DOMINION

MOTOR AND
CONTROL
LTD.
 Abhijeet Ghogare MBA21006
Arnav Singhal MBA21029
Bakul Parmar MBA21039
Bibhu Prasad Mallick MBA21043
Presented by : Maninder Singh Malkania. MBA21104
Nitish Kumar MBA21129
 About the company
1973 – DMC WAS FOUNDED
OVER YEARS, DMC ACQUIRED A MARKET SHARE
OF OVER 50% IN OIL WELL PUMPING MOTORS IN
CANADA

MARKET OFFERINGS

Product group

Control and panel boards

Fractional horsepower motors
1-200 HP motors
250- 2,000 HP motors
 1984 sales which shows its success
with the turnover of $323 million

Market of DMC
80% OF THE DOMINION MARKET IS
LARGE BUSINESS USERS.
THE ESTIMATION THAT 1000 NEW
WELLS PER YEAR WOULD COME UP IN
THE NEXT 5 YEARS.
THE SEASON OF HIGHEST SALES IS
BETWEEN APRIL AND SEPTEMBER.
MANY SMALL OIL OPERATORS FOLLOW
LARGE COMPANIES FOR PURCHASING
POLICY AND EQUIPMENT CHOICE.
THE BUYING AND • LARGE CANADIAN OIL PRODUCERS WERE
TYPICALLY ORGANIZED SO THAT PRODUCTION WAS

SELLING OF OIL SEPARATED FROM REFINING AND MARKETING.

• RIG SUPERVISORS WERE IN CHARGE OF OPERATING

WELL MOTORS THE RIG ITSELF AND WERE VIEWED AS IMPORTANT

PEOPLE.
• NORMALLY, SALESPEOPLE CALLED ON THEIR
CUSTOMERS TO KEEP THEM ABREAST OF CHANGES
IN THE LINE AND TO NURTURE THE RELATIONSHIPS
THEY HAD DEVELOPED OVER THE YEARS.
• THE SMALLER COMPANIES TENDED TO COMPLY
MORE WITH INDUSTRY STANDARDS IN THEIR BUYING
AND OFTEN FOLLOWED THE LARGER COMPANIES IN
PURCHASING POLICIES AND EQUIPMENT CHOICE.
DOMINIONS ADVERTISING
AND PROMOTION PROGRAM

Dominion had an advertising program that management considered of limited

value Trade journals were used to reach the different buyinging influences.
Catalogs were important in DMC's promotional program. Each motor size was
described in a general catalog distributed to purchasing and engineering
personnel. This single-publication approach, in contrast to pamphlets describing
each motor, was difficult to revise.
But management believed that the catalog was lower cost and more efficient than
individual pamphlets because the product line was quite small and the motor
designs and specifications were seldom changed.
FACTORS AFFECTING SPECIFICATIONS OF OIL
WELL MOTORS
Approximately 80% of the motors sold for oil well pumping applications since
1973 had been 10-hp NEMA design C (high starting torque, low starting current),
totally enclosed, fan- cooled units with moisture-resisting insulation. The
remaining 20% of sales were motors of the same type but with higher or lower
horsepower ratings.
There were various factors which decides the type of motor best suited for this
area.
One particularly important determinant had been the low winter temperatures
which required a motor with a high starting torque.
To be assured of sufficient starting torque, many oil companies were using 10-
hp motors even though these were larger than was actually required to lift the oil
to the surface. This practice was called "overmotoring."
During 1984 power companies serving the oil fields made two announcements that could
affect the specifications of oil well pumping motors. First, their 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 :

Second , power companies demanded that their customers stop overmotoring and
improve their power factor of their installations.They did not however, indicate at
the time what , if any ,penalty over motoring would incur.
HAMILTON'S FIELD TEST John Bridges, Hamilton's chief electrical engineer,
initiated field tests on oil well pumping motors.
PROGRAM His objective was to define the specifications of a
motor which could be used most economically. The
tests, therefore, were to determine.
(1) The horsepower required lifting the fluid.
(2) The maximum starting torque required to start the
pumping units at low winter temperatures
 FINDINGS OF THE TESTS.
HAMILTON'S FIELD TEST
PROGRAM Fluid-lifting requirements dictated a 3- to the 5-hp motor.
Starting torques above 70 pounds-feet would energize the
pumping units at temperatures as low as -50°F.
This starting torque requirement would necessitate a 7 ½-hp
motor.
Because the Spartan 7 ½-hp motor had the highest starting torque
of the motors tested and the Universal 7 ½-hp motor had the
second-highest, these should be his company’s first and second
choices in the future. Dominion's 7 ½-hp motor would be the third
choice.
 PROBLEM STATEMENT

Dominion Motors & Controls, Ltd. is in danger of losing its current

market share in the mine pumping engines, because a major client of
theirs, Hamilton having experienced several competing brands engine
ranked DMC to be 3rd amongst its competitors.
 POSSIBLE SOLUTIONS TO DOMINION'S
PROBLEM
Four courses of action were developed by Dominion executives:

ALTERNATIVE 2 ALTERNATIVE 3 ALTERNATIVE 4

ALTERNATIVE 1
Re-engineer DMC's present Undertake design of a Attempt to persuade Bridges
Reduce the price of DMC's
7'/2-hp motor to make its definite-purpose motor for and Hamilton executives that
10-hp motor to that of the
starting torque at least equal the oil well pumping market. the conclusions reached
7'2-hp motor.
to that of the Spartan 7/-hp This ideally would be a basic from their test results unduly
unit. 5-hp motor with the starting emphasized obtaining the
torque of a 10-hp unit. maximum starting torque
available
.
 REDUCE THE PRICE OF DMC’S 10 HP MOTOR TO
ALTERNATIVE 1 THAT OF 71/2 MOTOR.

ACTUAL PRICE OF 10-HP MOTOR= $1580

NEW REDUCED PRICE = $ 1200

= Profits get reduced by $342 / unit.

 PROS
No additional investment in plant and equipment is required.
Required Torque capacity is achieved.

Cons
Reduced profits.
Equipment set up time is 3 months.
Will start torque war which would be detrimental to the motor industry.
Customer reaction to the new product is uncertain.
The company’s policy of maintaining NEMA standards is being violated.
 Two ways of Reengineering 71/2 hp motor.
ALTERNATIVE 2 1. Increasing torque with increase in temperature.

2. Increasing torque with increase in frame size.

Going by this alternative would violate NEMA standards and would lead to unbalanced motor design
Even the cost analysis shows a reduced profit, hence this alternative is not feasible.
 PROS
This is a quick initial way to meet the problem requirements.
The company sales would not be affected for the current season.
They get more time to analyze Bridge’s test and derive their own conclusions.

Cons
Reduced profits.
Extra expense for user.
For 71/2 hp motor, the electrical consumption = $21.5 *7½ =$161.5
For 10 hp motor, the electrical consumption = $20 * 10=$200
Therefore extra expense of $38.5 for the user.
This is not a long-run solution.
If the power companies start penalizing for over motoring, the customers would be at risk.
 Considering the definite purpose motor

ALTERNATIVE 3 specification 5 hp unit having torque of a 10 hp

Motor

Monthly Power Charges according to Horse

Power is given below:

By using 5 hp motor instead of 10 hp motor the user can save 75$ /month and 75*12=900$ / year.
This 5 hp can be sold for a minimum price of $1045 and a maximum price of $1200.
 Referring to Exhibit 2:

The fixed cost here is 571.20 – 511.53=$59.67

But the manufacturing cost of the Definite purpose motor is around $665.

Including the sales commission and transportation cost(10%). i.e $104.5 for ($1045 S.P ) and
$120 for ( $1200 S.P)
Therefore, 5 hp motor can be sold for $1200 with a profit of $355.33

According to industry estimates, an average of 1000 new wells would be added every year.

But this alternative requires an investment of $75000 for the necessary engineering and testing.

Therefore, Total sales from profit would be 1000 * 355.33= $355,330.

Hence, the payback time for the initial setup cost would be 75000/355330=0.21 years
·
 PROS
This alternative can be adopted as the profit is considerable with less payback time and DMC Ltd. Can
catch up with its competitors.
DMC will have the first mover edge of offering a product that directly tailors to the need.

DMC will maintain its image of following all NEMA standards.

It can moreover be considered as an extension to the current product line.

CONS
The new wells coming up may require different motors.

Small companies may not want the same motor that Hamilton wants.

It would take 4 or 5 months for the production to begin

 PROS
If DMC’s testing results prove the fallibility of the premise for
ranking, it will restore customer confidence and reassure them
ALTERNATIVE 4 that they are getting the best of products.

CONS
Bridges is more convinced of his interpretations, and it isn't
easy to meet him directly.
The presentation of different arguments is not known.
Even if we try to alternate Bridge's recommendations, it
would only generate ill will.
 Problem
WHAT DO WE REALLY KNOW DMC’s potential loss
Quick response to match the competitors
ABOUT THIS SITUATION ?
Causes of Problem
Hearsay of Case study by largest oil company
active in Canada
If true, competitors of Dominion will benefit

Approx 1000 wells/year to enter in next 5 years.

BRUSH-FIRE OR AN DMC has 50% market share and would have
IMPORTANT PLAN ? approx. 2500 wells motor business.
Could lose money and brand image
Spill effects could occur in other markets
Important problem
 HOW PROFITABLE IS EACH OF THE 4
ALTERNATIVES SUGGESTED ?

ALTERNATIVE 1 ALTERNATIVE 2 ALTERNATIVE 3 ALTERNATIVE 4

Price cut could be Higher temperature Motor could exceed Convincing Bridges
delayed until test’s than NEMA standards NEMA specs and based purely on
results are published Customers would go priced below 7 ½ numbers
Not a long term for larger motors motor
solution but could buy rather than motor Selling season would
time for DMC exceeding NEMA be over
standards

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 Short Term
Alternative 1
DMC'S PROGRAM BE FOR Attract more sales as oil companies prefer higher torque
THIS CURRENT SEASON ? machines
No penalties or restrictions in near future for overmotoring
Long Term
Alternative 3
Step crucial for DMC to counter Hamilton’s report.

CONSIDERATIONS IN NEMA Standards

Specification requirements of companies
PLANNING A PRODUCT FOR
Mostly Seasonal market
THIS MARKET
Market growth
Trend Setting companies
RECOMMENDATIONS TO Can use billboards for advertisement
Existing customers to get discount on new and better improved
IMPROVE DMC'S
motors.
MARKETING PROGRAM
EMI System for small companies
Free Servicing for loyal customers

Finance
PEOPLE'S OPINION ABOUT Extra burden on company due to R&D of the new specs motor
PROBLEM Profits reduced in selling 10HP motor at the price of 71/2HP
Engineer
Tests didn’t produce results accurately
Tests conducted under given set of operating condition
PR Team
At a disadvantage after Hamilton test results are published
Have to do damage control.
Production
Their opinion about machinery were respected by other oil
company personnel.
Thank You