BRAND PIPE CASE ANALYSIS

B2BM PGPBM 18-20 GROUP 2: AUDI | MAHESH | MADHAN| RAJESH| SARAVANAN

CONTENTS
 Problem definition
 Company background
 Industry background
 Product background
 Nested Approach
 Promotion and Sales
 Purchasing approach
 Selection criteria
 Cost benefit analysis
 Conclusion
PROBLEM STATEMENT

 Brand pipe company, a division of Arnol Corporation, is making losses Margin

10000
 Unavailability of Marketing strategy and plan to 6581

o Turnaround the current situation and make it profitable -23940 -4025

0
o Provide a base for continued growth Poly PVC ABS Styrene

-10000
 Flawed pricing strategy and product policy

 Lack of management staffs for Strategy and Planning, Quality Control -20000

 Dual role and responsibilities (GM and Sales, Plant Engineer and -30000

foreman)
-40000
 Inability to maintain adequate control over pipe-wall thickness of its -47909
-50000
thermoplastic pipe product leading to material wastages

 Minimal support from the parent company -60000

COMPANY BACKGROUND
o Second largest Plastic extruder serving
Pacific Northwest (Sales: $1.8 Mn)
o Started in 1950s and got acquired by Arnol

Alan Buford
(GM and Sales
Manager)

George Timkin
(Plant Manager)
PUGET

Alan Britt
(Plan Engineer,
Plant foreman)
INDUSTRY BACKGROUND
 Thermoplastic pipes produced by Brandpipe
competes with:
o Iron
o Aluminium Petrochemical suppliers
o Asbestos-cement

 Plastic pipes Pros,:

o Cost Plastic Resins
o Ease of installation and maintenance PVC
Styr
ABS Poly
o Less erosive ene

 Plastic pipes Cons.:

o Crushability, Strength
o Melting temperature
o Less than 10 inch dia. Thermoplastic pipes
o High degree of thermal expansion
PRODUCT BACKGROUND
 Standard quality with 1.5 to 8 inches in
diameter and pressure rating in the range of
80-600 psi
 Plant investment of $2 million enabled
Brand pipe to have the most technically
advanced resin-blending and pipe-extrusion Thermoplastic pipes 1.5 to 8 inches
equipment
 200 pipe products of varying sizes and resin Pressure rating: 80 to 600 psi
types supplied to 11 market segments (pounds per
square inch)
 7 percent more resin material got consumed
leading to material wastages
 Lack of production planning and control,
and inventory management led to frequent
changeovers impacting cost of production
 NESTED APPROACH
1
Which of the 11 Applications make a perfect fit for
1 Brand Pipe
2
Which type of Companies shud they serve within
3 2 the chosen Industry
4
Purchasing approaches to be decided- Centralized
5 3 or Decentralized
Analyzing the urgent fulfilling orders (non-
4 standard products, changeover impact)

Decision making competencies within Brand Pipe

5

1 & 2  Can use secondary data and segment markets 

PROMOTION AND SALES

Limited Advertising & rely on personal Selling.

Soliciting inquiries through mailer using

product folder

Sponsor morning farm radio programs

Geo based & inhouse Salesperson

Visits to major contracts (Mr.Buford handled

multiple contracts)
 PURCHASING APPROACH
 Supplier with strong  20% of accounts contribute
technical skills will suit 75% of gross revenue.
large customers.  Buford had several working
 Choosing customer with Buyer-seller relationships contracts in his control.
Power structures
strong technical base Absence of Delegation.
avoids need for training  Figure out unattractive market
by supplier. Purchasing segments
Function
Organization
 Bargaining power of
 Brand pipe uses 2/10 supplier high in brand
net 30. General Purchasing Purchasing criteria pipe.
 Transfer Inventory policies  Price & Delivery
to Distributors major factors
 Can consider bidding  Benefit segmentation
& market-based price approach (why
based on situation in customer buy)
future
 SELECTION CRITERIA

High Market share and Speed delivery and

Volume Geo based save on logistics.
growth projection

Physical
Product Low competition
characteristics Application & selection Competition pressure
and properties order size

High suitability , meets

High margin Profitability Raw material regulation, low
wastages and no over-
engineering
COST BENEFIT ANALYSIS
Tables Brief description
Given Exhibit Profit summary per pound basis
Margin per product- Current Plastic Type Production share & Contribution to Profit (Loss)
Proposed Internal changes Internal Operational Efficiency
Projection Profit summary per pound basis
Proposal- 1 Assuming Sale numbers are constant
Proposal- 2 Assuming Brand Pipe is able to maintain same production
levels and increase sales in PVC & Styrene
Proposal- 3 Assuming Brand Pipe is able to grow at 10%, which is 2%
more than market growth due to segmentation. Margins same
COST BENEFIT ANALYSIS- CURRENT
Poly PVC ABS Styrene
Profit Summary - Per Pound basis
Amt VA Amt VA Amt VA Amt VA
Gross Sale Price 0.3625 100.0 0.276 100.0 0.3648 100.0 0.2762 100.0
Less: Discounts, frieght and allowances 0.071 19.6 0.0138 5.0 0.0378 10.4 0.0377 13.6
Current Net Sales Price 0.2915 80.4 0.2622 95.0 0.327 89.6 0.2385 86.4
Less: Variable Costs( RM & Conversion) 0.305 84.1 0.223 80.8 0.3392 93.0 0.211 76.4
Direct Margin -0.0135 -3.72 0.0392 14.2 -0.0122 -3.3 0.0275 10.0
Less: Fixed Costs 0.0397 10.95 0.0375 13.6 0.0501 13.7 0.0314 11.4
Profit -0.0532 -14.68 0.0017 0.6 -0.0623 -17.1 -0.0039 -1.4

Margin per
Plastic Type Production share & Production % Share Margin/
Product
Contribution to Profit (Loss) in Pounds Pound
Category
Poly 450000 7% -0.0532 -23940 Market
Current PVC 3871000 63% 0.0017 6580.7 Share:
ABS 769000 13% -0.0623 -47908.7 17%
Styrene 1032000 17% -0.0039 -4024.8
Total 6122000 100%   -69292.8
COST BENEFIT ANALYSIS- PROJECTION
Internal Operational Efficiency Poly PVC ABS Styrene
RM & Changeover Costs 0.305 0.223 0.3392 0.211
Proposed Changeover Costs per pound 0.009 0.009 0.009 0.009
Internal RM Cost 0.296 0.214 0.331 0.202
Change
7% More Resin cost 0.019 0.014 0.022 0.013

Revised RM Costs 0.277 0.200 0.309 0.189

Poly PVC ABS Styrene

Profit Summary - Per Pound basis Remarks
Amt VA Amt VA Amt VA Amt VA

0.363 100.0 0.276 100.0 0.365 100.0 0.276 100.0 Sales Price is assumed to remain
Gross Sale Price same due to Competitive nature
Less: Discounts, frieght and allowances 0.071 19.6 0.014 5.0 0.038 10.4 0.038 13.6  
Net Sales Price 0.292 80.4 0.262 95.0 0.327 89.6 0.239 86.4  
Revised RM Costs - Batch
Less: Variable Costs(Revised RM Costs) 0.277 76.4 0.200 72.6 0.309 84.7 0.189 68.5 production
Direct Margin 0.014 3.99 0.062 22.4 0.018 4.9 0.049 17.9  
Fixed Costs are assumed to be
Less: Fixed Costs 0.038 10.48 0.038 13.6 0.038 10.4 0.038 13.8 similar to all
Profit -0.024 -6.49 0.024 8.8 -0.020 -5.5 0.011 4.1  
ANALYSIS
Sl No Market Segment Remarks
1 Agricultural Irrigation Plastics - 11% Share,
2 Private Potable Water System Resistance from Plumbing Contractors
3 Mobile Home Market National Contract Basis- Hard to penetrate
4 Public Potable Water Styrene has given way to PVC. Good opportunity
5 Industrial Market Usage severly limited. Not attractive
6 Turf Irrigation Small Dia used. Good opportunity
7 Drain Waster & Vent ABS preferred. Resistance from Plumbing unions
8 Conduit Major Users - Large Contractors, Bidding system
9 Sewer & Outside drain Recently approved for Rural Homes. Good opportunity
10 Gas Transportation Bulk lots, yearly purchases. Not happy with plastic pipes
11 Water Well Service & Stock Water Limited Market share
COST BENEFIT ANALYSIS – SELECTING THE MARKET SEGMENTS
Current Size in Pounds
CAGR Projected
Sl No Market Segment Pipe Type Used Current MS (Annual) MS after 5
Washington Others Total yrs

1 Agricultural Irrigation PVC, Poly 8250000 8250000 16500000 45% 3% 36%

2 Private Potable Water System PVC, Poly, ABS 145000 205000 350000 1% 0% 1%
3 Mobile Home Market ABS, PVC 130000 1270000 1400000 4% 12% 5%
4 Public Potable Water PVC, Poly, ABS 2000000 3000000 5000000 14% 15% 19%
5 Industrial Market PVC, Poly 600000 400000 1000000 3% 8% 3%
6 Turf Irrigation PVC, Poly, ABC 3000000 2900000 5900000 16% 10% 18%
7 Drain Waster & Vent ABS(88%) PVC (12%), Styrene 1000000 750000 1750000 5% 5% 4%
8 Conduit PVC, Poly, Styrene 465000 535000 1000000 3% 10% 3%
9 Sewer & Outside drain Styrene & PVC 1400000 1400000 2800000 8% 13% 10%
10 Gas Transportation PVC, Poly, ABS 123000 177000 300000 1% 0% 1%
11 Water Well Service & Stock Water PVC & Poly 400000 500000 900000 2% 0% 2%

1,75,13,000 1,93,87,000 3,69,00,000

Selected segments: 1, 4, 6, 9 Rejected segments: 2, 5, 7, 10 Future segments: 3, 8, 11

COST BENEFIT ANALYSIS Revised Margin
Plastic Type Production share & Production Margin/ Fixed Cost Revised per
% Share Margin/
Contribution to Profit (Loss) in Pounds Pound @ 4903000 Product
production Pound Category

Proposal -1
PVC 3871000 79% 0.024 0.048 0.014 54526
Assuming Sale numbers are Styrene 1032000 21% 0.011 0.048 0.002 1652

constant

Total 4903000 100%       56178

Margin per
Assuming Brand Pipe is Plastic Type Production share & Production Margin/
% Share Product

Proposal-2
Contribution to Profit (Loss) in Pounds Pound
able to maintain same Category Revenue Projection
production levels and PVC 4469060 73% 0.024 105413
increase sales in PVC & 1233461

Styrene Styrene 1652940 27% 0.011 18351 456542

Total 6122000 100% 123764 1690003
Assuming Brand Pipe is Margin per
Plastic Type Production share & Contribution to Production in Margin/
able to grow at 10%, which Profit (Loss) Pounds % Share Pound Product Revenue Projection
Category
is 2% more than market
Proposal-3

PVC 4915966 80% 0.024 115954

growth due to Styrene 1818234 30% 0.011 20186 1356807
segmentation. Margins 502196
same 1859003
Total 6734200 110%   136141
CONCLUSION Brand Pipe Tamarack Sierra

 Proposal 3 is suggested by our Group

 Brand pipe can meet the ABS type requirement by
outsourcing production
 Brand pipe should work with Selected Market
segments – Can’t be everything to all
 Re-design distribution channel to encourage
Inventory holding (More Selective Intensity of
Distribution)
 Primarily target home markets to derive cost
advantage from Transportation (15% of Sales)
 Brand pipe should concentrate more on Public
Potable Water segment as Competition is focusing
more on Agricultural irrigation( Tamarack) and
Conduit (Sierra)
 Incentive based salary for sales people
THANK YOU
B2BM PGPBM 18-20 GROUP 2: MAHESH | RAJESH | AUDI | MADHAN | SARAVANAN
APPENDIX
Pricing policy
Market Segments
Competition
PRICING POLICY

 Reduction in price increases

 Compete in speed of delivery  Reduction in price increases
 Compete in speed of delivery Market share
rather than price point (to Market share
rather than price point (to  Increases production and
drive out Japanese vendors) Overcapacity,  Increases production and
drive out Japanese vendors) Overcapacity, narrow the gap between plant
 Increased plant capacity Market Share narrow the gap between plant
 Increased plant capacity Market Share capacity and the Production
proactively (to drive out capacity and the Production
proactively (to drive out level
Sierra plastic company) level
Sierra plastic company)  Minimizes FC per unit
 Minimizes FC per unit
 PLASTIC PIPE MARKET SEGMENTS
Agricultural Irrigation Private Potable Water System
 Largest volume plastic pipe market  Private systems deployed Copper and Aluminium for
 Expected Market Growth – 17% home water supply systems
 Region – Pacific Northwest  Expected Market Growth – Nil
 Plastic Sprinkler Irrigation systems replaced open / metal
pipe water supply system
Area Pipe Consumption Area Pipe Consumption
Washington 8.25 million pounds Washington 0.145 million pounds
Total 4 states (Washington, 16.5 million pounds North West Region 0.35 million pounds
Oregon, Idaho, N.California)

Mobile Home Market Public Potable Water

 Application: plumbing fixtures Product improvement from PVC to Styrene spec pipes
 Mode of purchase: National Contract basis
 Local or regional extruders no scope
Area Expected Growth Pipe Consumption Area Expected Growth Pipe Consumption
Washington 90% 0.13 million pounds Washington 100% 2 million pounds
Regional 75% 1.4 million pounds Regional 100% 5 million pounds
 PLASTIC PIPE MARKET SEGMENTS
Industrial Market Turf Irrigation
 Limitations to use in Industry Market due to sensitivity to  Application: Public and private lawn watering system
steam, sparks and hot fluids  Material: Small Diameter PVC
 Expected Market Growth: 45%
 Application: Copper Mining, Pulp & Paper Mfg, Food
Processing, Seawater transfer

Area Pipe Consumption Area Expected Growth Pipe Consumption

Washington 0.6 million pounds Washington 66% 3 million pounds
Region 1 million pounds Regional 57% 5.9 million pounds

Drain Waste & Vent Conduit

 ABS Pipe – around 90%, followed by Styrene  Application: Insulation of electric power, telephone lines
 Resistance from plumbing union – reduced labor costs  Material: Styrene || Competition: Aluminium
due to ease of installation  Buyers: Large Contractors through bidding system
Area Expected Growth Pipe Consumption Area Expected Growth Pipe Consumption
Washington 27% 1 million pounds Washington 75% 0.465 million pounds
Regional 35% 1.75 million pounds Regional 50% 1 million pounds
 PLASTIC PIPE MARKET SEGMENTS
Sewer & Outside drain Gas Transportation
• Application: Connections for septic tank, water drainage,  Application: Low pressure Natural Gas transmission from
sewer system terminals to residence, business and industries
• Material: Styrene, PVCC  Testing results of plastic pipes = not satisfactory
• Competition Material: Asbestos Fiber, Cast Iron, Clay –  Primary Material – Conventional Steel pipe / Epoxy
restricted to large size public sewer system coated Steel
• FHA approved plastic pipe for rural homes

Area Expected Growth Pipe Consumption Area Expected Growth Pipe Consumption
Washington 90% 1.4 million pounds Washington Marginal 0.123 million pounds
Regional 78% 2.8 million pounds Regional Marginal 0.3 million pounds

Water Well Service & Stock Water

 Application: Rural area, water movement from farm wells to home and distribute to farm building and livestock
 Material: PVC, Polyethylene
Area Expected Growth Pipe Consumption
Washington Marginal 0.4 million pounds
Regional Marginal 0.9 million pounds
COMPETITION- SIERRA PLASTICS AND TAMARACK PIPE
Regional National producers
Manufacturers
Domestic competition 6 5 to 8
Market share 75% -
60% of NW Market 3 -