Cmi

Discussion Questions for CMI:

1. What does the income statement reveal about CMI’s situation?

Income statement reveals that sales at CMI are decreasing while selling expenses are increasing. Net income and income per share are also decreasing. Basically, the company is regressing and something needs to change.

2. What business is CMI in?

CMI specializes in curled metal products. These products can be used as filtration media. They have also found new uses for this material including exhaust system seals and most recently, pile driving pads.

3. What’s your price for the curled metal pads? How does this relate to other elements of the marketing mix such as communications?

I would charge ~ $700 per 11.5” pad with a similar mark up for the larger pads. It seems like the break-even price when considering par use only will be somewhere between 175-400 dollars per pad. This would be the price at which the user would be no better off or worse off no matter which pad they used when looking at material cost only. However when looking at increased efficiencies, reduced labor, and less equipment wear, the curled metal pads seem like they could fetch a much higher premium. I would be leery of charging too much early on in the product launch however, because the industry is used to the asbestos pads, and you have to provide them with an above average deal to get them to switch from what they know.

4. How much do you think one of these pads is worth to a customer? Do the test data tell you anything about that?

I think these pads are worth at least $200 to the customer. Possibly as much as $1400. If the 2 test companies had used asbestos pads on the entire job they would have spent $1000 on the first job and $2000 on the second. The fist job would have required 6 curled metal pads. The second job would have required 5. They are worth more than just the equal cost of asbestos pads however because they are more efficient and cause less wear and damage to the equipment. Additionally they do not have any adverse health affects as the asbestos pads are starting to show.

5. How big is this market? Can you estimate a market potential? What are the dimensions of this opportunity?

There are between 19,500 and 26,000 pile drivers in operation per year. They operate 25 weeks per year for about 30 hours per week. Assuming 23,000 pile drivers, this equals 17,250,000 pile driving hours per year. These drivers penetrate at about 20 ft/hr, so we can estimate 345,000,000 feet per year. Initial estimates show we will get ~10,000 ft per set of pads. This would equal 34,500 sets per year. There are 6 pads per set, so this would be 207,000 pads per year. At minimum $200 per pad, this could be a 41 million dollar a year industry. Possibly as much as 290 million at $1400 per pad.