Discussion Questions for CMI:
1. What does the income statement reveal about CMI’s situation?
Income statement reveals that sales at CMI are decreasing while selling expenses are increasing. Net income and income per share are also decreasing. Basically, the company is regressing and something needs to change.
2. What business is CMI in?
CMI specializes in curled metal products. These products can be used as filtration media. They have also found new uses for this material including exhaust system seals and most recently, pile driving pads.
3. What’s your price for the curled metal pads? How does this relate to other elements of the marketing mix such as communications?
I would charge ~ $700 per 11.5” pad with a similar mark up for the larger pads. It seems like the break-even price when considering par use only will be somewhere between 175-400 dollars per pad. This would be the price at which the user would be no better off or worse off no matter which pad they used when looking at material cost only. However when looking at increased efficiencies, reduced labor, and less equipment wear, the curled metal pads seem like they could fetch a much higher premium. I would be leery of charging too much early on in the product launch however, because the industry is used to the asbestos pads, and you have to provide them with an above average deal to get them to switch from what they know.
4. How much do you think one of these pads is worth to a customer? Do the test data tell you anything about that?
I think these pads are worth at least $200 to the customer. Possibly as much as $1400. If the 2 test companies had used asbestos pads on the entire job they would have spent $1000 on the first job and $2000 on ...