Harper Chemical Company Inc Case

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Harper Chemical Company Inc., a medium sized manufacturer of industrialchemicals served a customer base mainly in the paper industries. In 1979, to diversify risk and reduce its dependence on the paper industry, Harper Chemical decided to increase itsproduct line by venturing into the production of a mineral called Dominite. Dominitesprimary uses were as a replacement of talc in the ceramic tile manufacturing and as anextender pigment in the paint industry. Dominite had superior product features over talcand provided substantial cost savings to the ceramic tile manufacturers. Use of Dominite inpaints produced superior quality paint over existing product. The companys estimateddemand for Dominite was approximately 55,000 tons by the end of year 1983. However,companys optimism in the estimated sales and profits was soon misplaced when therealized demand for Dominite reached mere 8,700 tons. Given Harpers considerable sunk costs in R&D, PPE, leases and sales force, the firm management must decide whether or not to persist in its efforts to increase sales volume, target new customers and move ahead, orto divest the entire Dominite operation.In order to move forward, Harpers management team needs to evaluate its current strategy to analyze if it can raise the required revenues to sustain the operations. If not,then it should divest the Dominite business.Harper faces multiple issues as described below:1.

The projected sales estimates were highly optimistic. Target markets weredeveloped based on the firms expectations rather than actual market research.2.

Harper Chemicals was trying to address issues at multiple fronts in terms of R&Dwithout focusing on customer needs.3.

The companys core sales competencies were primarily within the paper industry;Dominite was new territory both in terms of industry and product.4.

There was a lack of analysis as to the value proposition of Dominite to Harpercustomers. There were considerable upfront costs for the tile manufactures to