The table illustrates the statement of cash flows for a courier company for the last fiscal year.
Due to aggressive market competition, the management of the company performed a strategy review and
based on their findings and the current market conditions they came up with strategic and tactical changes in
order to keep a competitive market position.
In order to strengthen customer retention strategies through a new competitive advantage, the company is
considering implementing a live parcel tracking system. The added value will be that the customers may
determine the exact location of the parcel whether it is in a warehouse, crossing the ocean through an overseas
ship, or travelling in a delivery truck at any time. The system tracks the location of the parcel by tracking the
vehicle in which it is contained. However, for a group of old delivery trucks, it was noticed that the engine sound
and vibration disturbed the tracking signal and caused interruptions. Therefore, the tracking does not perform
accurately on these vehicles. Although the majority of management would like to sell these vehicles and replace
them with newer ones, the Chief Financial Officer (CFO) was strongly against that approach. The CFO argued
that instead of hanging tracking devices on the trucks’ body, they can have the truck drivers manually send the
truck location from a hand held mobile device every 30 minutes.
The company has a total of 134 old delivery trucks that have been in service for 10 years. Each vehicle was
bought at a price of $22,000. Depreciation is done using a straight line basis and it is estimated that the vehicle
depreciates at $1000 per year. The estimated salvage value per vehicle is about $3,000.
Another area of tactical improvement for the courier company is pricing. The management strongly believes
that they can start a price war with the most aggressive competitor. Management thinks, with their variable cost
of $4 per parcel and fixed cost of $6 per parcel, they can win the market. However, after implementing the
tracking solution, fixed cost will jump to $8 per parcel which made management reconsider their options. The
competitor has variable costs of $5 per parcel and fixed costs o $7 per parcel.
In order to align with the added value required from the parcel tracking solution that would be an important
requirements’ category for the BA to give more focus?