CMR Enterprise-Blackstone Partnership - Case Study Example

CMR Enterprise-Blackstone Partnership The Organization’s decision to initiate a relationship with Blackstone Architectural millwork companies had stiff competition in residential and commercial construction markets. With residential works market size increasing by each day, CMR’s desire to remain a key player in the market was evident. In the year Blackstone approached CMR for a joint business venture, it was going to build forty homes in the next forty months and seventy additional once in the coming year. Therefore, Blackstone was looking for a strategic partner who would efficiently deliver the increasing workloads. The partnership would see CMR majorly benefit since all the homebuyers who would be buying their homes from Blackstone would buy their cabinets exclusively from CMR, this was a unique approach in the market.The partnership also increased chances of the oldest employees to improve their expertise since they were mainly in the residential business. Other millworks in the market had consolidated and were going full throttle into the residential business. Blackstone had given CMR an immediate opportunity into the market share. Their volume too supported their goals their processes into flexible cells. Also, they were willing to pay the full price for the goods. With the manufacturing changes that CMR was making, Blackstone was making it easy for them since they were using the new models in the standardized home plans. In light of the above, CMR’s decision to partner with Blackstone was a good call. According to the Harvard Business School Journal, the move was a strategic one as it provided the two organizations with an opportunity to grow in business. Besides, Blackstone had established and cut a niche for itself in the residential and home buyer market. The group was fronted for by various homebuyers for providing quality for the lowest price in the market.CMR, on the other hand, had established itself in the millwork industry, especially in the commercial business. CMR was looking forward to a business partner that would advance its prospects in the residential market. Blackstone was looking for a subcontractor who would meet its demand and would permit homeowners to make selections only from its partner subcontractors.The symbiotic relationship would allow both to provide favorable conditions to increase their individual revenues. Profit generated by Blackstone account. According to the article, Blackstone had an upper hand in the residential market, having produced year revenue of $400,000.However, in 1998, from the detailed report on profitability, especially the profitability of the Blackstone Homes jobs; CMR noted that they had indirect cost. One sales person, two project managers and one shop coordinator. The expenditure was $200,000. According to the Harvard Business School article on the CMR Enterprises, Blackstone Homes made a profit of $200,000 in the residential business. This was a good profit margin according to previous sales that they had while they used the Mike Cabinets name. It was; however, a worse margin compared to the commercial business which 48% against 38%. Evolution of the CMR-Blackstone relationship and highlights of important events and actions that influenced such evolution In the first year of operation, the partnership between Blackstone and CMR Enterprises saw the latter grow its residential business market share to 25%. Blackstone directed all their customers to CMR Enterprises, increasing their customer base as a result. Increased profits characterized this period. However, a few incidences where employees of Blackstone were being overextended even as they were continuing with work. The Onus to correct things that Blackstone was likely to miss was given to CMR which did not. Later on, concerns about the partnership started to be raised. CMR had anticipated an increase in its efficiencies that would result in lower prices. Several months down the line, project managers discovered that this was not the case. Homeowners still worked directly with other subcontractors and ended up visiting the CMR showrooms to get the cabinets for their homes. Also, both the companies, CMR, and Blackstone were unable to limit the changes that the home owners made in good time. This partnership also caused an increase in the closing of homes. In case of upgrades for homes, CMR billed Blackstone, who in turn raised the prices for closing homes. Secondly, this relationship caused project managers and project coordinator problems. Working independently from other subcontractors made it seem easy since there were little modifications as discussed by homeowners. However, there were fewer visits to the field by both; this made it hard to know if there were mistakes in the new cabinets until they visited the area. Once they did, they noticed mistakes made, and the issue would arise of who was to pay for the error. Also, Blackstone did not share their information on the Info Central platform.The platform had been designed so that the sales team and the managerial team, could interact with customers; maintaining and communicating information about what was going on at customer accounts. For instance, if Blackstone had shared the information about a change that they had on the cabinets, then Marcus would not have found a whole set cabinets seating outside one of CMR showroom.Sharing information would have saved both parties time and money.For example, they made it difficult to deliver in a given time since they did not share information through the InfoCentral. Lack of communication caused a rush in delivery. Thereby inconveniencing the customers and CMR since the delay in delivery and the changes added up to three to four thousand dollars. CMR also had to consider Blackstones reaction in any decision they made. Another critical notice in the partnership was Blackstone keeping using the same allowance that was used by CMR even before the change in ownership. CMR changed its pricing on individual items and revised other prices across the board by 7%. However, Blackstone still used the previous rates. This act in turn led to homeowners who used the previous allowances in the showroom realize that the cabinets turned out to be 15 to 17 percent more costly. Blackstone consequently started blaming CMR of betraying their agreement by raising prices. As a consequence of such an act, CMR Enterprises began losing customers to other shops and millwork companies across the road that had lower prices. Lastly, there was a reduced ownership of the project by the experts in CMR Enterprises. There was decreased morale amongst staff due to poor communication skills from the Blackstone employees. The workers kept yelling at CMR project managers on the phone over matters that would have otherwise been solved if the Blackstone employees had used the software platform to put their concerns. Reasons why CMR Enterprises insisted on the Blackstone relationship and remedies for the same CMR Enterprise relied heavily on its name it has had over the past years. The companys good reputation has made it cut a niche for itself in the commercial business. However, the organization had little influence and weakness in the residential business. Blackstone, on the other hand, had made a name for themselves in the residential business especially in the home-buyer market. Being marketed as offering the best quality for a lower price to homebuyers, they needed to make their business profitable. In doing so, they needed a partnership with a subcontractor who would handle the demand and would convince their customers only to make a selection from the chosen subcontractors. CMR Enterprises viewed the Blackstone partnership as a huge opportunity to increase their market share in the residential business. With this partnership, CMR would no longer worry about the big expense they have to spend on marketing since Blackstone was doing this for them. The interaction between CMR and the homeowners would improve pricing in the first year of their partnership. Remedies An elaborate session with the employees of both CMR Enterprises and Blackstone would have come in handy. This session would discuss the pros and cons of the relationship critically prior to making a rush decision. This initiative would bring on board all the underlying factors that would otherwise not have been noticed before the signing of the agreement. Striking a new agreement of a significant restructure in CMR and Blackstones partnership would suffice. The agreement would improve the employee relationship in order to boost the morale of the employee from either company. This would be critical in ensuring a continuous production and delivery of quality services to the clients. A need to create a customer base in our own terms and maintain the extra touch that is offered in the commercial business would also act as a remedy. Increasing customer interactions so that it can be easy to convince homeowners about new designs and custom made items, make follow-ups and also make good pricing for the cabinets. Also, I would encourage more on-site visits so that there would be face-to-face interactions with the homeowners. The interactions would make it easier to do upgrades, and answer questions that would arise on custom made cabinets. Discuss the next step that CMR should take regarding the Blackstone account. Without any reasonable doubt, Blackstone account has over the years proved to have been beneficial to CMR, especially in the residential business. The account has not only provided the much-needed revenue for CMR to invest in other business but has also provided the organization with an opportunity for further growth. However, a significant restructuring of the agreement between the two partners needs to be enforced. An agreement that would address issues such as who should improve efficiency should be considered. Besides, a clearly spelt agreement of who should foot costs in case of mistakes should be defined. These initiatives would iron out any pending or raised concern that is critical in enhancing business between the two partners. References Harvard Business School. (2015). CMR Enterprises. Harvard Business School, 1-2 Read More