Colorscope, Inc.

Colorscope, Inc.
Overview
Founded on March 1, 1976
Andrew Cha, Owner
Family-owned
Special-effects photography laboratory
Services local agencies in Southern California
agency giants
large retailing companies
entertainment companies
Sales peaked in 1988 at $5 million
Issues of Pricing & Systems
How might they change their pricing strategy?
Pricing Strategy
Implement new rework policies
Invest in technological updates
Restructure the organizational chart
Conclusion
Upgrade technology
Restructure the organizational chart
Turn efforts towards web-based and television based media sources
Find new location better suited to spatial needs
Job Profitability
Cost-Quality Trade Off
Colorscope, Inc.
Industry & Competitors
Diverse range of products
Greeting cards
Catalogs
Financial reports

Competitors:
Largest Printer: R.R. Donnelley & Sons
National pre-press houses
Standalone firms
Why would any customer, let alone large advertising agencies and department stores, go to Colorscope rather than go to the large printers?
Why go to Colorscope?
Personalized Relationships
Skilled Employees
Quality Service & Products
Customer Loyalty
Overhead Rate
Profitability Analysis by Job
Most Profitable Jobs
Most profitable jobs are 61202, 61203, 61204
Jobs did not require rework

In total, 16 out of 26 jobs were profitable
What is the financial consequence of rework?

Loss of $9,154 due to customer change in specifications
Loss of $6,565 due to in house errors (Quality Control)
Recommendations for solving the
cost-quality tradeoff problem?
What is the overhead rate for each activity?
Overhead Rate
Idle time of $21,840 + Unused space of $13,000
Total of $34,840 in excess cost
Rework
Several pricing structures available
Most effective for Colorscope:
Cost-Plus Fee
Helps reduce high cost of rework
Currently, high quality work is costly for Colorscope
Update equipment
Update policies regarding rework
Employee compensation
Recommendations
Colorscope's Actual Future
June 6, 2007 acquired by Quebecor World
Joe Cha (son), President

Wes Lucas, President & CEO of Quebecor World said:

“The acquisition of Colorscope provides us with a strong, highly respected Premedia presence on the west coast, new relationships in Asia and composition resources that can provide additional value to our customers. I am fully confident that Joe and his Colorscope team, combined with our Premedia Division, will deliver new and innovative solutions to our customers as well as greater value to our shareholders.”
What should the company do about this?
What can Colorscope do to lessen the cost of rework?
Customers
President
Andrew Cha
VP Marketing & HR
Agatha Cha
Customer Service
12 Operators
Ruth Fukushima
Head of Customer Service
Don Chin
Technology Director
John Gibson
Controller
Where are they now?