CMR Enterprises

Group 2

(Q1) What should CMR do about the Blackstone account?

Mikes Cabinet should stick with Blackstone Homes as it is their largest account and 25% in their residential
business
External
They should interact with Blackstone highlighting the importance of operational efficiency and ensure that Blackstone is
taking the required steps to fulfill all the requirements of customers
The new pricing model should be thoroughly discussed with Blackstone as changing the price without informing the main
account was a wrong step
Discuss with Blackstone the importance of coordinating the work of all subcontractors to avoid last minute changes, which
would be mutually beneficial
Beneficial for Blackstone: No delay from subcontractors
Beneficial for subcontractors: No extra cost
Internal

Train and mentor the project manager to update the Infocentral

Hire a Project Manager from the Industry who has experience in handling big accounts such as Blackstone
Focus on residential business as much as on commercial business
Align the business processes and tools of Infocentral to suit the residential business

(Q2) How much profit is being generated by CMRs commercial relative

to its residential business? By the Blackstone account?

(Q3) Was CMRs decision to initiate a relationship with Blackstone a

good one?
Initially

The Blackstone proposal looked good and it was a huge opportunity for CMS to expand into the residential
space
The initial concerns about the contribution margins of 38% as compared to 48% in commercial spaces were
brushed away
Since Blackstone was on a growth spree, this meant growth for CMR as well
They would provide with huge volumes of work
But later

Blackstone's reputation of being hard on their subcontractors was not taken into account
CMR should have hold onto its policies rather than just giving in to Blackstone. They shouldve spoken about
competition in the cabinet industry beforehand
The two companies were not a fit for each other
The industry was price sensitive especially for the residential work

(Q4) What is the nature of CMRs business? How does it differ across
the two market segments?
Custom architectural millwork industry
Low capital investment
Proprietary companies operating the business
Commercial

By the name of CMR Business

Very structured process
Involves bidding and contractorship
Due to low price negotiations, conversion ratio was just 20%
Deal with owner, architect and general contractor

Residential

By the name of Mikes cabinets

Residential carpentry: mainly cupboards cabinetry
Very less push strategy
Homeowners primary target
Operated on referrals and word of mouth

Long business cycles, with payment in the end

Commercial and residential space

(Q5) How did the CMR-Blackstone relationship evolve over time?

Highlight important events and actions that influenced this evolution
Who

Why

What

Blackstone Homes Residential Customer One

of the largest homebuilders
in the area market
positioning as best quality
for lowest pricing
3 subdivisions starter
homes ( $120,000) , family
homes ( $120,000$150,000) , luxury homes (
$150,000- $200,000)
Unique Strategy : Partner
closely with subcontractors
and permit homeowners to
make selections only from its
partner subcontractors

Strategically aligned and

great fit
Residential market seemed
great opportunity for a
scalable , replicable business
model
Aligning with one of the
biggest customers of the
area resulting in direct
increase in market share
Standardize processes into
flexible cells
Blackstone ready to pay full
price

Blackstone agreed to specify

only CMRs cabinets in its
homes and CMR to assign
the project manager who
had worked on previous
projects to work exclusively
with Blackstone

(Q5) How did the CMR-Blackstone relationship evolve over time?

Highlight important events and actions that influenced this evolution

YEAR 1

Blackstone directed all its customers to CMR and contributed to 25% of the
residential business
At times changes were made by Blackstone and homeowners last moments but
no information was updated in the project management system

YEAR 2

Two parties sat for discussion on pricing as Blackstone President asked Marcus
to reduce prices on account of increased operational efficiency which Marcus
felt they hadnt achieved
Companies agreed on cost reduction by limiting CMRs interaction with the
homeowners
However their attempt towards cost reduction did not work
Coordination problems were cropping up and often there were conflicts
regarding who pays for the mistakes
Other contactors started calling CMR instead of Blackstone to get drawings

(Q5) How did the CMR-Blackstone relationship evolve over time?

Highlight important events and actions that influenced this evolution

Problems
Blackstone homeowners were directly working with other subcontractors
Project co-ordination problems
Marcus was concerned about asymmetry of information and recommended Info
Central for all future orders which was not taken well due to standardization issues
Differences between estimated and actual cost of each project for CMR
Contribution margins were 38% of sales in residential as opposed to 48% for
commercial
CMR raised prices by 7% and corrected prices for some individual items that were
mispriced that made Blackstone feel betrayed
Change in orders were last moment and not updated in the system causing a lot of
unpaid orders for CMR

(Q6) Why did CMR persist in the Blackstone relationship? How

would you remedy such a situation
Reasons for persisting in the relationship:

Blackstone had approached CMR due to its reputation in the community and good experiences
Volume was compelling, seemed like a strategic fit
Biggest customer in the area huge opportunity for immediate market share
High growth plan
Steady revenues 25% of their business comes from Blackstone
Biggest account so far
Can play a major role in reaching the target sale of $70 million by 2007

Remedies for such a situation:

Greater involvement with Blackstone in terms of issues faced by them from the customers
Flow of information between CMR & Blackstone to be reworked
Updating the Info Central for all internal communications by the residential team
For easy analysis of customers and funds coming from customers
Explain the reasons & need for an increase in price by CMR