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Dominion Motor Case Study

- Dominion Motor Case faces the problem that its largest customer, Hamilton, has ranked it as the #3 supplier due to starting torque test results. This could impact Dominion's sales to Hamilton as well as influence other customers. - If Dominion loses Hamilton's business, it would lose potential sales of 2,500 motors over the next 5 years, resulting in lost profits of over $1 million. Additionally, Dominion could lose market share with smaller companies that follow the lead of larger companies like Hamilton. - Dominion needs to determine the best steps to take to maintain its 50% market share and continue growing, such as lowering prices, developing a new product, or retesting with Hamilton to improve its

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63 views

Dominion Motor Case Study

- Dominion Motor Case faces the problem that its largest customer, Hamilton, has ranked it as the #3 supplier due to starting torque test results. This could impact Dominion's sales to Hamilton as well as influence other customers. - If Dominion loses Hamilton's business, it would lose potential sales of 2,500 motors over the next 5 years, resulting in lost profits of over $1 million. Additionally, Dominion could lose market share with smaller companies that follow the lead of larger companies like Hamilton. - Dominion needs to determine the best steps to take to maintain its 50% market share and continue growing, such as lowering prices, developing a new product, or retesting with Hamilton to improve its

Uploaded by

pranay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Dominion

Motor Case
Study
PUNEET KUSH
The problem is that DMC’s (50% market share)
largest consumer Hamilton (30% wells) of oil well
pumping motors has ranked them the #3 supplier,
and not only could this impact purchasing from this
customer (Hamilton), other smaller companies follow
this large company for their purchasing decisions, so
that they get the benefit of copying their R&D
decisions.
.”
- THE PROBLEM
Reasons of Problem
Power companies implemented a graduated monthly base charge per HP
at installation, to mitigate in efficiencies caused by over motoring in order
to improve power factor. Upon the announcement of this change, the
head of Hamilton's EE department (Bridge) conducted testing on motors
from different manufactures and used starting torque as the deciding
parameter, in order to define the specifications of a motor which could be
used most economically.
Kya ye itni badi problem hai
Look at sales potential for DMC in this particular market. 1,000 new wells will enter production over the
next 5 years, so that's 5,000 wells. Since DMC has 50% of this market, that would mean 2,500 potential
sales. Per exhibit 2, the total cost to manufacture a 7.5 HP unit is $714.00, and it is sold to large users for
$1,200, for a net profit of $486.00 per motor (the profit on mfg cost is 536.49 per motor.) Additionally,
there DMC sells about 15% of the control and panel-board applications. Other than lost dollars, what
are the other implications if DMC looses Hamilton? Other smaller companies that do not have their own
engineering staffs follow the purchasing decisions of the larger companies, so that they can avoid the
R&D investment. Therefore, DMC could stand to lose some of that market as well.
Major Issues
The information received from the sales person following up with Hamilton, had put the
executives under difficulty as to what steps must be taken to maintain the market share and
grow in the market.
The change in the schedule of power rates, could affect the specifications of oil well pumping
motors. Power companies also demanded that over motoring must be stopped.
Alternatives - 1
Reducing the price of the motor will be a feasible option only for a short
period. As in the industry the companies want more of starting torque. So
it will work until the report is out. People who wanted 10 horse power will
also get advantage as all those wanted 10hp will get it at a lesser price.
We should also reduce price because if the report is out at the right time
then the 10hp stock will not sell. So we need to reduce the price and sell
it in the market.
Alternative - 2
$790 (cost) - The Company has to lower down its margins. It follows NEMA. Competitors can also
do. Torque war will start. 4. 2nd way-$867 (cost) - High cost and so we sell it in lower quantities and
margins.
Alternative - 3
Until the formal report comes out in the public domain till then there is no large benefit for going
for a new product. So wait till then. Manufacturing cost + investment will have to be made. The
economies of large scale production will not come in. 22000 in 1-200hp at 50%market If it goes
up to 60% to 26400, then 4400*1045=4598000.Even without including that oil wells grow by the
anticipated fig of 1000 then even the company can earn profit.
Alternative - 4
The 3rd alternative will encourage the trend of definite-purpose motors; they wont remain
competitive in the market. So there is a need to contact and ask them to test it again as tests had
not produced data sufficient to define oil pumping requirements. But it is tough to meet
Hamilton

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