FinePrint Company (FPC) owner and manager John Johnson is weighing a proposal from a local Virginia businessman by the name of Ernest Bradley and his small business “SmallPrint Shop” (SPS). FPC employs one sales representative and one printing-press operator, but it also relies on temporary labor to help with the fluctuations in volume. At current it is running at full capacity: 150,000 brochures a month. SPS is known for its basic printing services; however it is capable of more elaborate work. Recently it lost its largest client and is now sitting with idle capacity on its specialty press, which it bought mainly to serve their orders. It is hoping to do some elaborate work cheap for “FinePrint Company.” Because SPS would like to simply keep the press running, Bradley proposed a deal with FPC to print a maximum of 30,000 brochures at $8 per 100 brochures. John Johnson felt that SmallPrint was a good company that did dependable quality work. The proposal sounded like a good deal to him but he was unsure of the price comparisons.
The Fineprint Company faced two major internal issues. First is the fact that it is operating its production facility at near capacity. This leaves little room for new jobs and threatens to increase the fixed cost associated with the capacity. Second, FPC is relying heavily on temporary labor to meet volume changes in production. With the use of temporary workers comes the burden of fluctuating labor costs through wage changes and constant training. FPC also has external issues of SmallPrint affecting it in a positive way. When SPS lost its largest customer, it opened up opportunity for FinePrint to use its idle capacity. SPS’s limited exposure as an elaborate printing house and its willingness to work for cheap allows FPC the upper hand in negotiations on price of possible venture.
Relationship Between Issues
FPC’s consistent operation at near capacity increases its need to use temporary labor....