Curled Metal Inc Essay

Topics: Marketing, Costs, Variable cost Pages: 12 (3735 words) Published: February 27, 2012
Case: Curled Metal Inc. (CMI)
Introduction Curled Metal Inc. originally sold metal as a finished good but has later developed its business concept to transforming metals into high value added manufactured products. Early in 2008, the company was about to launch a new product, which could revolutionize its business, setting a new standard in the pile-driving market: CMI cushion pads. However, this product launch poses key strategic issues to the company, ranging from assessing manufacturing capacity to defining the product value proposition. In the roadmap to the launch CMI has also to consider how to approach the market, identifying key customers or/and influencers, positioning its new product, assessing distribution alternatives and essentially computing an adequate selling price, one that could guarantee the company’s success. The cushion-pads market in the pile-driving industry Despite the importance of cushion pads to the pile-driving process, the market is quite immature, considering that there are no consistent available solutions. The existing cushion pads do not result from a manufacturing process, with different products and competitors, but from ad-hoc solutions resulting from simply cutting pieces of aluminum and micarta with the required dimensions. The most common diameter of the pads is 11 ½ inches, with a direct connection with the usual size of the piles to be driven. From the data provided, it is possible to compute the market size, considering two different scenarios, as follows: ANNUAL POTENTIAL MARKET (feet driven) Pile hammers owned by pile-driving companies Leased pile hammers (min / max) Total pile hammers in industry (i) Weeks of use per year (ii) Hours of use per week (iii) Standard average actual driving speed (feet/hour) (iv) Total amount of feet of piles driven annually (v)= (i) x (ii) x (iii) x (iv) Pessimistic 13.000 6.500 19.500 25 30 20 292.500.000 Optimistic 13.000 13.000 26.000 25 30 20 390.000.000

As a result of introducing a new product, specially designed to the purpose of effective pile-driving, CMI should define an ambitious marketing objective, setting an expected market share in its first year of operation somewhere around 5% to 10% of the total market, aligned with the strategic objectives of shaping a new market and assuming in the medium term the role of major player. Applying this assumption, and again considering a combination of scenarios, it is possible to compute the product demand forecast for CMI pads, both in terms of feet driven and number of pads to sell: 1

PRODUCT DEMAND FORECAST FOR CMI PADS (feet driven) CMI expected market share (volume) - Assumed for first year of operation Market Forecast PRODUCT DEMAND FORECAST FOR CMI PADS (nº of pads) Feet driven for each set of CMI pads (*) (vi) Number of CMI pads for each set of pads (vii) Number of CMI pads demand (1st year of operation) (viii) = (Market Forecast / (vi)) x (vii) Average scenario of demanded CMI pads (both scenarios with same probability) (*) 15.000 Experiment by Kendrick Foundation Company 12.000 Experiment by Corey Construction

Pessimistic 5% 14.625.000

Optimistic 10% 39.000.000

15.000 4 3.900 11.700

12.000 6 19.500

Situation Analysis Looking at the industry as whole, the cushion pads market can be considered as a brand-new one. In fact, there are no organized competitors, providing CMI a privileged position, should the company be able to effectively approach the potential customers. These customers (contractors) tend to be price sensitive, considering that until now, the pads have been considered an undifferentiated product. However, they also reveal other concerns, such as how fast can they drive piles or personnel safety issues, when handling equipments. In what concerns potential entrants, it appears that there are few companies either with the interest or the ability to compete with CMI in technical or product development aspects. Also, with appropriate patent protections, the...
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