Speedy Delivery is a medium-sized parcel-delivery firm. Lately, the firm has been finding it difcult to retain existing customers and to gain new ones. The mergers between some of the major delivery firms have given those firms tremendous competitive advantages. The big firms are now far more cost-competitive than Speedy Delivery, and they are able to offer expert services in all areas of delivery. The senior managers of Speedy Delivery have called a crisis meeting to consider what they can do to survive in this newly structured market. Currently, the firm offers three types of services: sameday delivery, overnight delivery and international delivery. A number of strategic options are proposed at this meeting. I Carmen Jones, the overnight delivery manager, argues that the firm should offer only overnight delivery, as this is the potential growth area of the future and it currently generates the most revenue for the firm. Jack North, the managing director, has suggested that the firm should continue to offer the full range of services, but only to corporate customers. He suggests that small customers should be dropped. Leslie Quinn, the finance manager, proposes that the decision be deferred until the profitability of the three main areas of the business and of corporate and small customers is investigated. In preparation for the next meeting, Quinn prepared some information for last year: The sales revenues and direct costs of the three services offered by Speedy Delivery during that year were as follows: Same-day delivery Overnight delivery International delivery Sale: revenue \\1 300 000 '5 400 000 N4 600 000 Dirrcr court. 1 000 000 '- Tm WIN 3 200 000 The percentage of sales revenue of the three services to the two customer groups was calculated as follows: Small customers Corporate customers Qume-daf' delu'rl} 4-0 00 UVernIght delix'elj' l3 35 International d|l\\'l"_.' 50 50 Customer-driven activities were identified, the total cost of each activity during the year was determined, and the activity cost per unit of activity driver was calculated: Activity Activity cost per unit of activity driver Process invoice $200 per monthly invoice Receive cheque $50 per cheque Handle disputed invoice $300 per dispute Follow up overdue account $400 per overdue account Handle customer complaints $160 per complaint Investigate delivery $400 per investigation Make initial sales call to corporate customers $900 per initial call Make credit check on corporate customers $700 per check The number of customer-driven activities consumed by the two customer groups was determined: Activity Small customers Corporate customers No. of invoices processed 8 000 500 No. of cheques received 8 000 600 No. of invoices disputed 200 100 No. of customer complaints 120 70 No. of delivery investigations 90 37 No. of overdue accounts followed up 300 50 No. of initial sales calls to corporate customers 70 No. of credit checks on corporate customers 40 Promotions to attract new small customers $100 000 Advertisements to attract new corporate customers $500 000