Dominion Motors & Controls, Ltd

Section B | Group 4 Gautam Hariharan 12P137 Apoorva Dave 12P133 Faiz Haque 12P134 Kshitij Ahuja 12P143 Rajesh Choudhary 12P158

Dominion Motors and the Market

What Dominion does? - A large supplier of motors and control equipment in Canadian Market

Wide range of products

Excellent salesperson

Main Competitors Spartan Universal Foreign Companies

Excellent reputation for product quality

Capability of producing closer to the NEMA standard

Purchasers
OEM Reseller

Strengths

Large User

Small User

Problems
Motors have low torque
Weaknesses

Weak Advertisement campaign

Schedule of power rates changed Stop overmotoring and improve power factors Hamilton Test: Dominion recognized as third best

Alternative 1
Reduce the price of 10 hp motor to that of a 7 hp motor Horsepow Manufact Commerci er uring Cost al Cost 7 663.51 714.00 Prices to Large Users 1200 Result

10
Issues:

816.00

907.80

1580

Unit Contribution: 1200 816 = $384

Profit is reduced from $673 to $ 273 per motor If power companies penalize for overmotoring, customers would bear expenses For 7 hp motor, Electrical Consumption = 21.5*7 = 161.5$ For 10 hp motor, Electrical Consumption = 20 *10 = 200$ A way to ensure that company retains its existing customers short run and gets the majority share in the upcoming oil wells in the coming year

However, the problem is not price but the starting torque, hence this might not be successful

Alternative 2
Re-engineer present 7 motor to produce more starting torque Two options
Operating temperature above NEMA standards - $790/Unit Contribution = 1200 790 = 410$

Larger motor frame - $867

Unit Contribution = 1200 867 = 333$
Issues:

Reduced Profits, Not in line with the NEMA standards Very unlikely for oil companies to opt for such a product which does not satisfy specifications Could create negative impression of the company for not complying with NEMA May take time to re-engineer, hence a threat of losing customers exists Will start torque war which could have detrimental effect on motor industry

Alternative 3
Design a definite purpose motor
Price of Definite Purpose Motor Manufacturing Cost $1045 $665

Investment Cost (fixed)

Unit Contribution Breakeven Volume

$75000
= $1045 $665 = $380 = Fixed Cost / Unit Contribution = $75000 / $380 = 198

Benefits:
Minimal risk with 1000 wells coming up every year First Mover Advantage, Fulfils NEMA specifications

Issues:
Not realizable before 4-5 months Upfront investment of 75000 $ It is a definite-purpose motor whereas the Canadian motor industry adheres to general-purpose motors

Alternative 4
Persuade Bridges and Hamilton executives
Dominion Perspective: The motors already have a staring torque which comfortably clears the minimum requirement (70 foot) Hamilton recommendations could severely impact image of company and lead to lost business opportunities in future Benefits: No need to change product and market strategy Issues: Hard to approach Bridge directly Difficult to convince Bridges who is confident and proud of his research Attempt to alter Bridges recommendations could generate ill-will

Recommendations
As a short term solution, to retain market share in current selling season, Alternative 1 can be employed and thus company could generate higher sales albeit at lower profit margins For long term solution, Dominion must parallely develop Alternative 3 which requires 4-5 months to launch customized product for Canadian market. Estimated to increase market share of Dominion to 60% in oil well pumping market After definite purpose motors are ready for sale, aggressive promotion campaign must be employed to highlight features of new customized product with reference to policies of power companies, industry requirements and regulations