master
Northern Drilling
Problem definition
Peter Bremner, general manager of Northern Drilling Inc. (Northern), is facing a decision on whether to submit a proposal to Mond Nichkel Company (Mond). If he decides to propose, he has to decide the following.
1). Invest equipments (drill, skipper/bulldozer, etc) or not
2). Offering price
3). How to secure drillers
Criteria selection
To make a decision about above problem, I have set the following criteria.
1). Business expansion strategy
2). Net present value
3). Relationship with Noranda
4). Competition (Boart, Major, and Orbit)
5). Risk of shrink of market
Alternative development
To deal with this problem, I came up with the following alternatives. “Not invest” means use the 4 existing drills which are used for Noranda in Sudbury and find more drill used for other customers.
1). Not bid
2). Not invest in drills and bid only intermediate job
3). Not invest in drills and bid only deep job
4). Not invest in drills and bid on both jobs
5). Invest 4 in drills and bid only intermediate job
6). Invest 4 in drills and bid only on the deep job
7). Invest 8 in drills and bid only on both jobs
Analysis
Analysis result is as below.
1). Business expansion
As it is a new and the largest contract, the contract for Mond is very important for Northern to expand its overall business. Expected impact for this project can be seen in exhibit 1. Northern drill can grow its sales by 14% and increase market share by 0.5% from its current share (3.7%) if it wins either intermediate or deep job and doubled figure if it wins both jobs so the impact of this business is pretty big. In addition, having another major customer enables Northern to improve its customer portfolio.
The sales for Noranda accounts for 60% of Northern’s overall annual revenue, which is 34.4M Cdn$, while the annual revenue for Mond contract is 16-18M Cdn$ with the both intermediate and deep jobs. This means that Northern should invest in
Problem definition
Peter Bremner, general manager of Northern Drilling Inc. (Northern), is facing a decision on whether to submit a proposal to Mond Nichkel Company (Mond). If he decides to propose, he has to decide the following.
1). Invest equipments (drill, skipper/bulldozer, etc) or not
2). Offering price
3). How to secure drillers
Criteria selection
To make a decision about above problem, I have set the following criteria.
1). Business expansion strategy
2). Net present value
3). Relationship with Noranda
4). Competition (Boart, Major, and Orbit)
5). Risk of shrink of market
Alternative development
To deal with this problem, I came up with the following alternatives. “Not invest” means use the 4 existing drills which are used for Noranda in Sudbury and find more drill used for other customers.
1). Not bid
2). Not invest in drills and bid only intermediate job
3). Not invest in drills and bid only deep job
4). Not invest in drills and bid on both jobs
5). Invest 4 in drills and bid only intermediate job
6). Invest 4 in drills and bid only on the deep job
7). Invest 8 in drills and bid only on both jobs
Analysis
Analysis result is as below.
1). Business expansion
As it is a new and the largest contract, the contract for Mond is very important for Northern to expand its overall business. Expected impact for this project can be seen in exhibit 1. Northern drill can grow its sales by 14% and increase market share by 0.5% from its current share (3.7%) if it wins either intermediate or deep job and doubled figure if it wins both jobs so the impact of this business is pretty big. In addition, having another major customer enables Northern to improve its customer portfolio.
The sales for Noranda accounts for 60% of Northern’s overall annual revenue, which is 34.4M Cdn$, while the annual revenue for Mond contract is 16-18M Cdn$ with the both intermediate and deep jobs. This means that Northern should invest in