Cumberland Metal Industries
Essay Preview: Cumberland Metal Industries
Report this essay
Executive Summary
We see the company considering the penetration to the new market with a new product. After testing, their prototype cushion pads, consisting of curled metal, performed superiorly to asbestos pads, which are currently the industry standard compliment product to pile drivers.
Despite the fact that theres no such a product on the market at the moment. The copmany is likely to face competition from the asbestos pads market (a substitute product)
The potential market demand for pads could range between 174,000 to 234,000 per year
The traditional distribution structure for asbestos cushion pads is not well established. The company must be aware a key characteristic CMI of market players and influencers in order to tailor their marketing strategy.
The critical issues that company shall prepare a sound solutions for relate to product pricing, market potential, market penetration strategy and competitors opposition.
The recommended starting price range is $1,299 – $1,899
CMI might obtain $107M in annual profits before marketing
In order to penetrate the market, CMI must conduct substantial customer-education marketing initiatives
There are several marketing alternatives the company might choose to follow (high price, niche strategy, international markets etc)
Situation Analysis
Company
Cumberland Metal Industries (CMI) is a large and well established manufacturer of curled metal products in the US and has experienced significant growth since its founding. Typically, CMI sells products that are then used as raw materials in other products. Furthermore, CMI is sophisticated at developing and manufacturing products for highly technical applications; traditionally in the automotive sector. Its product known as SlipSeal, has been carrying CMI for several years as the market leader, however, CMI wishes to diversify at this time.
CMI management is very interested in a new complimentary product that could be used as a cushion pad in pile driving hammers (a technique used by construction contractors). After testing, their prototype cushion pads, consisting of curled metal, performed superiorly to asbestos pads, which are currently the industry standard compliment product to pile drivers. Their curled metal pads lasted longer and were easier to change compared to asbestos–curled metal transmits force without creating significant heat and still remains resilient enough to prevent shock. Furthermore, the growing concern over the health risks associated with asbestos gave CMIs pads an added advantage. Potential government regulations prohibiting the use of asbestos or making them costly to handle, could push contracts of pile drivers toward CMIs cushion pads.
Product benefits vis-à-vis asbestos pads
*Based on the Corelick and Fazio tests
Curled metal pads performed 20% – 33% better than asbestos pads.
Curled metal pads lasted 10 – 20 times as long as asbestos pads.
Curled metal pads reach up to a mild 250 degrees Fahrenheit whereas asbestos can reach a dangerous and time consuming 700 degrees Fahrenheit.
This results in fewer pads driving an increased number of feet with fewer set changes, lowered downtime and potential injuries.
Current perception is that pads are merely a necessity and not a vehicle for cost and performance savings and subsequently ignored.
Competitors
CMI would be first-to-market with their curled metal pads and faced no direct competition with this product offering. However, CMI faced competition from the asbestos pads market.
Fortunately, there are no major players in the asbestos pads market. In fact, most pads are unbranded and are often thrown in free when other contracting supplies are purchased or rented, perhaps lowering any sort of product loyalty to asbestos pads on behalf of contractors. Hence, CMI is unlikely to face stiff competition from asbestos pads.
While CMI lacked direct competitors in curled metal pads, it is concerned about new entrants encroaching on this space as the product is easily replicable and raw materials readily available. CMI must factor this competitor response into the pricing decision (See Recommendation).
Customers
Based on industry sources, CMI estimates that approximately 13,000 pile hammers were owned by companies directly involved with pile driving, with another 6,500 to 13,000 being leased. Additionally, hammers are in operations 30 hours per week and 25 weeks per year, which equates to 750 hours per hammer per year. It was further assumed that most jobs average 20 feet of pile driving per hour. Hence, a range of 290M to 390M pile feet are driven annually.
Therefore, the potential market demand for pads could range between 174,000 to 234,000 per year. For example, 390M ft / 0.010M ft x 6 pads = 234,000 pads. (See Recommendation for market size in dollars).
Channels / Purchase Influencers
The first step CMI must take in successfully marketing its new pads is identifying the market players. The key industry constituents are pile manufacturers, architectural/consulting engineers, soil consultants, pile hammer distributing/renting companies, engineering/construction contractors, and independent pile-driving contractors. Each of these players has a key characteristic CMI must be aware of in order to tailor their marketing strategy.
Channels
Importance
PH manufacturers
High influential
Not a primary purchaser
Architectural engineers
Most influential
Not a primary purchaser
Soil consultants
Influential when use
Rarely used
PH distributing companies
Contractor contact point
Conflicting goals (rental time)
Contractors
A the primary buyers
Players are fragmented
Independent