Alternative 1:

Since Hamiltons endorsement was not known to Dominion for almost a year,
company lost a valuable time to develop a new motor as per the new
specifications. Hence one of the alternatives considered by the Dominion is
reducing the price of DMCs 10-hp motor to that of 7.5-hp motor. This will make
sure that motor will satisfy the torque requirements of the new specifications
and since saving from using 7.5-hp motor of same torque were not large enough,
Dominion didnt expect any penalization from oil companies. Only thing
Dominion needs to decide in this option is to when should it reduce the prices
a) Reduce the prices immediately
b) Reduce the prices once formal report is disclosed by Hamilton
Pros
Increased market share
Quick way to meet the problem
No initial investment or technical changes
required

Con
Not a long term solution
Reduced profitability
Oil companies may not prefer as
they get motors of similar torque
with less hp

Useful temporary competitive measure till

they could obtain and completely study
Bridges test results
Horsepow
er

Manufacturi
ng Cost

Total
Cost

List
Price

7.5
10

663.51
816

714
907.8

1940
2550

Horsepower of
Installation
5
7.5

Price to
Large
Users
1202.8
1581

Sales &
Transpo
rt Costs
120.28
158.1

Profit
Margin
419.01
606.9

Monthly Base Charge per Horsepower

Monthly Total Charge Co

25
21.5

125
161.25