CMR Enterprises

Group 4
Tarun Gahlot

B018

Dhruv Mangukia

B038

Smit Patel

F044

Shrenik Mehta

H035

Prannoy Mathew

H037

Dhwani Shah

H058

Karthika Paliath

I045

Q 1. What should CMR do about the Blackstone account?

Problems:
Less focus on the Residential business than the commercial business
Miscommunication between Blackstone and CMR leading to lack of coordination
Lack of experience or effort from its project coordinator.
Reluctance from Blackstone to share their information with CMR unlike their other customers
specially on the IT software front- InfoCentral.

Ideas of 3
camps :
The current problems are not unusual and its a matter of time before it gets sorted
between the two and generate greater business.
There are some fixable problems and CMRs poor performance in the residential space
due to the lack of focus was deemed responsible for the same. Lack of proper upgrading
of InfoCentral to the requirements of residential was another problem.
Termination of the accountor a significant restructuring in the existing contract between
the two companies. Even droping the residential business altogether was suggested.

Approach of CMR to the problem

InfoCentral has been made keeping in mind the commercial business only, So it should be made
compatible to the Residential business also.
CMR should try to maintain a healthy relationship with Blackstone through continuous talk &
sharing of information. It should clear the air with Blackstone about its current situation and the
problems faced on account of the relation management, Blackstone yelling at CMR and the
unpaid costs.
CMR should discuss the new pricing with Blackstone to take them into confidence as changing
the prices without informing your major account was an inappropriate step.
CMR should tell the importance of the InfoCentral system and persuade it to share their data so
that the process could be streamlined.
Also they should communicate that for mutual benefit the homeowners should not be made to
contact them directly such that they put the responsibility to Blackstone aboutt it and may even
offer a the product at lower prices on the condition that final communication is made from
Blackstones side and not from homeowners.

If Blackstone shows no signs of agreement to the offers made then CMR should terminate its relations
with Blackstone and concentrate on other clients.

Q2. How much profit is being generated by CMRs commercial relative to its
residential business? By the Blackstone account?
By Contribution Margin

Blackstone

Hours
Revenue
Labor costs($ 16/hr)
Material costs (% of revenue)
Material costs
Estd COGS

Residential
5643
210314

Total

1596000

90288
26%

Commercial

7270000

26%

34%

54681.64

144969.64

Contribution Margin(% of revenue)

38%

48%

65344.36

606480

3489600

SG&A

68792.08211

522039.2511

2377960.749 2900000

Profits

-3447.722111

84440.74893

1111639.251

Contribution Margin

Total revenue of CMR

8866000

Segmentwise breakup

210314

1596000

7270000

2.37%

18.00%

82.00%

% wise breakwise

Q2. How much profit is being generated by CMRs commercial relative to its
residential business? By the Blackstone account?
By Material cost & labour

Residential

Commercial

Hours

2985

6045

Revenue

1596000

7270000

Labor costs($ 16/hr)

47760

96720

Material costs (% of revenue)

26%

34%

Material costs

414960

2471800

Estd COGS

462720

2568520

SG&A

522039.2511

2377960.75

Profit

611240.7489

2323519.25

Q3.Was CMRs decision to initiate a relationship with Blackstone a good

one ?
Bad Decision:

Good Decision :

A constant flow of work in

the huge volumes of sales order that came along with it.

a seasonal industry

It was as ambitious

It had grown to be the largest

homebuilder in 2 years so

CMR saw that the market was getting consolidated and

the competition was increasing. A relation for the sake of

vs

it.

had a promising future for

business for CMR

CMR only focussed on getting the large account and

Strategic fit or synergies between the companies Not

Checked

Blackstone's reputation of being hard on its Subs

Provided great volumes of

ignored which should have been carefully analysed and

work

the project manager should have sketched out a strategy

based on it.

CMR didnt put up any of its terms and all that it did
was to please the big account..

Q4.What is the nature of CMRs business ? How does it differ across the two market segments ?

Commercial

Residential

Three Roles:

Personal dealing for prices

Owner : Ultimate owner and paid for the job

Quicker estimation and revision

Architect : Designing and developing detail

Personal touch with customer interaction

drawings

Onsite

General Contractor : Turning the plan into

finished project by a specific date

General

contractors

solicited

bids

from

many project managers for subcontracting

bids.

Dependent on referrals than marketing by

CMR

subcontractors for portions of a project. Had

Q4.What is the nature of CMRs business ? How does it differ across the two market segments ?

Commercial

Residential

Retail store fixtures, executive suites, lobbies for

Custom cabinets and millwork for both new and

office buildings, customized wood work for banks and

remodeled homes (Showrooms and Blackstone

doctors offices and other buildings.

Homes)

Project cycles were generally six months or more and

Project cycles were four to six weeks

Kitchen and bathroom cabinetry

$4.8 billion market in 1996

Was the pride of the company, The Mikes Way

generally got paid at the end

Evenly

spread

between

new

and

remodeled

buildings.
$5 billion in 1996
Was two thirds of the projects and generated 80% of
its sales. It worked by the name of CMR Enterprises

had helped the company maintain premium pricing

and good margins.

Q5. How did the CMR-Blackstone relationship evolve over time? Highlight important events and
actions that influenced this evolution

Year 1

Year 2

Blackstone president met Marcus to offer

the

contract on immediate bases

Blackstone

offered

chance

Blackstone President asked Marcus to reduce prices

on account of increased operational efficiency which

to

be

the

only

subcontractor
Blackstone became a major client : Contributed to

Marcus felt they hadnt achieved

Faced problems with communication & coordination

Increased prices by 7% resulting in overall increase

25% of the residential business

of 15-20% for customers of Blackstone

Concerns : A lot of CMR cabinets were placed on the

Discussion of the two presidents n pricing

side. Blackstone had made a change in a piece at the

Phone call with heated conversation between

last moment but no information was updated in the

project management system
Last minute changes affected operations

Blackstone and CMR team

Q.6 Why did CMR persist in the Blackstone relationship? How would you remedy such a situation?

To meet their aggressive growth strategies ( $70 million by 2007) and also meet their objectives of making their
company scalable and replicable business they need the support of the biggest residential customers in the area
Planned to build 130 homes in one year
Accounted for 25% of the residential business
High growth rate in terms of revenue (32,295$ in 1997 to 303,237$ in 1998)
Blackstone had the potential to provide steady ,profitable income to moderate the erratic income from the commercial
business
Termination of the blackstone relationship would be a big blow to the companys morale

10

Recommendations to CMR to tackle the situation

Negotiate new terms for their agreement
Look into alternatives for cost reductions because the homeowners preferred
working directly with CMR .
Monetize the efforts for which CMR pays field visits to take measurements which
is the work of a contractor
Better communication on increases in price with Blackstone and ask them to
pass that on to the homeowners so that they do not feel exploited.
Internal Changes
Improve the internal communication by improving and upgrading InfoCentral to
meet the needs of not just commercial business but also the residential
business. (eg.capturing details on change orders)
Increase ways to coordinate better with other subcontractors
11
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