PESTLE ANALYSIS of the following case study.

Apollo Box Inc. started in 2005, as a small design house and printing operation. In thecompetitive printing industry, Apollo became well known for its superior graphicdesign. Design had remained a hallmark of the company to this day.By 2009, the firm had $5,000,000 in sales annually and with 20 employees. Profit was$150,000 in 2009. In light of the slim profit margins on regular print goods, in 2009,Jim Herrington had begun to explore other printing related opportunities.A strategic re-direction took place with the firm moving from simple print material tofold down boxes. At the same time, a labour sponsored fund became an importantequity partner in the firm with the firm restructuring its share capital. After therestructuring Jim Herrington and his family held 60% of shares, the labour fund 35%and a third silent partner 5%. At that time, a full-fledged corporate governance modelwas introduced to the company with regular board meetings and committees of theboard.Fold down boxes are typically made from card type stock. Each 125 cm sheet canmake 2 boxes. Apollo Box planned to operate (and continues to operate) 16 hours perday for 250 days each year. When there is a rush order, or equipment breakdownsthe recovery occurs over weekends or by extending the shifts. Average salary for press operators is $25 per hour. Overtime is paid at time and ahalf.The injection of capital allowed Apollo to pursue their new mission, that being oneof the top ten fold down box manufacturers in western Canada Prairies. Itallowed for the acquisition of five printing presses and gluing equipment along withmajor expansion to the facility, which could hold up to 10 large printing presses.Expectations were it would lead to sales of $15,000,000 in 3 years, with 55employees, and an estimated annually profit of $750,000. Platinum is a non unionshop.Execution of the new business plan was difficult. First, suppliers were reluctant tooffer reasonable terms for the purchase of the new printing equipment, especially to anew comer to the box printing industry. After failed negotiation with several largeinternational printing press suppliers, Jim Herrington turned to an old friend.Page 1 of 6 OperationsMGMT-6081 SCMJim Herrington has been a close friend of the grandson of the founder of Mid-Continent Printing Equipment and its current president, Conrad Thickwood sincechildhood. Mid-Continent presses were well known in the industry. Mid-Continentstarted in Winnipeg in the early 1900's. They had a reputation of having verygood quality but not necessarily the highest quality.Apollo Box was able to purchase five suitable presses, on reasonable terms. Conradmentioned to Jim that it was a partially a favour to him andhe expected him toremember it in the future.Card stock for printing boxes was also a difficult to acquire. The local paperdistributors had established relationships with local print shops including the two otherfirms in the box business. In fact, one was a box manufacturer as well. The effect wasoverpriced card paper, relative to other markets. The Board of Apollo andmanagement decided that they would move sourcing for paper further afield, withApollo becoming a buyer of card stock in the southern United States.During the expansion, Apollo experienced severe cash flow shortage due to the costsof the expansion and the slow development of the market. Apollo overcame these andby 2012 had sales of $20,000,000, with 75 employees. Some of these were familymembers, with three of his children working in the business.In late 2012, Jim Herrington, the President of Apollo, along with the Board of Apolloannounced a new market direction for the company, which is to expand into theUnited States, with high quality products. The push was to begin in six months andshould reach its potential 1.5 years later. At that time, Apollo was expected to beselling 250,000,000 boxes per year in the US. Sales were expected to double in 3years.Apollo existing box printing equipment is basically the same as acquired in 2009 withMid-Continent presses. Although the have a normal service life of 10 years the Mid-Continent's that were purchased in 2009 are still going strong. To meet its goals ofexpanded production the thinking at Platinum is to acquire 5 more presses.During the years between 2005 and 2018, the company had restructured. Of theoriginal shares issued in 2005, Jim Herrington had purchased the 5% silent partnersshares. The Herrington family now held 65% of the shares, with Jim and his wifeholding 51%, and his four children, 3.5% each. The labour fund now held 25% of theshares. The remainder had been bought back by the company and distributed to keyemployees. Fransico Rameriz, the general manager had 5% of the shares. AnthonyLewison, the plant manager held 2.5% and Sheila Brown, the head sales person heldPage 2 of 6 OperationsMGMT-6081 SCMthe remainder.Apollo uses the South Central Credit Union as its prime banker. Indications are that itwill finance purchase up to $3,000,000 at an interest rate of 5.25% over ten years.James Jonathon (J.J) Herrington is the procurement manager for Apollo Box. JamesJonathon along with his staff are charged with the task of making a recommendationto the Apollo Box Board for the new presses.James Jonathon and Franciso have had a tumultuous working relationship sinceJames Jonathon joined the business in his late teens. Fransico considered JaredJohn as too young for his responsibilities, while J.J. saw Fernando as old and stuck inhis ways. Fransico often overruled J.J. on decisions, even when they were gooddecisions. Many times, they would work it out, but recently Jim Herrington had to bethe tiebreaker.J.J. has three staff members. Colin Smithson has the CSCMP designation. JudyDarling is working on her CSCMP, while Adrian Humphreys is a there as a technicalspecialist.The procurement group in consultation with plant management develop aspecification for the presses and investigate potential sources. Colin who is leadingthis part of the effort concludes there are 3 potential presses that are available andwould meet their need s.The Merakuri Luxo 10000. 1l,is is the most modem press in Merakuri's group,offering, according to Merakuri, the highest standard in reproduction with a capacity tohandle up to 150 cm stock. Tile press can run, 10,000 sheets per hour. Operatingcosts are $.05 per sheet produced. Merakuri is located in Seoul South Korea andsells it products in Canada through a distributor located in Regina. Each Merakuripress is $500,000 delivered to Vancouver. The presses have a 10 year life span. Thevalue of the scrap is estimated at $5,000. The cost of removal form the plant isestimated at $4,000. Transportation front Vancouver to Winnipeg is about $5,000.Once in Winnipeg, Merakuri will send a set up team from the Regina office to assist inthe commissioning of each press. Merakuri promises next day service on major pressfailures with a full warranty on parts for 3 years. Merakuri provides financing at a rateof 5% per year over 10 years.Mid-Continent is located in Winnipeg, about 70 kilometres from Apollo Box plant. Theycan also handle up to 125 cm paper. Typical operating cost per sheet is $.07 basedon average production of 7,000 sheets per hour. Each press is $400,000. Mid-Page 3 of 6 OperationsMGMT-6081 SCMContinent will install the presses at the Apollo Box plant as well as dispose of them atthe end of their 10-year service life. They will provide Apollo with a credit for thedisposal value at that time. Mid-Continent also provides a 3-year warranty on itsequipment, inclusive of parts and labour to install the parts. Mid-Continent does notprovide financing on its equipment.Mid-Continent is a union shop. The Union, the Amalgamated Association of Printersand Related Equipment Suppliers, (AAPRES) has worked relatively co-operativelywith Mid-Continent since unionizing their plant in the early 1990s. AAPRES hasestablished a goal of unionizing all print shops in the area over the next two years.They have mad e no bones about the fact they consider the platform offered fromtheir base at Mid-Continent as a valuable asset in achieving their goal.Phenom Press is the third possible source. Phenom is a new and aggressive firmthat has adopted pylaser print technology. The technology, which is new to themarket, has proven to produce extremely high quality output.The operating costs of the Phenom Press unit is $.04 per sheet. It can produce 7,500,125 cm sheets per hour. The press costs $675,000 commissioned and operating inthe Apollo Box plant. Phenom builds it presses in Jacksonville North Carolina.Phenom has been building presses for only 2.5 years. The press is estimated to last10 years. Decommissioning is expected to cost $4,000 with a scrap value of $4,500.Phenom warrants its equipment for 5 years for parts and labour to install the parts.Service is provided from corporate headquarters. Phenom provides 5 years financingat a rate of 4% per year. Further refinancing is available at 5 years, at the prevailingprime rate plus 2%.Merakmi has offered J.J, Colin, Fransico and Jim a trip to South Korea to see theirplant for a demonstration of the equipment. All are enthusiastic except Colin whosuggests that perhaps the y could simply go to Regina to see the press in operation.Mid-Continent also offers a tour and show of the equipment in operation. Conrad hastalked to Jim over the phone about the purchase, where he mentioned the Length oftheir relationship.Phenom has bee n a little less enthusiastic. Adrian has been at the Phenom plantpreviously when he worked for a different company. He describes it as a first classoperation with outstanding products, which use technology that is veryenvironmentally sound.Judy has been investigating the maintenance and repair costs for the three presses.Page 4 of 6 OperationsMGMT-6081 SCMBased on experience the Mid-Continent presses at Apollo Box have had averagemaintenance costs of $20,000 per year. Non-normal downtime is 4 days per year perpress. Maintenance and repair costs were $40,000 per year for each of the last twoyears. Judy had checked with staff in other printing firms and found that indeed theMerakuri presses produced the highest of quality output. They were, however, costlyto repair when they broke down. Based on conversations with colleagues theysuggested that a budget of $35,000 per year for repairs and maintenance wasreasonable. They indicated average downtime was about 3 days per year. FewMerakuri presses, it was noted made it beyond 12 years. She only found one personwho had experience with the Phenom presses. Their comment was that they ranstrong with no maintenance problem s on the press they had.Jim has been very specific with his staff about controlling costs of this buy, as a newdirector has been appointed by the labour sponsored fund, who is quite well known asa being very cost conscious. Accordingly, staff have been keeping track of their timespent on the project.Costs to date are as follows: The long awaited day arrives or J.J. to make his presentation to the Apollo Board of Directors.Assignment:Prepare a Formal Case Analysis with your recommendations to the Board of Directors.