Harvard Business Recurled Metal

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CASE STUDY
Curled Metal Inc.
Engineered Products Division

Marketing Management
Professor João Borges de Assunção
Alexandre Neves, student nº 153011108

Curled Metal Inc. Engineered Products Division

CONTENTS
The Problem Statement ................................................................................................................ 3 Demand Estimation ....................................................................................................................... 3 Cost Estimation ............................................................................................................................. 4 Price Method Proposal .................................................................................................................. 5 Strategic Positioning and Pricing ................................................................................................... 7

Curled Metal Inc. Engineered Products Division

THE PROBLEM STATEMENT
Curled Metal Inc. has been given the opportunity to diversify its business portfolio. CMI had an impressive growth in revenues from $750.000 in 1991 to $55.000.000 in 2001. Strict environmental regulations in automotive sector were successfully addressed by their product Slip-Seal, and as consequence sales increased steadily over a decade. But the future had become a little bit dark, as CMI’s management team felt that Slip-Seal could lose some terrain to their competitors, nevertheless, a new opportunity had risen. Curled Metal Technology could be successfully applied in the driving process of piles. The existent cushion pads weren’t produced in an efficient manner, they had performance problems in transmitting power, and they had to be replaced frequently. Moreover they were made from hazardous materials that could cause accidents involving human losses and material losses. The CMI’s new product for pile driving had been tested by Kendrick and the results were a major success. Kendrick management team was putting a lot of pressure on CMI so that they established a price to the new product. Although CMI’s management team was eager to launch the new product on the market, they understood that a clear and long-term strategy positioning must be polled up before deciding which price to ask for the new product.

DEMAND ESTIMATION
There were virtually no statistics whatsoever that could be used in order to estimate the potential U.S. market size for cushion pads, however, there were some pieces of information that could be used in order to get a sense of scale. First, a report by Construction Engineering magazine estimated that about 13.000 pile hammers were owned by companies that perform pile driving as their usual business. Secondly Industry sources estimated that another 6.500 to 13.000 hammers were leased. From this estimative for the number of pile hammers (19.500 to 26.000) and assuming that they worked on average 25 weeks per year and 30 hours per week, they can assume that 290 to 390 Million feet were driven per year.

Curled Metal Inc. Engineered Products Division
Using a conservative estimation of 10.000 feet/set for the resilience of a CMI set we have an estimative of demand between 174.000 units/year and 234.000 units/year. Market Demand Minimum Maximum Units 290.000.000 390.000.000 foot/year 29.000 39.000 foot/set 174.000 234.000 units/year 14.500 19.500 units/month

COST ESTIMATION
Production costs can be computed using the information presented on Exhibit 6. We can either chose to produce with current equipment on the plan or investing in a new tooling. The tooling investment will approximately halve the production unitary costs from $444 to 208$. Any increment of capacity of 250 units/month will need an investment of $75.000. A more efficient tooling, which enables cutting unitary costs to half, needs an investment of $150.000 per any given upgrade of 250 units/month. Total Investment Without Tooling With Tooling Add. Capacity...
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