REQUIREMENT:

- Identification of the issues/problem definition

- Executive summary - Competitive analysis - Quantitative analysis

- Qualitative analysis

- Recommendation based on your analysis

CASE: COLLEGE COURIERS INC from Ivey School of Business.

In early December 2003, Dwayne Leslie was searching for a challenge when, coincidentally, his good friend, Ryan Thomas, was selling his London, Ontario-based legal courier service. College Courier Inc. (CCI) had been in operation for almost four years under Thomas's direction, and Thomas wanted Leslie's decision by calendar year-end. LONDON, ONTARIO London is situated in Southwestern Ontario, approximately 200 kilometres west of Toronto, Ontario, a major Canadian financial hub. The city of London had a population of 336,559 in 2001 and was estimated to grow one to two per cent by 2006. London boasted an international airport, extensive railway system and public transportation system. The maximum distance from north to south London was 23 kilometres, and from east to west London was 24 kilometres. Wonderland Road was the most traveled street in London, carrying 45,000 cars per day. In 1994, a transportation plan review board had recommended the City identify and protect an area for the development of an expressway to address longer term transportation needs. This expressway had not been built by December 2003. THE INDUSTRY Courier services were required at one time or another by almost every type of business as well as by individuals. Requests ranged from delivering flowers to filing court documents, or from making bank deposits to delivering Christmas presents. Most couriers targeted clients based on their service needs and specialized in one or two specific services. Examples of specific services were legal couriering and general deliveries. The legal industry targeted lawyers, accountants and other professionals. The general delivery industry served companies such as computer repair shops and printing businesses.THE OPPORTUNITY Dwayne Leslie Leslie was considering purchasing CCI because he liked the flexibility it offered, and he wanted to "be his own boss." Leslie was 25 years old, single and had a high school education. He had recently been employed by Summit Foods, a food delivery company, where he travelled across Ontario, usually during the night. He did not enjoy the schedule or long hours, and had quit two months after being hired. Currently, he did odd jobs for his family and friends, but his income was insufficient to support him. He hoped to earn a salary of $250 per week in the first year and $400 per week in his second year, in addition to any vehicle and telephone expenses. He also hoped to take a 10-day holiday in August. If necessary, Leslie had $3,500 in personal savings that he was willing to invest in the business. If he purchased CCI, Leslie would need to purchase a vehicle, a cellphone, a computer and a printer for the first day of operations and planned to use Thomas's estimates for these costs. Operating Costs Several costs were associated with the successful operation of CCI. Each employee had to possess a personal cellular phone. While Thomas was the only one to receive calls from clients, each employee also needed a phone so that Thomas could dispatch them on jobs. Thomas's cellular phone originally cost him $150, and the monthly plan cost $350, which allowed him approximately 3,000 minutes. Thomas did not pay for or reimburse his employees for their cellular phones or their usage. Gas was a major expense of operating this business. A full-time employee used approximately three tanks of gas each week and, with gas at $0.70 per litre, each tank cost about $35. A tank of gas was consumed every 400 city kilometres. Thomas did not reimburse employees for their gas, but estimated he used a similar amount of gas as would a full-time employee. Gas prices were predicted to rise to almost $1 per litre by the summer of 2004.\fThomas estimated he used two part-time employees for four separate days each month and four part-time employees for 10 different days in April. Thomas paid himself a salary of $600 per week on top of any vehicle or cellular phone expenses. Marketing Leslie had thought of several promotional options for the company, but was unsure which to pursue should he decide to purchase the company. He wanted to include his decisions within his projected cash budget. The first thought was to list in the Yellow Pages Directory, both on-line and in the phone book. The option would cost approximately $500 per year. Leslie also thought a name change might be appropriate. A name change would cost $210 to both file the appropriate forms and to register the new business name. Leslie also thought that in addition to signs placed in vehicle windows ($2 per sign), he might actually stencil the business name and phone number onto the side of his car. A local body shop quoted a price of $1,100 for this work. Other Considerations Leslie had previous experience working for Thomas, but had never managed the phone calls himself. Leslie wondered whether a change in ownership would affect the current number of CCI clients serviced. He thought a worst-case scenario would be a drop in total revenues of 40 per cent, but wanted to know how far revenues could fall before incurring a net loss. If revenues fell 40 per cent, Leslie thought he could perform all the couriering himself but he would still require a vehicle, a cellular phone, a computer and a printer. For the first year, Leslie planned to do all the billing himself.Exhibit 2 RAPID TRAXX PRICE LIST DESCRIPTION PRICE Direct $12.00 1 hour $7.00 2 hour $6.00 4 hour $5.00 Exhibit 3 FELIX COURIER PRICE LIST DESCRIPTION PRICE Direct $10.00 1 hour $6.50 2 hour $5.50 4 hour $4.50\fExhibit 5 PRICE LIST FOR OUT-OF-TOWN DRIVES FROM LONDON CITY PRICE CITY PRICE CITY PRICE Ailsa Craig $ 34 Glencoe $ 51 Port Stanley $ 34 Arva $ 8 Goderich $ 87 Richmond Hill $ 182 Aylmer $ 43 Grand Bend $ 85 Sarnia $ 88 Barrie $ 229 Guelph $ 107 St. Catharines $ 177 Brampton $ 155 Ingersoll $ 29 St. Thomas $ 25 Burlington $ 127 Kitchener $ 99 Walkerton $ 187 Cambridge $ 95 Mississauga $ 155 Waterloo $ 102 Clinton $ 72 Niagara Falls $ 191 Windsor $ 170 Dorchester $ 22 Oakville $ 146 Woodstock $ 50 Etobicoke $ 156 Peterborough $ 285 Zurich $ 60 Source: company files Exhibit 6 CCI PRICE DESCRIPTION PRICE Direct $8.00 1 hour $5.25 2 hour $4.25 4 hour $3.50 Court filing $9.00 Cheque certification $8.00 (5 cheques or less) Process serving $35.00 Source: company filesExhibit 7 2003 MONTHLY GROSS REVENUES MONTH REVENUE January $ 5,015.12 February 5,750.66 March 7,364.63 April 11.585.84 May 9.970.97 June 9.254.26 July 9,243.57 August 5,345.61 September 9.135.07 October 9.118.07 November 5.831.80 December 8.045.13 Total $ 95.660 73\fLegal ccuriering and general delivery were highly competitive, fragmented markets- CCI competed directly with approximately 43 other small local couriering companies in addition to competing indirectly with all of the large, wellestablished delivery companies, such as FedEx, UPS, Caopar and Prrrolator. The Legal Market In London, the Yellow Pages online directory had 436 individuals and rms listed as lawyers, and 145 individuals and rms listed as accormtants- The legal market required courier services for banking, deliveries, court lings1 and process servings.2 Banking activity ranged from simple bank deposits to cheque certication3 Most lawyers, accountants and other professionals utilized cornier companies that could provide them with the hill range of services- When deciding which courier company to retain, the legal market also considered price, speed, exrbility and personal integrity. Price could be the most or least important buying criterion. This market demanded that services be completed in the agreedupon time, but often expected couriers to accept rush andr'nr' special orders in addition to normal requests, hence, exibility was highly valued. Many documents entrusted to couriers were of a sensitive nature and, therefore, required professional handling, so these professionals preferred to use a courier company or an individual whom they knew and trusted. Once the lawyer, accountant or professional became a client of the courier company, that courier service would be used almost exclusively. nly when the courier company was unable to accept a request would the client contact another courier company. Permanent switching of couriers occurred only when clients were dissatised with their service. Clients were displeased if the courier was slow, unfriendly or Ianilling to accept rrrsh or special requests. Alrmrgh some chants were price conscious, couriers rarely lost clients due to price, since courier costs were commonly passed on to the lawyer's or accormtant's respective chants. This meant that although the lawyer or accormtant would pay the courier, the clients would eventually pay the lawyer or the accormtant as part of their ovm bill. The legal courier industry was highly dependent on the demand for the services provided by lawyers and accountants- lawyers were typically busier when the housing market performed well. More houses were sold when interest rates were low and during the summer months, the preferred time to move- See Exhibit 1 for interest rates in Canada from 1975 to 20433. Accomtants. on the other hand, were typically busy in December when most businesses experienced scal yearend and in April, when personal Canadian income taxes were due. The General Delivery Market Clientsinthe general deliverymarketusedthe sametarying ci'iteiiaas did the legal marketbutwere more price sensitive. The general delivery market required pickup and dropelf of various items, such as owers, computer equipment, posters, business cards, letterhead and gis. Although the delivery process was less complicated in the general delivery market (no intermittent stops at banks or courts): pickup and dropoff destinations tended to be farther apart. This market experienced little seasonality. Pricing Theoourierpricechargedforarequestdependedonhowurgenttherequestwas,howfarh'om1e downtowncorethe destinationwasandwheierleitem neededtoberetumedtotheclient. The more urgent the client request, the higher the price charged The client had a choice ofurgency ranging om a \"direct\" drive to a \"Tourhum\" drive. The former requested the courier perform the delivery as soon as possible. while the latter gave the courier up to mr hours to complete the delivery. Although the direct drives were the most lucrative, they could also cause scheduling problems. The number of direct drives a courier could accept was limited by the number of employees or drivers working iat particular day. Another consideration was the distance (he- pickup to delivery) om the requesting client to the delivery destination the shorter the distance, the lower the price charged for the (hive. Most couriers charged more for deliveries beyond the downthwn core. Each courier had its own process for determining the amount of additional charges for \"outofcore\" deliveries, but most segmented the cit}.r into zones the farther 'om downtown the higher the price charged for the drive. Outoftnwn drives were not offered by all courier rms; and often had to be completed after regular business hours- The charges for outoftown drives dependedonthedistance inkilometres'omthe centre ofLondon. Some requests required that a receipt or document be returned to the client after the service was performed. In this case, couriers would doublecharge the client for a \"return th'ive." For example, the price of a four hour return drive was twice that of a fourhour drive. Competition Thomas had gathered some information regarding two legal competitors and three general delivery competitors: Walton Legal Service Walton Legal, owned by Kevin Walton, had approximately 40 clients and employed Walton's father part- time. Walton worked very long hours, and his company performed well as a result but he consistently complained of having a limited social life and no time for his family. Walton had recently tried to hire a full-time employee but several had quit since he paid only minimum wage. Michael Collingwood Michael Collingwood was in his 50s, and had been operating in London for more than 20 years. He offered strictly court filing and process serving. Collingwood had approximately six large clients. He had a reputation for being less personable than Walton, and as a result, his clients were beginning to call both Walton and CCI with their requests.Forest City Letter Service Forest City Letter Service was owned and operated by Doug Jansen, a 36-year-old London native. Jansen charged less than the cost of a stamp to deliver letters around the city, which he did each morning beginning at 4 a.m. During regular business hours (8 a.m. to 4:30 p.m.), he delivered only rush requests, in the downtown core, for $3 per item. Jansen had been married three times, and he believed his failed relationships to be a direct result of his demanding schedule. Rapid Traxx Joe Taylor operated Rapid Traxx, a business that earned almost $500,000 in gross revenues annually. He employed up to 15 drivers at one time. Taylor was married, with one child, and made a drive to Windsor for one particular client every day. Fifty per cent of Taylor's business was flower delivery. Prices for some of Rapid Traxx's services are listed in Exhibit 2. Felix Courier Historically, Felix Courier had been one of the largest local couriering businesses. Felix had 140 clients, employed 28 drivers and performed deliveries both in and out of the city. Felix was a well-recognized name since all employees displayed the company's logo in their vehicle windows while they were working. Recently, Felix began losing clients to Karl Simpson, a former Felix employee who had quit and started his own company. Of Simpson's 40 clients, three-quarters of them were former Felix clients. Thomas understood that clients had switched to Simpson because he was much more personable than Felix's average employee. Selected Felix prices are listed in Exhibit 3.COLLEGE COURIER INC. History Ryan Thomas graduated from Fanshawe College in April 1997 with a diploma in radio broadcasting. After several unsuccessful attempts to find a job in radio, he began to work in landscaping for his stepfather. Over the next three years, he tried several different jobs, and finally went back to school in January 2000 to learn another trade. After a short stint in culinary school, he was still unhappy, and in April 2000, he began working for Adam Bates, a friend who needed some help with his couriering business. Two months later, Bates wanted to sell the business and Thomas bought and took ownership of CCI on June 5, 2000. Thomas's preference at the time was to operate the company by himself so he had to reduce CCI's client list by fifty per cent. The first year was tough; often Thomas received only a few calls a day, and he went weeks without compensation. He quickly learned that even with a smaller client list he could not do it all himself. Slowly he gained his clients' trust and developed a reputation for being a reliable, friendly and fast courier. Thomas hired a full-time driver, Bob Zurawski, in January 2001 and began to rebuild the firm's client list. Exhibit 4 outlines CCI's zones and corresponding surcharges, and Exhibit 5 gives out-of- town prices.Financial Performance Three years after Thomas hired Zurawski, CCI was performing well. See Exhibit 6 for CCI's price list and Exhibit 7 for 2003 monthly gross revenues. CCI had a client list of approximately 30 firms (see Exhibit 8). The revenue generated by each client varied widely. For example, Thomas's best clients (Thomson Mahoney Dobson Delorey, Thomas Bates Law, and Lockyer Spence) were each billed approximately $1,300 per month. Five of CCI's smaller clients were each billed less than $100 per month. Of the 2003 gross revenues of $95,660.73, April represented 12.1 per cent. Thomas billed his clients on the last day of the month for work performed that month and expected payment within 30 days. Thomas believed if he continued to own and operate the business in 2004, he could grow revenues five per cent, without an increase in prices. Operations Thomas was very well-liked by his clients and their assistants, and often received feedback that he and his full-time worker, Bob Zurawski, were "favorites" around the offices. They were not only much younger than other couriers but also better groomed. Thomas often asked his retired father to work for him on busy days, and occasionally needed up to six part-time employees. These temporary positions were usually filled by Thomas's friends. If working alone, Thomas believed he could handle about 30 to 40 drives each day. He and Zurawski, on average, made a total of 70 drives each day. Thomas predicted that a new employee would only be able to handle 20 drives each day. Thomas enjoyed the job for many reasons. It was physically demanding, social and outdoors. The job was sometimes frustrating because calls were often received in waves; he would not do a delivery for an hour and then five or six calls would come in within five minutes of each other. This unpredictability also made scheduling employees very difficult.Administrative Tasks In addition tn answering phone calls li'om clients, dispatching other engiloyees and couriering, Thomas had manyr administrative tasks. He had to order and distribute waybills, create invoices for clients once or twice a month depending on their preference, pay employees and compile tax records for the government- To assist him with these tasks, he utilised the servioes of an aoconntant to whom he paid $151] quarterly starting in January of each year and hired a end parttime for $50 monthly to help process the bills. Marketing Thomas relied solely on referrals to gain new clients. Overall, he was content with the size of the company, and with additional clients, he thought he would need In hire another hill-time employee. Essentially, there was no marketing plan for CCI. The company was not listed in the Yellow Pages print directory or anywhere online. While Thomas did place a cardboard sign with the company name and phone number inside his vehicle windshield when on a delivery, it was used more to avoid being ticketed than to advertise. ' Used each time a client requested a arm, see Eidiibit 9