Group Case Assignment: Canada’s Cleaners Inc.

Group Case Assignment: Canada’s Cleaners Inc.

Group Members:

Karan Khattar 6066088, Brad Van Veen 5992821, Ashna Anand 6022537, James Timykoglou 6064281, Hannah Westerhoek 6051890, Ethan Snook 6102297

Course: MGMT 1P96

Section: 3

Instructor: Mr. Michael Robertson

Date: March 18th, 2017

EXECUTIVE SUMMARY: Canada’s Cleaners Inc. (CCI) is a London, Ontario based dry cleaning company started by Ron Burdock in 1987. CCI offers cleaning and pressing services. The customer base comprises mainly of white collar workers. Its competitive advantage is having the best quality dry cleaning service in town, for the best value, and offering quick service. CCI is in a good financial position, making a profit of ¢20 per shirt, with the ability to invest in new cleaning equipment. It also has an annual revenue of around $250,000. CCI is currently facing a decision on the purchase of a new shirt machine to improve its cleaning performance.

CCI’s strengths include convenient and easily accessible locations, an experience of over a decade in the industry, and lastly the owner being readily available to employees and commencing operations early in the morning. Its weaknesses include 70% of shirts requiring touch ups, sales remaining constant for 2 years, and the shirt press incurring $4,000 worth of repair costs. CCI gains opportunity with the purchase of new cleaning equipment and the customers expecting high quality service in a competitive environment. CCI faces a threat from the declining industry volume, introduction of home dry cleaning kits and one-price cleaners, and the shift in workplace clothing to casual wear. The trend that is occurring is an increase in casual wear in the workplace. Home dry cleaning kits and one-price cleaners have also revolutionized the industry.

The main problem CCI is experiencing is it’s shirt pressing machine not operating to the company's high standards. This is due to the current machine being 22 years old. The machine requires 70% touch ups, as opposed to only 30% required by competitors. It has also had a number of breakdowns and is unable to ensure adequate pressing of sensitive “dark shirts”, which require lightweight pressing. Therefore, a decision is highly significant to preserve CCI’s competitive advantage, as the best quality dry cleaner in town. The decision should be made within a week as to prevent further costs.

CCI’s owner can choose from 3 shirt press machines which are “The Shantoka”- a Japanese two-piece shirt press, “The Halter HBS-I”- similar to the current one, or “The Universal PRS”- which is considered to be the Cadillac of pressing machines. In order to make a decision, the machine should be able to press more than 55 shirts/hour as the current one presses 40 shirts/hour. Another criterion is that the machine should last 15 years or more because such a huge investment should pay off. However, the most suitable criterion is making at least $160,000 profit in the first year because CCI has already been experiencing an unaltered growth in sales.

We recommend that CCI should buy the Halter HBS-I. This machine is the only one that fits all the 3 decision criteria. It costs $51,000 and is the cheapest of all three. It even presses the highest number of shirts. A price increase to $2 per shirt can be justified by the increased quality. This machine is the best alternative as it provides the best value both in terms of profit and efficiency along with minimal cost.

The action plan will commence within one week after making the decision. Ron Burdock will contact the supplier and make the payment. After 2-3 days the delivery and installation date will be finalized. After a week the delivery and installation will occur. The current machine would be sold and delivered to its new owner. The most critical step in this is the installation of the new machine. If there is a slight error, then thousands of dollars’ worth of machinery could be damaged along with causing a delay in the installation process. If the installation process stops in between, CCI can use its contacts to use another cleaning plant until the process is completed. If at all the decision is scrapped, then CCI can look for more machines or fulfill Burdock’s goal of building a flagship plant in an affluent part of the city.

SITUATION ANALYSIS:

Overview: Canada’s Cleaners Inc. (CCI) is a London, Ontario based dry cleaning company started by Ron Burdock in 1987. CCI offers cleaning and pressing services with a quarter of the business coming from shirts. The customer base comprises of 75% women and 25% men, with the majority being white collar workers. Its competitive advantage is having the best quality dry cleaning service in town, for the best value, and offering quick service. CCI has a good financial position as it makes a profit of ¢20 per shirt and has the ability and desire to invest in new cleaning equipment. Its revenue is around $250,000 per year, which is the median annual revenue for cleaners in North America. CCI is currently facing a decision on the purchase of a new shirt machine to improve its cleaning performance.

SWOTT Analysis:

Strengths: A strength of the company is the fact that they are spread all over London with 3 stores. This makes their locations convenient and easily accessible for customers. Another strength would be the company’s experience, being 14 years old, and the owner having an experience of 21 years in the industry. This leads to CCI having a knowledgeable and well-informed owner leading to good reputation in the market along with customer loyalty. Lastly, the owner being readily available to employees and commencing operations early in the morning is a strength. This leads to the owner gaining respect from staff and motivating them from his dedication towards his work.

Weaknesses: A weakness that CCI faces is the current amount of touch ups that shirts require after getting pressed. Competitors require 30% touch ups, while CCI requires 70%, which reduces efficiency, costing both time and money. Another weakness of the company is that their sales have remained constant for 2 years. Even though the market has advanced, it has not gained financially from this. The shirt press incurs repair costs worth $4,000 causing an opportunity cost, which is a weakness. This occurs due to excessive breakdown of the 22-year-old press.

Opportunities: CCI has the opportunity to purchase new cleaning equipment. If they do, they will become one of the few cleaners in London with the latest technology, creating efficiency in their operations. Another opportunity is the customers having an upper hand and expecting high quality service, is what CCI is known for. Unable to meet this demand, many less experienced and “mom and pop” dry cleaners have been forced to cease operations, while CCI continues to thrive.

Threats: CCI faces a threat from the fact that the industry volume declined over 20% in the last 20 years. This has caused the remaining players in the market to become more competitive. Another threat is the introduction of home dry cleaning kits and one-price cleaners. These affect CCI’s revenue and market share. The shift in workplace clothing to casual wear also poses a threat. This causes fewer people to dry clean office clothes which is a quarter of their business, thus affecting revenue.