Mrs. Lee
Harvard Business School
9-191-053
rP os t
Rev. June 28, 1994
Catawba Industrial Company
op yo Marge McPhee, general manager of the compressor manufacturing department of Catawba
Industrial Company, quickly spotted the reports that she had been waiting for in the pile of mail that had accumulated during her trip to a West Coast industrial equipment trade show. A sales forecast and a cost tabulation for a proposed new, light-weight compressor provided her with the information she needed to ascertain whether or not to introduce it, what volume to produce, and what price to charge. Catawba Industrial Company, located west of Charlotte, North Carolina, was a major supplier of automatic industrial paint systems (used for painting newly manufactured goods such as agricultural machinery, metal furniture, and appliances) and related industrial equipment. The compressor department manufactured a standard compressor for use in the company’s paint systems and for a wide variety of other purposes as well. Marge McPhee, who had earned a Bachelor of
Mechanical Engineering Degree from Georgia Tech., was recently promoted to her present position in recognition of her strong technical and managerial capabilities. The company employed almost 1,200 persons and had more than $200 million in sales.
tC
The marketing department’s sales forecast for the new product, see Table 1, looked promising.
The numbers seemed to indicate an upper price limit of $7,500 to $8,000 and a maximum demand of approximately 30 units per week. While the lower weight and size made the new compressor attractive for certain applications, it was less rugged than the standard unit. It also required customers with standard units to carry another set of spare parts.
Table 1
Sales Forecast Light Weight Compressor
Units per Week
$5,500
$6,000
$6,500
$7,000
$7,500
$8,000
31
30
28
24
17
10
* Compressors were priced at $500 increments only.
Do
No
9-191-053
rP os t
Rev. June 28, 1994
Catawba Industrial Company
op yo Marge McPhee, general manager of the compressor manufacturing department of Catawba
Industrial Company, quickly spotted the reports that she had been waiting for in the pile of mail that had accumulated during her trip to a West Coast industrial equipment trade show. A sales forecast and a cost tabulation for a proposed new, light-weight compressor provided her with the information she needed to ascertain whether or not to introduce it, what volume to produce, and what price to charge. Catawba Industrial Company, located west of Charlotte, North Carolina, was a major supplier of automatic industrial paint systems (used for painting newly manufactured goods such as agricultural machinery, metal furniture, and appliances) and related industrial equipment. The compressor department manufactured a standard compressor for use in the company’s paint systems and for a wide variety of other purposes as well. Marge McPhee, who had earned a Bachelor of
Mechanical Engineering Degree from Georgia Tech., was recently promoted to her present position in recognition of her strong technical and managerial capabilities. The company employed almost 1,200 persons and had more than $200 million in sales.
tC
The marketing department’s sales forecast for the new product, see Table 1, looked promising.
The numbers seemed to indicate an upper price limit of $7,500 to $8,000 and a maximum demand of approximately 30 units per week. While the lower weight and size made the new compressor attractive for certain applications, it was less rugged than the standard unit. It also required customers with standard units to carry another set of spare parts.
Table 1
Sales Forecast Light Weight Compressor
Units per Week
$5,500
$6,000
$6,500
$7,000
$7,500
$8,000
31
30
28
24
17
10
* Compressors were priced at $500 increments only.
Do
No