The Future of Communisis - A Case Study

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THE
FUTURE
OF
COMMUNISIS

A
CASE
STUDY
 ‐
 
 2
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CASE
STUDY
–
THE
FUTURE
OF
COMMUNISIS
 • Jenniner
Allen
 • Aurora
Costea
 • Philip
Gregory
 • Eva
Kleinert
 • David
Owusu

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Table of Contents CASE 
STUDY 
– 
THE 
FUTURE 
OF 
COMMUNISIS

3

Introduction

6

Executive Summary

7

External Analysis

8

Industry stakeholders and structure Environmental analysis

12

Strategic Partnerships

14

Print Industry Value Chain Table

15

Bargaining power in the market

16

Bargaining power of buyers

17

Bargaining power of suppliers

18

Threats

18

Competitors

19

Survival and success factors of the industry

21

Internal Analysis of Communisis PLC

22

Communisis established business activity

22

Corporate Strategy

23

Acquisition of Absolute Intuistic

24

Services and their relatedness

26

Diversification and Risks

27

Communsis Business Segments and their place in the Industry Life Cycle

28

Communisis Value Chain

29

Technology Management

29

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8


Relationship Management

30

Process Management

30

Knowledge Management

31

Financial Analysis Communisis Financial Performance Overview 2008

32

Figure
13:
Key
Stats
&
Ratios

32

Detailed Financial Analysis

33

Profit

33

Turnover

34

Gross Profit Ratio

35

Return on Capital Employed (ROCE)

36

Stock Turnover

37

Debt Collection

38

Creditor Payment

38

Turnover per Employee

39

Cross‐Selling

40

Communisis Marketplace Positioning

40

Strategic Options

42

Identification of Strategic Issues

43

Prioritisation of Strategic Issues

44

RACES analysis

45

Recommended Strategic Options

46

Option 1: Expand in­house media and marketing capabilities

46

Option 2: Invest in new technology and process management

47

Option 3: Explore merger and acquisition opportunities

48

Summary

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32

50


Introduction 
This
report
is
about
the
future
of
Communisis.
It
focuses
on
three
main
issues:

The
External
Analysis
which
covers
the
impact
of
external
factors
on
the
UK
the
Print
 Industry,
the
Industry
structure
and
the
Industry
value
chain.

The
Internal
Analysis
of
Communisis

Three
strategic
options
that
could
be
implemented
subsequent
to
a
successful
takeover.

Communisis
is
one
of
the
top
ten
Print
companies
in
the
UK.
 The
printing
industry
makes
up
21%
of
the
total
turnover
of
the
UK’s
printing,
publishing,
pulp,
 paper,
and
paper
products
industry.
It
is
divided
into
two
sectors:
that
of
the
technology
media
and
 the
paper
media
which
represents
the
traditional
printing
industry.
 The
industry
is
currently
in
a
period
of
consolidation
and
has
seen
a
marked
contraction
in
 traditional
printing
due
to
technological
developments
and
competition
from
emerging
economies.

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Executive Summary Communisis
plc
is
a
United‐Kingdom
based
company
engaged
in
the
manufacturing
of
printed
 products
for
direct
marketing,
forms,
stationary,
an
critical
transactional
products
and
the
provision
 of
print
sourcing
services.

This
report
will
analyse
the
external
environment
within
which
 Communisis
operates,
i.e.
the
Print
Industry,
and
also
analyse
the
internal
environment
of
the
 company
structure
and
performance.


 Following
these
analyses
Group
E
recommend
three
strategic
options
for
the
future
development
of
 the
Communisis
business.

These
are:
 1. Expand
in‐house
media
and
marketing
capabilities.
 2. Invest
in
new
technology
and
process
management.
 3. Explore
merger
and
acquisition
opportunities.

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External Analysis

Internal Analysis

Strategic Options


External Analysis The
manufacture
of
pulp,
paper
and
paper
products;
publishing
and
printing
is
UK's
fifth
largest
 manufacturing
industry.
The
print,
packaging
and
graphics
communications
industry
made
up
21%
of
 the
total
industry
turnover
in
20071.
 
The
chart
below
illustrates
the
size
of
different
components
of
the
industry.
 UK Printing,publishing,pulp,paper and paper products industry size

Reproduction Media Printing 1% 21%

Manufacture of pulp, paper and paper products 18%

Publishing 60%

Manufacture of pulp, paper and paper products Publishing

Printing

Reproduction Media

Figure
1
UK
Printing,
publishing,
pulp,
paper,
and
paper
products
industry
size
2007

Industry stakeholders and structure In
2006
the
UK
print
industry
employed
153,000
people
in
11,000
companies,
which
are
spread
 throughout
the
UK.
The
sector
is
dominated
by
small
and
micro
companies
which
focus
mainly
on
 the
domestic
market.
The
vast
majority
of
companies
in
the
industry
(75%)
employ
less
than
10
 people
and
account
for
20%
of
industry
turnover.
In
contrast
0.5%
of
companies
in
the
industry
 employ
more
than
250
people
accounting
for
25%
of
the
2006
industry
turnover,
illustrated
below2.

 
 




























































 1

http://www.statistics.gov.uk/abi/subsection_de.asp
[
accessed
07/03/09]
 
http://www.britishprint.com/page.asp?node=297&sec=Essential_facts_on_the_UK_printing_industry
 [accessed
07/03/09]

2

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Companies with less than 10 employees

Companies with 10 ‐ 25 employees

Companies with more than 250 employees

Figure
2:
The
distribution
of
employees
in
the
print
industry.
 The
structure
of
the
industry
reflects
the
diversity
of
its
products
and
fragmented
nature
of
its
 markets.

Due
to
fragmentation
within
the
sector
there
is
a
lack
of
a
common
and
shared
vision
in
 the
industry
as
at
least
75%
of
the
industry
is
made
up
of
small
companies.
These
companies
also
 tend
to
specialise
in
one
area,
which
has
led
to
low
levels
of
consolidation
in
the
industry.

 However,
mergers
and
acquisition
have
become
common
between
some
larger
companies
as
they
 seek
to
strengthen
their
position
in
the
industry.
 Printed
Products
are
standardised
products
which
can
be
produced
with
machinery
available
to
 anyone,
regardless
of
location.

Therefore
printers
have
to
be
innovative
in
order
to
sell
more
than
 just
a
commodity.
 The
UK
print
industry
serves
all
sections
of
the
economy
ranging
from
central
and
local
government
 to
financial
services
institutions,
retailers,
distribution,
travel
and
tourism
and
manufacturing
 industries.

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All
these
sectors
are
stakeholders
in
the
UK
Printing
Industry
along
with
the
general
population
 whose
interests
are
represented
throughout
all
sectors
including
environmental
agencies
and
other
 NGOs.
 The
UK,
as
in
the
rest
of
the
EU,
has
seen
an
upward
trend
in
imports
of
printed
matter
in
the
last
10
 years.
 The
graph
below
compares
the
rise
of
imports
from
China
into
the
different
EU
countries.3

Figure
3
Imports
of
printed
matter
in
selected
European
countries
1995‐2006.

3

http://www.egin.nl/downloads/Annual_2008/Presentations/Printing%20Industry%20China[
accessed
 07/03/09]

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This
trend
will
continue
to
have
an
adverse
effect
on
the
UK
printing
industry
as
it
struggles
to
 compete
in
the
international
marketplace
on
price
and
labour
costs
whilst
still
complying
with
 stringent
EU
Legislation
compared
with
non‐EU
competitors.

 
 •

The
EU
directives
that
the
industry
must
comply
with
among
others
relate
to
the
emissions
of
 VOCs
(volatile
organic
compounds)
which
have
been
identified
as
a
major
pollutant.
VOC
 emissions
are
dealt
with
by
several
directives:

 o

A
global
industry
framework
Directive,
IPPC
(Integrated
Pollution
Prevention
and
 Control),
1996.

o

A
specific
Directive
for
solvent
using
sectors,
the
SED
(Solvent
Emissions
Directive),
 1999.

o

NEC,
a
Directive
addressed
to
Member
States,
setting
maximum
National
Emissions
 Ceilings
attributed
according
to
the
size
of
national
industries,
20004

4

http://www.intergraf.eu/Content/ContentFolders/PressReleases/Europa_Pres_MsKlose.pdf

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Environmental analysis The
UK
Print
industry
is
undergoing
a
period
of
consolidation
due
to
declining
demand,
overcapacity
 in
the
local
economy
and
stiff
competition
from
emerging
economies
such
as
China,
India
and
 Eastern
Europe.
 Technological
advances
in
digital
printing
are
diminishing
the
role
of
traditional
printing.

Together
 with
the
prevailing
economic
downturn,
which
has
left
many
companies
experiencing
cash
flow
 problems
due
to
lack
of
credit
from
the
banks,
this
has
led
to
a
contraction
of
the
industry.
 Outsourcing
services
such
as
preprint
and
typesetting
to
emerging
economies
has
contributed
to
 further
job
losses
in
the
UK
as
companies
seek
to
maximise
their
profits
by
taking
advantage
of
lower
 labour
costs
abroad.

 
A
combination
of
these
factors
has
seen
the
numbers
of
employees
in
the
industry
fall
by
20%
and
 the
number
of
companies
reduced
by
15%
in
the
past
five
years5.
 These
tough
trading
conditions
have
led
to
several
mergers
and
acquisitions
in
the
past
5
years.

The
 table
below
demonstrates
Merger
and
Acquisitions
activity
in
the
Print
Industry
in
the
past
5
years6:

5

http://www.britishprint.com/page.asp?node=297&sec=Essential_facts_on_the_UK_printing_industry
[accessed
 07/03/09]
 6 
http://www.printweek.com/news

[accessed
15/03/09]

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Year

Merger
&
Acquisition
Company
names

November
2008

Communisis
and
Absolute
Intuistic

August
2008

Coutts
Retail
Communications
(CRC)
and
 Bluetouch

April
2008

Antalis
Visual
Communications
and
McNaughton
 Printall

February
2007

Kelvin
Graphics
and
Print
Group

November
2006

Donnelley
and
Banta

October
2005

WH
Anderton
&
Sons
and
Doric
Board
&
 Packaging

December
2004

Schawk
and
Winnets
and
Seven
Worldwide

July
2003

Astron
and
Hays
Business
Process
Outsourcing.

Figure
4:
Mergers
and
Acquisitions
in
the
Print
Industry
over
the
past
5
years.

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Strategic Partnerships The
UK
print
industry
and
its
industry
representatives
have
joined
forces
to
improve
the
industry’s
 productivity
and
competitiveness.
Increased
productivity
and
more
efficient
processes
will
help
the
 industry
to
compete
for
business
within
the
EU
and
globally.
 The
diagram7
below
demonstrates
the
role
each
party
has
to
play
in
order
to
achieve
this
objective.

Figure
5:
Print
Industry
Strategic
Partnerships
 Vision
in
Print
is
responsible
for
productivity
and
competitiveness,
Proskills
is
the
sector
skills
council
 responsible
for
training
and
BPIF
is
the
umbrella
trade
organisation.
 This
collaboration
could
help
retain
skills
in
the
industry
and
goes
some
way
to
meeting
government
 objectives
of
increasing
the
number
of
Apprenticeships
available.

Attempts
are
also
being
made
to
 create
jobs
by
retraining
people
in
the
industry
to
take
up
technologically
skilled
jobs. 




























































 7

http://www.britishprint.com/page.asp?node=315&sec=Three_Pillars
[accessed
07/03/09}

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The
UK
print
industry
is
addressing
these
issues
by
investing
in
digital
print
technology.

This
provides
 the
capability
to
make
last
minute
changes
to
print
runs.

Service
providers
are
able
to
work
round
 the
clock
printing
several
orders
at
once
reducing
wastage
and
increasing
efficiency.

Print Industry Value Chain Table 
 The
Industry
is
divided
into
two
sectors:
 1. The
paper
media
which
represents
the
traditional
print
industry.
 2. Technology
media
which
is
becoming
increasingly
important
as
new
printing
technologies
 are
developed.

Communisis
is
moving
more
of
its
business
away
from
the
traditional
printing
sector
into
the
 technology
media
sector
as
a
service
provider.

Communisis’
place
in
the
Print
Industry
 8

Figure
6:
Print
Industry
Value
Chain

8

http://www.ecmsa.org/downloads/ValueChain2006Flyer.pdf

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Bargaining power in the market 
 
 
 
 
 
 
 
 
 Figure
7:
Print
Industry
Structure

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Bargaining power of buyers •

Buyers
 come
 from
 different
 market
 sectors
 (financial
 and
 insurance
 services,
 retail,
 government,
telecommunications
and
utilities).

Depending
 on
 what
 their
 requirements
 are,
 most
 of
 the
 buyers
 in
 the
 print
 industry
 have
 a
 variety
 of
 organisations
 to
 choose
 from.
 This
 means
 as
 long
 as
 several
 printers
 offer
 the
 required
 product
 the
 buyer’s
 bargaining
 power
 is
 high.
 Printers
 are
 limited
 in
 how
 high
 they
 can
set
prices
and
may
be
forced
to
incur
high
costs
to
meet
customers
demand.

If
buyers
are
unsatisfied,
they
can
cancel
contracts
and
switch
to
a
competitor
with
relatively
 low
switching
costs;
e.g.
TPF Group
lost
its
primary
source
print
management
contract
when
 Sky Broadcasting
decided
to
set
up
an
in‐house
print
management
team9

The
buyer
power
tends
to
be
more
evident
in
a
recession.
Buyers
can
use
their
power
as
they
 become
increasingly
cost‐conscious
and
better
informed.

Bargaining
power
enables
buyers
to
push
their
requirements
through.
E.g.
as
more
and
more
 customers
 have
 environmental
 representatives
 on
 their
 boards,
 buyers
 can
 demand
 eco‐ friendly
standards
from
their
printing
suppliers.

Printers
are
in
a
weak
negotiation
position
due
to
overcapacity
in
the
printing
industry
and
a
 historical
lack
of
cooperation
between
printers.

9

Printing
World,
Aug
2008,
p48.

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Bargaining power of suppliers •

Suppliers
 for
 the
 highly
 fragmented
 print
 industry
 come
 from
 different
 sectors.
 As
 the
 print
 industry
 produces
 physical
 goods
 there
 are
 several
 suppliers:
 machinery
 (digital
 and
 litho),
 paper,
ink,
logistic
and
transport,
software
and
printing
subcontractors.

Switching
costs
may
vary.
As
the
costs
to
change
a
logistics
company
may
be
relatively
small,
 changing
a
main
software
supplier
could
be
costly.

The
bargaining
power
of
suppliers
in
the
fragmented
printing
industry
varies.
There
are
goods
 where
 a
 few
 big
 suppliers
 have
 high
 bargaining
 power
 and
 can
 dictate
 terms;
 e.g.
 many
 printers
 face
 a
 small
 group
 of
 large
 suppliers
 for
 paper
 machinery.
 Whereas
 other
 suppliers
 e.g.
 printing
 subcontractors
 from
 abroad
 compete
 for
 contracts
 which
 leave
 them
 with
 less
 bargaining
power.

Threats

Threat
of
substitutes

 •

Threat
of
new
entrants

The
 print
 industry
 is
 not
 a
 mature
 market.
 • As
 long
 as
 attractive
 profit
 margins
 can
 be
 made,
 There
 is
 customer
 demand
 for
 new
 and

new
entrants
will
try
to
enter
the
market.
With
new

above
 all
 cheaper
 products
 and
 services.

entrants
 competition
 would
 intensify
 and
 profits

New
technological
developments
have
to
be

could
fall.
It
is
important
to
note
that
not
all
parts
of

integrated
in
the
existing
product
range.

the
 print
 industry
 are
 able
 to
 achieve
 high
 profit
 margins.
There
is
a
mixture
of
high
in
low
margins
to
 be
found.

Substitutes
 for
 the
 print
 industry
 are
 online
 • For
 new
 entrants
 digital
 printing
 offers
 an
 services
 and
 online
 banking.
 Increasingly

opportunity
where
profit
can
be
made
from
orders
in

journals,
 magazines
 and
 newspapers
 are

smaller
 volumes
 as
 the
 cost
 per
 sheet
 is
 almost

produced
 and
 read
 online.
 E‐books
 are

identical.

already
widely
available
(e.g.
Sony’s
eReader
 &
 Amazon
 Kindle)
 and
 new
 technologies
 make
 these
 products
 and
 services
 more
 user‐
friendly.

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Competitors •

The

print

industry

is

a

fragmented

industry

with

strategic

competition.

The
 market
 structure
 is
 an
 oligopoly
 where
 companies
 are
 interdependent;
 what
 one
 company
does
to
win
market
share
will
affect
its
rivals.
 •

The
entry
and
exit
of
the
market
can
be
difficult.
Start‐up
and
exit
costs
may
be
considerably
 high,
especially
when
newcomers
want
to
take
on
large
established
firms.

The
 degree
 of
 product
 differentiation
 is
 high;
 i.e.
 Communisis
 and
 its
 competitors
 actually
 compete
 by
 offering
 differentiated
 products.
 Under
 the
 label
 of
 print
 management
 Communisis
and
competitors
such
as
Williams
Lea
and
RR
Donnelley
offer
services
which
are
 more
 differentiated
 than
 what
 the
 traditional
 printer
 could
 provide
 e.g.
 single
 point
 of
 contact
for
customers
for
jobs
sourced
to
multiple
suppliers.

Competition
 for
 the
 British
 print
 industry
 comes
 also
 from
 abroad
 where
 companies
 are
 sending
print
orders
abroad,
e.g.
to
China
and
India
and
Eastern
Europe
where
material
and
 labour
costs
are
lower.

There
is
fierce
competition
in
the
print
market.
Established
and
new
companies
try
to
control
 different
market
segments.
Communisis
pursues
the
plan
to
control
a
middle
segment
of
the
 market
between
the
market
leaders
completing
mega‐deals
and
small
competitors
taking
the
 lowest
price
approach10.

The
following
figures
illustrates
how
Communisis
fits
into
the
print
industry.

Figure
8a
below
shows
 the
top
20
print
management
companies
in
the
UK.

Figure
8b
highlights
the
difference
in
the
 services
offered
by
the
top
4
companies.

10

Steve
Vaughan,
CEO
Communisis,
Interim
Report
2008,
p6.

19
|
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Print
Management
Companies
–
Turnover
£m11

700 600

500

400

300 200

100

0

Figure
8a:
Top
20
companies
in
Print
Management
 
 
 Company
 Williams
Lea
 RR
Donnelly
 Global

Communisis

Xerox
Global
 Services

Logistics

Procure‐ ment No
 No
 
 
 Yes
 Yes
 Distrib.

 Supplier
 system
 To

 others
 Yes
 Yes
 
Warehouse
 
 in
Leicester/
 Supplier

 Newcastle
 To
others

No

Yes

Design and Development Yes
 
 Yes
 consultants

Production

Marketing

Service

Yes
 
 Yes
 Billings
 etc

Yes
 
 Yes

Yes
 
 Yes

Yes
 
 Consultancy
 Services
and

 Bespoke

 products
 
 Yes

Yes
 
 Billing,
 cheques
 etc

Yes
 
 Known

 Brand
in

 printing

Yes

Yes

Yes
 
 Care/
 Loyalty

 scheme s
 
 Yes

12

Figure
8b:
Top
4
competitors
in
printing
management

11

Ranked
 by
 turnover
 (£m).
 Figures
 are
 from
 2008
 and
 taken
 from
 information
 provided
 by
 the
 companies
 themselves
andPrintWeek
Top
500
and
accounts
filed
at
Companies
House.
PrintWeek
22,
January
2009. 12 
Ranking
from
PrintWeek
22,
January
2009.
League
Table,
Top
500
Print
Management.
 
 20
|
P a g e


Survival and success factors of the industry •

The
 print
 industry
 produces
 commodities.
 Product
 volume
 is
 an
 important
 survival
factor.

Customer
 relationships
 are
 a
 main
 survival
 factor.
 Close
 relationships
 with
 customers
and
the
capability
to
meet
their
needs
better
than
competitors
may
 yield
success.

Compliance
with
EU
regulations
and
“green”
credentials
are
two
further
survival
 factors
set
by
government
and
customers.

The
 print
 industry
 relies
 on
 the
 awareness
 that
 customers
 are
 becoming
 increasingly
 environmentally
 conscious.
 In
 order
 to
 survive
 in
 the
 industry
 companies
 have
 to
 show
 a
 product
 range
 that
 is
 both
 non‐polluting
 and
 environmentally
acceptable.

A
 crucial
 survival
 factor
 in
 the
 print
 industry
 is
 technological
 competence.
 Without
the
know‐how
of
key
technologies
a
printing
company
cannot
survive
in
 the
market.

A
 further
 success
 factor
 is
 the
 ability
 to
 control
 the
 technological
 standard
 for
 the
digital
applications
the
industry
uses.
Competition
in
the
printing
industry
is
 also
 based
 upon
 research
 and
 development
 and
 the
 ability
 to
 innovate
 faster
 then
competition.

21
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Internal Analysis of Communisis PLC Communisis established business activity The
group's
principal
activity
is
manufacturing
printed
products
for
direct
marketing,
forms,
 stationery
and
critical
transactional
products
such
as
statements
and
cheques
and
the
provision
of
 print
sourcing
services13.

 The
group
operates
through
4
business
segments:
 Business
Segments

Direct
Mail
and
Business
Forms
 • provides
mailings
for
promotional
material,
legal
and
 governmental,
product
launch,
membership
statement,
 e‐mailing,
integrated
and
high
security
printing.

Printing
Sources
 • provides
sourcing,
procuring,
producing,
storing
and
 distributing
key
print
requirements.

Turnover
 Profits
 2008
 2008
 (2007)
 (2007)

Margins
 2008
 High
margin
due
to
 (2007)
 disposal
of
Bath
forms

£m

£m

91.8

5.5

(115.7)

(3.5)

6%
 
 (3%)

96.7
 (107.4)

1.3





 (0.9)

1%

business
and
strong
 growth
in
digital
print

Low
margin
impacted
 by
the
loss
of
 Sainsbury
and
HBOS
 contracts.
Customers
 from
this
segment
 buy
higher
margin
 services
from
other
 segments

20%
increase
due
to
using

Transactional
print
 • produces
invoices,
statements,
bills,
payslips,
statutory
 notifications,
account
reminders,
letters,
purchase
 orders,
marketing
and
support
literature,
cheque
 payments,
data
mailings,
chequebooks,
credit
books,
 cheque
mailers,
encoded
vouchers
and
clearing
 documents.

57.3

13.3

(55.1)

(11.1)

suitable
facilities
and
the
 
 new
contract
with
Co‐ 
 operative
group
 
 not
 available
 Previous
lower
margin

Technology
and
Services

11.9

5.1

43%

• include
consulting
to
improve
the
marketing
process,
and
 tools
to
deliver
increased
efficiency
and
effectiveness
to
 our
customers’
marketing
campaigns.

(4.0)

(4.0)

(32%)

13

http://wrightreports.ecnext.com/coms2/reportdesc_PRICE_C826C5610

22
|
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assignments
have
not
 recurred.
 Further
growth
is
 foreseen
from
the
 acquisition
of
Ai


Corporate Strategy At
the
end
of
February
2007,
Communisis
changed
their
print
management
strategy
with
the
 appointment
of
Steve
Vaughan
as
the
CEO,
who
announced
that
the
group
would
focus
on
 developing
high‐margin
value
added
services.

 The
overall
strategy
of
the
Board
is
to
concentrate
on
improvements
in
customer
communication,
 centred
on
the
marketing
processes
and
exit
the
most
commoditised
part
of
manufacturing
print.
In
 so
doing,
it
allows
the
Board
to
concentrate
investment
on
those
parts
of
the
Company
that
are
 growing
and
fit
best
with
the
strategy.
 To
achieve
this
aim
a
new
corporate
strategy
was
introduced
in
3
stages:

January
2007

July
2007

July
2008

Communisis
started
in
stage
1
by
focusing
on
improving
their
‘Customer
&
Service’
area
through
 building
customer
loyalty
and
developing
long‐term
relationships.

This
also
included
stabilising
the
 cash
flow
within
the
business.
 In
Stage
2
Communisis
focused
on
‘Cross
Sell
&
Value’
by
selling
more
services
from
their
portfolio
to
 the
same
customers.
Through
this
strategy,
the
organisation
will
gain
value
from
making
higher
 margins
from
the
higher
profit
services
while
keeping
the
high‐volume
low‐profit‐margin
services.

23
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In
Stage
3
Communisis
are
moving
towards
offering
an
Integrated
Portfolio
of
services.

Acquisition of Absolute Intuistic In
December
2008,
Communisis
acquired
a
data
services
business,
Absolute
Intuistic
Limited
 (“Absolute
Intuistic”
or
“Ai”)
to
improve
the
technology
available
to
grow
the
business
and
to
 facilitate
the
offer
of
an
integrated
portfolio
of
services.

Ai
is
a
new
entrant
in
the
market,
delivering
 robust
and
effective
direct
marketing
solutions
to
over
100
clients
in
both
B2B
and
B2C
market
place
 across
a
variety
of
different
vertical
sectors.

They
have
big
contracts
already
in
place
such
as
 Barclays,
HSBC,
The
Co‐Operative,
RBS,
Centrica,
P&G,
Tesco,
Post
Office,
DEFRA
and
COI.

Although
 the
acquisition
deal
had
a
value
of
£12.4m14,
according
to
2008
Preliminary
Annual
Report,
 Communisis
paid
£4.5m
cash
in
2008.
A
deferred
cash
consideration
of
up
to
a
further
£8m
is
 payable
early
in
2011,
based
on
financial
performance
over
the
period
from
1
September
2008
to
31
 August
2010.15
 Further
investments
in
technology
were
made
during
2008
of
£1.5m
in
digital
print
and
£2.3m
in
 software
applications
for
document
compositions
which
resulted
in
operating
margin
in
2008
 improving
to
5.8%
(2007:
3.6%).15

These
investments
also
contribute
towards
stage
3
of
the
 corporate
strategy
to
offer
an
integrated
portfolio
of
services.
 In
June
2008
Communisis
sold
its
business
forms
operation
in
Bath
for
£12.8m
paid
in
2
instalments
 (£8.2m
paid
on
completion
and
the
remainder
payable
in
further
instalments
to
1st
July
2012),
which
 fitted
least
with
the
strategic
focus
on
value‐added
communications.

The
Bath
Business
Forms
 business
had
recorded
a
decline
in
profits
over
the
last
5
years.16

14

http://www.aidataintelligence.com/default.asp?docId=12552

 15 
http://www.communisis.com/assets/x/50345
 16 http://www.communisis.com/assets/x/50313

24
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In
October
2008,
Communisis
began
a
joint
venture
with
competitor
Williams
Lea
working
together
 on
a
contract
with
HBOS17.

Williams
Lea
is
a
global
business
process
outsourcing
(BPO)
company
 that
manages
digital
information
for
internal
and
external
audiences.

This
joint
venture
will
combine
 expertise
in
digital
printing
and
it
will
be
an
opportunity
to
learn
from
each
other
because
their
 services
are
complementary.

However,
Lloyds
TSB
has
acquired
now
HBOS
and
it
is
unsure
if
the
 newly
formed
Lloyds
Banking
Group
will
honour
the
HBOS
contract
with
Communisis
and
Williams
 Lee.18
 This
new
strategy
has
shifted
the
centre
of
gravity
of
the
value
chain
towards
the
use
of
consulting,
 technology
and
service‐based
propositions.

17 http://www.printweek.com/business/news/858052/Communisis‐ties‐Williams‐Lea‐HBOS‐work/ 18 http://www.accountancyage.com/computing/news/2226389/lloyds‐tsb‐hbos‐merger‐lead

25
|
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Services and their relatedness 
 Services

Common
 market

Common
 Specialist
 Skills
 (design)

Market
 knowledge

Common
Technology
 Specialist
 software

Data
 Specialist
 analysis
 printing
 databases
 hardware

Print
and
 Document
 Management
 Services

Statement
and
 Billing
 Outsourcing

Direct
Mail
 Services

Business
Forms
 Services

Cheques
&
 Security
Prints

Sourcing
 Solutions

Marketing
 Process
 Consultancy
 (New
 diversification)

Figure
9:
Services
offered
by
Communisis
and
their
relatedness
 Communisis
are
seeking
to
increase
the
proportion
of
their
business
generated
through
high‐margin
 services.

The
extra
services
include
non‐print
offerings
such
as
digital
asset
management
and
 consultancy
on
subjects
such
as
how
best
to
use
envelopes
under
Pricing
in
Proportion,
response
 handling
for
direct
mail
campaigns,
software
consultancy
and
streamlining
areas
of
the
print
and
 marketing
process.

26
|
P a g e


Communisis
is
therefore
running
the
established
manufacturing
print
business
in
conjunction
with
 the
new
marketing
consultancy
business
aiming
to
get
inside
the
customers
firms
and
becoming
 indispensable,
rather
than
aiming
for
big
print
contracts.

Diversification and Risks There
are
however
risks
associated
with
such
a
diversification
of
the
business
aims
of
Communisis.

 These
are
illustrated
in
the
table
below.
 Reduced
Risk

Increased
Risk

Cover
multiple
markets
to
share
the
risk

Marketing
Skills
not
available

Identify
a
profitable
area
of
the
business

Not
understanding
the
environment

Competition
from
specialised
organisations

Takes
time
to
build
a
portfolio
of
customers

Figure
10:
Diversification
and
associated
risks

27
|
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Communisis Business Segments and their place in the Industry Life Cycle Analysing
each
business
segment
of
Communisis
and
where
these
segments
are
situated
in
their
 lifecycle
can
be
seen
in
the
figure
below.
 Technology
and
Services
 Direct
Mail
and
Business
Forms

Transactional
Print

Printing
Sources

Figure
11:
Communisis
business
segments
&
Life
cycle
 Management
efficiency
can
help
to
prolong
the
maturity
stage
of
the
life
cycle.

Communisis
must
 consider
and
plan
on
how
to
keep
the
growth
of
the
‘Technology
and

Services’
segment
and
of
the
 ‘Direct
Mail
and
Business
Forms’
segment
and
when
they
will
reach
the
maturity
phase
of
their
 lifecycle.

Production
in
improvements,
like
just‐in‐time
methods
and
lean
manufacturing,
can
result
 in
extra
profits.

Technology,
automation,
and
linking
suppliers
and
customers
in
a
tight
supply
chain
 are
also
methods
to
improve
efficiency.

28
|
P a g e


Communisis Value Chain Human
Resources

Secondary
Activities

Sales
 Customer
Services
 Information
Technology
 Research
and
Development
 Transport
and
Facility
 Online
Campaign
Management
 Print
&
 Document
 Management

Online
 Campaign
 Management

Statement
&
 Billing
 Outsourcing

Direct
Mail
 Services

Business
 Forms
 Cheques

Security
 Print

Marketing
 Process
 Consultancy

Sourcing
 Solutions

Figure
12:
The
Communisis
value
chain
 Communisis
examined
the
primary
and
secondary
activities
of
their
value
chain
in
an
attempt
to
add
 value
to
the
organisation.
The
following
high‐level
activities
have
been
changed
to
ensure
future
 success
of
the
company:

Technology Management 1. €1.5m
agreement
with
Emtex
Software
for
Production
Intelligence
Output
Management
 Software.
This
includes
the
provision
of
an
advanced
form
of
Mail
Optimization
Solutions
 which
when
fully
functional
will
create
a
fully
automated
document
factory
with
zero
 tolerance
of
failure
and
also
enable
more
highly
targeted
communications
across
multi‐ channel
delivery
that
drive
response
and
loyalty.
 2. The
Centre
of
Excellence
opened
in
Liverpool
with
state‐of‐the‐art
technology
(over
£17m
 invested).
This
was
developed
for
the
production
of
transactional
documents
including
 statements
and
bills
using
sophisticated
software
and
hardware.
At
the
heart
of
this
new
 facility
was
the
installation
of
the
advanced
form
of
Output
Management
Solutions
software

29
|
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which
not
only
allows
centralised
and
automated
workflow
but
essentially
made
a
range
of
 print
re‐engineering
possible.
This
also
performed
a
key
function
within
Communisis’
 ‘greenprint’
strategy
which
has
culminated
in
being
short‐listed
for
an
environmental
award.

Relationship Management 1. Communisis
acquired
Absolute
Intuistic
(£12.6m)
which
enables
the
targeting,
 personalisation,
customisation,
optimisation,
analysis
and
accumulation
of
direct
mailing
 services.
Ai
and
Communisis
shared
clients
however,
a
range
of
added
value
technological
 capabilities
such
as
its
sophisticated
e‐procurement
solutions
and
its
services
including
 analysis
of
campaign
effectiveness
and
credit
checking
made
its
acquisition
inevitable
 because
Communisis
would
be
able
to
accurately
pick
and
choose
profitable
and
lowest
 credit
risk
customers.
 2. Communisis
realigned
their
key
contract
with
Barclays
Bank
to
focus
on
value
added
 services.
Primarily,
this
was
not
only
a
service
improvement
but
also
a
cost
saving
exercise
 for
Barclays.
As
part
of
the
new
agreement
the
installation
of
IQ
(Instant
Quoting)
software
 from
Communisis
on
desktops
within
Barclays
enabled
direct
on‐line
ordering
and
on
the
 spot
price
checking
for
any
specification
and
modification
to
the
design
of
print
jobs.
 Communisis
would
be
able
to
charge
market
rates
for
its
print
related
services.

Process Management 1. Online
print
quoting.
This
is
a
process
that
is
unique
to
Communisis
in
the
print
industry
and
 to
a
very
large
extent
appears
to
have
been
modelled
on
the
efficient
process
management
 of
Toyota
in
the
automobile
industry.

Communisis
makes
this
functionality
available
to
 clients
with
whom
it
has
multi‐million
pound
contracts
such
Defra
and
Barclays.

30
|
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2. Continuous
process
improvement
has
led
to
the
following
accreditations,
APACS
cheque
 printer
accreditation
scheme
(standard
55),
APACS
bank
giro
certification,
QMP
royal
quality
 assurance
programme,
CIPS
standard
excellence
in
purchasing
policies
and
procedures.

Knowledge Management 1. Recruiting
industry
experts
to
key
positions
such
as
A.
Blaxill
from
HP,
implementation
of
 account
management
systems
and
building
relationships
with
large
customers
across
many
 industry
sectors.
 2. Confirmed
S.
Vaughan
as
CEO
with
huge
experience
and
strong
track
record
in
Outsourcing,
 major
contracts
and
systems
and
technology.

31
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Financial Analysis Communisis Financial Performance Overview 200819 Figure
13:
Key
Stats
&
Ratios
 Q4
(Dec
'08)

Annual
 (2008)

Annual
 (TTM)

Net
profit
margin

3.67%

3.35%

3.35%

Operating
margin

4.92%

5.58%

5.58%

EBITD
margin

8.08%

8.08%

Return
on
average
assets

3.32%

3.54%

3.54%

Return
on
average
equity

6.15%

6.56%

6.56%

Employees

1,916

19

http://www.google.com/finance?q=LON%3ACMS

 
 32
|
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In
September
2008
the
share
price
has
started
to
fall,
which
could
be
attributed
to
the
start
of
the
 credit
crunch
in
the
3rd
quarter
of
2008.

Detailed Financial Analysis Profit

ProTit (before tax) 20000 10000 0 ‐10000 2002 2003 2004 2005 2006 2007 2008

£'000

‐20000 ‐30000 ‐40000 ‐50000

Communisis RR Donnelley Williams Lea

‐60000 ‐70000 ‐80000 ‐90000

Figure
14:
Gross
Profit
 Communisis
has
demonstrated
a
transformation
from
loss
to
profit
over
the
past
few
years.

It
 remains
to
be
seen
if
this
will
continue
into
the
future
although
it
appears
that
the
back
to
basics
 strategy
of
cash
flow
improvements
appears
to
be
working
in
terms
of
basic
profit
levels.
 However,
caution
must
be
exercised
when
analysing
gross
profit
figures.

Some
of
the
profit
for
2008
 (£1.3m)
can
be
attributed
to
the
sale
of
Bath
Business
Forms
business
however
this
has
been
offset
 by
an
exceptional
property
provision
(1.9m)
related
to
lease
guarantees
of
former
group
companies.

33
|
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Turnover

Turnover 400000 350000 300000 £'000

250000 Communisis

200000

RR Donnelley

150000

Williams Lea

100000 50000 0 2002 2003 2004 2005 2006 2007 2008

Figure
15:
Turnover
 Communisis
turnover
has
fallen
in
2008.

This
is
somewhat
expected
as
the
sale
of
the
Bath
Business
 Forms
business
has
removed
a
high
revenue
generating
business
unit
which
so
one
would
expect
to
 see
a
drop
in
the
turnover
of
the
business
at
this
point.


 
 As
Communisis
now
focuses
on
business
units
that
generate
higher
margins
it
is
important
that
this
 is
reflected
in
their
results
with
increased
profit
levels
achieved
at
a
lower
turnover.

34
|
P a g e


Gross Profit Ratio

Gross ProTit Ratio 10.00% 5.00% 0.00% ‐5.00%

2002 2003 2004 2005 2006 2007 2008 Commuisis

‐10.00%

RR Donnelley

‐15.00%

Williams Lea

‐20.00% ‐25.00% ‐30.00%

Figure
16:
Gross
Profit
Ratio
 The
Gross
Profit
ratio
compares
gross
profit
with
revenue.

If
margins
are
increasing
but
turnover
 decreasing
we
would
expect
to
see
the
percentage
in
this
ratio
increase.

Communisis
has
seen
its
 gross
profit
ratio
fluctuate
over
the
past
few
years
but
it
now
increasing.
The
gross
profit
ratio
has
 increased
in
2008
but
not
extraordinarily
so.

With
the
acquisition
of
AI
we
can
expect
this
ratio
to
 continue
to
increase
significantly.

The
fluctuations
may
be
attributed
to
investment
in
digital
print
 technology
in
2006.

When
compared
with
RR
Donnelley
and
Williams
Lea
it
can
be
seen
that
 Communisis
is
performing
well
as
the
gross
profit
ratio
of
their
competitors
is
decreasing.

This
is
 indicative
of
a
lack
of
innovation
in
their
business
to
in
order
to
increase
profit
margins
rather
than
 competing
on
price.

35
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Return on Capital Employed (ROCE)

ROCE 50 40 30 20 10

Communisis

0 ‐10

2002 2003 2004 2005 2006 2007 2008

‐20

RR Donnelley Williams Lea

‐30 ‐40 ‐50 ‐60

Figure
17:
Return
On
Capital
Employed
 This
is
a
measure
of
how
much
profit
was
generated
by
the
investment
of
the
shareholder’s
in
the
 companies.

ROCE
indicates
that
Communisis’
cost
of
generating
a
profit
has
increased
in
2008.

 Communisis
have
indentified
a
number
of
overhead
savings
which
can
be
implemented
to
rectify
 this.
 In
order
to
assess
how
efficient
the
businesses
are
operating
we
can
assess
their
stock
turnover,
 debt
collection
and
credit
control
operations.

36
|
P a g e


Stock Turnover Stock Turnover 500 400 300

Communisis

200

RR Donnelley Williams Lea

100 0 2002 2003 2004 2005 2006 2007

Figure
18:
Stock
Turnover
 This
is
a
measure
of
how
quickly
stock
moves
through
the
business.
Communisis
have
increased
their
 stock
turnover
from
15
days
in
2002
to
26
days
in
2007.

This
is
a
strong
performance
in
comparison
 to
Williams
Lea
and
RR
Donnelley
whose
stock
turnover
is
360
and
51
days
respectively.

 Communisis
would
not
have
a
large
stock
holding,
as
any
print
business
would
not.

The
nature
of
 their
product
is
such
that
it
is
unlikely
to
be
held
in
stock
waiting
to
be
sold
rather
finished
goods
are
 produced
once
a
customer
has
committed
to
purchase
them.

Stock
will
relate
to
printing
supplies,
 e.g.
paper
and
ink,
rather
than
finished
goods.

When
compared
to
a
different
industry,
e.g.
retailing,
 which
relies
on
a
large
volume
of
stock
required
to
trade
the
print
industry
is
in
a
good
position.

37
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P a g e


Debt Collection Debtor Collection 90 80 70 60 50 40 30 20 10 0

Communisis RR Donnelley Williams Lea

2002 2003 2004 2005 2006 2007

Figure
19:
Debtor
collection
 Communisis
appear
to
have
their
credit
control
operations
under
control
and
are
managing
to
 collect
debts
within
60
days.

When
compared
with
Williams
Lea
and
RR
Donnelley
the
collection
of
 debts
is
within
the
norm.

Creditor Payment Creditors Payment 70 60 50 40

Communisis

30

RR Donnelley

20

Williams Lea

10 0 2002 2003 2004 2005 2006 2007

Figure
20:
Creditor
Payments

38
|
P a g e


The
number
of
days
taken
to
pay
creditors
by
Communisis
decreased
from
57
days
to
40
days.

This
 reflects
the
ability
of
Communisis
to
pay
debts
from
the
cash
within
the
business.

Turnover per Employee This
is
a
measure
of
the
revenue
generated
per
employee
and
is
indicative
of
the
productivity
levels
 within
a
business.

Turnover per Employee 250000 200000 150000

Communisis RR Donnelley

100000

Williams Lea

50000 0 2002 2003 2004 2005 2006 2007

Figure
21:
Turnover
per
employee
 Communisis
has
the
highest
turnover
per
employee
and
is
therefore
performing
well
in
comparison
 to
RR
Donnelley
and
Williams
Lea.

39
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P a g e


Cross­Selling Communisis
have
identified
that
cross‐selling
their
value‐added
services
to
their
existing
customer
 base
as
part
of
their
3‐part
strategy.

They
have
made
some
success
as
illustrated
below
going
from
 14
of
their
top
100
customers
buying
more
than
one
service
from
Communisis
in
2006
to
24
in
2007
 and
32
in
2008.

No of Top 100 Customers using more than one service 35 30 25 20 15 10 5 0 2006

2007

2008

Figure
22:
Communisis
Cross
Selling

Communisis Marketplace Positioning Communisis
occupy
a
unique
niche
within
the
print
industry
where
they
are
large
enough
to
handle
 large
contracts
yet
small
enough
to
offer
specialised
and
tailored
services
to
their
customers.

All
 their
business
segments
operate
profitably
and
Communisis
are
well
placed
as
market
leaders
in
 direct
mail
and
Cheque
printing.

This
is
illustrated
in
the
figure
below:

40
|
P a g e


Direct
Mail

Print

Cheques

Sourcing

Market

Statements

Technology

&
Bills

&
Services

UK
No
1

UK
No
4

UK
No
1

UK
No2

n/a

£61.9m

£107.5m

£29.9m

£25.2m

£12.4m

5%

9%

95%

12%

n/a

Position

Turnover
 (2007)

Market
 Share

Figure
23:
Communisis
Business
Segments
and
their
Market
position
 The
offer
of
an
integrated
portfolio
of
products
is
a
new
area
of
business
for
Communisis
and
the
 acquisition
of
Absolute
Intuistic
will
help
to
cement
their
place
within
this
market.

The
move
up
 value
chain
occurs
as
Communisis
shift
their
focus
from
operating
as
a
traditional
printer
to
a
multi‐ faceted
organisation
focused
on
high‐margin
value‐added
services.
 The
economic
climate
is
concerning
for
all
businesses.

Communisis
have
contracts
with
financial
 services
institutions
although
many
of
these
relationships
are
based
on
long‐term
contracts
and
as
 the
economy
begins
to
grow
marketing
spend
with
these
organisations
will
provide
a
large
 opportunity.
To
control
costs
in
the
meantime
Communisis
have
maintained
tight
control
on
the
 operating
costs
within
their
business,
instituting
redundancies
of
6%
of
the
workforce
in
2008
a
 business‐wide
wage
freeze
for
2009.

41
|
P a g e


Strategic Options Having
analysed
the
industrial
environment
in
which
Communisis
operates
and
the
business
strategy
 and
position
of
Communisis
it
is
possible
to
begin
the
process
of
indentifying
three
strategic
options.

 These
three
options
represent
the
steps
to
implement
subsequent
to
takeover
in
order
to
drive
the
 business
forward.
 A
considered
evaluation
process
has
been
conducted
to
reach
the
three
options
recommended.
The
 first
stage
of
the
process
was
to
identify
a
series
of
strategic
issues
that
Communisis
may
need
to
 address
in
the
future.

These
issues
were
then
prioritised
according
to
the
tangible
difference
and
 the
significance
of
any
improvement
delivered
subsequent
to
implementation.


Once
priority
issues
 were
identified
a
series
of
options
to
address
the
issues
was
produced
and
assessed
according
to
the
 RACES
criteria
of
resources
required,
acceptability
to
stakeholders,
consistency
with
existing
 strategy,
effectiveness
in
delivering
aims
and
sustainability
of
any
competitive
advantage
gained.

42
|
P a g e


Identification of Strategic Issues Group
E
have
identified
the
following
issues
which
Communisis
face
currently
or
in
the
near
future
in
 order
to
deliver
their
stated
desire
to
move
their
business
up
the
value
chain:
 1. Communisis
have
lost
key
contracts
(e.g
Sainsbury’s,
HBOS)
in
the
past,
how
can
they
 develop
customer
loyalty
whilst
margins
are
being
squeezed
in
a
mature
market?
 2. Communisis
has
positioned
itself
in
the
middle
of
the
print
industry
as
both
a
print
 management
and
data
solutions/marketing
company,
how
can
they
capitalise
on
their
 competitive
advantage?
 3. How
does
the
declining
economic
climate
influence
the
print
industry?
 4. How
does
Communisis
maximise
productivity
of
their
digital
print
technology
investment?
 5. Should
Communisis
continue
to
offer
a
broad
range
of
services
as
they
currently
do
or
are
 there
segments
of
their
business
they
should
dispose
of
and
outsource
the
contracts?
 6. Should
Communisis
continue
to
invest
in
software
innovation
and
process
streamlining?
 7. Does
Communisis
have
the
capability
to
crossover
into
other
industries,
e.g.
marketing
and
 PR?
 8. Should
Communisis
explore
expanding
their
business
segments
to
cover
more
of
the
 industry
value
chain?
 9. Should
Communisis
develop
their
business
into
2
distinct
subsidiaries
in
order
to
make
 winning
new
clients
easier?

For
example,
would
a
potential
marketing
customer
enter
into
 an
agreement
with
a
print
company
which
also
offers
marketing
services
or
rather
a
distinct
 marketing
specialist.

43
|
P a g e


Prioritisation of Strategic Issues The
nine
issues
outlined
above
have
been
prioritised
according
to
the
following
criteria:
 Strategic Option Survival
factor
 Advantage
under
threat
 Time‐constrained
issues
 Better
resource
management
 Speculative
opportunities
 Spare
capacity
usage

1
 ✔

2
 ✔

3
 ✔

4
 

 

 

 ✔

5
 ✔

6
 ✔

7
 

 

 

 

 ✔

8
 ✔

9
 

 

 

 

 ✔

Figure
24:
Strategic
Options
for
evaluation
 Therefore
issues
1,
2,
3,
5,
6
and
8
are
priorities
for
further
consideration
shown
in
the
table
below:
 Option
No

Issue
 Addressed

1

1

Develop
Customer
Relationship
Management

2

1

Offer
loyalty
incentives
to
customers

3

1

Offer
flexible
accommodation
of
services

4

2

Invest
in
advanced
technology
and
process
 management

5

2

Build
on
existing
knowledge
management

6

2

Build
on
relationship
management

7

3

8

3

9

5

10

5

11

6

12

6

13

8

14

8

Option
Proposed

Explore
Merger
and
Acquisition
opportunities
as
 they
arise
 Renegotiate
contracts
with
suppliers
and
financial
 agreements
 Yes
‐
sell
print
business
and
focus
only
on
value
 added
services
to
existing
clients
 No
‐
keep
print
business,
retain
customers
and
 opportunity
to
cross‐sell
 Invest
in
advanced
technology
and
process
 management
 Invest
in
research
and
development
 Continue
with
marketing
services
and
expand
the
 business
segment
 Develop
partnerships
with
device
and
OEM
 manufacturers

Figure
25:
Strategic
options
to
address
identified
issues

44
|
P a g e


RACES analysis

Option
No

Resources

Acceptability

Consistent

Effective

Sustainable

These
strategic
options
were
then
subjected
to
a
RACES
analysis:

Total

1
 2
 3
 4
 5
 6
 7
 8
 9
 10
 11
 12
 13
 14

4
 4
 4
 3
 4
 4
 4
 5
 5
 3
 3
 1
 3
 1

4
 3
 4
 4
 4
 4
 4
 3
 3
 2
 4
 3
 4
 2

4
 3
 3
 5
 4
 4
 5
 4
 4
 3
 5
 1
 4
 1

3
 2
 2
 5
 3
 3
 5
 4
 4
 1
 5
 4
 5
 3

2
 1
 2
 3
 2
 2
 3
 1
 1
 2
 3
 3
 3
 1

17
 13
 15
 20
 17
 17
 21
 17
 17
 11
 20
 12
 19
 8

Figure
26:
A
RACES
analysis
of
the
strategic
options
for
Communisis

From
the
RACES
analysis
the
strategic
options
with
the
highest
score
are
4,
7,
11
and
13.

These
are:

• • •

Invest
in
advanced
technology
and
process
management
 Explore
Merger
and
Acquisition
opportunities
as
they
arise
 Continue
with
marketing
services
and
expand
the
business
segment

After
consideration
of
their
fit
with
the
existing
business
strategy
and
feasibility
these
options
have
 been
carried
forward
to
form
our
strategic
recommendations.

45
|
P a g e


Recommended Strategic Options Option 1: Expand in­house media and marketing capabilities As
the
print
industry
continues
to
mature
there
is
an
increasing
polarisation
where
very
big
players
 chase
very
large
deals
with
the
few
customers
able
to
offer
such
contracts.

At
the
other
end
of
the
 spectrum
many
printers
are
using
cost
as
their
only
tool
pushing
prices
down.

This
is
ultimately
 unstable
and
by
adding
value‐added
services
and
offering
a
range
of
services
Communisis
position
 themselves
well
for
the
future.


 Further
significant
investment
is
required
to
cement
this
particularly
in
skilled,
creative
employees
 with
marketing
experience.

By
offering
customers
a
complete
marketing
solution
(incl.
ad
campaign
 design
and
management)
Communisis
can
build
and
strengthen
their
current
business
platform.

 This
would
complemented
the
acquisition
of
Absolute
Intuistic
and
the
ability
to
profile
&
target
 clients
customers.

Being
able
to
tailor
a
customers
marketing
solution
from
concept
through
to
 multi‐channel
delivery
targeted
to
the
desired
client
places
Communisis
in
a
strong
position
within
 the
marketplace
combining
print
expertise
with
marketing
and
data
analysis
skills.

46
|
P a g e


Option 2: Invest in new technology and process management Innovation
represents
an
opportunity
to
lead
the
market
in
digital
print
processes
and
the
efficiency
 that
these
methods
can
achieve.

Communisis
are
already
Hewlett
Packard's
fastest
growing
digital
 print
client.


 By
continuing
to
invest
in
new
techniques
Communisis
will
be
able
to
offer
a
greater
range
of
 products,
with
shorter
lead
times,
produced
with
less
wastage
(incl.
waste
paper,
energy,
capacity)
 offering
greater
flexibility
to
their
customers.
 Careful
evaluation
of
the
features
and
benefits
of
any
investment
must
be
tempered
by
the
amount
 of
investment
required,
payback
time
and
opportunity
cost.

47
|
P a g e


Option 3: Explore merger and acquisition opportunities The
current
economic
climate
is
likely
to
prove
very
challenging
for
many
businesses
for
some
 months
to
come.

Inevitably
this
will
present
Communisis
with
further
acquisition
opportunities.

 Any
acquisition
must
fulfil
the
following
requirements:

Offers
value
to
the
business

Complementary
to
the
strategy

Further
differentiates
Communisis
from
their
competitors

Communisis
are
in
a
position
where
they
now
have
some
experience
in
this
area
and
must
take
 advantage
of
the
opportunity
to
further
consolidate
their
position
as
a
marketing
and
print
expert.
 An
area
where
Communisis
should
focus
their
attention
in
terms
of
acquisition
targets
would
be
an
 online
publishing
company.

Many
publishers
are
beginning
to
branch
out
into
offering
their
content
 in
an
online
format.

This
has
the
potential
to
reduce
the
volume
of
content
that
is
physically
printed.

Issuu.com

48
|
P a g e


Issuu
is
an
online
publisher
allowing
personal
users
to
upload
their
own
publications
for
free
or
 business
users
to
upload
their
publications
without
the
Issuu
branding
for
a
fee.

This
company
 represents
the
leading
use
of
online
publication
technology
allowing
users
to
add
multimedia
 content
and
internet
links
to
their
publications.
 To
further
integrate
this
business
into
the
Communisis
business
would
use
the
skills
of
the
workforce
 of
Issuu
to
develop
the
online
capabilities
of
existing
business
functions.

An
initial
step
would
be
to
 offer
Communisis
customers
a
website
design
service
that
would
be
a
complementary

design
to
the
 marketing
material
published
by
Communisis.


 The
database
services
offered
by
Absolute
Intuistic
and
the
Emtex
desktop
software
from
 Communisis
also
present
an
opportunity
that
could
be
exploited
by
the
knowledge
of
the
staff
of
 Issuu.

Communisis
would
be
able
to
move
their
desktop
applications
to
an
online
facility
which
 would
mean
that
rather
than
installing
software
onto
a
customers
computer
the
application
would
 be
present
on
the
internet.

An
example
of
this
is
Google
Documents
which
allow
a
user
to
create
 word
processing,
spreadsheet
and
presentation
documents
via
their
internet
browser
rather
than
a
 software
package,
e.g.
Microsoft
Office.
 This
increased
use
of
online
technology
would
lead
to
an
increase
in
costs
for
Communisis
for
the
 extra
Internet
bandwidth
and
hosting
charges.

An
option
to
circumvent
this
would
be
to
acquire
an
 Internet
Hosting
provider
such
as
Just
Host
(www.justhost.com).
 To
summarise
acquisition
targets:

An
online
publishing
company
(e.g.
Issuu)

A
Web
hosting
company
(e.g.
Just
Host)

49
|
P a g e


Summary In
recommending
the
options
above
we
have
been
careful
to
select
options
that
are
consistent
with
 the
current
business
strategy
of
Communisis
yet
offer
further
differentiation
and
competitive
 advantage
from
their
competitors.
 The
strategic
options
reflect
the
desire
of
the
Directors
to
increase
the
value‐added
technology
 services
business
segment.

The
strategic
options
address
four
of
the
initial
strategic
issues
and
are
 likely
to
move
Communisis
higher
up
the
print
industry
value
chain.
 Communisis
is
in
a
financial
position
to
be
able
to
develop
the
business
in
the
way
suggested
and
has
 funds
available
for
acquisitions
should
the
opportunities
present
themselves.


 The
cost
to
the
business
of
not
implementing
the
strategic
options
is
considerable.

To
preserve
any
 competitive
advantage
derived
from
their
market
position
Communisis
need
to
continue
to
innovate
 and
develop
their
services.

As
long
as
their
customers
know
that
Communisis
are
able
to
fulfil
and
 exceed
their
print
and
marketing
requirements
Communisis
will
maintain
their
market
leading
 position.

50
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