Professional Documents
Culture Documents
Group 2
The Blackstone proposal looked good and it was a huge opportunity for CMS to expand into the residential
space
The initial concerns about the contribution margins of 38% as compared to 48% in commercial spaces were
brushed away
Since Blackstone was on a growth spree, this meant growth for CMR as well
They would provide with huge volumes of work
But later
Blackstone's reputation of being hard on their subcontractors was not taken into account
CMR should have hold onto its policies rather than just giving in to Blackstone. They shouldve spoken about
competition in the cabinet industry beforehand
The two companies were not a fit for each other
The industry was price sensitive especially for the residential work
(Q4) What is the nature of CMRs business? How does it differ across
the two market segments?
Custom architectural millwork industry
Low capital investment
Proprietary companies operating the business
Commercial
Residential
Why
What
YEAR 1
Blackstone directed all its customers to CMR and contributed to 25% of the
residential business
At times changes were made by Blackstone and homeowners last moments but
no information was updated in the project management system
YEAR 2
Two parties sat for discussion on pricing as Blackstone President asked Marcus
to reduce prices on account of increased operational efficiency which Marcus
felt they hadnt achieved
Companies agreed on cost reduction by limiting CMRs interaction with the
homeowners
However their attempt towards cost reduction did not work
Coordination problems were cropping up and often there were conflicts
regarding who pays for the mistakes
Other contactors started calling CMR instead of Blackstone to get drawings
Problems
Blackstone homeowners were directly working with other subcontractors
Project co-ordination problems
Marcus was concerned about asymmetry of information and recommended Info
Central for all future orders which was not taken well due to standardization issues
Differences between estimated and actual cost of each project for CMR
Contribution margins were 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 that made Blackstone feel betrayed
Change in orders were last moment and not updated in the system causing a lot of
unpaid orders for CMR
Blackstone had approached CMR due to its reputation in the community and good experiences
Volume was compelling, seemed like a strategic fit
Biggest customer in the area huge opportunity for immediate market share
High growth plan
Steady revenues 25% of their business comes from Blackstone
Biggest account so far
Can play a major role in reaching the target sale of $70 million by 2007