Curled Metal Inc. is facing declining sales, but has created a new product (pile driver pads), which provide a strong value for CMI customers. J. Fernandez and R. Sanwal are responsible for defining an appropriate strategy for the new cushion pads. What should be the price for customers? Other issues, such as the market potential, are additionally discussed in the case study.
Benson P. Shapiro, Frank V. Cespedes
Harvard Business School (709434-PDF-ENG)
Oct 2, 2008 (Revision: Mar 14, 2011)
Case questions answered:
- What should a customer be willing to pay for one of Curled Metal Inc.’s new cushion pads? What factors are relevant in calculating the willingness to pay in this situation? Prepare a specific monetary estimate of customer value in this situation.
- What price should CMI set for one of its new cushion pads? Why? Please focus on an 11.5-inch cushion pad.
- On page 1 of the case, Curled Metal Incorporated’s vice president Joseph Fernandez says, “The way we price this could have a significant impact on everything else we do.” An integrated strategic option specifies the basic type of advantage a company will pursue (e.g., differentiation? low cost? other?), relevant decisions about customer and product scope, and key choices throughout the company’s value chain. Please prepare an integrated strategic option for CMI – an option that specifies your price but also specifies the many other choices facing Curled Metal Inc. in formulating a strategy for its new cushion pads (e.g., in marketing, sales, distribution, production, finance, and other functions).
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Case answers for Curled Metal Inc.
This case solution includes an Excel file with calculations.
What should a customer be willing to pay for one of Curled Metal Inc.’s new cushion pads? What factors are relevant in calculating the willingness to pay in this situation? Please prepare a specific monetary estimate of customer value in this situation.
When calculating the value of Curled Metal Inc.’s new cushion pads to the customers one has to take a variety of factors into account. These are the total costs per hour of pile driving, the saved costs for driving as well as the savings in changing time.
By calculating the total amount of money saved when applying the new pads, one can calculate the “real value” of the product.
One “real hour’s” worth of pile driving for Curled Metal Inc.’s new cushion pads is calculated as follows:
One real hour of pile driving for Curled Metal Inc.’s new cushion pads has a total cost of $714. We will use this number for further calculations.
Below I have calculated the total costs for driving time, replacing pads for both the Kendrick Foundation Company and Corey construction…