Lakmini Print & Pack: When the School Goes Digital
Nethmi Fernando has run 'Lakmini Print & Pack', a stationery and photocopying shop 400 metres from a government school in Kurunegala, for six years. Monthly sales average LKR 480,000, of which about 55% comes from photocopying worksheets and past papers for students. Three things have changed this year. The school has issued tablets to its Grade 10 and 11 classes and now sends most worksheets through a messaging app. A national stationery chain has opened a branch one kilometre away, advertising prices roughly 10% below hers. Her paper supplier has raised prices by 18% and, because her account is three weeks overdue, now supplies her only on cash on delivery. She is also owed LKR 95,000 by two school societies for printing done last term, and her rent is due to rise by LKR 8,000 a month from next quarter. Nethmi has LKR 180,000 in the bank, no other borrowing, and works in the shop herself with one part-time assistant.
1. Classify the changes Nethmi faces into elements of the external business environment, and explain with figures which single change most threatens her monthly profit.
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Classification
- Technological: the school's shift to tablets and digital worksheets.
- Competitive: the chain branch pricing about 10% lower.
- Supplier/economic: the 18% paper price rise and the loss of supplier credit.
- Social/financial: school societies buying on credit; rising rent.
Which matters most Photocopying is 55% of LKR 480,000 = LKR 264,000 a month, and it depends entirely on printed worksheets. If tablet use removes even a third of that trade, she loses LKR 88,000 of monthly sales. Because photocopying carries a high paper cost, most of that lost revenue is also lost contribution, whereas the price war affects only the stationery side (45% of sales = LKR 216,000); matching a 10% cut costs about LKR 21,600 a month in receipts. The paper rise is serious but recoverable: if paper is roughly 40% of the price of a photocopy, an 18% increase adds about LKR 19,000 a month to costs, which can partly be passed on.
Judgement: the technological change is the biggest threat because it attacks the product itself, not just its price, and it is not reversible by her own decisions. The competitor and supplier problems are pressures she can respond to; the tablet programme changes what customers need.
2. Recommend two actions Nethmi should take in the next three months. Justify each with the figures given and state one risk of each.
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Action 1 – Replace photocopy income with services the tablets cannot provide. Add binding, laminating, ID-card printing, past-paper packs and a small 'print from phone' service (students still need hard copies for revision and parents want them). Target keeping at least half of the LKR 264,000 photocopy income rather than defending it as it was. She has LKR 180,000 available; a second-hand laminator and binding machine can be bought well within that, leaving a buffer. Risk: students may not pay for extras, so the machines sit idle and the money is lost. Mitigate by testing demand with a one-week trial before buying.
Action 2 – Restore supplier credit and collect the LKR 95,000. Paying the overdue account converts cash-on-delivery back to credit, which frees cash each month, and the LKR 95,000 owed by school societies is more than half her bank balance. She should agree dated payments with the societies and settle the supplier from collections. She should also stop giving open credit to new customers and take a deposit on large printing orders. Risk: pressing the societies too hard may lose their future orders; mitigate by offering staged payments rather than refusing service. Matching the chain's 10% discount is not recommended - it costs LKR 21,600 a month in receipts with no guarantee of extra volume.