GROUP NO.

: 42
Debpratim Sarkar | Sneha Kundapur | Naveen Chander Dhar | Saswati Nayak

B2B MARKETING
Dominion Motors Controls Ltd.

Problem Statement:
In what ways can DMC choose the right course of action to increase its

market share in the oil well pumping sector.

Introduction:
Dominion Motors & Controls, Ltd. (DMC), was one of the largest supplier of
motors and control equipment in the Canadian market and had acquired over
50% of the market for oil well pumping motors in the northern Canadian oil
fields.
Dominion offered a line of motors ranging from small fractional horsepower
(hp) units to large 2,000-horse power motors. The company also produced
motor control and panel-board units, which would automatically control and
protect a motor.
80% of the companys sales were made directly by company salespeople to
original equipment manufacturers (OEMs) and large industrial users, such as
oil companies, paper mills, and mining concerns. Nearly 20% of the sales
were made to distributors for resale, primarily to small users (small drilling
contractors and others) and small OEMs.
Dominion's competition consisted of other well-known Canadian motor
manufacturers and a number of foreign competitors particularly British,
German, and Japanese firms). All the Canadian manufacturers maintained
closely competitive pricing structures. Foreign competitors, however,
usually, old 10% to 20% below the Canadians' established prices.

Issues:
Power companies serving the oil fields came up with two announcements. First,
change of power rates to the graduated schedule based on connected horsepower
of an installation. Second, demand to stop over motoring by their customers and
improve power factors of their installations. Although the penalty for over
motoring was not declared.
John Bridges sought to define specifications of a motor so that it could be used
economically. Test were conducted and following were the observations:

(1) Fluid-lifting requirements dictated a 3- to 5-hp motor;

(2) Starting torques in excess of 70 pounds-feet would energize the pumping units
at temperatures as low as -50F;
(3) This starting torque requirement would necessitate a 7 -hp motor; and
(4) Because the Spartan 7 -hp motor had the highest starting torque of the motors

tested and the Universal 7 hp motor had the second-highest. Dominion's 7 -hp
motor would be the third choice.

Possible Solutions to the alternatives:

1. Reduce the price of DMCs 10-hp motor to that of 7-hp

Manufact
uring cost

Curre
nt
Futur
e

907.8
907.8

Sales and
Transport
ation cost

Sellin
Total g
Cost
Price Profit
1065.
158
8
1580 514.2
1027.
120
8
1200 172.2

The sales might go up but profits get reduced as seen in the above table.
2. Reengineer DMC's present 7 -hp motor to make its starting torque at
least equal to that of the Spartan 7 -hp unit
There are 2 ways to reengineer the 7 - hp motor:
i)
Increasing the torque by increasing the temperature
ii)
Increasing the torque by increasing the size of the motor frame
Although this will not increase the cost in terms of production but it will
exceed the NEMA standards.
3. Undertake design of a definite purpose motor for the oil well pumping
market. This ideally would be a basic 5-hp motor with the starting
torque of a 10-hp unit.
Horse
Power(hp)
5
7 1/2
10

Base rate/Horse
Power ($)

Monthly power base

rate ($)
25
125
21.5
161.25
20
200

5 hp motor:
Manufacturing cost= $511.53
Total cost= $571.2
Fixed cost= 571.2-511.53= $59.67
From the case, manufacturing cost of definite purpose motor= $665
Minimum selling price= $1045
Total cost= 1045-(1045*(.08+.02)-59.67-) = $880.83
Profit= $1045-$880.83= $164.17
Maximum selling price= $1200
Total cost= 1200-(1200*(.08+.02)-59.67) = $1020.33

Profit= $1200-$1020.33= $179.67

Therefore, selling the motor at $1200 proves to be profitable for the
company.
Choosing this alternative requires an investment of $75000,
As estimated there will be an addition of 1000 new wells every year.
Therefore, net profit from the sales will be 1000*179.67= $17967
Hence, this alternative can be chosen considering the amount of profit
generated.
4. Attempt to persuade Bridges and Hamilton executives
conclusions reached from their test results unduly emphasized
obtaining the maximum starting torque available.
There was a belief among DMCs management group that the conclusions of
Bridges were not accurate and hence should be rechecked. If the above is
true, it might lead to loss of customer base and fall in the profits.

Recommendations:
The price of the 10-hp motor can be reduced to that of 7 -hp motor but
there should also be the production of 5-hp motor with a torque of 10-hp to
compensate the fall in the profits due to the price reduction.