1.How Big Is the Market for Curled Metal Pads

The first critical issue for CMI to consider is the market for its curled metal pads. The company should study the market size, existing distribution channels, and competition. Thomas Simpson, the Group Manager at CMI, had few statistics available to determine the potential U.S. market for the cushion pads. Based on industry sources and a 1977 Construction Engineering magazine report, he estimated that approximately 13,000 pile hammers were owned by companies directly involved with pile driving, with another 6,500 to 13,000 leased. He also assumed that the total of 19,500 to 26,000 hammers would operate about 30 hours per week and 25 weeks per year, which equates to 750 hours per hammer per year. He further assumed that most jobs would average 20 feet of pile driving per hour. According to these figures, a range of 290 million to 390,000,000 of piles were driven annually (calculation: 26,000 hammers x 750 hours/ hammer yr x 20 ft/ hr = 390,000,000 feet/yr). He also assumed that a total of 6 CMI pads would be required to drive 10,000 feet.

Based on these numbers, the potential market demand for pads could range between 174,000 to 234,000 per year. For example, (390,000,000 feet/10,000 feet) x 6 pads = 234,000 pads.

In addition, CMI had tested their pads via the Colerick Foundation Company (the 1st test) and Fazio Construction (2nd test). The results bode exceptionally well for CMI. In the first test, Colerick paid $1,000 for a total of 480 asbestos pads required (20 sets x 24 pads/set). In the second test, Fazio paid $2,000 for their total of 600 asbestos pads. Colerick needed 6 CMI pads to do the same amount of work and Fazio needed 5 CMI pads. Without considering savings in time, Colerick would likely be willing to pay $1,000 for the number of CMI pads needed to drive the same amount of miles. Therefore, if the price is $1,000 per set of pads and 6 pads are required per set, the price per pad would be $166.67. For Fazio, where 5 curled metal pads were in a set,...