Dominion Motors and Controls Ltd.

– Case Analysis

By- Group 5

(Dhiraj Agarwal, Akshay Sharma, Harish Vijayan, Soumitra Dubey,

Kapil Khatter, Shreyas Gupta, Hiteswara T.)

Submitted To-
Dr. K. Abdul Waheed
Defining the problem:

The given case study is on Dominion Motors and Controls Ltd, the topmost engine manufacturer in
Canada. The company is known for offering a myriad of motors for oil well pumping industry. The
company is in danger of losing its current market share in the mine pumping engines, according to
the field test conducted by Hamilton a major client of theirs. Hamilton having experienced several
competing brands engine ranked DMC to be the third amongst its competitors. The case revolves
around the issues looked by their executives regarding the company’s response. The focal issue,
which was to be taken care of by the company was:

“To respond to the result of the test thereby suggesting a proper solution in order for the company to retain its
position as the leader in the oil well pumping market.”

Dominion Motors Company as said, was the third choice, only after Spartan Motors Ltd, and the
Universal Motor Company that Bridge would recommend to Hamilton’s executives. If Hamilton
decides to choose another company other than Dominion Motors, DMC would lose a huge market
share in the region because Hamilton owned and operated more than 30% of the total production
wells in the area.

Formulating the alternatives:

 Reduce the price on 10-hp motors - Many executives proposed reducing the price of DMC's
10-hp motor to the level of its 7 1⁄2-hp unit. It would not be a long-run solution. However, that
a 10-hp motor could continue to be acceptable for the short run because the savings from using
a 71⁄2-hp instead of a 10-hp motor were not large and because no oil company had yet been
penalized for maintaining low power factors. Some executives maintained that until Bridges
has delivered his final report the sales of motors will remain unaffected, Dominion should
continue selling its 10-hp motor at the usual price.

The proponents of this alternative thought that the price cut would Hamilton's endorsement of
the Spartan motor. It can be a temporary measure post which the DMC can reach a more
satisfactory and reasoned strategy decision.

 Redesign existing 7.5 hp-motors - Many executives proposed to redesign their existing 7 ½HP
motor to provide them with starting torque equivalent to or even greater than Spartan 7 ½ HP
motor. The executives proposed 2 ways to achieve this. First, modifying the internal motor
components, keeping the size of the frame constant and allowing the temperatures to rise above
the standard motors.

Second, using a larger motor frame which would meet all the required NEMA’s minimum
standard except NEMA mounting dimension.
 Generate a definite-purpose motor - DMC’s executives also proposed making designing a
definite purpose motor for the oil well pumping market. A 5- hp motor with a starting torque of
a 10- hp motor and will exceed minimum NEMA specifications. This will allow the oil
companies to get high starting torque without over motoring. DMC motor could increase the
company’s share by 60%.The development of the motor required an investment of $75,000,
further, it would take 4-5 months for production to begin.

 Persuade Bridges and Hamilton executives - Several members of management group believed
they should attempt to convince Bridges and Hamilton managers that the findings achieved
from their test outcomes unduly stressed the maximum accessible starting torque. Since some
DMC managers have a social relationship with Hamilton's Vice President, it is quite feasible to
persuade them to re-evaluate the test on the basis of inaccuracy and over-emphasis on the
starting torque element. But there was a risk of Bridges stiff and proud behavior which could
develop an ill will if there’s any alter in Bridges recommendation.

Analyzing the alternatives:

1. Reduce the price on 10-hp motors - DMC would reduce the price of 10-hp motor to that of the
7.5 HP motor. The executives believed it would make DMC competitive with other two
companies. This could give DMC time to reach a satisfactory and reasoned strategic decision.

PROS: Lower price for 10-hp motors could attracted Hamilton to switch to DMC since most of
the oil companies were using the 10-hp motors to lift the oil to the surface. Competitive
pricing of higher powered motor is a quick initial method to stay competitive. The savings
from using 7.5 hp motor instead of 10 hp motor were not significantly different.
CONS: “Over motoring” become an issue to Hamilton to re-concern if they should continue using
the 10-hp motors. If the Hamilton is subject to penalty by using the large capacity motors
that they are not required, Hamilton would go for the smaller motor no matter much the
10-hp go to be.

2. Redesign existing 7.5 hp-motors - DMC would redesign the present 7.5 hp motor that would
make the motor specifications comparable to the motor that Spartan is producing.

PROS: Reengineer the present 7.5 hp motor allows DMC to compete with Spartan. Hamilton‘s
report is based on starting torque od the motor, this will give DMC a fighting chance
against Spartan.
CONS: Redesigning present 7.5 hp motor could not be cost effective. The cost on reengineering
could be a lot expensive than keeping the existing model. It might also take certain length
of time that Hamilton would switch to other company before the new model comes out.
Increasing the torque of the current motor makes the temperature rise greater than NEMA
staandards.

3. Generate a definite-purpose motor - Generate a definite-purpose motor for oil well pumping
market. The new design would give the basic 5-hp motor with 10-hp unit torque.

PROS: Specialize on the definite-purpose motor to meet Hamilton requires can increase the chance
for DMC to earn the contact. Definite-purpose motor also helps DMC to develop brand new
market segmentation on oil well pumping industry. Only Minor investment is needed for
plant and equipment for the new motor.
CONS: The market size in Canadian motor industry is a lot smaller than in the U.S. that makes
special-purpose motor economically inefficient, and more expensive than the imported
motors.

4. Persuade Hamilton executives - Attempt to convince Hamilton executives to believe the

conclusion of the test result unduly emphasized obtaining the maximum starting torque motor
available.

PROS: The executives on Hamilton would reconsider the test result and possible to perform another
test on the maximum starting torque motor.

CONS: The action will give Hamilton’s executives a wrong impaction that DMC is questioning their
professional on the program. The act might angry Hamilton not to do business with DMC at
all.

Recommendations: The recommendations will help the customers of DMC to avoid the fine for over
motoring. It would be the ideal solution since it addresses the need of a superior product in terms of horse power
as well as torque requirement as per the requirements in perspective of industry standards. Definite- purpose
motor would also help DMC to develop brand new market segmentation on oil well pumping industry. But on the
contrary other industries could also demand similar customized products in the future. DMC has a possibility of
winning most of the total purchase order by Hamilton which accounts for 30% of the total oil well pumping
motor market, by giving credibility and appreciation to the research of their engineers, along with the first
mover’s advantage. Although as per the case facts, the market on definite-purpose motor is very small in the
region that will be difficult to determine if the future return on the initial investment will pay back.

Short-term plan: Reduce the price of DMC's 10-hp motor to that of the 7 (1⁄2)-hp motor.

Reducing the price of DMC's 10-hp motor to the level of its 7(1⁄2)-hp unit was advocated by
several executives as a quick initial way to meet the problem. Such a move can be taken either
immediately or as late as May 1985. The executives pointed out that the oil well motor market was
rapidly becoming active after its usual winter slump and that if the company wanted to share in the
1985 sales, DMC must gain a competitive position immediately. This would not be a long-run
solution, but a suitable temporary option to go for, until the company comes up with a long-term
plan.

Long-term plan: Design a definite-purpose motor for the oil well pumping market.

The ideal design would be a basic 5-hp motor with the starting torque of a 10-hp unit. Most of the
executives felt this was the only way to regain effective product leadership. The Hamilton tests,
they pointed out, indicated that the specific motor desired would have the running characteristics
and rating of a 5-hp unit but the starting torque of a 10-hp motor. This motor would exceed
minimum NEMA specifications. Such a unit will have unquestioned competitive superiority in the
market. Preliminary examination indicated that the motor could be produced at a manufacturing
cost of approximately $665 which is comparatively much lower than reengineering DMC's present
7(1⁄2)-hp motor to make its starting torque at least equal to that of the Spartan 7(1⁄2)-hp unit, that
would incur a manufacturing cost of $790 to produce this motor.

Such a motor can be successfully sold at a net price of $1,045 to large users, and can be priced
close to the 5-hp general-purpose motor because it was actually a 5-hp motor. Also, it can be
priced below the 7(1⁄2)-hp general-purpose motor to give DMC a price advantage over the
competition's 7(1⁄2)-hp motors.

Specifying the plan of action:

It should reconsider the price of DMC’s 10 hp motor and reduce it to the level of its 7(1/2)-hp unit
as it is the initial way to meet the problem. This would help them gain back their position in the
market to some extent. In meanwhile, DMC will have sufficient time to reach a strategic decision.
The next thing is to generate a new motor which helps DMC to develop brand new market
segmentation in oil well pumping industry. The ideal design would be a 5-hp motor with starting
torque of a 10-hp unit which may take 4 months to launch. They should launch the new product
with appropriate positioning compared to the competitors. These are the steps which has to be
taken by DMC in order to position themselves as a leading oil well pumping motors in the country.

Contingency Plans:
There are some possibilities of things going wrong. DMC should be ready with the contingency
plan. They should modify the existing 7(1/2)-hp motor so that is gives a starting torque equal to or
greater than that of spartan 7(1/2)-hp motor. This can be done by two ways.

 Modifying the existing 7(1/2)-hp internal motor components which would have the same frame
size as the existing motor.
 They could use a large motor frame which will meet or exceed all NEMA’s minimum standard
performance specifications.

Both the above mentioned methods would involve their respective additional investment in plant or
equipment and it even takes time to begin shipment of the modified motor. This can be the
contingency plan followed by DMC.