Curled Metal Inc.

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Case Discussion
Submitted By : Harshit Dixit, E022 Anshika Garg, E025 Prerna Gaur, E026

Navodita Singh, Dhaval Thacker, E064 Shreya Shroff, H055 Rujuta,

Case Overview

 Conventional cushion pads came from unbranded

 Outside vendors supply the raw material sources and are heavily overlooked by the
 Curled Metal Inc. flattens and curls material for industry.
cushion pads  CMI cushion pads
 Contractors use cushion pads to drive piles  Incorporate Slip Seal.
 Piles provide support for large structures  Stretchable
 Cushion Pads transmit energy from hammer to  10x longer life
pile, prevent shock of hammer, prevent air from
 Extremely safe for workers (just use hand gloves)
seeping in between striker plate and ram
 Faster replacement
Purchasing Influencers

 Pile Hammer Manufacturers  Engineering / Construction Contractors

 Architectural / Consulting Engineers  Independent Pile-Driving Contractors
 Soil Consultants  Professor Stephen McCormack of Pennsylvania
 Pile / Hammer Distributing / Renting Companies A&M University
Ques 1: What should a customer be willing to pay for one of Curled Metal Incorporated’s
(CMI) new cushion pads? What factors are relevant in calculating willingness to pay in this
situation? Please come to class with a specific monetary estimate of customer value in this
situation.

Willingness to Pay & Customer Value

Factors
Company Willingness to Pay Value
• Cost Savings Kendricks Foundation 500 25562.4
Corey Company 1200 28562.4
• Durability
• After Sale Support and
Service
• Replacement Time
Microsoft Excel
Worksheet
Ques 2: What price should CMI set for one of its new cushion pads? Why? (focus on an 11.5-
inch cushion pad)

    Kendrick Foundation Corey Construction

Description Units Conventional Cushion Conventional Cushion
Piles Number 300 300 300 300
Feet /Pile Feet 50 50 40 40
Total Feet Feet 15000 15000 12000 12000
Cost of Equipment in $ Feet Driven/ Hour Feet 150 200 160 200
(from Table A) Number of hours Hrs 100 75 75 60
Cost / Hour $ 714 714 714 714
Diesel Hammer 102 Total Cost $ 71400 53550 53550 42840
Crane 156 Time for change / set Mins 20 4 20 4
Leads 24 Number of set changes Number 20 1 50 1
Labor 132 Total time (in mins) Mins 400 4 1000 4
Overhead 300 Total time (in hours) Hrs 6.67 0.07 16.67 0.07
Cost for change time $ 4760 47.6 11900 47.6
Total Cost/ Real
Hour 714 Cost per set $ 150   120  
Number of sets Number 20 1 50 1
Total Cost/ Job $ 76160 53597.6 65450 42887.6
Cost saving for customer / job     22562.4   22562.4
Cost Saving / Pad     3760.4   4512.48
Ques 2: What price should CMI set for one of its new cushion pads? Why? (focus on an 11.5-
inch cushion pad)

With Existing Equipment Cost (in $)

Total variable cost 133.32
Fixed factory overhead 311.04
Better performance due to time saving
• Using value based Total manufacturing cost 444.36
• Feet driven per hour with CMI pads is more pricing, we will provide Distributor margin 35%
• Time required to change each set is lower for CMI pads a significant value to our Corporate margin 50%
customers and price it Selling Price = 444.36 + .35SP + .5SP =
Safety of workers 2962.4
at $41,250 for 250
cushion pads, taking the
• Workers have to handle conventional pads at 600-700F, selling price to Purchase Permanent Cost (in $)
whereas CMI pads heat only up to 250F $165/pad Tooling
Total variable cost 81.84
More set life than conventional pads
Fixed factory overhead 125.70
Depreciation (10 year 5
period* 12*250 per year)
• At present, the savings represented by CMI’s pads average out to about $3540 Total manufacturing cost 212.54
• Taking into account the value derived, this is the maximum price we can charge to our Distributor margin 35%
customers
Corporate margin 50%
• Any charge below this represents savings to the customer
Selling Price = 212.54 + .35SP + .5SP =
Ques 3: How big is the potential market for this product, and what should be
CMI’s strategic and marketing objectives in introducing this product?

Parameters Conservative Optimistic

Number of Pile Hammers (Owned + 13000+6500 =19500 13000+13000=26000
Leased)

Number of operating hours/year 30 hours per week*25 weeks per 30 hours per week*25 weeks per
year = 750 year = 750
Number of feet per hour 20 20
Feet of piles driven annually 20*750*19500 = 292500000 26000*20*750= 390000000
Size of the market in sets 29250000/10000 = 29250 sets 390000000/10000 = 39000 sets
Size of the market in pads 29250*6 = 175500 39000*6 = 234000
Total Market Value in Dollars 165*175500 = 28957500 165*234000 = 38610000
Ques 3: How big is the potential market for this product, and what should be
CMI’s strategic and marketing objectives in introducing this product?

Strategic Objectives Marketing Objectives

• Decision over existing capacity versus new • Use influencers: pile Hammer manufacturer,
machinery architectural engineers) and other important
• Controlling cushion pads distribution references (Oklahoma contractor / Pile talk /
• Filing for a patent to protect their intellectual Professor Stephen McCormack)
property • Branding to gain market share over competitor
products
• Differentiation of the product and premium
pricing due to added benefits
Ques 4: Develop an integrated strategic option for CMI—an option that specifies your price
but also specifies the many other choices facing CMI in formulating a strategy for its new
cushion pads (e.g., in marketing, sales, distribution, production, finance, and other functions)

After Sales
Production Marketing Sales Distribution Finance
Service

Marketing:
• Type of content: Make the buyer understand the value of the product in terms of time and cost savings
• Type of marketing: Word of mouth via architectural engineers, soil consultants, renting companies and
construction contractors
• Renting Companies: Value creation for them as customers will be happy and they will come repeatedly, hence long
term relations
• Marketing Tools: Direct mailers, pile driving and construction magazines and promotional video campaigns to gain
confidence of influencers
Ques 4: Develop an integrated strategic option for CMI—an option that specifies your price
but also specifies the many other choices facing CMI in formulating a strategy for its new
cushion pads (e.g., in marketing, sales, distribution, production, finance, and other functions)

Sales & Distribution:

• Direct Sales Team for the initial years till break even is achieved and customers are aware of the product and value
created by it
• Account Managers for larger engineering and construction contractors
• Solution Service Providers for pile hammer distributors and renting companies and pile manufacturers
• The SSPs can be given targets geographically
• Future Plan: Once the product is commoditized, can be sold via hammer sales outlets and construction supply outlets

Positioning
• Comparatively overall low TCO
• Highly efficient as energy usage is better and its not wasted as heat
• Ease of use because it supports changeover at lower temperatures
• Time saving as it entails reduced time for changeover
• Value creation for contractors giving them happy customers and long term relations
• Overall safe and higher savings
Ques 4: Develop an integrated strategic option for CMI—an option that specifies your price
but also specifies the many other choices facing CMI in formulating a strategy for its new
cushion pads (e.g., in marketing, sales, distribution, production, finance, and other functions)

Finance:
• Plough back profits after taxes for new business development
• Give increased dividends once sales increase and break even is achieved

After Sales Service:

• Can be done via service centres in hammer sales and construction supply outlets
• Overhead costs for after sales service will increase greatly if handled in house
• Third parties to be provided a fee for the services provided
Production:
• Produce using permanent tooling and buy additional equipment for a capacity of 5,700 units annually
• 14.5 million feet (5% of total feet drilled in a year)
• 1450 sets
• 8700 pads
• Manu cost per pad (existing)= (8700 x 133.32) + (311.04 x 3000)+ (225,000 x 2) + (5700 x 81.84) = 30,09,492
• Manu cost per pad (per tool)= (8700 x 81.84) + (125.7 x 3000) + (225,000 x 3) + (570 x 81.84)= 18,10,757