Running Head: SINGAPORE METALS LIMITED

Singapore Metals Limited

Name of the Writer

Name of the Institute

Date
Running Head: SINGAPORE METALS LIMITED

Executive Summary

Singapore Metals Limited (SML) should introduce its metal pad on the commercial basis,

and sales prices should be based on the pricing policy of the company and customer and industry

response overall. The SML shall diversify from the Slip seal and auto industry and shall enter

into the construction company.

Situation analysis

SML vice president of the Engineer department was considering introducing the new

product to diversify the range of product that SML offers. SML wishes to diversify its sales from

Slip seal and the automaker in this regard SML have introduced metal pad which will diversify

the SML into the construction industry and a new product.

By using SML metal pads, companies will save 16 minutes on time required for per set.

If 15 minutes of this labor are saved and the company is paying $20 to labor means companies

will save $5 per 15 minutes. This is a huge savings as the cost of conventional pad cost $120 per

set and total of 50 sets are required while same work can be done just for one pad
Running Head: SINGAPORE METALS LIMITED

SML situation can be further analyzed using SWOT analysis,

Strengths

 Company is operating since 1991; SML is operating since 1991 and have expertise in this

industry.

 Diversification, diversify into different industries will help SML to avoid reliance on one

source of income

Weakness

 New Investment, $150,000 will be required to setup new permanent tool

 Pricing, High pricing will lead to low demand

Opportunity

 New market, this is new market for SML and it can be explored by SML

 Innovative Product, there is no other product like SML pad so there will huge demand for

pad.

 Huge savings, construction companies saves huge amount of time and money by using

SML pads.

Threat
Running Head: SINGAPORE METALS LIMITED

 New Entrant, SML will face decreased revenue as new entrant will enter the market

 Change on hammer technology, construction technology change time to time if

technology changes.

Main problem and issue

The main problem with SML is their new metal pad market and pricing strategy; SML

has to consider the price of its pad, that should capture enough market share to make this project

viable and profitable for this purpose SML have allowed trial to two construction companies and

results were successful.

Running Head: SINGAPORE METALS LIMITED

What’s your price for the curled metal pads? Why?

SML requires an average of 45% profit margin on sales price, while selling prices will

vary accordingly pad size and cost will depends upon machinery whether it is produced with

existing machinery or new permanent tooling.

If existing machine is used, then the price of 30cm pad is determined (refer to exhibit 1)

$807.93 and $941.95 for 35cm, $1428.55 for 44cm,$16252.24 for 51 cm, $20205.27 for 58cm

and $3491.73 for 75 cm. While if same is producing using the new and permanent tools than

price will be $377.35 for 30cm, $494.84 for 35cm, $721.75 for 44cm,$896.51 for 51 cm ,

$1056.98 for 58cm and $1929.27 for 75 cm.

There is a significant difference in price due to fact existing machinery will have to modify in

order to produce pads and labor time be wasted while factory overheads also depend upon cost

of labor if there is more labor cost than factory overheads will also be more.

While in $150,000 new and permanent tools will overcome labor waste time and so overheads

will also be low as labor can work overtime without modifying the machinery as production cost

is reduced sop the selling price is also reduced thus SML can sell it in competitive manner.

How much are the pads worth to a customer? What do the test data indicate?

SML convinced the Allied Constructions to try its new pad, results was success by eliminating

downtime required for changeover and other advantages such as average temperature of SML

pad never went above 125 centigrade and SML product finish the work 33% more faster than

traditional methods which translate into increased savings for the Allied construction.
Running Head: SINGAPORE METALS LIMITED

Allied Construction has showed willingness to buy more pads for their project which can be a

driver of SML pad. After the successful result for Allied Construction, SML have asked

Welltech Engineering for the same for the comparison of the results. SML pas also worked for

the Welltech Engineering and results was positive thus all these factors combine crested pads

importance for the customers.

How big is the market? Is it a good opportunity for SML?

As there was no active market of the cushion pads, assumption are made in order to estimate

the size of overall industry. A report by industry trade magazine suggests that there are 13000

pile hammers that are owned by the companies in addition to this there are 7000 to 13000 other

hammers that were leased by the companies. An average of 20,000 to 26000 pile hammers could

be estimated in the industry. This hammer operates 30 hours per week and about 25 weeks in a

year’s assuming all.

If it is assumed that 75 to 100 million piles driven annually and curled metal pads installed

initially and replaced after every 2500 meters than the potential size of the industry will be

around 228,000 pads demand annually. Initially fours pad are required and if every pile hammer

used the metal pad than a total of 92000 pads will be required while after every 2500 drives pads

need to be the change so there would be another 136,000 pads will be required.

As there are different hammer sizes depends upon pile so the data cannot be divided among

Which size pad demand will be higher and which pad size demand will be lower.
Running Head: SINGAPORE METALS LIMITED

Does your price effect how much of the market you will get?

Yes prices will be affected which will depend upon how much SNL will capture the market, if

SNL quick capture the market and become a market leader than it can increase the price without

compromise the volume of the sale, while in opposite case if other companies came up with

better and cost effective product than SNL market share would also be compromised.

SNL should also keep in mind about the alternative that are used and its cost as compare to

pad, if the companies find it there is no value for money of using pas than volume of sales will

decline and hence price as well.

Is it more important to make profits or build market share?

Both are important on its own but as SML pad markets are new, and customer is unaware of the

product so priority is to build market share and later on profits can be made on the

product.

Who has to say “yes” before you sell a curled metal pad? Would any of these parties like to

see curled metal pads fail?

Every party which tried metal pad is willing to use it again and buy more from the SML because

it not only saves time but also cost as well, so there was no party identified which claim that

curled metal pad have failed.

How are you going to market these pads? Describe in detail the channel members,
Running Head: SINGAPORE METALS LIMITED

influencers and others and give us your plan.

Pads could be the market using different channels and date; SML can market its production with

support of positive results from the Allied construction and

Recommendation

After successful results of SML pad, SML can approach with commercial launch of the product

with pricing of its product that could be market penetration or skimming as there is no other

comparative product so market skimming pricing strategy will work for this product as product is

valued by the companies and save thousands of dollars.

Appexdix 1

Strengths Weakness
Industry expert New Investment
Diversified in will be required
different industries High price means
low sales valume

Opportunity Threat
New maket New Entrant
Innovative Product Chnage in Industry
Savings for users Dynamics
Running Head: SINGAPORE METALS LIMITED

Appendix 2

Exhibit 5 Two Sets of Projected

Manufacturing Costs (in
Singaporean Dollars)
30 cm 35 cm 44 cm 51 cm 58 cm 75 cm
Estimates per Pad with Existing Equipment
Variable
Material $46.92 $61.71 $95.43 $121.17 $159.48 $287.07
Labor 86.4 99.21 150.06 171.21 207.48 355.08
Total variable 133.32 160.92 245.49 292.38 366.96 642.15
Fixed factory overhead 311.04 357.15 540.21 616.35 746.94 1,278.30
@ 360% direct labor
Total manufacturing cost $444.36 $518.07 $785.70 $908.73 1,113.90 $1,920.45
Average Margin 45% $363.57 $423.88 $642.85 $743.51 $911.37 $1,571.28
Selling Price $807.93 $941.95 $1,428.55 $1,652.24 $2,025.27 $3,491.73

Estimated with Purchase of $150,000 of

Permanent Tooling

Variable $46.92 $61.71 $95.43 $121.17 $159.48 $287.07

Material
Labor 34.92 45.75 65.55 80.85 91.71 168.27
Total variable 81.84 107.46 160.98 202.02 251.19 455.34
Fixed factory overhead 125.7 164.7 235.98 291.06 330.15 605.76
@ 360% direct labor
Total manufacturing cost $207.54 $272.16 $396.96 $493.08 $581.34 1,061.10
Average Margin 45% $169.81 $222.68 $324.79 $403.43 $475.64 $868.17
$377.3 $494.8 $1,056.9 $1,929.2
Selling Price 5 4 $721.75 $896.51 8 7