Dominion Motors & Controls, Ltd.

1) The problem: DMC s potential loss of significant market share in the near and long term, of oil well pumping motors if DMC doesn t respond quickly and effectively to the expected change in motor specs for the industry.

2) Causes of the problem: Hearsay concerning a study by the trend setting buyer in the market, which, if true, will promote the motors of DMC competitors and relegate DMC to third choice in the oil pumping market.

Also DMC s perceived late discovery of the study. (Other manufacturers don t seem to know so DMC may still be ahead of the others in information, but their machine is 3rd choice so timely information is more critical to DMC)

3) Is this a brush fire or an important problem?

1000 wells per year over the next 5 years (possibly more) DMC has ~51%=510. per year=2550 over 5yrs ( plus whatever replacements) 510/yr @$1200=$612000.yr

(1200.= price of 7 hp which is 3rd in torque but above 70pf or the price of the 10hp reduces to the 71/2hp price)

(Potential $loss if reduce price = 94962.yr but losing market would be a bigger problem.)

612,000/85,000,000= .0072% (~3/4 of 1% of revenues in 1-200hp market { what % is 5-10hp sales?})

If DMC loses Hamilton, other than lost dollars, which doesn t seem to be significant, DMC could lose brand image and reputation as a result of being downgraded in the industry. This could be worse than lost dollars. In addition it could lose the industry by losing the leader of the industry. Although this market is a small slice of DMC s revenues, one cannot afford to easily lose market share. In addition, this could have spill over affects in its other markets when it circulates that DMC was a failure in one market.

In the end I would say it s an important problem not for the immediate dollars, but for the future dollars that could be lost with a tarnished image as well as losing market share.

4) The profit impact of each of the four alternatives:

(i) Lower price: $384 per unit or mark up of 47% vs $764. per unit or mark up of 94% (not really a markup, fixed costs not included).

(ii) a) Re-engineer 71/2hp for higher torque mfg cost of $790. would be $410. per unit or a mark up of 52%.

b) Use a larger motor frame mfg cost $867. would be $333. per unit or 38% mark up (iii) Design a definite purpose motor mfg cost $665. SP $1045. (or more): $380 per unit or 57% mark up (how does the $75000. investment factor in?) 4 or 5 month to market mean they will miss most (if not all) of this years sales and it could have residual impact in loss of repeat business.

(iv) The impact of attempting to persuade Bridges and Hamilton Oil that another set of conclusions could be drawn from the test results is unpredictable. Hamilton could be alienated by feeling challenged or suspected of weak analysis and it could negatively impact DMC s market share. Hamilton could be persuaded and it could be a neutral affect (although in his scenario, Bridges could be offended and that could have some negative impact).

5) Key advantages and disadvantages of each alternative:

Reduce price can give a competitive edge; maintain or increase market share. It could diminish revenue; it is overmotoring which is against the new standards.

Re-engineering would provide what the market wanted and thus hold market share. It could diminish revenue. It could invite a torque war which could cause confusion in the industry and possibly encourage the oil companies the look for innovative ways to avoid the confused market. This could hurt the entire industry. This alternative is also 3 months from market.

A definite purpose motor could capture an even larger share of the market. It could possibly dominate the market. It would be usable in one market and changes in the industry could render it obsolete. It can t be easily transferred to other uses. There is an investment of $75000. And it s 4 to 5 months from market.

Persuade Hamilton of another interpretation of the study results: Hamilton could be persuaded and the non-affect is a positive for DMC. Hamilton could be alienated and that could hurt DMC

6) What should DMC s program be for this season?

I think DMC should reduce the price of the 10hp to after the results are announced or if others started to react to the impending release of the study results. It could be suspicious if DMC reduce price suddenly with no clear reason. The lower price allows DMC to go to market immediately and fight for its market share. It s motor qualifies under the study criteria so DMC should also get the word out that their regular machine qualifies under the study criteria and has less risk of breaking a pump in extreme cold weather.

7) What is the major marketing challenge here?

The marketing challenge is to maintain or grow market share (i.e. not lose share), while the industry leaders promote your competitors. How to maintain your leadership in the market. The challenge also is getting good reliable information on the changes in the market.

8) What should DMC s marketing strategy be?

DMC s strategy should be to hold the market share now with a lower price on the 10hp (there are no penalties announced on over motoring.), while developing a definite purpose motor to dominate the market. In addition, DMC should consider the feasibility of doing similar studies to predict or define the needs of the market place.

It doesn t seem to be a huge expense for this $323m. Company to develop the product that the industry needs.