Dominion Motors Case

How do you characterize the markets which are being served by Dominion Motors?

Dominion Motors & Controls Ltd. has had a relatively stable and significant holding in the market for Oil Pumping in Northern Canada through the early 1980s.

Dominion Motors & Controls, Ltd (DMC) had acquired 50% of the oil well pumping market in the northern Canadian oil fields since they were started in 1973. DMC offered a line of motors ranging from small fractional horsepower (hp) units to large 2,000 hp motors. It also produced motor control and panel board units.

By 1984, there were approximately 5,500 producing wells in the fields. According to industry estimates, an average of 1,000 new wells would enter production each year for the next five years. Sales to this market were seasonal; over 80% were made between April and September.

Large Canadian oil producers were typically organized so that production was separated from refining and marketing. The production organization in large companies typically included field operations people, engineers, purchasers, geologists, and standard administrative functionaries. Normally, sales people called on their customers to keep them abreast of changes in the line and to nurture the relationships they have developed over the years.

The smaller companies had simpler organizations. They tended to comply more with industry standards in their buying and often followed the larger companies in purchasing policies and equipment choice.

What are the developments in the marketplace which caused Dominion management to be concerned?

Dominion Motors & Controls January 28, 2008 Problem Dominion Motors controlled a very large percentage of the market for oil pumping in Northern Canada by selling a few different types of oil-pumping motors and controls. In 1985, their largest customer conducted a study and discovered that the motors they were buying from Dominion were in fact the third best ones on the market for what they needed.

Approximately 80% of the motors sold for oil well pumping applications, since 1973, had been 10 hp motors. The remaining 20% of sales were motors of the same type but with higher or lower horsepower ratings.

During 1984 power companies serving the oil fields made two announcements that could affect the specifications of oil well pumping motors.

1. Schedule of power rates was changed. The former flat rate, charged regardless of the horsepower of motors on a pumping installation, was replaced with a graduated schedule based on connected horsepower of an installation.

2. Power companies demanded that customers stop over motoring and improve the ‘power factors’ of the installations.

DMC’s competition consisted of other well-known Canadian Motor manufacturers and a number of foreign