Group 1

CMR ENTERPRISES

1) What should CMR do about the Blackstone account?Alternatives available• Hold on as it is as the problems are not unusual and will be

sorted out in a sometime.• There are problems which are fixable.• Terminate or significantly restructure the agreement with

Blackstone.

Solution • Identify the areas of conflict• Better flow of information by making InfoCentral an integral part of the information flow• Get in touch with the other workers of the sub contractor in order to minimise the changes made due to misfit with other works• Lay down a billing policy for the changes that have to be made depending on the past trends

2) Profit generation by Commercial relative to Residential business

2) Profit generated by Blackstone

3) CMR relationship with Blackstone in retrospect• Yes, it was a good decision• It provided CMR with a constant flow of work in a seasonal industry• It was as ambitious as CMR in its growth ambitions• It had grown to be the largest homebuilder in 2 years so had a promising future for business for CMR• Provided great volumes of work

4) Nature of CMR’s business and how it varies across the two market segments

• Retail store fixtures, executive suites, lobbies for office buildings, customised wood work for banks and doctors offices and other buildings.• Evenly spread between new

and remodeled buildings.• $5 bn in 1996• Was two thirds of the

projects and generated 80% of its sales• Project cycles were generally

six months or more and generally got paid at the end

• Custom cabinets and millwork for both new and remodeled homes• Kitchen and bathroom

cabinetry• $4.8 bn market in 1996• Was the pride of the

company, “The Mike’s Way” had helped the company maintain premium pricing and good margins.• Project cycles were four to

six weeks

Commercial Residential

Commercial work • Three roles

Owner

Architect / Designer

General contractor

Ultimate customer Paid for the job

Designing and developing detailed drawings

Turning the plan into finished project by a specific date

General contractors solicited bids from subcontractors for portions of a project. Had many project managers for subcontracting bids.

5) Evolution of CMR- Blackstone relationship• Blackstone was founded in 1995 and it had grown to be the largest homebuilders in the area.• Offered a partnership to CMR in 1997• It agreed to specify only CMR cabinets in its homes and CMR assigned Project Managers to work exclusively with Blackstone• Blackstone directed all its customers to CMR and grew to be 25% of CMR’s residential business• Cost reduction initiatives by Blackstone• There were problems in project co-ordination • Differences in the estimated and actual costs due to changes at the last moment• Rise of prices by CMR led to clashes between the two regarding the price reduction contract

6) Reasons for persisting in the Blackstone relationship• Revenues of $400,000 annually, hence so far the largest CMR account.• Provides constant source of revenue• High growth plans

6) How would you remedy the situation• Be involved with Blackstone in getting to know what the customer at the end of the value change wants• Understand the process at Blackstone and suggest ways to improve it• Rework on the flow of information between CMR and Blackstone• Explain the reasons and the need for the price increase by CMR to Blackstone

THANK YOU…