In the Dominion Motor Company case there was four alternatives the executive team came up with. We have decided that alternative four is the only way to manufacture precisely what the market needs. When choosing this alternative DMC will incur the energy costs of a 5-hp motor and will be able to deliver the same level of performance as a 10-hp. The price point for this alternative will fall below the 7.5-hp motor but the attractiveness of the total offering allows this motor to be priced above the 7.5-hp motor. This engine 's performance will exceed the NEMA specifications. The engineers at DMC are confident that this engine will give DMC a long term competitive advantage over its competition, this is because you can sell the motor at a greater
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If you go with alternative three the large users would be buying at $1,400 / 5-hp unit with a $665 manufacturing cost, this will make DMC an additional $200/unit in profit. The list price of this engine would be $2,250, strategically priced $400 dollars under a 10-hp engine while delivering the same amount of torque. To implement alternative 3 there is a $75,000 capital investment required for engineering and testing. After running a financial analysis on the price point we found that DMC can break even after selling 102 units. If DMC had ownership of 60% of the market they could sell 600 units over a one-year period. With profit profit margins at $736.49 and a break even point of 102 units projected profit for the next year will be approximately $366,772.02. If you want to look at projected profits for the next 5 years you can multiply the yearly profit by that number giving you …show more content…
This case took place early in 1985 and the peak season for engine sales happens to fall between the months of April and September. This would mean the newly designed engine would be completed in either April or May which would be perfect timing for a product release. This new engine also presents a unique opportunity for DMC, they can get involved early in Hamilton’s buying cycle and craft their motor specifically to Hamilton’s needs. This would counteract their original problem of getting involved to late in the cycle and needing to change their prices to stay competitive. With Hamilton satisfied with the new engine the rest of the market would surely follow their buying decision as proven in the past.
After our analysis we found that alternative three is the best option to achieve the largest profits. Alternative three will also help DMC increase its market share to 60% from the existing 50% market share it was commanding. Option three will also allow DMC to be able to retain Hamilton as a client which is more important than losing money in production. Ultimately it is crucial that DMC maintains and grows its market share as they cannot afford to lose any of their existing market
If you go with alternative three the large users would be buying at $1,400 / 5-hp unit with a $665 manufacturing cost, this will make DMC an additional $200/unit in profit. The list price of this engine would be $2,250, strategically priced $400 dollars under a 10-hp engine while delivering the same amount of torque. To implement alternative 3 there is a $75,000 capital investment required for engineering and testing. After running a financial analysis on the price point we found that DMC can break even after selling 102 units. If DMC had ownership of 60% of the market they could sell 600 units over a one-year period. With profit profit margins at $736.49 and a break even point of 102 units projected profit for the next year will be approximately $366,772.02. If you want to look at projected profits for the next 5 years you can multiply the yearly profit by that number giving you …show more content…
This case took place early in 1985 and the peak season for engine sales happens to fall between the months of April and September. This would mean the newly designed engine would be completed in either April or May which would be perfect timing for a product release. This new engine also presents a unique opportunity for DMC, they can get involved early in Hamilton’s buying cycle and craft their motor specifically to Hamilton’s needs. This would counteract their original problem of getting involved to late in the cycle and needing to change their prices to stay competitive. With Hamilton satisfied with the new engine the rest of the market would surely follow their buying decision as proven in the past.
After our analysis we found that alternative three is the best option to achieve the largest profits. Alternative three will also help DMC increase its market share to 60% from the existing 50% market share it was commanding. Option three will also allow DMC to be able to retain Hamilton as a client which is more important than losing money in production. Ultimately it is crucial that DMC maintains and grows its market share as they cannot afford to lose any of their existing market