Colorscope Report Havard Business School Case

Colorscope Report Background Colorscope, Inc. which was founded by Andrew Cha in 1976 operates mainly in the pre-press house or “color separator”. It has achieved an impressive sales performance. With Colorscope peaking in 1988 with 5 million dollars sales, Donnelley, the largest printer in the world, offered to acquire Colorscope for approximately 10 million. However, it is because Cha’s overconfidence in his existing base of high-margin clients and ignorance of the business trend, Cha declined to accept this acquisition. The graphic arts industry has seen dramatical business changes over the years.

With the rapid development of such technologies as desktop publishing and the World Wide Web as well as the consolidation of several major players within the industry, the company now has to reconsider its market positioning and operation. In the following we will analyze Colorscope Inc. from the SWOT perspective, then we will come up with some recommendations for its future developments. Strength The company has built solid relationship with highly valuable print and pre-press buyers in the marketplace and really done a good job in the business processes and training methods.

Colorscope’s operators were cross-trained and could work effectively on any stage of the production process. Weakness The stock shares were largely owned by Andrew Cha himself, which is not good for the decision-making mechanism. When it comes to critical decision-making point, it is impossible for Andrew Cha to consider all the aspects of the problems and get the hang of the industry trend. Cha currently do not have a sales infrastructure similar to those competitors who operates with loose affiliations to other printers and advertising agencies. Colorscope was unable to adopt expensive accounting systems or to hire onsultants to design a state-of-the –art activity-based cost system. Opportunity In the commercial printing business for catalogs, there were only a handful of printers with the necessary capacity and marketing strength to compete effectively for large print customers. The typical catalog pre-press job represented approximately 10% to 20% of the printing price charged to the client. At present Colorscope quoted more or less the same for per-page price for different customers, plus additional charges for special effects. There is large space for improvements of product pricing. Threat

Colorscope’s largest client, which representing about 80% of Colorscope’s business, announced to develop its own graphic design and production equipment, replacing Colorscope with an internal group. With the spread use of desktop equipment, Colorscope’s advantage in quality has now faded away and the price continues to burden with downward pressure. Colorscope faces three types of competitors. Firstly were larger, more technically savvy printing companies with professional salespeople. Another significant rival was represented by the horizontally integrated national pre-press houses or “trade shops”.

A third rival did the type comprise other standalone firms that competed with loose affiliations to other printer or advertising agencies. Recommendations for Colorscope’s future development 1 It is necessary to rearrange the equity allocation and redesign the company’s decision-making mechanism. We need to decentralize the decision power which will help to get the hang of the industry trend and avoid critical decision fault. 2 The employees are the treasury to the company; we have to carry out a Stock option incentive plan for the employees, allowing them to share the gains of the company and building solid loyalty of the employees. Update our equipment, buying desktop equipment and lowering our cost and price, which will in turn improve our competitiveness. 4 Specialize in catalog or some other market subsets. 5 Cooperate with other printers and advertising agencies to create our own affiliation and sales infrastructure. 6 As for the product pricing, due to the impossibility of expensive accounting system, we have to allocate wages to each project due to the hour’s clocked record and other expense can be allocated to each project on the basis of the materials used in each project.

Via such method, it is possible to estimate each project’s cost and sign a cost-plus contract, charging different customers different prices. 7 Quality Control for proofing had better involve in the original scanning, assembling and output, via which the company will save time from reworking. 8 Work flow and production procedures should be not only standardized but also documented, which will help Colorscope maintain and improve operational efficiency.