Analysis of "Craig Manufacturing: The Commander Decision"

This case study explores Craig Manufacturing (CM), a third-generation family business specializing in
customized heavy equipment attachments, and its decision to enter the compact equipment
attachment market with a new product line, Commander. The analysis will cover key strategic
aspects, including company background, market conditions, competition, financial implications,
and challenges of diversification.

1. Craig Manufacturing (CM): Company Background

 Founded in 1946, CM built its reputation on customized heavy equipment attachments for
construction, snow removal, and oil & gas industries.

 Its core strengths include engineering expertise, customer service, and premium-priced,
high-quality products.

 CM has a strong dealer network with Caterpillar, John Deere, and Volvo dealerships.

 The company rebuilt itself after a fire in 2005, demonstrating resilience and adaptability.

 Ben Craig, VP, is evaluating whether Commander, a standardized product line for smaller
machines, aligns with CM’s strategy.

2. Market Conditions in 2011

 The construction industry was recovering from the 2008 financial crisis, with positive
revenue projections for 2011.

 Smaller construction machines (skid-steers, mini excavators, backhoes) were growing in

demand due to renovation and maintenance projects.

 Industry consolidation was increasing competition, leading to price sensitivity and cost-
cutting pressures among dealers.

 Rental market growth was shifting demand from custom-built to standard attachments,
benefiting manufacturers of standardized products.

3. Competition in the Equipment Attachment Industry

 Major OEMs (Caterpillar, John Deere, Volvo) produced standardized attachments, but
customization was left to smaller firms like CM.

 Large attachment manufacturers (Weldco-Beales, Paladin, H&H Manufacturing) offered

both standard and custom solutions, making competition tough.

 Smaller competitors (Ellis Fabrications, AMI Attachments) catered to niche markets with
standardized mini attachments.

Competitive Challenges for CM:

✅ CM’s strong reputation and dealer network could help its entry into the mini-equipment market.
❌ Pricing pressure in the standardized attachment market may impact profitability.
❌ CM’s traditional business model is based on customization, not mass production, requiring
operational adjustments.

4. The Commander Decision: Strategic Shift

Key Differences Between CM’s Traditional and Commander Product Lines

Feature Traditional CM Products Commander Products

Custom-designed, high-end
Product Type Standardized, mass-produced attachments
attachments

Heavy equipment (excavators, wheel Compact equipment (mini excavators,

Target Market
loaders, graders) backhoes, skid-steers)

Dealer relationships, sales reps, high- Online sales, bulk orders, showroom
Sales Model
touch process display

Average Deal
$18,000+ $2,500
Size

Manufacturing In-house, high-quality engineering Sourced from China, cost-focused

Delivery Time ~6 weeks (customized) 10-12 weeks (bulk orders)

Potential Benefits of the Commander Line:

✅ Expands CM’s market reach to mini-equipment buyers.

✅ Diversifies revenue in response to declining heavy-equipment demand.
✅ Leverages CM’s brand reputation for quality in a growing segment.

Potential Risks and Challenges:

❌ Cultural Shift: Moving from high-end customization to standardized products may affect CM’s
brand positioning.
❌ Supply Chain Dependence: Manufacturing in China introduces risks (quality control, shipping
delays, counterfeiting).
❌ Dealer Incentives Needed: OEM dealers demand 25–35% discounts, impacting margins.
❌ Salesforce Resistance: Sales reps may resist lower commissions on the lower-margin Commander
products.

5. Financial Considerations

 82% of financial models show positive NPV, indicating a promising return on investment.

 High upfront costs: Setting up supply chains, warehouses, and sales channels requires initial
capital investment.

 Competitive pricing pressure: Low-margin, high-volume strategy needed to compete with

established standard-attachment suppliers.
  Projected growth in compact machine sales supports long-term profitability (Exhibit 8
shows higher projected demand for mini-equipment in both Canada & the US).

6. Final Decision: Should CM Launch Commander?

✅ Yes, If:

 CM manages quality control in its Chinese supply chain.

 The online sales model gains traction, reducing dealer dependency.

 Sales team incentives are aligned with Commander’s lower-margin, high-volume model.

 CM successfully builds brand recognition in the standardized attachment market.

❌ No, If:

 The Commander line cannibalizes CM’s premium brand identity.

 Operational complexities (inventory management, logistics) become too costly.

 Dealer resistance reduces market penetration, making it hard to scale.

Conclusion: A Calculated Risk

Craig Manufacturing’s decision to enter the compact equipment attachment market through the
Commander line represents a strategic shift from customized solutions to standardized, high-
volume products. While the growth potential is evident, CM must carefully navigate pricing
pressure, supply chain risks, and organizational resistance to ensure the success of this new
business model.

Would you like an actionable implementation plan or risk mitigation strategies for the decision?

1. Core Competencies of Craig Manufacturing (CM)

Craig Manufacturing’s core competencies are the unique capabilities that give it a competitive
advantage in the heavy equipment attachment industry. These competencies have been developed
over decades and are rooted in innovation, customer relationships, and operational excellence.

CM’s Core Competencies:

✅ Customization & Engineering Excellence

 CM specializes in customized attachments for heavy equipment like excavators, graders, and
loaders.

 It offers innovative, high-quality designs tailored to specific customer needs.

 Use of CAD-based prototyping and field visits ensures a perfect fit for equipment.
✅ Strong Dealer & Customer Relationships

 CM works closely with major OEM dealerships (Caterpillar, John Deere, Volvo),
strengthening its distribution channels.

 Provides 24/7 customer service, technical support, and on-site assistance.

 Has a reputation for reliability and problem-solving, making it a preferred supplier for
custom attachments.

✅ Operational Efficiency & Lean Manufacturing

 CM’s lean production system ensures a six-week turnaround from order to delivery.

 The 2005 fire and subsequent rebuild allowed CM to modernize its plant, increasing
efficiency.

 Ability to maintain high quality standards while handling complex designs.

✅ Brand Reputation & Market Positioning

 Established as a leader in high-end, premium heavy equipment attachments.

 Recognized for engineering excellence and durable products, allowing it to charge premium
prices.

✅ Resilience & Adaptability

 CM has demonstrated adaptability to changing market conditions, such as its expansion

into Ontario and sourcing from China.

 The company successfully recovered from the 2005 fire, showcasing strong leadership and
problem-solving capabilities.

2. How CM’s Core Competencies Shaped Its Value Chain & Competitive Strategy

CM’s core competencies directly shaped its value chain and competitive strategy, allowing it to
differentiate itself from competitors in the heavy equipment attachment industry.

Value Chain Configuration

 Inbound Logistics:

o CM sources high-quality materials from suppliers like Russel Metals, Lincoln

Electric, and Linde Canada.

o Recently started sourcing from China to control costs, though quality concerns
remain.

 Operations & Manufacturing:

o Uses lean manufacturing principles to minimize waste and optimize production.

o Custom design process involves field visits, engineering, and prototyping, ensuring
precision.
  Marketing & Sales:

o Strong dealer relationships drive most sales through OEM partners like Caterpillar &
John Deere.

o Salesforce is highly experienced, with long tenure and relationship-based selling.

 Customer Service & Support:

o Provides 24/7 support, online resources, and in-person visits for troubleshooting.

o Offers customized solutions, leading to high customer retention.

Competitive Strategy Shaped by Core Competencies

CM’s competitive strategy is based on:

✅ Differentiation through customization: CM does not compete on price but on engineering
excellence and tailored solutions.
✅ High-touch customer service: Unlike standardized attachment manufacturers, CM offers on-site
visits and direct consultation.
✅ Dealer partnership model: CM collaborates closely with OEM dealerships, ensuring a steady
distribution network.

This high-quality, customization-based strategy helped CM maintain premium pricing and strong
dealer relationships.

3. How Industry Factors Impacted CM’s Competitive Strategy

The construction industry trends in 2011 forced CM to rethink its strategy as market conditions
changed.

Key Industry Factors Affecting CM’s Strategy

✅ Economic Recovery Post-2008 Recession

 The financial crisis reduced construction demand, impacting heavy equipment sales.

 Recovery was slow but improving, with 2011 showing signs of market stabilization.

✅ Shift Towards Compact Equipment

 More construction companies were opting for mini excavators, skid-steers, and backhoes
for smaller, flexible projects.

 CM’s traditional focus was on large attachments for heavy equipment, but demand was
growing for standardized, smaller attachments.

✅ Dealer Consolidation & Price Pressure

 Large construction firms were consolidating, meaning dealers had fewer customers placing
larger orders.

 Dealers demanded discounts & bulk pricing, which threatened CM’s customization-based,
high-margin model.
✅ Rise of the Rental Market

 More companies were renting equipment rather than buying, leading to higher demand for
standard attachments that fit multiple machines.

 CM’s customized attachments were less suited for rental fleets, which required
standardized, adaptable products.

Impact on CM’s Strategy

 CM had to adapt to new demand patterns by considering an entry into standardized mini-
equipment attachments (Commander Line).

 The competitive landscape was shifting, requiring diversification to maintain growth.

4. Proposed Competitive Strategy for the Commander Business Unit

The Commander product line represents a strategic shift from customized, premium attachments to
standardized, mass-produced mini-equipment attachments.

Key Elements of Commander’s Competitive Strategy

✅ Cost Leadership & Volume Sales

 Unlike CM’s traditional high-margin custom products, Commander will focus on low-cost,
high-volume sales.

 Sourcing from China to reduce manufacturing costs and improve profit margins.

✅ Online & Dealer-Based Distribution

 First-year sales strategy: Introduce Commander through CM’s current sales team and
distribute marketing materials.

 Long-term plan: Shift to an online ordering system, reducing reliance on personal sales
visits.

✅ Broad Market Appeal

 Unlike CM’s traditional niche market, Commander products will be OEM-compatible, making
them adaptable for various brands.

 Targeting construction, agriculture, industrial plants, and rental companies.

✅ Warehouse-Based Inventory Management

 Unlike custom-built products, Commander attachments will be pre-manufactured in batches

and stored in warehouses for quick shipping.

 Ensures faster turnaround time, addressing a key buying factor for mini-equipment
customers.

✅ Dealer Incentives & Pricing Strategy

 Offering OEM dealers a 25–35% discount to push sales.

  Lower pricing but ensuring quality, service, and warranty to differentiate from low-cost
competitors.

Challenges of the Commander Strategy

❌ Potential Brand Dilution: CM’s reputation is built on high-end, custom solutions—will a mass-
market product weaken this perception?
❌ Supply Chain Risks: Heavy reliance on Chinese suppliers may introduce quality control issues and
delivery delays.
❌ Salesforce Resistance: Current sales team is accustomed to high-margin deals—will they accept
lower commissions?

5. Should Ben Craig Launch the Commander Business Unit at the Cambridge Facility?

✅ Reasons to Launch Commander:

 Market Demand: Strong growth in mini-equipment sales and increasing dealer interest in
non-OEM attachments.

 Revenue Diversification: Helps offset declining sales in heavy-equipment attachments.

 Lower Cost Base in Cambridge: The Cambridge plant offers strategic location advantages,
and fixed costs are already in place.

 Online & Dealer Synergy: Allows CM to build its online sales expertise while leveraging
existing dealer relationships.

❌ Concerns & Risks:

 Brand Identity Conflict: CM is known for custom, high-end attachments—will a

standardized product line weaken brand equity?

 Profitability Uncertainty: Lower-margin, high-volume strategy is untested for CM.

 Operational & Logistical Challenges: Managing Chinese suppliers, warehousing, and online
sales requires new capabilities.

Final Recommendation: Proceed with Caution

 Yes, CM should launch Commander, but with risk-mitigation strategies:

o Strict quality control for Chinese suppliers.

o Phased online sales approach, starting with existing dealer support.

o Dedicated Commander sales team, minimizing resistance from CM’s core team.

o Clear branding strategy to differentiate Commander from CM’s premium products.

Would you like a detailed implementation plan or financial projections for this decision? 🚀

Exhibit Analysis & Implications for Craig Manufacturing's Decision

The exhibits provide quantitative data on industry trends, competitive landscape, and financial
projections, helping to evaluate whether launching the Commander product line is a viable
strategic move.

📊 Exhibit 1: Revenue Growth in Construction Equipment Manufacturing, Wholesaling, and Rental

Industries (2006-2011)

Key Insights:

 The construction equipment industry declined significantly between 2008-2010 due to the
financial crisis.

 Signs of recovery in 2011, with positive revenue projections across manufacturing,

wholesaling, and rental markets.

 Rental market growth is particularly notable, suggesting demand for compact equipment &
attachments.

Implications for CM:

✅ Good timing for Commander launch, as the market is rebounding.
✅ Compact equipment market growing—opportunity to diversify away from heavy equipment.
❌ Price sensitivity remains an issue—Commander must compete with low-cost standard
attachments.

📊 Exhibit 2: GDP Contribution of Construction Industry in Canada (2006-2010)

Key Insights:

 Construction industry showed resilience, with engineering & repair services driving growth
in 2010.

 8.1% growth in 2010, compared to 3.41% across all industries, indicating construction
sector recovery.

Implications for CM:

✅ Economic recovery supports infrastructure spending, boosting demand for equipment
attachments.
✅ Increased repair/maintenance work means higher demand for compact equipment attachments,
which aligns with Commander’s focus.

📊 Exhibit 3: New Building Permits in Canada (2005-2010)

Key Insights:

 Non-residential & industrial building permits rebounded in 2010, showing positive

construction activity.

 Total permit value grew from $26.3 billion (2009) to $28.9 billion (2010), indicating
reinvestment in construction projects.
Implications for CM:
✅ Growth in commercial & industrial construction signals opportunities for attachment sales.
✅ If these trends continue, both CM’s traditional & Commander product lines could benefit.

📊 Exhibit 4: Residential Building Permits in Canada (2005-2010)

Key Insights:

 Sharp decline in permits (2008-2009) due to recession, but strong rebound in 2010.

 Residential construction is a key driver of compact equipment demand.

Implications for CM:

✅ Residential construction recovery supports increased demand for compact equipment
attachments (Commander’s target market).
✅ If growth continues into 2011-2012, Commander will have strong market potential.

📊 Exhibit 5: Public & Private Capital Investment in Canada (2005-2010)

Key Insights:

 Private capital investment rebounded in 2010, after declining in 2008-2009.

 Public investment remained stable, supporting infrastructure projects.

Implications for CM:

✅ Private sector recovery means more construction equipment purchases, benefiting Commander
products.
✅ Stable public investment ensures demand for heavy equipment attachments, supporting CM’s
traditional business.

📊 Exhibit 6: U.S. Construction Spending (2005-2010)

Key Insights:

 Massive decline in private construction spending (2006-2010), but public spending

remained steady.

 Recovery started in 2010, but overall U.S. market still weak compared to pre-2008 levels.

Implications for CM:

✅ U.S. infrastructure spending still strong, presenting an opportunity for expansion.
❌ Weak private sector demand may slow Commander’s U.S. sales, requiring more aggressive
pricing.

📊 Exhibit 7: Comparison of Craig Manufacturing’s Standard & Commander Products

Feature Traditional CM Products Commander Products

Offering Custom attachments Standard attachments

Avg. Deal Size $18,000 $2,500

Target Heavy equipment (Excavators, Compact machines (Mini Excavators, Skid-

Equipment Loaders, Dozers) Steers, Backhoes)

Implications for CM:

✅ Diversification into compact equipment helps CM adapt to shifting market demand.
✅ Lower deal size but higher volume potential—requires efficient inventory management & cost
control.
❌ Shift from customization to mass production—risk of brand dilution & salesforce resistance.

📊 Exhibit 8: Projected Market for 2012 in Canada & U.S.

Equipment Type Canada U.S.

Heavy Equipment Carriers 7,602 units 14,860 units

Mini Carriers (Commander Target Market) 4,591 units 31,719 units

Implications for CM:

✅ Mini-carrier market (Commander’s focus) is significantly larger than heavy-equipment market.
✅ U.S. demand for mini-carriers is nearly 7x higher than in Canada, suggesting Commander could
have strong U.S. potential.

Final Analysis & Decision: Should CM Launch Commander from the Cambridge Facility?

✅ YES, CM Should Launch Commander, But With Caution

📌 Key Reasons to Proceed

 Market Demand is Strong: Mini-carrier sales are projected to outpace heavy equipment.

 Economic Recovery Supports Expansion: Both public & private investment in construction
are rebounding.

 Diversifies Revenue Streams: Helps offset declining custom attachment sales.

 Leverages Cambridge Facility: Existing resources reduce upfront costs.

 Dealer Interest is Positive: Survey shows dealers welcome a CM-branded standardized

product.

⚠️Key Risks to Address

❌ Brand Dilution: CM is known for premium, customized solutions—Commander must clearly

differentiate itself.
❌ Supply Chain Complexity: Manufacturing in China introduces risks (quality control, logistics).
❌ Salesforce Resistance: CM’s high-touch sales team may resist lower-margin products.
❌ Dealer Discount Pressure: Offering 25-35% dealer discounts reduces profitability.

Risk Mitigation Strategy

1. Strict Quality Control for Chinese Suppliers → Prevents reputation damage.

2. Phased Rollout → Start with select dealers before full-scale expansion.

3. Dedicated Sales Team for Commander → Avoids internal resistance from existing CM
salesforce.

4. Hybrid Distribution Model → Use both dealers & online sales to maximize reach.

5. Pricing Strategy → Ensure competitive pricing without undercutting profitability.

📌 Final Recommendation

🔹 Proceed with the Commander launch at the Cambridge facility—but with a phased, controlled
approach to mitigate risks.

Would you like a detailed financial breakdown or an execution roadmap for the Commander
launch? 🚀