Dominion Control - What, Precisely, Is the Problem Here?

What, precisely, is the problem here?

The problem is that DMC's largest consumer of oil well pumping motors has ranked them the #3 supplier, and not only could this impact purchasing from this customer (Hamilton), other smaller companies follow this large company for their purchasing decisions, so that they get the benefit of copying their R&D decisions.

What are the causes of the problem?

Power companies implemented a graduated monthly base charge per HP at installation, to mitigate ineffieciencies caused by overmotoring in order to improve power factor. Upon the announcement of this change, the head of Hamilton's EE department conducted testing on motors from different manufactures and used starting torque as the deciding parameter, in order to define the specifications of a motor which could be used most economically.

1. Reduce the price of 10 hp motor to that of 7.5 hp motor.

It would be a quick initial way to tackle the problem. This was not a long term solution. The sales of the motors was largely seasonal so they thought that in the coming season ( 1985) , they could grab a large chunk in the market.

Prices –

HP Total cost Sales comission + transportation (10% of billed sales) Final cost to Company List Price Price to Large Users % Profit

5 571.2 104.5 675.7 1685 1045 54.65443

7.5 714 120 834 1940 1200 43.88489

10 907.8 158 1065.8 2550 1580 48.24545

15 1371.9 231 1602.9 3725 2310 44.11379