Northern Drilling case
1. Problem Definition
Peter Bremmer, has the opportunity to bid for the drilling contract of one of the largest players in the Canadian mining industry. Winning this bid could be a major step to achieve his growth strategy, but the company currently does not have sufficient equipment and experienced drillers available, the industry is short of skilled workers and the highly cyclical industry environment makes long-term investments risky. Additionally, he has only 3 weeks to make a decision.
2. Criteria selection
Bremmer must evaluate (1) if the tender is supporting Northern’s growth strategy, (2) if they can secure the required experienced workers and the equipment, (3) the potential risks and (4) at what price to bid. The following criteria shall be used:
Alignment with company growth strategy (for 1)
Diversification of income sources (for 1)
Impact on reputation (for 1 and 3)
Access to skilled drillers on the market (for 2)
Access to workers and drills from Noranda contract (for 2)
Feasibility in terms of cash and capabilities (for 2)
Long-term industry outlook (for 3)
Impact on existing customer relationship (for 3)
Competitiveness and strategy of competitors (for 3)
Likelihood to fail to perform the job and perform on time (for 3 and 4)
Profitability and strategic value of the project (for 4)
3. Alternative development
Bremmer has 3 alternatives: (1) Do nothing (=don’t submit bid), (2) submit a bid for both jobs, and (3) submit a bid for one job only.
4. analysis
Evaluation 1: Decide to bid or not
Through this project Northern (1) could be established as one of the Canada’s most technically competent drilling contractors, achieve its growth strategy, (2) diversify its income sources and decrease its dependency on its biggest client (Noranda), (3) strengthen its reputation which is important to win long-term complex projects in the future and (4) gain an additional minimum gross profit of over $6mln (see exhibit 3, scenario 2).
Peter Bremmer, has the opportunity to bid for the drilling contract of one of the largest players in the Canadian mining industry. Winning this bid could be a major step to achieve his growth strategy, but the company currently does not have sufficient equipment and experienced drillers available, the industry is short of skilled workers and the highly cyclical industry environment makes long-term investments risky. Additionally, he has only 3 weeks to make a decision.
2. Criteria selection
Bremmer must evaluate (1) if the tender is supporting Northern’s growth strategy, (2) if they can secure the required experienced workers and the equipment, (3) the potential risks and (4) at what price to bid. The following criteria shall be used:
Alignment with company growth strategy (for 1)
Diversification of income sources (for 1)
Impact on reputation (for 1 and 3)
Access to skilled drillers on the market (for 2)
Access to workers and drills from Noranda contract (for 2)
Feasibility in terms of cash and capabilities (for 2)
Long-term industry outlook (for 3)
Impact on existing customer relationship (for 3)
Competitiveness and strategy of competitors (for 3)
Likelihood to fail to perform the job and perform on time (for 3 and 4)
Profitability and strategic value of the project (for 4)
3. Alternative development
Bremmer has 3 alternatives: (1) Do nothing (=don’t submit bid), (2) submit a bid for both jobs, and (3) submit a bid for one job only.
4. analysis
Evaluation 1: Decide to bid or not
Through this project Northern (1) could be established as one of the Canada’s most technically competent drilling contractors, achieve its growth strategy, (2) diversify its income sources and decrease its dependency on its biggest client (Noranda), (3) strengthen its reputation which is important to win long-term complex projects in the future and (4) gain an additional minimum gross profit of over $6mln (see exhibit 3, scenario 2).