CMR ENTERPRISES

B2B Marketing – Case Presentation

What is the nature of CMR’s business? How d
oes it differ across the two market segments?
 COMMERCIAL Owner

General
Designer
NATURE OF CRM ENTERPRISE Contractor

• Custom architectural millwork industry

Sub
• Contractor
Commercial and residential space
(CMR
• Enterprises)
Low capital investment

• Proprietary companies operating the business

• Market Size: $4.8 Billion in USA
• Long business cycles, with payment in the end • Project Cycle: More than 6 Months
• Process Type: Structured
• Conversion Ratio: 20%(due to low price negotiations
 RESIDENTIAL Home
Owner
• Market Size: $5 Billion in USA
• Project Cycle: 4-6 Weeks Contractor
Designer
• Primary Target: Home owners (Blackstone)
• Based upon referrals and word of mouth advertisement
• Product Type: Mainly residential carpentry i.e. - cupboards Mike's
Cabinet
 How much profit is being generated by CM
R’s commercial relative to its residential bu
02 siness?  By the Blackstone account?
 CMR Commercial Vs Residential
From
exhibit
7a
From Commercial Residential
Actual Revenue 89.75 44.69
exhibit 4
per shop hour($)
Total Shop Hours 81003 35713
Revenue($)(in FY 1998)
Commercial 7270000 Fully Burdened 16 16
Residential 1596000 Shop Rate($/hr)
Total Shop Rate $1,296,044.57 $571,403.00
Total 8866000
Expense($)
SG&A Expenses ($) 2900000 2900000

Commercial Residential
Material Cost (34% of $2,471,800.00 Material Cost (26% of $414,960.00
Revenue) Revenue)
SG&A(appropriated per $2,377,960.75 SG&A(appropriated per $522,039.25
revenue contribution) revenue contribution)
Shop Expense $1,296,044.57 Shop Expense $571,403.00

Total Cost $6,145,805.32 Total Cost $1,508,402.25

Profit $1,124,194.68 Profit $87,597.75

Profit Margin 15.46% Profit Margin 5.49%

 Blackstone Account
Blackstone Budgeted Actual

Revenue for the FY 1998 $210,314.00 $210,314.00

Revenue Per Shop
Hour($/hr) 51.78 40.63
Total Hours 4061.684048 5176.322914
Material Cost (26% of
Revnue) $54,681.64 $54,681.64
SG&A $68,792.08 $68,792.08
Total Shop Expenses $64,986.94 $82,821.17
Total Cost $188,460.67 $206,294.89
Profit $21,853.33 $4,019.11
Profit Margin 10.39% 1.91%
 Was CMR’s decision to initiate
a relationship with Blackstone
Q3. a good one?
Taking into account the pros and the cons, we believe that CMR made a
good decision to initiate a relationship with Blackstone

Pro #1 Potential
Blackstone had a huge potential for growth in the residential sector and hence meant
potential for growth of CMR

Pro #2 New Market-Space

The relationship with Blackstone meant that CMR could venture into the residential
market

Pro #3 Revenue
Blackstone gave CMR a revenue of $303,237 in the FY 1998 which was essential to
funding investments by CMR

Price Controlling
Con #1
With CMR being the market leaders in the cabinet-space, they were restricted from
controlling prices due to the compelling nature of the agreement with Blackstone

Lack of Co-Ordination
Con #1
There was a definitive lack of co-ordination between the organizations which often
resulted in the employees of Blackstone shouting at CMR’s employees
 What were the problems with the Blackstone
relationship for CMR and why did CMR persist
in the relationship?
Q4. How would you remedy such a situation?
 The Problems
There were multiple co-ordination There were some last Blackstone and CMR clashed on
problems as CMR employees minute change in orders the prices set for the cabinets
didn’t know the layout of the which were not updated in with Blackstone continuing to list
house and their cabinets would CMR’s system causing late, old prices even after CMR had
be conflicting with stuff like unpaid deliveries until the made changes which resulted in
heating vents and pipes house sale was closed frustrated customers

Homeowners who There was a reluctance There were a lot of The contribution margin was
contracted with to adopt InfoCentral on differences between the considerably worse being 38% in
Blackstone were Blackstone’s end and this estimated cost of a the residential sector as
working directly with resulted in a lack of data project and the final cost compared to 48% in the
other subcontractors being available to CMR with no actual systematic commercial sector. Blackstone
tally of the data was also a very angry client who
often got into shouting frenzies
with the project managers
 Why CMR Persisted
Volume
Blackstone was looking at considerable
growth with a target of building 40 houses #1
in the next 12 months and 70 houses in
The Target
the 12 months to follow
The revenue generated from Blackstone
Contribution #2 was essential for other investments.
The target of achieving $70 mil by 2007
Blackstone accounted for 25% of all
business CMR had in the residential
sector and was growing perpetually
#3 hinged a lot on them

Market Share
Blackstone were one of the biggest
#4 players in the residential sector in that
area. Being their exclusive partner
meant a direct access to a big chunk of
current market share
 The Remedies

Information Systems Standardizing Upgrades

Use a system like InfoCentral with more Can have standardized costs for
personalization at handling orders and upgrades being made unless hyper-
communication chains in the residential personalization is being asked for.
sector so as to have an effective channel Blackstone could be informed of the
of data assimilation prices of upgrades so as to inform the
customer at the beginning

Negotiating Prices Improving Management

The prices of the cabinets should be The Blackstone account seemed to be
negotiated so as to reach a mutual price too tough for just one project manager to
point which works for both organizations be handling it. Looking into dividing the
without one feeling betrayed in the complete task into subtasks or giving the
process project manager the required training
would be beneficial
 What should CMR do about the Blackstone
Account now?
Q5.
 The 3 choices
Acknowledge the Terminate/
Hold On.
Blackstone sorts itself
problems. Work tow- Significantly
ards fixing them Restructure

• Relooking at agreement between Blackstone and CMR and understanding scope for price
STEP 1 increase.

• Trying to fix the miscommunication – Delay Reduction, Accommodate price changes

STEP 2

• Based on outcome of negotiation – Increase the allowance a bit more.

STEP 3

• CMR and Blackstone should work together as partners in minimizing costs and streamlining
STEP 4 costs
Blackstone Homes – Steppingstone for big promises made on gaining market share of
Residential Market.
We suggest they stick with Blackstone – Emphasize on scalability and replication of
business model
Focus  Reduction of unfavorable variance (< 50% overall)
Insist  Collaborative Exchange instead of Transactional one
Both parties limiting last minute changes without considering lead times
.
ESTABLISH the TRUST

• Demonstrate Use case of InfoCentral and its importance to CMR, and how it can help
• Streamline internal processes for Blackstone as well.
• Discuss with Blackstone to customize InfoCentral features.

A little patience goes a long way!

Thank you