GREAT LAKES INTITUTE OF MANAGEMENT, GURGAON

ARROW PRINTING AND PUBLISHING-The Road Ahead

WC 1 2018-2019

Presented to: Submitted by:

Dr. Niva Bhandari Ankita Mahajan (P182B17)
P Ganesh (P182B74)
 No: 74/17, Thunder Bay, Northern Ontario

Table of Contents
Executive Summary:................................................................................................................................ 2
Letter of Transmittal ............................................................................................................................... 3
Situation Analysis .................................................................................................................................... 4
Problem Statement ................................................................................................................................. 6
Decision Criteria ...................................................................................................................................... 6
Generation of Alternatives ..................................................................................................................... 6
Evaluation of criteria’s ............................................................................................................................ 7
Recommendation.................................................................................................................................... 8
Action Plan .............................................................................................................................................. 8
Contingency Plan .................................................................................................................................... 9

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 No: 74/17, Thunder Bay, Northern Ontario

Executive Summary:

This report provides an analysis and evaluation of current profitability, personal interest and
expansion options available for deciding the future course of action for Arrow Printing and
Publishing. Sam Dunnett has spent around 23 years of his life building Arrow to what it is
now, but given the monotonous nature of work and zero challenges left for Sam to handle, he
is trying to seek a balance between his personal and professional life keeping the long-term
growth prospects of Arrow in mind. In light of this, he is considering various options such as
selling his company to his son Peter Dunnett or selling it to an external buyer or expanding
the company himself in a specific area. Results of the analysed financials, show that Arrow
has been able to maintain a decent profit margin for the past 23 years and the sales have also
increased steadily by 10% year on year despite the stiff competition faced from the local
players and home based printing services in the recent past.
The report designs various criteria for evaluating the options available with Sam keeping in
mind that they have both financial and personal interest associated with them. The current
position of the company in the market is positive but it can work upon its advertisement
strategies, Credit policies and expansion plans across various regions and portfolios.
With a thorough analysis, it has been recommended that Arrow should expand in the specific
area of four-color printing with a partnership model so that interest of both the business and
Sam are met without compromising the future growth prospects of Arrow Printing and
Publishing.

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Letter of Transmittal

8th July 2018

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

Subject: Report regarding future course of action for Arrow Printing and Publishing

Dear Sir

We are writing to you with a project report “Arrow Printing and Publishing-The Road
Ahead” enclosed. The purpose of our report is to analyse the current market environment and
the future growth prospect of Arrow Printing and Publishing. The report focuses on designing
various criteria for evaluating the various options available. After thorough analysis of all the
factors that would play a key role in Arrow’s growth we would like to recommend that the
best course of action would be to expand into specific area of four-color printing with a
partnership model and with an experienced salesperson.

If you should have any questions concerning this report and analysis please feel free
to contact us.

Enclosure: Arrow Printing and Publishing-The Road Ahead

Thanks and Regards

Ankita Mahajan
Team Lead

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Situation Analysis

Arrow Printing and Publishing is an established commercial printing business based in

Burk’s Falls, Northern Ontario. It was initially part of “The Burk’s Falls Arrow”, a local
North Ontario newspaper which was started in 1880. With gradual expansion it was renamed
as “The Amalguin News” to represent the large geographic territory it covered and in 1975
the newspaper and printing business were separated as individual entities. Though it turned
out to be financially unsuccessful, it had developed a loyal customer base and goodwill in the
area over the years. This was one of the major reason why its current owner Sam Dunnett had
bought it at a price of $60000 given the older equipment and shop premise.
Sam Dunnett was an experienced printer and entrepreneur. He had started his career in 1959
as a printing apprentice in a Toronto based printing company right after graduating from his
high school and progressed rapidly to the position of a Manager by the age of 21. After 5
more years working as a manager, Sam along with a partner started their own Web press
company which was very successful and profitable with a well-known clientele such as the
Government of Canada, Volkswagen and State Farm Insurance. This was also the time Sam
grew his business acumen and technical expertise of the printing industry. Upon buying
Arrow, Sam modernized the shop and replaced all older letterpress equipment with modern
offset printing machinery. Sam entered into local politics in 1993 to make a contribution to
the community and became a councillor on the township’s governing board and in 1995 he
was elected to the position of reeve (township’s equivalent to City mayor). Dunnett held this
position for eight years and though he had to share his time now between politics and Arrow,
he managed both simultaneously.
The geographical location of Burk’s falls fell in the economically depressed area of Northern
Ontario and was categorized with a “Northern Ontario Status”. The major economic driver
was tourism followed by manufacturing and farming though manufacturing was declining.
The businesses were constrained by limited internet and transportation access in the region.
Only public facilities such as hospitals, schools and libraries enjoyed high speed internet
through wireless satellite connection while the others still had to use the very slow dial-up
connections. There was also limited road connectivity through Highway 11, a two lane
highway to the Southern Ontario cities which were the commercial centres and thus logistics
were affected due to high traffic on weekends and holidays. Though there were plans to
improve the internet connectivity and transportation access by Government of Ontario and
thus improve economic prosperity, none of the plans were supposed to be completed in the
immediate short term.
Although Arrow was the only printer in the Burk’s Falls area, it still faced some competition
from the local printers, in-home printing, Kwik Kopy, FedEx Kinko and internet based
printing services. The local printers in the region, closest one in Huntsville (40 kilometres
away) had similar histories and reputation as Arrow and enjoyed strong presence in their

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respective localities, they also relied mainly on word of mouth promotion. They had
comparable modern technology as Arrow and managed to sustain in the business. In-home
printing appealed to be exciting to the customers who required simple low volume jobs with
minimal design requirements and home printing had become a trendy solution. Kwik Kopy
and FedEx Kinko also based in Huntsville were large franchises who provided a variety of
printing services to customers. The presence of computers and software programs for “Do it
yourselfers” and customer representatives with design knowledge were the major selling
points for the two. Given the nation-wide presence of these franchises due to their marketing
campaigns they had a good brand recognition. Internet based printing offered quick service,
price comparison and cheaper options for the customers. Many companies provided these
services and even franchises like FedEx Kinko and Kwik Kopy competed with smaller
businesses such as Digital print in this area by providing online services that allowed
customers to design, create and submit orders. Once an order was completed, the customer
had to pick up the order or arrange its delivery.
Arrow provided 3 major types of printing services: Specialty Web Work, Black and White
Printing and Specialty Colour work. A majority of Arrow’s revenue came from “Black and
White” printing which included run of the mill works, using only one colour of ink and it
involved high volume production with not so high margins. Another 10% of revenue was
from the “Specialty web work” which offered attractive margins but with affected cash flows
as the payments were received only after the long production work was completed. The rest
of the 20% revenue of Arrow was from “Specialty color work” which involved a four color
process for works such as books, magazines and brochures with a margin of around 25%.
Arrow had a very loyal customer base and market share in the Burk’s Falls area with 80% of
its customers being repeat customers and only 20% of the customers accounting to first time
customers. Though first time customers were usually interested in a wide range of printing
services and were quality conscious they were primarily interested in price and thus they
were both an opportunity as well as a challenge to be handled. Sam with his customer service
and high quality of work was ultimately effective in converting these customers to repeat
customers. Sam shared a good rapport and trust with most of the repeat customers and had
personal knowledge of their businesses and thus they relied heavily on Arrow for their
printing and publishing needs. Since price was not an issue for these kind of customers Arrow
was able to maintain its margins even when overhead costs increased. Dunnett followed a
strict practice of never providing a quote upfront for any proposed jobs unlike his competitors
and took all the material costs and previous charges and relationship with the client into
consideration before quoting a price and this helped protect Arrow from margin issues in the
long run. Arrow also offered its customers the option of credit terms for 30 days, and this was
also one of the reasons customers preferred Arrow as compared to its competitors who
requested upfront payments.
Arrow didn’t invest much in advertising and most of its business were through established
customer relationships and referrals, direct advertising was very less and even those were
only concentrated to the immediate areas around Burk’s Falls. Arrow, though used many

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charitable events for advertising by donating to the cause and fundraisers. Arrow was mainly
managed by Sam Dunnett and his son Peter. While Sam managed the customer management,
Peter handled all of the production for Arrow. Peter was well versed with technological
aspects of printing and was also experienced with computers. Dunnett’s wife Maria managed
the bookkeeping on a monthly basis.
Even though the business is profitable and Arrow has had shown a steady profit for the past
23 years since Dunnett had taken over, Dunnett is slowly lacking the challenges he faced
earlier in managing Arrow and his increasing focus into politics and his ambitions has
currently put him in a state of dilemma. He is thinking of the options about how to proceed
with Arrow, whether to focus primarily on Arrow and expand its services or if he should sell
Arrow to his son Peter/ or an external buyer and focus on his political career or to do nothing
and maintain a status quo and continue splitting his time amongst both.

Problem Statement

What course of action should Sam Dunnett follow with regards to Arrow Printing and
Publishing?

Decision Criteria

1. Time and efforts of Sam Dunnett

2. Business development and growth
3. Higher financial profits for Arrow
4. Percentage of family stake in business

Generation of Alternatives

1. Sell the company to Peter Dunnett

2. Sell the company to an external buyer
3. Sam Dunnett to expand the current business with a partner and take up four color
specialty web work
4. Maintaining status quo and Sam Dunnett to continue focussing on both Arrow and
politics

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Evaluation of criteria’s

1. Sell the company to Peter Dunnett

Selling the business to Peter was Sam’s first option given Peter’s interest in the
business and his current involvement in running the business meant he is well versed
with it and can takeover without any issues. Though Peter cannot pay Sam the money
upfront for taking over Arrow, he can finance it by monthly payment. This will keep
the business in the Dunnett family and stake remains unchanged. Also after handing
over the business to Peter, Sam can fully focus on his political career and ambition
without involvement in Arrow’s business.
However, Since Peter is currently completing his paramedic qualifications and taking
over Arrow means managing it in a shift-nature along with his paramedic’s job. This
will result in Peter only being able to handle 75% of Arrow’s current output, meaning
a decline in Annual revenue and growth options for Arrow.
2. Sell the company to an external buyer
Selling the business to an external buyer meant getting an upfront payment of the
market value of the business and given the strong reputation and customer base Arrow
has it would mean a profit for Sam. Though Sam can fully focus on his political
career, he will initially have to support the buyer in order to transfer customer loyalty.
If the buyer is a well-established printer with excess capacity the cost of production
will decrease by 10%. There would be a loss for the potential buyer in terms of the
receivables collection and also there would be an increase in advertising costs
involved. This approach also meant a zero stake for the Dunnett family in the
business.

3. Sam Dunnett to expand the current business with a partner and take up four
color specialty web work

If Sam Dunnett chooses to expand the business himself instead of selling it to Peter or
an external buyer and ventures into four-color specialty web work, he will have to
target the customers based in Muskoka area and national corporations. For this he will
require an experienced salesperson from one of the existing companies already
serving these markets and to attract the salesperson, Arrow would have to offer a
partnership of 49% to the Salesperson for any new business. This also meant an
investment of $500,000 to purchase equipment and make building upgrades necessary
for the production of four-color work. Dunnett is confident that the investment can be
handled with programs supported by Government of Ontario and almost 100%
funding can be secured. Out of the 100% funding received, only 25% would be

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repayable and 75% non-repayable contribution. With the expansion strategy and
additional salesperson, Arrow can witness a 42% growth in revenue in the first year
itself and then followed by 25% growth every year. This also means the Dunnett
family has a controlling stake in the business. However, Sam will have to put in
considerable time and efforts to manage the expansion and even though the later
stages of business can be managed by the salesperson and Peter, there would be a
major involvement in the beginning for Sam.

4. Maintaining status quo and Sam Dunnett to continue focussing on both Arrow
and politics

If Dunnett continues his association with Arrow without any changes, this will have
no effect on any of the above criteria as things are going to be unchanged. It will
neither provide any improvement in Arrow’s growth and financial results. Sam will
also be left juggling both Arrow and his political career together.

Recommendation

Considering the above options, expansion of the business with the help of a talented
salesperson is the alternative that would be best suited to for fulfilling all the criteria and
would ensure highest profitability and growth for Arrow Printing and Publication.

Action Plan

 First line of business to follow the suggested course of action would be to request
funding from the Government of Ontario’s Futures program for the development of
Arrow printing and publication.
 Mr. Dunnett should focus on hiring the best talent from the industry for the role of
salesperson, keeping in mind the necessary client contacts and capabilities required
for Arrow’s growth.
 Sam should also focus on gaining and learning the technology and knowledge
required to handle four-color specialty web work.
 Arrow can also advertise more and market the new line of printing service to gather
more customers from the current region as well as their target region.

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Contingency Plan

As a contingency measure, in case Arrow is unable to secure the funding needed for
development and growth from the Government of Ontario’s Futures program, they should
approach the local banks with whom they share a good relationship to secure loans and then
focus on development of the business.