uncertain.
 The company’s policy of maintaining NEMA standards is being
violated.
 Considering the definite purpose motor specification 5 hp
unit having torque of a 10 hp motor.

 Monthly power charge paid acc. To horse power.

Horse power(hp) Base rate/horse Monthly power

power($) base rate($)
5 25 125
7 1/2 21.50 161.25
10 20.00 200
 By using 5 hp motor instead of 10 hp motor the user can save
75$ /month and 75*12=900$ / year.
 This 5 hp can be sold for a minimum price of $1045 and
maximum price of $1200.
 Referring to exhibit 2:

hp Manufacturing Total cost

cost
5 $511.53 571.20

 Fixed cost here is 571.20 – 511.53=$59.67

 But the manufacturing cost of Definite purpose motor comes
around $665.
 Including the sales commission and transportation cost(10%) .
i.e $104.5 for ($1045 S.P ) and $120 for (S.P $1200)
Selling Price($) *Total cost ($) Profit($)
1045 829.17 215.83
1200 844.67 355.33
 * Total Cost includes manufacturing cost, fixed cost and sales
commission and transportation cost.
 Therefore, % hp motor can be sold for $1200 with a profit of $355.33
 According to industry estimates, an average of 1000 new wells would be
added every year.
 But this alternative requires an investment of $75000 for the required
engineering and testing.
 Therefore, Total sales from profit would be 1000 * 355.33= $355,330
 Hence, the pay back time for the initial setup cost would be
75000/355330=0.21 years
 Hence , this alternative can be adopted as the profit is considerable with
less pay back time and DMC Ltd. Can catch up with it’s competitors.
 CONS:
 The new wells coming up may require different motors.
 Small companies may not want the same motor that Hamilton wants.
 Also it would take 4 or 5 months for the production to begin.
 Pros:
 Not necessary to change the product and market strategy

 Cons:
 Bridges is more convinced of his interpretations and its difficult to
meet him directly
 Presentation of different arguments is not known
 Even if we try to alternate Bridge’s recommendations it would only
generate ill will.

 Additional alternative:
 Some executives believed that DMC should begin testing and
defining the motor needs of the companies’ various market
segments as it would be a long term investment in maintaining
DMC’s future market position.
 But it requires additional hiring.
 As soon as the Bridges results gets published DMC
can take up Alternative 1 to retain the market
share in the current selling season. To make this
alternative more attractive the minimum marginal
profit can be retained and additional discount can
be provided over and above 45%.

 And parallely DMC must work on Alternative 3 and

launch a customized product for the Canadian
market (which is strongly influenced by BRIDGES’
result)