...1. Why would any customer, let alone large advertising agencies and departmental stores, go to Colorscope rather than go to the large printers listed in Exhibit 3? The main line from the colorscope inc background are the corporate was found in march 1976, the first target customers is local customers (small agencies), and after that colorscope growth significantly that thing can be proved in 1988 sales colorscope over than USD 5 Milion and they served Big Customer, since growth they invest capital expenditure in order to improve services. In 1990 when the overall technology growth rapidly and there are more competitor than before, this situation make the condition under pressure, the first impact from this condition is price war, so the market pressure forced him to reduce his own price. After all finally in 1994 , colorscope loss signifant & long term client ( where the client omset is 80 % of his business). If colorscope want to survive in this business they must reevaluate the industry from the operation to his pricing policy. Direct Competitor 1. Larger, more technically savvy printing companies with professional salespeople pushing bundled pricing, integrating pre-press services with printing in a single package, such as R.R. Donnelley & Sons Co. and Quad Graphics. 2. Companies that competed in several different submarkets beyond catalogs, e.g. insert, comic syndications, and coupons, such as American Color and Wace/Techtron. 3. Standalone firms that competed with...
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...1. Why would any customer, let alone large advertising agencies and departmental stores, go to Colorscope rather than go to large printers listed in Exhibit 3? Before desktop publishing became popular, Colorscope had a competitive advantage through its expensive proprietary computer equipment that could produce complicated print special effects. Colorscope had also been able to build strong relationships with valuable customers through the years and had a good reputation for providing high quality work in its field. Another reason why Colorscope could compete with the large printers was the high fragmentation of the pre-press industry. This was due to the fact that most pre-press companies focused on just a few print products (e.g. catalogs, newspapers or coupons) and had strong specialized expertise in these. Because of that, Colorscope could provide higher quality than the large printers in the fields where it had specialized. Before the dawn of desktop publishing, which led to commoditization of the services, competition was more based on quality than on price. As a small agency, it is also probable that Colorscope could be more flexible in meeting specific demand and provide more tailored services to the few customers it served, compared to the large printers which would have a bigger and more bureaucratic organization. 3. What you have done above is a “full-cost” analysis. This is in contrast to a “direct-cost” analysis that ignores overhead costs. Is full cost...
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...Capital at Ameritrade 1. What factors should Ameritrade management consider when evaluating the proposed advertising program and technology upgrades? Why? 2. How can the Capital Asset Pricing Model be used to estimate the cost of capital for a real (not financial) investment decision? 3. What is the estimate of the risk-free rate that should be employed in calculating the cost of capital for Ameritrade? 4. What is the estimate of the market risk premium that should be employed in calculating the cost of capital for Ameritrade? 5. In principle, what are the steps for computing the asset beta in the CAPM for purposes of calculating the cost of capital for a project? 6. Ameritrade does not have a beta estimate as the firm has been publicly traded for only a short time period. Exhibit 4 provides various choices of comparable firms. What comparable firms do you recommend as the appropriate benchmarks for evaluating the risk of Ameritrade’s planned advertising and technology investments? 7. Using the stock price and returns data in Exhibits 4 and 5, and the capital structure information in Exhibit 3, calculate the asset betas for the comparable firms. 8. How should Joe Ricketts, the CEO of Ameritrade, view the cost of capital estimate you have calculated? Colorscope, Inc. 1. Why would any customer, let alone large advertising agencies and departmental stores, go to Colorscope rather than go to the large printers listed in Exhibit 3? 2. Set up a two...
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