DOMINION MOTORS & CONTROLS LTD

1. IDENTIFICATION OF THE PROBLEM:

In 1984, Dominion Motors was supplying to more than 50% of the available market
for oil well pumping motors in northern Canada. Currently, John Bridges, person-in-
charge of motor testing program in Hamilton is in the process of publishing a report in
which Dominion’s motors are third in line in terms of recommended motors, tested on
the basis of maximum starting torque required to pump at low temperatures and the
horsepower required to lift the fluid. Hamilton is the largest oil company in Canada and
Bridges being a credible expert in the field of electrical motors, claims made by Bridges
will be highly regarded. Considering the third position after Spartan Motor and Universal
Motors, Dominion executives are expecting a sharp decline in their sales in the once the
report reaches the industry. Thus, the core problem is how to combat the negative effects
as a result of the report given by Bridges. Any solution offered should be in compliance
with NEMA standards.
2. ANALYSIS OF THE SITUATION:
According to industry experts, an average of 1000 wells per year would become active
in the next five years The company has four alternatives to go forward with and each has
been evaluated below.
2.1. ALTERNATIVE 1: Reduce the price of DMCs 10HP to that of 7 1/2HP motor. The
only advantage of this option is that it can be immediately implemented but requires a
decrease in price which might send a negative signal in the industry, along with an
obvious decrease in profit. However, this is a short term solution. As of now, companies
are not penalized for using low power factor motors but it may be enforced at a later
stage.
2.2 ALTERNATIVE 2: Re-engineer DMC’s present 7 1/2HP motor to make its starting
torque at least equal to that of the Spartan 7 ½ unit. This option would allow Dominion’s
motor to gain more credibility as per the criteria in Bridge’s report but would violate the
NEMA standards. The first method involves increasing the starting torque with increase
in temperature which violates the temperature standards, which is also a safety concern.
The second method of increasing torque by increasing frame size violates the frame size
standards, which would lead to torque wars in the industry. Adhering to NEMA standards
is an option but this is necessary as the perception of the buyer will be influenced by this.
2.3. ALTERNATIVE 3: A definite purpose 5HP Motor with starting torque of 10HP
motor. This option will allow Dominion to charge the customers a higher price than
Rs.1045 but ideally lesser than Rs.1200. It will also enable the company to capture 60%
of the market. In this option, an investment of Rs. 75,000 is needed and it is difficult to
justify small productions. This motor will only be ready after 4-5months for production.
2.4. ALTERNATIVE 4: Persuade Bridges and Hamilton’s executives to re-consider the
results. If this option is pursued and Dominion is successful in its attempt, then no new
investment has to be made, no discounts to be given and no other changes to be made.
There is a high probability that they will not succeed and Dominion will lose out on their
sales in future.
3. RECOMMENDATION:
After evaluation of all four options, we have come to a decision of investing in a
definite purpose 5HP motor with starting torque of 10HP (Option3).
While the 5HP motor is being developed, we shall engage in talks with Bridges to
convince him that Dominion’s motors are general purpose while his tests are for
definite purpose motors (Option4).
As an additional request, Bridges would be asked to test the new 5HP and include it in
his report.