Outotec (B): Action Plan

By: Robert J. Dolan and Doug J. Chung

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Synopsis: Outotec was a market leader in providing mining solutions to large mining companies. The company's specialization and proprietary technology created value for its customers and helped the firm differentiate from its competitors. Yet, Outotec was not pricing or marketing its solutions in a way that took advantage of its distinct capabilities and value-add. Outotec used a cost-based (inside/out) pricing policy, which was the industry norm. As a result, operating profit was only 8% of sales and the CEO had promised the investment community improvements above 10%. The company and particularly the newly hired VP of Market Operations want to move from a cost-based (inside/out) to a value-based (outside/in) pricing and selling model to capture more profitable revenues and meet profitability targets the CEO announced to investors. But there are several challenges to this, which the case study highlights for students to discuss and debate.