Q 1. What should CMR do about the Blackstone account?

Blackstone and CMR started when Blackstone needs a trustworthy service provider Later CMR feels that the cost of serving Blackstone was very high due to lot of changes and unpaid costs. Also the customers were coming back to are its stores to get theaccount customizations Problems : that Blackstone CMR assumed will help itdone. in having scalability in its
business CMR has taken huge debt and invested lot of money in the business and the commercial success was very important to it. So they increase the prices which does not go well with Blackstone.

Lack of experience from its project coordinator.

Blackstone was not coordinating well with CMR on the IT software front.

Options
Blackstone Homes is largest account for CMR with $400,000 an year.

If CMR has to become scalable and replicable business model in this

industry along with clearing off its huge debts and investments , the company has to stick with Blackstone Homes. It should have conversation with Blackstone regarding 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. They should discuss the usage of InfoCentral and its importance to CMR. CMR should also discuss that the last minute changes done by Blackstone increase the costs for CMR and hence they should have a dialogue to discuss bringing down the process costs for both of them which can result in higher margins for both. But even the cordial rounds of discussions, if Blackstone shows no

Ques. 2. How much profit is being generated by CMRs commercial relative to its residential business? By the Blackstone account?
commercial residential
Revenue Burdened shop rate($/hr)) SG&A (As per case) commercial material cost SG&A shop cost total cost profit residential material cost SG&A shop cost total cost profit Total revenue(1998) Revenue per Shop hour Total Shop hours 7270000 89.75 81003 1596000 44.69 24554 16 2900000 2471800 2377961 1296045 6145805 1124195 414960 522039 392862 1329861 266139

15%

17%

Blackstone
Budgeted
Revenue (1998) Revenue per shop hour Shop hours material cost SG&A shop cost Profit Profit margin

Actual

210314 51.78 4061.68 54681.64 68792.08 64986.94 21853.33 10% 40.63 5176.32 54681.64 68792.08 82821.17 4019.11 1.91%

Q 3. Was CMRs decision to initiate a relationship with Blackstone a good one?

CMR only focussed on getting the large account and the huge volumes

of sales order that came along with it. All it wanted was to get the its business model replicable and scalable. CMR saw that the market was getting consolidated and the competition was increasing. So getting into a relation for the sake of it didnt make sense. CMR did not take into account if there was a strategic fit or synergies between the companies. It ignores the Blackstone's reputation of being hard on its Subs which should have been carefully analysed and 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. The company should have hold onto its policies rather than just giving in to Blackstones whim at every stage.

Q-4 What is the nature of CMRs business? How does it differ across the two market segments?
(A) NATURE OF BUSINESSES

Commercial
Solicited bids to General contractor

Residential

Showroom

Open Market projects

Blackstone Homes

Project cycle of 6months or more

Project cycle of 4-6 weeks

Subcontracting Characteristics
Developing a bid Dedicated sales team
Estimating time, material & labour hours required Buyout price & Lead time on buy items

Winning open market bids Create opportunities for negotiated bids Fromal hand-off from sales Co-ordinate with contractor to avoid mismatch between planning and site specifics Developing shop drawings and construction drawings Building relationships with contractors

Role of project manager

Residential work
Personal dealings for pricing

Quicker estimation and more revision Personal touch based on interaction with customer onsite

Dependent on referrals rather than marketing

relationship evolve over time? Highlight important events and actions that influenced this evolution
Blackstone Homes
Residential Customer One of the largest homebuilders in the area 3 sets of houses starter homes ( $120,000) , family homes ( $120,000-

$150,000) , luxury homes ( $150,000- $200,000)

Strategy : To permit homeowners to make selections only from its partner

subcontractors

Benefits to CMR :
A great strategic fit

A great opportunity for a scalable , replicable business model

Increase in market share Blackstone ready to pay premium for quality products

Partnership : Blackstone agreed to specify only CMRs cabinets in its homes

and CMR to assign the project manager who had worked on previous

Q5 Continue
YEAR 1
Blackstone became a major client : Contributed to 25% of the

residential business Concerns : A lot of CMR cabinets were placed on the side. Blackstone had made a change a piece at the last moment but no information was updated in the project management system

YEAR 2
Discussion of the two presidents n pricing. Blackstone President asked Marcus to reduce prices on account of

increased operational efficiency which Marcus felt they hadnt achieved

DECISIONS FROM MEETING

Cost Reduction : CMR to reduce customer interactions

Blackstone to keep the CMR project manager updated when it sold a

home

Problems
Blackstone homeowners still worked directly with other

subcontractors Homeowners who could afford upgrades presented an opportunity for CMR to increase profits Project co-ordination problems Marcus concerned about asymmetry of information and recommended use of Info Central for all future orders Margins less : 38% of sales in residential as opposed to 48% for commercial CMR raised prices by 7% and corrected prices for some individual items that were mispriced Change orders not reflected properly in system

Q.6Why did CMR persist in the Blackstone relationship? How would you remedy such a situation?
CMR persisting in the Blackstone Relationship:
Steady cash flows provided by account One of the biggest customers in the area Plans to build large number of homes Had a strong growth from $32,295 in FY97 to

$303,237 in FY98 Black stone can play critical role in reaching CMR target sales on $70 million by 2007

Handling Blackstone account

STEP 1

Relooking at agreement between Blackstone and CMR and understanding scope for price increase. Marcus should negotiate with Blackstone about price increase and invoice of $10,374 Marcus should ask Blackstone to pass on price increase(Based on outcome of negotiation) to customers

STEP 2

STEP 3

STEP 4

CMR and Blackstone should work together as partners in minimizing costs and streamlining costs

In addition to these Marcus has to make following changes to his business:

Customizing Info central for Residential Business Information about residential housing should be collected Limiting last minute changes in the orders Working in coordination with other subcontractors so that minimizing

THANK YOU