Cumberland Case Analysis

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Cumberland metal industries: cushion pad pricing report EXECUTIVE SUMMARY Cumberland Metal Industries is evaluating a new product that makes pile driving less costly and more efficient. The product is a cushion pad made from curled metal that prevents the shock of a hammer from damaging the hammer or the pile. Currently the industry uses asbestos pads and is the only form of competition the company faces. If adopted there is potential to sell 29,000 to 39,000 sets of pads (6 pads per set) annually. The most important issue CMI management faces is setting the price of each pad, in the words of Robert Minicucci “ The way we price this could have a significant impact on everything else we do with it.” CMI will consider a range or pricing options such as cost based pricing, competitor based pricing and value based pricing. Correctly priced the pad will generate profit of approximately $800,000 in it’s first year. Along with pricing it is important that the industry is correctly informed of the cost savings of of the cushion pad in order to facilitate a change in the industry’s preference. SITUATION ANALYSIS Company Cumberland Metal Industries was one of the largest manufacturers of curled metal products, originally it customized components for technical applications but since then has moved to selling products that use metals as a raw material. It saw significant growth in sales from 250,000 to 18.5M over a span of 16 years since 1963. It’s biggest break through came with the EGR valves used in U.S. automobiles. Cumberland developed a product called Slip Seal which captured a very large percentage of available business, giving them an 80% percent market share. At this point however management wanted to diversify to reduce reliance on EGR valves and the automative industry. This is why CMI management was very interested when a sales representative from Houston

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