CMR Enterprises
Q 1. What should CMR do about the Blackstone account?
Problems:
Less focus on the Residential business than the commercial business
Miscommunication between Blackstone and CMR leading to lack of coordination
Lack of experience or effort from its project coordinator.
Reluctance from Blackstone to share their information with CMR unlike their other customers
specially on the IT software front- InfoCentral.
Ideas of 3
camps :
The current problems are not unusual and its a matter of time before it gets sorted
between the two and generate greater business.
There are some fixable problems and CMRs poor performance in the residential space
due to the lack of focus was deemed responsible for the same. Lack of proper upgrading
of InfoCentral to the requirements of residential was another problem.
Termination of the accountor a significant restructuring in the existing contract between
the two companies. Even droping the residential business altogether was suggested.
Approach of CMR to the problem
InfoCentral has been made keeping in mind the commercial business only, So it should be made
compatible to the Residential business also.
CMR should try to maintain a healthy relationship with Blackstone through continuous talk &
sharing of information. It should clear the air with Blackstone about its current situation and the
problems faced on account of the relation management, Blackstone yelling at CMR and the
unpaid costs.
CMR should discuss the new pricing with Blackstone to take them into confidence as changing
the prices without informing your major account was an inappropriate step.
CMR should tell the importance of the InfoCentral system and persuade it to share their data so
that the process could be streamlined.
Also they should communicate that for mutual benefit the homeowners should not be made to
contact them directly such that they put the responsibility to Blackstone aboutt it and may even
offer a the product at lower prices on the condition that final communication is made from
Blackstones side and not from homeowners.
If Blackstone shows no signs of agreement to the offers made then CMR should terminate its relations
with Blackstone and concentrate on other clients.
Q2. How much profit is being generated by CMRs commercial relative to its
residential business? By the Blackstone account?
By Contribution Margin
Blackstone
Hours
Revenue
Labor costs($ 16/hr)
Material costs (% of revenue)
Material costs
Estd COGS
Residential
5643
210314
Total
1596000
90288
26%
Commercial
7270000
26%
34%
54681.64
144969.64
Contribution Margin(% of revenue)
38%
48%
65344.36
606480
3489600
SG&A
68792.08211
522039.2511
2377960.749 2900000
Profits
-3447.722111
84440.74893
1111639.251
Contribution Margin
Total revenue of CMR
8866000
Segmentwise breakup
210314
1596000
7270000
2.37%
18.00%
82.00%
% wise breakwise
Q2. How much profit is being generated by CMRs commercial relative to its
residential business? By the Blackstone account?
By Material cost & labour
Residential
Commercial
Hours
2985
6045
Revenue
1596000
7270000
Labor costs($ 16/hr)
47760
96720
Material costs (% of revenue)
26%
34%
Material costs
414960
2471800
Estd COGS
462720
2568520
SG&A
522039.2511
2377960.75
Profit
611240.7489
2323519.25
Q3.Was CMRs decision to initiate a relationship with Blackstone a good
one ?
Bad Decision:
Good Decision :
A constant flow of work in
the huge volumes of sales order that came along with it.
a seasonal industry
It was as ambitious
It had grown to be the largest
homebuilder in 2 years so
CMR saw that the market was getting consolidated and
the competition was increasing. A relation for the sake of
vs
it.
had a promising future for
business for CMR
CMR only focussed on getting the large account and
Strategic fit or synergies between the companies Not
Checked
Blackstone's reputation of being hard on its Subs
Provided great volumes of
ignored which should have been carefully analysed and
work
the project manager should have sketched out a strategy
based on it.
CMR didnt put up any of its terms and all that it did
was to please the big account..
Q4.What is the nature of CMRs business ? How does it differ across the two market segments ?
Commercial
Residential
Three Roles:
Personal dealing for prices
Owner : Ultimate owner and paid for the job
Quicker estimation and revision
Architect : Designing and developing detail
Personal touch with customer interaction
drawings
Onsite
General Contractor : Turning the plan into
finished project by a specific date
General
contractors
solicited
bids
from
many project managers for subcontracting
bids.
Dependent on referrals than marketing by
CMR
subcontractors for portions of a project. Had
Q4.What is the nature of CMRs business ? How does it differ across the two market segments ?
Commercial
Residential
Retail store fixtures, executive suites, lobbies for
Custom cabinets and millwork for both new and
office buildings, customized wood work for banks and
remodeled homes (Showrooms and Blackstone
doctors offices and other buildings.
Homes)
Project cycles were generally six months or more and
Project cycles were four to six weeks
Kitchen and bathroom cabinetry
$4.8 billion market in 1996
Was the pride of the company, The Mikes Way
generally got paid at the end
Evenly
spread
between
new
and
remodeled
buildings.
$5 billion in 1996
Was two thirds of the projects and generated 80% of
its sales. It worked by the name of CMR Enterprises
had helped the company maintain premium pricing
and good margins.
Q5. How did the CMR-Blackstone relationship evolve over time? Highlight important events and
actions that influenced this evolution
Year 1
Year 2
Blackstone president met Marcus to offer
the
contract on immediate bases
Blackstone
offered
chance
Blackstone President asked Marcus to reduce prices
on account of increased operational efficiency which
to
be
the
only
subcontractor
Blackstone became a major client : Contributed to
Marcus felt they hadnt achieved
Faced problems with communication & coordination
Increased prices by 7% resulting in overall increase
25% of the residential business
of 15-20% for customers of Blackstone
Concerns : A lot of CMR cabinets were placed on the
Discussion of the two presidents n pricing
side. Blackstone had made a change in a piece at the
Phone call with heated conversation between
last moment but no information was updated in the
project management system
Last minute changes affected operations
Blackstone and CMR team
Q.6 Why did CMR persist in the Blackstone relationship? How would you remedy such a situation?
To meet their aggressive growth strategies ( $70 million by 2007) and also meet their objectives of making their
company scalable and replicable business they need the support of the biggest residential customers in the area
Planned to build 130 homes in one year
Accounted for 25% of the residential business
High growth rate in terms of revenue (32,295$ in 1997 to 303,237$ in 1998)
Blackstone had the potential to provide steady ,profitable income to moderate the erratic income from the commercial
business
Termination of the blackstone relationship would be a big blow to the companys morale
10
Recommendations to CMR to tackle the situation
Negotiate new terms for their agreement
Look into alternatives for cost reductions because the homeowners preferred
working directly with CMR .
Monetize the efforts for which CMR pays field visits to take measurements which
is the work of a contractor
Better communication on increases in price with Blackstone and ask them to
pass that on to the homeowners so that they do not feel exploited.
Internal Changes
Improve the internal communication by improving and upgrading InfoCentral to
meet the needs of not just commercial business but also the residential
business. (eg.capturing details on change orders)
Increase ways to coordinate better with other subcontractors
11
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