Harper: Cost and Attractive Markets

How good is the product? The product in theory has great potential able to save costs in two major industries, ceramics in paints. Looking at both individually: 1) Paints: Potentially 12 – 18 cents of savings to original estimations, however research with client has shown great difficulty. Was not working well due to suspension problems, was unable to have the right shine for use in white paints. Furthermore, once quality of end product was acceptable, savings was found to be 3cents per a gallon, which was deemed not worthwhile. However more wear on tear on machinery due to abrasive properties of domimite. 2) Ceramics: Huge initial investment to switch over the dies but estimated to be a large number of advantages: a. Strength of tile improves b. Minimal moisture expansion c. If used more than 20% thermal expansion goes down reducing tile mfg time. d. Low temperature in kiln e. Reduces Variable cost of tile by 17% through the above mechanisms. Tile industry Fixed cost is huge due to machinery, labor etc. However actual tests have not been so conclusive. While advantages of them are seen, there have been issues with warping and with cracks. Penetration with smaller suppliers but failed to interest medium and large manufacturers.

What obstacles has Harper encountered in developing the market for Dominite? Single source player, very unattractive to large customers Testing has been inconclusive Failed to find right mixture Failed to sale the higher grade material Penetrated the wrong market segment

Should Harper try to sell the Dominite operation? It Depends  How much for? For the right price, certainly. It comes down to how realistic are the new projections that came out in 1985. Can we really meet those targets? I doubt it. How much do we need to sell to break even? Assuming we use 1985 costs for 1986 we would need to sell? Doing the math I assumed everything was a fixed cost except for the 35% of the plant cost(if I took anything else as a variable