Singapore Metals Limited Harvard Case Solution & Analysis

PROBLEM STATEMENT

SML has been able to develop a new product, Curl Metal Cushion Pads which has great potential in the market. The new product is even better than any product SML has ever produced.

If it is successfully introduced in the market then it will double the sales of the company and will compensate the recent decline in market share of SML, which has brought a 42% decrease in the income from operations from years 2006 to 2007. Even a potential buyer is willing to buy the product; “Allied Construction” is asking for the price at which SML will be willing to sell the product. Alex Tan, the divisional manager has to make the decision of pricing this product, which is vital for SML as such a price has to set which will bring market penetration and high market share as it is necessary for the company due to its current market situation.

Refer sheet 3

INTRODUCTION OF THE COMPANY

SML has evolved over the time from making custom fabricated products to other highly technical applications. The company had a strategy of selling metals as finished products which the company later changed to selling metals to other companies who used it as raw material for their products. Success history of SML is that, when environment regulations around the world forced auto manufactures to prevent escape of very hot exhaust gases into the environment for which they required a high temperature, SML developed the product “Slip-Seal” which met the market specification and resulted in rapid growth for the company. The innovative product designed according to the market specification has been the reason for success of SML. The Curl Metal Cushion Pad represents the same strategy.

The Curl Metal Cushion Pads are used in the process of setting up the construction piles. They are heavy beams composite of concrete and steel which are used to provide support to any structure whether it is a bridge or a building. In addition, they are very important for places where the ground can shift under the weight of the structure. These piles are hammered in the ground using heavy machinery and the Curl Metal Cushion Pads are used to protect the piles and the hammer from damage.

The Curl Metal Cushion Pad acts as a buffer between the hammer and the pile and it is used to transfer the force from the hammer to the pile without generating heat and to be strong in order to provide enough support to prevent the shock. An ineffective pad can crack the pile, which will lead to waste and additional cost for the builders.

The alternative products that were used for this process were hardwood blocks; they were ineffective and later replaced by layers of aluminum plates, micarta slabs and phenolic plastic pads.

Curled metals have the specification that they can withstand any temperature and can stretch in length and width. Further, stacking them in layers will produce a shock mount and a highly effective filter.

ANALYSIS & RECOMMENDATION

- What price would you recommend Tan to propose to Allied Construction and why?

Considering the projected cost data provided by the manufacturing engineer with the assumption that the fixed overhead cost will be 360% of the labor cost for the Curled metals as for every other product manufactured by SML the pricing would be as follows,

Tan had the option of purchasing additional permanent tools, which would reduce the labor cost of the product that would have a big impact on the fixed overhead cost allocation and would reduce the total product cost by half.

Refer sheet 1

Since SML has developed an innovative product, hence it has the luxury of charging a high price as no other company in the market is providing....................................

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After winning independence in 1965, Singapore achieved some of the highest in the world economic growth. Most of the GDP and employment have come from direct investments of multinational companies in low-cost assembly, but in the 1990s in Singapore wage increase over its price of these sectors. Singapore can change ourselves from the assembler and manufacturer of western developed for the designer and marketer of desirable products? Lee Kuan Yew, the "father of Singapore," has been repeatedly demonstrated the ability to lead people through such transitions. Not only that his successor do not have such a track record, but the next transition can be difficult yet. "Hide
by Forest Reinhardt Edward Prewitt Source: Harvard Business School 25 pages. Publication Date: March 31, 1993. Prod. #: 793096-PDF-ENG

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