Curled Metal Incorporated has declining sales, but has developed a new product (curled metal pile driver pads) that, in field tests, deliver customer benefits that are many times CMI's manufacturing costs. Joseph Fernandez and Rajiv Sanwal of CMI's Engineered Products Division are responsible for formulating a strategy for the new product. A key issue is the price to charge for the pads. The case raises issues of analyzing market potential, aligning price with business strategy, and the implications of a price on development and execution of integrated strategic options.
To calculate customer benefits and examine other factors that affect willingness to pay and the implications for pricing. To allow students to develop and debate integrated strategic options based on different pricing possibilities. To illustrate the interdependent nature of elements across the value chain in developing and implementing strategy for a new product. Subjects Covered:
Competitive advantage; Distribution; Pricing; Product introduction; Strategic planning; Strategy; Valuation
1. We see the company considering the penetration to the new market with a new product. After testing, their prototype cushion pads, consisting of curled metal, performed superiorly to asbestos pads, which are currently the industry standard compliment product to pile drivers. 2. Despite the fact that there's no such a product on the market at the moment. The company is likely to face competition from the asbestos pads market (a substitute product) 3. The potential market demand for pads could range between 174,000 to 234,000 per year 4. The traditional distribution structure for asbestos cushion pads is not well established. The company must be aware a key characteristic CMI of market players and influencers in order to tailor their marketing strategy. 5. The critical issues that company shall prepare a sound solutions for relate to product pricing, market potential, market penetration strategy and competitors opposition. 6. The recommended starting price range is $1,299 - $1,899 7. CMI might obtain $107M in annual profits before marketing 8. In order to penetrate the market, CMI must conduct substantial customer-education marketing initiatives 9. There are several marketing alternatives the company might choose to follow (high price, niche strategy, international markets etc)
.Case Analysis Overview
Cumberland Metal Industries (CMI) is one of the largest metal manufacturers in the world. The company evolved from selling metal as a finished product to one that used it as a raw material, increasing sales from $250,000 in 1963 to over $18,500,000 in 1979. Currently, CMI relies heavily on SlipSeal, which is used as a high-temperature sealant in automobiles. Although CMI dominates the market for this product, corporate sales figures decreased over the last year. As a result, the management at CMI realized the importance of diversifying its product-line so that the company does not rely as heavily on SlipSeal or the automobile industry. With this in mind, CMI management was very interested in a new product that could be used as a cushion pad in pile driving. The cushion pads, consisting of curled metal, were superior in performance to the asbestos pads currently used throughout the industry. The curled metal pads lasted longer then asbestos pads and were easier to change. Furthermore, the growing concern over the health risks associated asbestos gave CMI's pads an added advantage. Government regulations prohibiting the use of asbestos or making them costly to handle, could push pile drivers toward CMI's cushion pads. The prospects prompted Robert Manicucci, the vice president of Engineered Products Division at CMI, to declare: Curled metal cushion pads seem to have more potential than any other product we've ever introduced. A successful market introduction could as much as double...
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