CASE STUDY:

FIRST CLASS
TRADING
CORPORATIO
N
Team 4

Case facts

First Class Trading Corporation, a

Montreal-based company, had two
partners: Jeff Morahan, the founder of the
company, and David Sciacca.
After evaluating the school supplies
industry, Morahan had identified an
opportunity to market a fully stocked
school bag to schools and parents.
The bag was filled with various items that
a child needed as determined by a given
teachers requirements.

Case facts

The strategy of the company was to target

elementary and secondary private schools in
the greater Montreal area, with elementary
schools as the initial target.
To date, the partners had generated a
disappointing level of sales through cold calls
and sales visits to schools. They had drawn up
a strategic plan with objectives, positioning,
and a marketing mix and were now wondering
if they were on the right track.

Protagonist
Jeff Morahan - The founder of the company
David Sciacca Co founder of the company
Strategic Planning Levels
Corporate
Business
Functional

Strategic Planning Process

1.
2.
3.

Mission: Create fluent learning environments

that render the education process more effective
and efficient.
Slogan: Your partner in education
Does it answer the following questions?
What business are we in? - Education
Who are our customers? - Students
Why do we exist? Learning partner

Opportunities & Threat

Analysis
Opportunities

Threats

New idea in the market

Dependence on suppliers.

Competition on price,
convenience and quality

Changing customer taste

Interesting for parents,

teachers and students
Creation of long-term
partnership

Depending on parent
committee approval.

Strength & Weakness

Analysis
Strength

Weakness

Product differentiation

Currently making loses

Quality & convenience

Difficulty to deal with

suppliers

Innovative
Unknown to the customers
Low cost
Interesting for teachers,
parents and schools

Not able to deal with many

orders
Purchase agent instead of
direct relationship with
supplier.

Portfolio Analysis

Only one product

Industry Attractiveness

Business Strength

Market Size:
Growth Rate:
Competition:
Profitability:
Environmental Impact:

Market Size:
Market Growth:
Image:
Price competitiveness:
Product quality:
Sales force efficiency:
Profitability:

Establishing Company
Objectives

5% market share of Quebec private

elementary schools by 2008.
Maintain marketing expenses at
roughly 5% of sales
increase sales growth by 25% per
year until 2009
Company wants to break even in
2008
re-evaluate their goals and
objectives.

Acceptable?
Flexible?
Motivating?
Consistent?
Understandable
?
Achievable?

Situation Analysis

Sales volume:
Gross margin: 30 per cent at least until
2009
Profits:
ROI:

Marketing Strategy
Formulation

Differentiate- smaller classes, newer

facilities and extra-curricular activities.
Collaboration with private schools
emphasize the unique benefits of K12 to
the schools and the various stake
holders.

Segmentation, Targeting & Positioning

Segmentation - Macro level

Macro level Industry level - Education
Industry
Organizational characteristics
Number of schools:?
Location: ?
Customers Industry: Education
Purchasing factors: ?
Purchase criteria: Quality, price & overall benefit
to the learning institution.
Product Application: ?

Organizational
Variables

Purchase situation
Variables

Individual Variables

Purchasing phase: New

task

Purchase importance-

Personal characteristics
Individuals in the DMUMostly women.
Parents -Price sensitive

Purchasing policiesCustomers experience

Inexperienced
Purchasing criteria-

Power structure Decision making

-application/use.
Marketing -after sale
support, usability,
quality etc
Sales programs
-personnel involvement.
Success -personnel
relationship.
Customer Interaction
Needs higher
Organizational
capabilities customers
will be attracted by
discounts, durability etc
as the product is new

Structure of buying
centre-

Evaluation of segments
Market profitability analysis

Competition analysis

Differentiator: Customized
solutions. Market potentialSales potentialSales forecastProfitability-

Big-box and discount stores

including large corporations such
as Bureau en Gros and Wal-Mart.
Offer identical products not
bundled
Convenience and competitive
prices
Benefitted from mass
promotional campaigns.
Multiple ways to shop online,
store

Competition analysis

Big-box and discount store

Wall-mart and BureauGros offering convenience
to customers and competitive prices.
They are also enjoying the benefit of large
promotional campaigns as they are serving
nationwide through various stores allocated in
different locations.
In school supplies Wall-mart offers a huge
variety of school material and also offering
customized product.

Targeting
Segment: Private School
Target: Undifferentiated market selection
1.Private elementary school directors.
People involved in DMU
DMU largely consisted of women, aged 45 years
and over.
Majority of directors worked in collaboration with
PTA. (Both had equal say)
Directors were the final decision makers with
regards to new purchase decisions.

Targeting
2. Private elementary school teachers and
parent-teacher committees.
Influencers

Purchase criteria

PTA (mostly women)

Product quality and benefit to

children. Product quality and
benefit to children.

Teacher committees (both

male & female)

Quality products that

enhanced learning.

Positioning

Organizational buying
process
Initiator

Influencer

Decider

Buyer

User

The children
are the
initiators of
this buying
process, as
they show
their urge to
have new
bag and
accessories
for the new
semester.

Parents
whose views
are working
as an
influence on
Board of
Directors
final
decision
whether to
give the
contract to
firm or nor
are
influenced.

The Board
of Director
of
elementary
schools are
decider as
they are one
to take
decision
about
uniform bag
and
accessories.

Parents are
buyers as
they handle
the
purchase
paperwork
for their
children or
pays.

Children are
the final
consumer of
the product.

Porters Five Forces

Supplier
power

Buyer
power

Competitive
rivalry

Threat of
substitutio
n

Threat of
new entry

The
possibility of
prices
driven up by
the
suppliers is
medium.

The
possibility
of prices
driven up
by the
buyer is
high.

The company
should mainly
focus on
existing
competitors in
markets like
Wall-mart and
Bureau Gros
who are
enjoying good
reputation in
the market.
The threats of
competitor is

As the
product idea
is innovative
and new in
the market,
there is a
low chance
of close
substitute
products
exist in a
market

Profitable
markets
attract new
entrants, so
there is a
medium
chance of
new
entrants in
the market
that can
erode
profitability.

PEST
Political Factor
Government
Subsidies

Economic Factor

The First Class

Trading Corporation is
not having a negative
Currently following all effect on the
government
purchasing power of
regulations
potential customers
and the firms cost of
No negative impact
capital as the
on a firm under
economy is working
political factor as the well and firm is
firm is operating
interested towards
under it.
growth.

Social Factors
There is a positive
impact of social
factor on the firm as
they are facilitating
customer with the
convenience of
availability.

Analysis Questions
1)What is the strategy proposed by
Morahan & Sciacca ? What is your
evaluation of this strategy?
2) As a result of your evaluation, what do
you think they should do? Why?

Four Ps and Its

Implications
Product

Implication

Full stocked bag according to

teachers required school supplies
inside. The bag comes
embroidered with school logo;
student names initials are
available and in school colors on
the bag. It saves students and
parents time spent searching for
the right materials, it also
increases school brand
awareness, and quality is
guaranteed.

Saves consumers time spent

searching for specific materials,
increases school brand
awareness and guarantees
quality

Price

Implication

Offering prices that appeal to

Uniform Stores as they are
serving to price inelastic
consumers. This will give a
chance to First Class, Schools
and Uniform stores retain
attractive profit margins. This
price will add up to student
tuition, charged by the school,
and then paid to Uniform stores
and First Class.

Value Based pricing to appeal to

Uniform Stores, who in turn,
serve price inelastic consumers.
This allows First Class, Schools
and Uniform stores to maintain
attractive profit margins.

Place

Implication

Fully stocked bags with all

required accessories required by
teachers are sold exclusively
through Uniform stores. Uniform
stores are sent to customers for
an additional charge. This
strategy allows management of
valuable resources.

This strategy allows

conservation of valuable
resources

Promotion

Implication

High grade of personal selling

Need to have schools push
Uniform suppliers to carry the
product.
Management can adapt network
from popular post-secondary
school to easily network and get
a contact with the board of
directors. This will take the firm
to a greater accessibility in
adopting a contract. Break
even analysis

Management can use alumni

network from prominent postsecondary school to easily
network and obtain contacts on
the board of directors. This will
lead to a greater receptiveness
in adopting a contract.

Analysis

First Class Trading Corporation Sales

2004 :$6,297 Sales
Company lost $9543
2005: $29,372 Sales
Company lost $5991
2006: $22,000 Sales
Contract with 2 schools ($11,000 each)

Analysis

Profit/Loss
-Wanted to capture 5% market share of
Quebec Private Elementary Schools by
2008
-Maintain marketing expenses at 5% of
sales
-Maintain gross margins at 30% until
2009 in order to cover all fixed/variable
costs.
Bags: $90 Retail
Cost: $63

Company Goals

Projected Contribution Margins

-Currently (2006): Contracted with 2
schools within franchise of 13 Private
Elem. Schools
-Goal: Acquire contracts with 7-10 (5075%) schools within franchise of 13
schools
-Goal: Capture 5% of Quebec Private
Elementary Market

Current/Future Contracts

Projected Contracts
*$11,000/school
*$90/student
To Reach Projected Goals
Break Even Analysis
*$11,000/school
*$126/student
If Sales Price was $126
Quebec $138
FCTC $90

External

Declining enrollment in schools bring

into question the feasibility of the
market. After conducting a feasibility
analysis (Exhibit 1-4), it was determined
that

Recommendations
1.

2.

3.

Raise the price of K-12, expand the

target market, and increase advertising
and promotion budget.
Continue with the same price and
target market, but alter the advertising
and promotion strategy.
Stop all business operations.