Cmr Enterprises Case

Market Analysis

Architectural millwork companies competed in both residential and commercial construction markets. For residential markets which estimated a $4.8B market in the United States in 1996, they provided custom cabinets and millwork including kitchen and bathroom cabinetry. Whereas the largest commercial market was for retail store fixtures and commercial projects split evenly between new construction and remodeling. Estimates of market size varied widely upwards of $5B in the United States in 1996.

Company Analysis

HBS graduate Sam Marcus along with experienced investor William Walters tried to find out an investing opportunity with good cash flow in an ‘B’ industry. Finally they saw the chance of market growth potential in Mike’s cabinet and purchased 25 year old small cabinet-making company from its founder in June 1997 and renamed in CMR Enterprises. Mike’s Cabinet was one of 1,500 mostly small companies that made up the custom architectural millwork industry, which produced custom installed woodwork, cabinetry, and furnishings for businesses and high-end homes. When Marcus and Walters bought the company two years ago, it employed 115 people and was doing $6.8 million in annual sales, which put it in the top 5% in its industry. Although commercial work consisted of two thirds of its projects and 80% of its sales, residential worked showed huge growth potential.

Was CMR’s decision to initiate a relationship with Blackstone a good one?

At the first stage, the business relationship between CMR and Blackstone Homes started smoothly and fulfilled the needs from both parts. A partnership was made whereby Blackstone agreed to specify only CMR’s cabinets in its homes and CMR to assign the project manager who had worked on the previous projects to work exclusively with Blackstone. Through these close cooperation, Blackstone did direct all its customers CMR’s way and grew to be 25% of CMR’s residential business. It seemed great relationship because the ability to start with a standard plan for a model home