Cumberland Metal Industries Essay

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Cumberland Metal Industries (CMI) should price their new cushioning pads at $900 to maximize profit. CMI should begin by targeting the customers that will find the greatest value in the product an pay the most. This allow the company to maximize unit contribution, and leave available options for dealing with future competition and sales challenges.

Customer
CMI estimates a potential customer base of 19,500 to 26,000 actively operating pile drivers in the United States. Currently the marketplace approaches cushion pads as an afterthought; pads are available for $2-$10 depending on size. The pads are produced by various local shops; CMI will be the first major industrial producer in the market.

The introduction of a new and more …show more content…
• Corelick used 480 asbestos pads to 6 CMI pads. The total cost of asbestos pads was $1000. Using this factor only, an equal cost for CMI pads would be $167
• Fazio used 650 asbestos pads to 5 CMI pads. The total cost of asbestos pads was $2000. Using this factor only, an equal cost for CMI pads would be $400
• CMI pads can be changed in 16 minutes less than asbestos pads and will last approx. 24 times as long. o At a cost of $238 per hour Corelick saved $1570.94 in changing costs [($79.34*19) + (63.48*1)] o At a cost of $238 per hour Fazio saved $1888.30 in changing costs [($79.34*23) + (63.48*1)]

Competition
CMI is currently not aware of any other companies bringing a similar product to the market. However, it is likely that a successful introduction of the product will lead to new entrants in the business. The product though somewhat revolutionary could be easily built by other metal works and the required materials are readily available in the marketplace. CMI has built their pads to conceal the key contents but this offers little protection form copycats and reverse engineering. The likely entrance of competition factors into the pricing decision. The initial price should allow the company to capture and adequate market share, if they are properly supplying and servicing customers, the customer is less likely to make a change. The ability to lower the price to combat competition and still maintain profitability is also an
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EXECUTIVE SUMMARY Cumberland Metal Industries is evaluating a new product that makes pile driving less costly and more efficient. The product is a cushion pad made from curled metal that prevents the shock of a hammer from damaging the hammer or the pile. Currently the industry uses asbestos pads and is the only form of competition the company faces. If adopted there is potential to sell 29,000 to 39,000 sets of pads (6 pads per set) annually. The most important issue CMI management faces is setting…

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