Maximizing the Market Potential for Process #887 in the Saw Blade Industry

Process #887: A New Metal Finishing Technique from Memaksa Steel

Santi der Majoido, CEO of Memaksa Steel (a manufacturer of specialty steel products in Indonesia) had just reviewed the R&D reports on firm's latest project Process 887. Process 887 was a new metal finishing process that increased the wear time of steel products subjected to intense abrasion by nearly 60%. The marketing department had concept tested the innovation for use in the manufacturing of custom milling equipment, and for steel saw blades to be used in the lumber mills of Indonesia. Memaksa's management team recommended that they should further investigate the market potential for Process #887 in the saw blade market. 

The company currently sold saw blades to sawmills in one of two ways: 
• Saw blades and other metal products (such as drive shafts, metal rods, etc.) were sold to industrial metal implement distributors, who in turn used their own sales force to call on domestic fabricators, saw mills and industrial manufacturing facilities;

• These products were sold to industry outfitters, who in turn resold a broad line of goods, including saw blades, to the sawmills. At times, outfitters bought these products directly from the distributors. 

In general, distributors received a 20% discount while outfitters enjoyed a 15% discount. Memaksa currently owned a 20% share of the domestic saw blade market. Exports were not a material part of their volume. 
Industry outfitters normally called on sawmills with a broad assortment of products that would be required for use in the sawmills. That is, they sold specialty tools, safety equipment (e.g., safety goggles, boots, and gloves for the workforce), maintenance equipment lubricants solvents and scrapping tools and treatment chemicals for wood preservation processes. Typically, an outfitter might carry between 3,500 and 6,000 stock-keeping units (SKUs). In contrast, a typical distributor would routinely carry roughly100 metal-based products. 

The company was very enthusiastic about Process because the average new saw blade would cut for nearly 3 hours and 12 minutes. The current blade had a life expectancy of 2 hours and 5 minutes. Changing saw blades was roughly an eighteen-minute process for the sawmill operator, and required that the production line be shut down during that time. 

The cost to manufacture steel saw blades using Process #887 was 12% greater than current processes. The company had asked its salespeople what they thought of the new product. The sales force reported, that "saw blades made of this new alloy could be sold for a price of 35% more than current saw blades". 
The Government of Indonesia had declared this invention to be one of the five most commercially viable innovations in the country and had given Memaksa Steel a National Science Institute Award. This award, given to five inventors annually, carried a cash prize of approximately Indonesian Rupiah 500,000,000 (US$ 57,000)'. 
Santi sat back and thought: how should Memaksa proceed?