Situational Analysis
3Cs
Company
CMI was very sophisticated in producing products for highly-technical application.
CMI had experienced large and rapid growth since its operation of business.
CMI was the first company to innovate the curled metal cushion pad in the pile driving industry-CMI had first-mover advantage in the new market
The results of two tests (Colerick test and Fazio Construction test) had shown that CMI cushion pad was superior to asbestos pad in general performance (i.e. efficiency and speed). CMI cushion pad had longer-life time and was less hazardous because it did not contain asbestos. CMI cushion pad was chemically stable, it would not head up and could handle resiliency much better. - CMI cushion pad had the potential to boost up sales for CMI that a successful market introduction could as much as double the sales of CMI and also compensate for the decline of some existing lines.
Colerick Foundation Company was very interested in purchasing CMI cushion pad- CMI was urgent to make the pricing decision
Competition
Curled metal cushion pad represented a new product in a new market of the pile-driving industry. CMI faced no direct competition in the new market but faced competition from the asbestos pad market (considered as substitution) which means that CMI had to ‘steal’ the same group of consumers from the asbestos pad market and transferred them to be consumers in the new curled metal cushion pad market.
No major competitor dominated in the asbestos pad market. Most pads were unbranded and not being promoted.
Small 111/2 inch asbestos pad was sold for $2 to $3 each and large asbestos pad was sold for $5 to $10 each. This implied that Asbestos pads had low price while CMI cushion pads could be sold at price premium to tell its superior quality and performance price differentiation not competing on price but rather on product quality and performance
Although CMI faced no direct competition in the new market, threat from new entrants could be high if CMI successfully introduced the curled metal cushion pad in the new market because curled metal cushion pad could be imitated easily and the required materials were readily available in the marketplace. CMI had to take this into consideration when setting price. Getting patent? Or having rapid market penetration to make it hard for new entry to enter?
Customers
Market size
Estimated potential customer base was around 19,500 to 26,000 in U.S(approximately 13,000 pile hammers were owned by companies directly involved in pile driving and another 6,500 to 13,000 pile hammers were leased)
An average actual driving figure amounted to between 290 million and 390 million feet of piles driven annually.
Typically, asbestos pads were considered as the standard in the industry
Little attention had been given to cushion pads before CMI’s involvement and little attention had been given to the importance of pads to the pile-driving process by most of the industry. Consumers did not aware the cost-saving potential of cushion pad in the pile-driving process.
However, customers were becoming wary of the asbestos pads’ well-publicized health dangers (resiliency was easily destroyed; heat went up easily, lasted short-period of time requiring frequent replacement). Many had expressed a desire to use some other material and were pleased that the new pads contained no asbestos this indicated that CMI cushion pads had the potential to replace asbestos pad because it was safer to be used and it contained no asbestos but rather other metals.
Four groups of customers: Pile hammer manufacturers, pile hammer distributing/renting companies, engineering/construction contractors, and independent pile-driving contractors
Consumers
Primary buyer?
Level of purchase influence
Level of sophistication
1) Pile hammer manufacturers
No
High
High
2) Pile hammer distributing/renting companies
Yes
High
High
3)Engineering/Construction contractors
Yes
Medium-High
High
4) Independent
