Dominion Motors and

Controls
Group B3 - 2012
Aditi Sholapurkar
Aditya Kumar M.
Ankit Bhageria
Inshul Sahni
Vignesh Mani
Yatin Kamat

Situation analysis
Dominion Motors & Controls
Excellent reputation for product quality
50 % share in oil well pumping motors in north Canadian oil fields
Good sales force

Period: 1973 1984

Foreign companies pricing product at lower rate

Selling motor and control unit as a package
Limited advertising value Single Publication approach
80 % of motors sold for oil well pumping applications are 10-HP motors

Change in policies
1. Graduated schedule based on connected horsepower
2. Improve power factor of installation

Report by Bridges
. Only starting torque considered; Other attributes not given due attention

Evaluation of Alternatives
1. Reduce price of DMCs 10 hp motor to that of a 7.5 hp motor

PROS

CONS

No penalty for violation of power

factor of firms installations

Willingness of consumers to adopt

to new method will be low given
limited long-term benefits and
upcoming regulations

Opportunity to exhaust the

inventory

Cannibalization of existing
products
Large firms are generally not
price sensitive
Cascading effect on price of 5 hp
and 7.5 hp motors

Evaluation of alternatives
2 (a). Re-engineer DMCs present 7.5 hp motor to make starting torque
>= Spartan 7.5 hp motor by modifying existing internal motor
components
Pros
Cons
No additional investment in plant
and equipment required

Operating temperature exceeds

NEMA standards

Frame size retained; No site

modification required

No guarantee of acceptability of
new product
Additional costs incurred while
moving through product life cycle
Advertising
High manufacturing (variable) costs
as compared to alternative 3
Compatibility with existing panels;
Increased starting torque leads to
increased starting current

Evaluation of alternatives
2 (b). Re-engineer DMCs present 7.5 hp motor to make starting torque
>= Spartan 7.5 hp motor by using a larger motor frame
Pros

Cons

Quicker response to Bridges report

Frame size changed; Ensuing

modification in site of existing users

No additional investment in plant

and equipment required

No guarantee of acceptability of
new product
Additional costs incurred while
moving through product life cycle
Advertising
High manufacturing (variable) costs
as compared to alternative 3
Compatibility with existing panels;
Increased starting torque leads to
increased starting current

Evaluation of alternatives
3. Designing basic 5 hp motor with starting torque of 10 hp motor

Pros

Cons

Exceeds minimum NEMA

specifications

Time lag in response = 2 3

months

Cost advantage Least variable

manufacturing cost

Late market entry

No operational issues because of

new design

Inherent consumer preference for

general-purpose motor

Increased consumer preference lower monthly base charge per

motor
At a decreased contribution of 359.2 per unit, the Break Even quantity
is a mere 209 units. As the Canadian oil well market adds 1000 new
wells every year for next 5 years, the BEP can be achieved quickly.
The new motor will also increase DMCs share of oil well pumping

Evaluation of Alternatives
4. Convince Mr. Bridges to re-consider his conclusions

PROS

CONS

Continue existing processes with

no change or overhead costs

Unprofessional behavior on part

of DMC to approach Hamilton for
a pro-active re-consideration

Set a precedent by challenging

the assumptions, as such tests
may increase over time

It may lead to the creation of illwill with Mr. Bridges

Additional costs of hiring and
man-power to account for such
tests in the future

Cost Comparisons
ASSUMPTIONS
In each alternative, the new/revised product only replaces the existing 10
hp motor
The total sale-units of motors is assumed to be X
The cost of advertising and other promotional expenses is assumed to be
negligible
Cascading effect of a price change on 7.5 hp motor on other motors is
1. ignored
Reducefor
Price
2. Re-engineer
3. Re-design
4. Re-consider
comparison
purposes
For large users,
For 2(a), reduced Total Fixed cost is Cost for hiring
Profit reduced by profit is
$75000
and recruitment
380 * 0.8x
130 * x
will affect profits
For medium
users, profit
reduced by
457 * 0.2 x

For 2(b), reduced

profit is
204 * x

Total reduction in
variable profit is
155 * x

Total profit
reduction 396x

Max Profit
Total profit
reduction is 204x reduction
75000 + 155x

Difficult to
estimate exact
costs

recommendation
It is recommended that DMC undertake
design of a definite purpose motor for the oil
well pumping market 5hp motor with a
starting torque of 10 hp unit (Alternative 3)