Essay About 10-Hp Nema Design C Motors And Long Term Solution

Decision Sheet – Dominion Motorls & Controls
Decision Sheet – Dominion Motorls & ControlsSituation Analysis: DMC has a nearly 50% market share in oil well pumping motors in north Canadian oil fields. Nearly 80% of the sales happen through OEMs (At a discount of 45%) and large users (at a discount of 38%). Since 1973, 80% of motors sold for oil well pumping applications happen through 10-HP NEMA design C motors. The company also sells control units for the motors, when majority of its competitors don’t follow suit. In a field test carried out by Hamilton (The largest oil company active in Canada with 30% well share), DMC’s motors were found to be at the third preference based on two factors – i) Maximum starting torque required to start the pumping unit in winters ii) HP required to lift the fluid. There was also a pressure from power companies to stop overmotoring. Hamilton’s endorsement of competitor products can be devastating to market share of DMC.Problem Statement: DMC has four alternatives as described below. It needs to decide the profitability and impact on market share for each of the options, both in short and long run.Options:Reduce price of DMC’s 10 HP motor to that of 7 ½ HP motorReengineer the present 7 ½ HP motor to make its starting torque equal to that of Spartan’s motorDesign a definite purpose motor (Basic 5 HP motor with starting torque of a 10 HP unit)Attempt to persuade Hamilton executives about the fallacies in their test resultsRecommendation: Design a definite-purpose motor for the oil well pumping marketRationale:Option 1 represents second biggest fall in profits (Exhibit 1). Moreover, this is not a long term solution as Spartan and Universal could also reduce prices, thus negating the effect of this option. Also, this solution does not tackle the issue of overmotoring which can be a problem if the power companies start imposing penalties.Though option 2 is more profitable than option 1, it causes compliance issues (due to high temperatures or large dimensions) which can lead to customer resistance.Option 4 may be difficult to execute as Mr. Bridges has an intense pride of authorship of his report and it would be very difficult to approach him. By adversely affecting the relationship with Bridges, this option can lead to loss of business from Hamilton which can trigger a domino effect.By selling the definite purpose motor at the price of a 7 ½ HP motor, the company manages to get away with only a 30% decline in profit per unit. This solution also represents a long term solution:All other options like price reduction, reengineering and persuasion are stop gap solutionsThe Canadian oil market will add 1000 new wells every year for next 5 year. By defining an industry standard motor, the investment of $ 75,000 can be recovered quickly as the breakeven quantity is a meagre 211 units (Exhibit 2)The new motor will be more power efficient and adhere to all NEMA and power company normsThere is still 2 months till test results by Hamilton will be made public and by initiating development for the definite purpose motor immediately will give a big headway to DMCThe introduction of new motor will increase DMC’s share of oil well pumping market to 60%PLEASE TURN OVER THE PAGEEXHIBIT 1 (ANALYSIS OF VARIOUS OPTIONS)Option No.OptionMfg. costTotal cost (Mfg. + Overheads)10% cost for commissions and transportFinal total costList pricePrice to large usersProfit / unitCurrent-816907.81581065.825501580514.21Reduce price of 10 HP to 7 1/2 HP816907.81201027.819401200172.22aReenginer (Temperature issues)790840.49120960.4919401200239.512bReenginer (Frame size)867917.351201037.3519401200162.653aDefinite purpose motor (Sell at 5 HP Price)665724.67104.5829.1716851045215.833bDefinite purpose motor (Sell at 7 1/2 HP Price)665724.67120844.6719401200355.33