Arrow Printing and Publishing 2003

Arrow Printing and

Publishing

A Detailed Report on Situation Analysis, Problem

and Recommendations on Alternatives

ABC Consultancy Firm

XXX, Ontario, Canada

2/22/2003
 Arrow Printing and Publishing 2003

Letter of Transmittal

From
ABC Consultancy Firm
Southern Ontario, Canada.

To
Sam Dunnett
Arrow Printing and Publishing
Burk’s Falls, Northern Ontario.

Monday 22nd February 2003,

Subject: Decision regarding Arrow’s future and its continued growth

Sir,

We take this opportunity to bring you a detailed report basis our analysis of Arrow Printing
and Publishing.
Considering the market scenario, the prevailing situations, available alternatives and of
course Arrow’s reputation we recommend that Arrow’s expansion of Business with pitching
in a partner is the most suited option to ensure Arrow’s continued and growing future.
The detailed report with all facts and figures is attached herewith, in support of the
recommended solution.

Should there be any queries, please revert to the undersigned.

Best Wishes for your Business.

Sincerely,
Mr.XYZ
XXXX,
ABC Consulting Firm

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 Arrow Printing and Publishing 2003

TABLE OF CONTENTS

S. No. CONTENTS PAGE NO.

1. Executive Summary 3
2. Situation Analysis 4
3. Problem Statement 5
4. Decision Criteria 5
5. Formulation of Alternatives 6
6. Evaluation of Alternatives 7
7. The Recommendations 9
8. Action Plan 9
9. Contingency Plan 9
10. Exhibits 10

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 Arrow Printing and Publishing 2003

Executive Summary

Sam Dunnett, Owner of Arrow Printing and Publishing, is into the business for the last 24
years. He has a cumulative experience of nearly 45 years in the printing industry. However,
He has developed interests in other fields and the current business is monotonous for him.
This scenario has led him to a state of dilemma. On one hand, he has the reputed business
which he has nurtured over the years and on the other, increased passion for politics.

In view of his vision for Arrow’s continued success along with the desire to pursue with his
passion, Sam is pondering upon three ways to choose from. The first two options involve
selling Arrow either to an external buyer or to his son Peter. However, the third option is to
team up an experienced professional as a business stakeholder and expand into new domains
of the printing field.

The three options have been evaluated in this text based upon market, development
perspectives in the geographical region and return on the investments.
Based upon the study, it has been analyzed that in order to ensure Arrow’s continued success
and pursue political passion in long run, Mr. Sam should expand his business along with a
business partner with 49% stakes, which ensures that he is readily supported by an
experienced professional in achieving business goals and that the business is still owned by
him.

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 Arrow Printing and Publishing 2003

Situation Analysis
The Arrow Printing and Publishing is the printing business running successfully at Burk’s
Falls, located 40 kilometers north of Huntsville.

Burk’s Falls and surrounding area have been given “Northern Ontario status”, deemed as
economically depressed. The major economic driver was Tourism. Though a plenty of labor
was available, businesses particularly manufacturing have been on a decline due to limited
internet and transportation resources. High speed Internet access is expected to reach the area
in future, though the plans may be long term. Similarly, the highway infrastructure is being
expanded by the government and is expected to complete by 2012.

In context to Printing industry, though Arrow is the only printer in the area, it did face
competition from local printers, franchises Kwik Kopy and FedEx Kinko and Internet-based
printing, which offers customers to design, create and edit services. These competitors also
provide online ordering facilities.

Arrow’s business comprises of Specialty Web-Work, Black & White Printing, and Specialty
Color Work, contributing 10, 70 and 20 percent of the revenue respectively. Specialty Web
Work includes printing of Brochures, Maps & Books etc., while Black and White Printing
involves stationery, business cards, and forms printing. The specialty color work is popular
for printing material such as special brochures, books, and magazines. This work offers a
margin up to 25 %.
20 percent of Arrow’s client comprises of the first-time customer who majorly contributes
towards Black and White Printing. The remaining 80% of Arrow’s customers were repeat
clientele. The repeat customers provide business to Arrow with all three printing needs.
Arrow spends the negligible amount in advertisement except only for the charitable cause.

Arrow’s current owner Mr. Sam Dunnett purchased it in 1979 and have developed it into a
profitable business with a loyal customer base. Mr. Sam has an immense experience in the
Printing industry, since 1959. At the age of 26, he started a Web Press company and have
gained important experience in technical and business expertise, which has been largely
applied into Arrow’s development.

However over the period of time, though Mr. Sam has become well versed with customer
management and price setting, he is not comfortable with new production technology, which
is handled very well by his son Peter. Peter is also passionate about emergency services and
ought to become a Paramedic in the future.

Since the last 9 years, Mr. Dunnett has been actively involved in politics and has an
increasing interest towards political career. Though Arrow has been a profitable business
since long, Mr. Dunnett is in dilemma for deciding future of Arrow.
Confronted with this dilemma of whether to stay in the business or move towards political
career, he has to take a decision which must take care of sustenance of Arrow’s proud
reputation and is also in-line with his and his families’ prosperity.

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 Arrow Printing and Publishing 2003

Problem Statement
What decision Arrow’s management should take regarding future of Arrow that would
ensure its continued growth?

Decision Criteria:

The criterion was considered for decision

 Sustaining Arrow’s prolonged growth and brand image.

 Continuity in business
 Management control of the business
 Impact on the personal and professional life of Mr. Dunnett
 Financial Evaluations of the Alternatives to choose quantitatively.
 Personal Interests of Sam.
 The Prosperity of the Family

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 Arrow Printing and Publishing 2003

Formulation of Alternatives:

Management has two broad category options available as under :

 Sell the Business and pursue Personal Interests.
 Expansion of the Business

1. Selling the Business:

There could be two potential buyers for the business as discussed below.

A. Peter

Mr. Dunnett can sell the business to Peter.

Peter has experience of 18 years in the business. He has sound knowledge of production
technology. However, Mr. Peter could face the following challenges in running the
business
 Mr. Peter can manage only 75% of the current business. Revenue may fall
proportionately.
 He has interest in other fields which may impact the growth of business.
 He does not interact with the Customers directly.

Additionally, Peter will make the payments in monthly installments for the sale of
Business.

B. External Buyer with established facilities and looking for geographical expansion
of his/her Business :

This alternative comes in with following challenges:

 Advertisement Cost for the Sale
 Sustainance of Arrow’s growth is not ensured as continuation of Customer relationships
is in jeopardy.
 Difficulties in recovering the account receivables.

2. Expanding the Business to Four Color specialty Web Work

The alternative comes in with following highlights:

 Available Market opportunity since the market in Northern Ontario is underserved.

 The market has the potential growth rate of 25%.
 Funds for new machinery can be obtained easily.
 Expected Margins high
 Hunt for Talented Salespersons looking for better opportunities for pooling in, which
shall not be a difficult task.

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 Arrow Printing and Publishing 2003

Evaluations of Alternatives:
The above alternatives have been discussed below based upon the decision criterion.

1. Selling the Business to Peter:

a) Sustaining growth of Business and Brand image:

 Based upon Mr. Peter’s involvement in Business there are fair chances of
Business growth but with reduced revenue to 75 % as Customer management
may pose a potential challenge.
 He shall run the business for his “extra needs”.
 Interest in other fields which may impact the growth of business.

b) Continuity of Business:

If the business is not managed properly, its existence will be a challenge. The
comparison of Statement of Earnings of 2002 and 2001.

Year 2002 ($) 2001($) Percentage change

Revenue 141,236 128,894 9.5%
Gross profit 93,173 83,938 11%

Since, gross profit has increased by 11% from 2001 to 2002. Similarly, Revenue has
increased by 9.5%. However, As predicted, if Peter manages the business then
revenue will decrease by 25%. Decrease in 25% in revenue will lead to similar
decrease in profit. The decrease in business of M/s Arrow will be opportunity to
competitors from adjacent areas. Hence sustainability of business will be a
challenge.

c) Mr. Dunnett will not have control on the business.

d) Mr. Dunnett will enter in politics. However, family income will be a challenge.

e) Mr. Dunnett will get sale amount in installation. Investmest opportunity for a small sum
will be less.

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 Arrow Printing and Publishing 2003

2. Selling to an External Buyer:

a) The business may de-grow because long term relationship with customers of existing
owner may not be the same with new buyer.
b) Difficulty in recovering the account receivables by external buyers.
c) New owner would have to advertise in an effort to establish strong relationship with new
and existing customers. And this shall add to the input cost resulting in reduction of
profits in initial years.

Hence, Sustaining growth of business is a challenge in this alternaitve.Further Mr.

Dunnett shall loose control and families properity would be uncertain.

3. Expanding the business: Four color specialty web work

a) Available market opportunity since the market is underserved.

b) The market has the potential growth rate of 25%.
c) Funds for new machinery can be obtained easily.
d) Availability of talented salespersons

The alternative essentially involves of pitching in a well experienced business partner to offer
him/her 49% business share and utilize the skill into developing business in new domains.
The option is fulfilling decision criteria of sustainable growth. The alternative shall open new era
of challenges and growth options at immense rate in business, which essentially is what
Mr. Dunnett is looking for.
The Funding can be sourced through Government’s aid for 100% investment cost and 75% would
likely be in form of a non-repayable contribution. This shall be possible as the Government shall
be attracted towards growth opportunity in the otherwise economically depressed Burk’s Fall
region.
Further the future infrastructural growth prospects in the region promise a successful future of the
expanded business.
Once the Business is on sustained growth, Mr. Dunnett shall be able to contribute more towards
society as well.
The Financial benefits have been worked out in Exhibit 1. The expected earnings for Mr. Dunnett
in this alternative comes out to be $134701 approximately 44% rise from the current figures.

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 Arrow Printing and Publishing 2003

The Recommendations

Considering above mentioned alternatives, most appropriate alternative is to expand the business by
collaborating with new partner. However, Current management of M/s Arrow will have controlling
stake.
Additionally, The expanded business will be a enough challenge to break the monotonous nature of
current business.
Moreover, running business at bigger scale will increase rapport of Mr. Dunnett in the Northern
Ontario region. It will also help Mr. Dunnett to grow in politics.

Action Plan
Action plan shall go forwards as
1. Selection criteria formulation for New business partner such as experience in four web work,
no of years of experience, current working profile etc. Accordingly, advertisement for
business partner requirement to be published in leading newspaper/Journals.

2. Selection of Land on lease basis for expansion.

3. Estimation of the Printing Equipment requirement based upon market projections and
selection of source.

4. Strong Application for Funds through Government depicting the future benefits to the society
supported by facts and figures.

5. Advertisement of four- color specialty work is must since the customers are getting it done
from Toronto.

Contingency Plan
If M/s Arrow is not able to find suitable candidate as business partner, M/s Arrow needs to
plan recruitment of new resource on company’s pay-roll.
Possibilities to be worked on increasing Peter’s Role in the company.
The Expansion process may have to be slowed down but keeping a firm decision of final goal
of entering into new domains.

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 Arrow Printing and Publishing 2003

Exhibit 1

Financial Summary for Expansion in Business and Business Shares

Arrow Printing and Publishing
Particulars Amount Projected Margins
Investment 500,000
Projected revenues
Y1 200,000 50,000
Y2 250,000 62,500
Y3 312,500 78,125
Y4 390,625 97,656
Y5 488,281 122,070
Cumulative 1,641,406 410,352
Repayment (25% @ 4% PA) 146,232
Net Profit 264,119
Profit for Mr. Dunnett 134,701

Revenue Distribution Client Base

20 10
20

70

80
Speiciality web work
Black and white printing
Speiciality color work New customer Existing customer

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 Arrow Printing and Publishing 2003

Exhibit: 2
Geographical Location : Burk’s Falls and Northern Ontario Region

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