CHANDANA L.

GARIMA TAMUDIA
KRITI SINGHAL
POOJA BERIA
S. MADHULA
RAJASURYA

The leading manufacturer Dominion motors

in Canada having aquired 50% of the
available market for oil pumping motors is
threatened by a loss of market share in
oilfield pumping motors because the
Hamilton Oil Company, having tested
several competing motor brands, finds the
competitor Spartan Motors motor to be
superior.

1Reduce the price of DMCs 10hp motor to

that of the 7 -hp motor,
2 Reengineer DMCs present 71/2 hp
motor to make its starting torque atleast
equal to that of spartans 7 hp unit,
3 Undertake design offer definite purpose
motor for the oil well pumping market.
4Attempt to persuade Bridges and
Hamilton executives that another set of
conclusions could be drawn from the test
results.

Hamilton is the largest producer with 30%

share on oil producing wells.
80% of the Dominion market is large business
users.
Estimation that 1000 new wells per year
would come up in the next 5 years.
The season of highest sales is between April
and September.
Many small oil operators follow large
companies for purchasing policy and
equipment choice.

Reduce the price of DMCs 10 hp motor to that of 71/2 motor.

Actual Price of 10-hp motor= $1580
New Reduced price = $ 1200
Suppose considering per unit sales:
Scenario

Cost
incurred

Sales +
Transport
Cost

Total
Cost

Selling
Price

Profit

current

907.80

158

1065.8

1580

514.20

Future

907.80

120

1027.80

1200

172.20

Profits get reduced by $342 / unit.

PROS:
This is a quick initial way to meet the problem requirements.
The company sales would not be affected for the current season.
They get more time to analyze Bridges test and derive their own
conclusions

Cons:
Reduced profits.
Extra expense for user.
For 71/2 hp motor, the electrical consumption = $21.5 *7
=$161.5
For 10 hp motor, the electrical consumption = $20 * 10=$200
Therefore extra expense of $38.5 for the user.
This is not a long run solution.
If the power companies start penalizing for overmotoring, the
customers would be at risk.

Two ways of Reengineering 71/2 hp motor.

1. Increasing torque with increase in temperature.
2. Increasing torque with increase in frame size.

options

Manufact
uring
cost

Fixed
cost

Sales
commissi
on(8%) +
transport
cost(2%)

Total cost

Selling
Price

Profit

1.

790

50.49

120

960.49

1200

239.51

2.

867

50.40

120

1037.49

1200

162.51

current

663.51

50.49

120

834

1200

366

Going by this alternative would violate NEMA standards and would

lead to unbalanced motor design.
Even the cost analysis shows a reduced profit, hence this
alternative is not feasible.

PROS:
No additional investment in plant and equipment is required.
Required Torque capacity is achieved.
CONS:
Reduced profits.
Equipment set up time is 3 months.
Will start torque war which would be detrimental to the motor
industry.
Customer reaction to the new product is uncertain.
The companys policy of maintaining NEMA standards is being
violated.

Considering the definite purpose motor specification 5 hp

unit having torque of a 10 hp motor.

Monthly power charge paid acc. To horse power.

Horse
power(hp)

Base
rate/horse
power($)

Monthly
power base
rate($)

25

125

7 1/2

21.50

161.25

10

20.00

200

By using 5 hp motor instead of 10 hp motor the user can

save 75$ /month and 75*12=900$ / year.
This 5 hp can be sold for a minimum price of $1045 and
maximum price of $1200.
Referring to exhibit 2:
hp

Manufacturin
g cost

Total cost

$511.53

571.20

Fixed cost here is 571.20 511.53=$59.67

But the manufacturing cost of Definite purpose motor
comes around $665.
Including the sales commission and transportation
cost(10%) . i.e $104.5 for ($1045 S.P ) and $120 for (S.P
$1200)
Selling
Price($)

*Total cost ($) Profit($)

1045

829.17

215.83

1200
844.67
355.33
* Total Cost includes manufacturing cost, fixed cost and sales
commission and transportation cost.

Therefore, % hp motor can be sold for $1200 with a profit of $355.33

According to industry estimates, an average of 1000 new wells would
be added every year.
But this alternative requires an investment of $75000 for the required
engineering and testing.
Therefore, Total sales from profit would be 1000 * 355.33= $355,330
Hence, the pay back time for the initial setup cost would be
75000/355330=0.21 years
Hence , this alternative can be adopted as the profit is considerable
with less pay back time and DMC Ltd. Can catch up with its
competitors.
CONS:
The new wells coming up may require different motors.
Small companies may not want the same motor that Hamilton wants.
Also it would take 4 or 5 months for the production to begin.

Pros:
Not necessary to change the product and market strategy
Cons:
Bridges is more convinced of his interpretations and its difficult to
meet him directly
Presentation of different arguments is not known
Even if we try to alternate Bridges recommendations it would
only generate ill will.
Additional alternative:
Some executives believed that DMC should begin testing and
defining the motor needs of the companies various market
segments as it would be a long term investment in maintaining
DMCs future market position.
But it requires additional hiring.

As soon as the Bridges results gets published

DMC can take up Alternative 1 to retain the
market share in the current selling season. To
make this alternative more attractive the
minimum marginal profit can be retained and
additional discount can be provided over and
above 45%.

And parallely DMC must work on Alternative 3

and launch a customized product for the
Canadian market (which is strongly influenced by
BRIDGES result)