After a year of declining revenues, Cumberland Metals Inc. (CMI), has created an innovative product derived from known technology. Initial tests of their new curled metal cushion pads showed that this product represents a significant advancement over the incumbent asbestos product. The product’s distinctive value proposition (DVP) consists of cost and time savings resulting from operational efficiencies, followed by safety and health improvements from reduced exposure to asbestos and heat (Anderson et al., 2006). Under pressure from potential customers, CMI must determine a strategy for pricing and distributing the new pads.
Porter’s Five Forces and other macro-environmental factors will help drive CMI’s decision regarding price and distribution of their new cushion pad. CMI’s pad poses a threat of substitution to asbestos pad makers. Asbestos pad makers are small and represent fragmented competition that make entry into the market attractive. CMI’s pursuit of patents (domestic and international) will prevent other curled metal firms from entering the market and asbestos pad makers from infringing on the new technology. CMI will be able to transition easily by combining existing capabilities with updated tooling. Access to large customers and retailers appears to present few problems. Potential customers are already pressuring CMI for an answer. Risks include becoming gradually more dependent on cushion pad business as their Slip-Seal revenues decline, elevating the barrier to exit. Additionally, steel suppliers can not wield excessive power over CMI as long as steel is plentiful and relatively low cost as a raw material. Buyer power would be a potent force for CMI pads as customers gain understanding of their value proposition. The macro environmental forces in the political/legal arena surrounding growing health concerns about asbestos exposure threatened asbestos pad manufacturers (http://www.healthdangers.com)....