0 9 | CASES: COPIER CO.

COP IE R CO.
Boston Consulting Group | Round 1 | Information Technology
B E H AV I O R A L
Prompt: INT E R VIE W
Copier, Co. is a national distributor of office equipment, particularly commercial-grade QUE S T ION:
copiers. The firm sells the equipment directly to companies for use in their offices, as
well as provides regular service including maintenance, repairs, and replacing
disposable parts. Recently, the company has experienced declining profit margins; we 1 . Te l l m e a b o u t
have been hired to determine why this is happening and what to do to reverse the a c ha lle n ge yo u
trend. s e t fo r yo u rs e lf
and then
Clarifying Information: a c c om p lis he d .
Note: Provide this only if corresponding questions are asked
Sales Process – The company actually bids on contracts; contracts are typically awarded to the
lowest bidder. The bid consists of a per copier cost which includes 1 year of maintenance as part of
sales price. Salesmen have free reign to determine bid price and are compensated based on 2 . W ha t d o you
commission (% of overall sales) wa n t t o g e t o u t
Competition – One major competitor (American Copiers), but a new, low-cost competitor (Bottom o f a c o n s u lt in g
Dollar Copier) has recently entered the market. These three companies are distributors and service e x p e r ie n c e ?
technicians, NOT manufacturers.
Product – This case will focus on one identical copier sold/distributed by multiple firms
UVA Darden School of Business 2018-19 Casebook

137
09 | CASES: COPIER CO.

Framework Guidance:
Note: There are many possible alternatives to this framework. These are only provided as possible suggestions.

Profit: Non-Financial:
• Revenue: • Competition:
• Volume: # copiers sold/contracts awarded • Size and share of competitors (AC, BDC), bidding
• Price: Avg. copier sale price/bid price process
• Costs: • Product:
• FC: Sales force (base), warehousing, overhead • Product quality and characteristics
• VC: Service/labor costs, COGS, transportation, sales • Customer:
force (commission) • Changing customer preferences, different markets
• Company:
• Salesforce compensation, product mix

How to Move Forward:

To get to the next portion of the case:

The candidate should ask for data related to revenue and costs to help determine why profitability is declining. Let the candidate probe until
they ask for information regarding unit price and copier quantity. Then, show them Exhibit 1 and ask for reactions.

UVA Darden School of Business 2018-19 Casebook

138
09 | CASES: COPIER CO.

E XHIBIT 1

UVA Darden School of Business 2018-19 Casebook

139
09 | CASES: COPIER CO.

Exhibit Guidance:
The interviewee should notice and verbally acknowledge the following in Exhibit 1. This is where you insert question and the answers to the question

• Good Response: Candidate should realize that there is a negative correlation – the more copiers in the contract, the
lower per copier bid price (price wars for more contribution). A candidate should hypothesize why that may be so –
perhaps the salespeople may be lowering bid price in effort to increase commission (due to higher sales from larger
quantity contracts) or looking to increase overall profit while overall margins are smaller.
• Great response: Candidate should point out that there are a few contracts with high bid prices. With the information
about the new competitor in hand, candidate should ask for information for average sales price based on the competitors
for the contract.

How to Move Forward:

To get to the next portion of the case, the interviewee should ask to explore:

• Information for average sales price based on the competitors for the contract

UVA Darden School of Business 2018-19 Casebook

140
09 | CASES: COPIER CO.

E XHIBIT 2
Copier Co. Successful Bid Info

Competing against Competing against Competing against

American Copier ONLY Bottom Dollar Copier both AC and BDC
ONLY
Average bid price $5,000 $4,000 $3,000
Average copiers in order 20 25 30
Cost of copier $3,000 $3,000 $3,000
Service cost* (per page $0.05 $0.05 $0.05
printed)
Average pages printed 1,000 1,000 1,000
per copier (per month)
* Service for 1 year included

UVA Darden School of Business 2018-19 Casebook

141
09 | CASES: COPIER CO.

Math Guidance:

Competing against Competing against Competing against

American Copier ONLY Bottom Dollar Copier both AC and BDC
ONLY
Contribution per copier $2,000 $1,000 $0
Service cost per copier $600 $600 $600
Profit per copier $1,400 $400 ($600)
Total profit $28,000 $10,000 ($18,000)

UVA Darden School of Business 2018-19 Casebook

142
09 | CASES: COPIER CO.

Exhibit Guidance:
The interviewee should notice and verbally acknowledge the following in Exhibit 1. This is where you insert question and the answers to the question

The candidate should start by determining profit for bids against American Copier only – if he/she does not immediately
begin the profit calculation, prompt them to do so. Common pitfalls will be failing to realize the pages printed are provided
in months (needs to multiply by 12 months to get annual) and that service is only included for a year.
After the candidate calculates profit for bids against American Copier, ask them whether the other bidding scenarios are
profitable. If candidate begins to lay out the math, ask them to just answer without doing the entire extent of the math.

How to Move Forward:

• Good response: Candidate should recognize that bids against BDC are profitable (but less so) and that bids against
all three competitors are generally not profitable, due to a contribution margin of zero. A good candidate would do
profit calculations on a contribution basis (rather than total revenue and cost).
• Great response: Candidate should transition into possible solutions to the problem.

UVA Darden School of Business 2018-19 Casebook

143
09 | CASES: COPIER CO.

BRAINS TORM
Have the candidate brainstorm solutions to the low bid issue.
Don’t allow the candidate to stop with “don’t bid on contracts with all three competitors.” Let them know that the
firm’s management wants to bid on all contracts and they need to come up with creative solutions to solving the
profitability problem in those scenarios.
Possible answers include:
• Minimum allowable bid prices for sales people
• Change compensation structure
• Offer different packages (no service component, multi-year service contracts)
• Negotiate better pricing for copiers
• Offer complementary products to copier sales (paper, other equipment, etc.)
• Joint venture with competitors on large orders

UVA Darden School of Business 2018-19 Casebook

144
09 | CASES: COPIER CO.

CONCLUS ION
The CEO is anxiously awaiting your analysis and recommendation – what answers do you have for
Copier Co?
To conclude, the interviewee should provide the following:
Summary
• Succinctly identify that the new competitor and commission-based compensation structure is resulting in
lower bid prices and thus lower margins.
Recommendation:
• One or two actionable solutions from brainstorming
Risks
Next Steps

UVA Darden School of Business 2018-19 Casebook

145