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W11351
FIRST CLASS TRADING CORPORATION
Christopher A. Ross wrote this case solely to provide material for class discussion. The author does not intend to illustrate either
effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying
information to protect confidentiality.
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Copyright © 2011, Richard Ivey School of Business Foundation Version: 2011-10-13
After evaluating the school supplies industry, Jeffrey Morahan and his friend Marco Forlini incorporated
their company, First Class Trading Corporation (First Class), in Montreal, Quebec, in 2003. Morahan had
identified a business opportunity which involved marketing a knapsack, fully stocked with school supplies,
to schools and parents. The school bag was filled with various items, as determined by teachers’
requirements. The company also offered dictionaries and other reference materials. After approximately
one year of operation, however, Forlini withdrew from the company and David Sciacca joined the
company as a co-owner.
In November 2006, Morahan and Sciacca were wondering whether they were on the right path to grow
their fledgling company. The company’s slogan was “Your partner in education” and according to
Sciacca, the goal was to “create fluent learning environments that render the education process more
effective and efficient.” Essentially, First Class partnered with schools in order to simplify the purchasing
process for school supplies by parents and schools.
First Class’s strategy was to target elementary and secondary private schools in the Greater Montreal area,
with elementary schools being its initial target. To date, the owners had generated sales through cold calls
and sales visits to schools. This strategy had won them two Montreal-based elementary schools. Sales to
these two schools totalled $22,000 and the total number of students purchasing was 240. Morahan and
Sciacca had committed their strategic plan to paper but as they sat in their office they were still wondering
whether the plan was viable: Should it be modified or should they give up the idea altogether because the
risk was simply too great?
THE SCHOOL SUPPLIES MARKET
In the province of Quebec,1 the education system was divided into two sectors: (a) public and (b) private
schools. A number of different school boards managed the public schools, while the private schools were,
in general, individually managed. Excluding universities, there were four levels of schools within each
1
In Canada, education was a provincial responsibility.
This document is authorized for use only by Angélica Dafne Carballo Barragán (adafne.cb@gmail.com). Copying or posting is an infringement of copyright. Please contact
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Page 2 9B11A037
sector: preschool, primary, secondary, and CEGEP.2 Quebec’s private schools were popular among
parents. Excluding the preschool and CEGEP segments, in 2005/2006 the 123,313 students in private
schools represented approximately 10 per cent of all Quebec students. With the adult sector of all
secondary schools excluded, there were 999,394 students enrolled in elementary and secondary schools
throughout the province, with 117,022 students registered in private elementary and secondary schools (see
Exhibit 1). This number represented a 14 per cent increase in enrolment over the period 1998 to 2005. In
Quebec, there were 2,755 elementary, secondary and mixed elementary/secondary schools and of these,
346 were private schools (see Exhibit 2). Some private schools were completely independent of
government funding but the vast majority, approximately 90 per cent, were partially subsidized by the
government to the tune of roughly 60 per cent of the cost to the school of each registered student. This
subsidy was resented by some members of the public and occasionally there were public calls for ending
subsidies to private schools. Public schools, however, were completely government funded.
Montreal had the highest density of private schools in the province. In 2005/2006, there were 444 public
elementary, secondary and mixed elementary/secondary schools. In addition, there were 162 private
elementary, secondary and mixed elementary/secondary schools. Of the private schools, 97 were French,
44 were English, and 21 were both French and English (see Exhibit 3). Private elementary and secondary
schools therefore accounted for 26.7 per cent of all elementary and secondary schools in Montreal.
In Quebec, 29 per cent of children attending private schools were from families with incomes below
$50,000 per year and another 29 per cent were from families earning between $50,000 and $74,000 per
year. Because of the low birth rate, however, the number of school-age children was decreasing rapidly.
Statistics Canada had projected a decrease of 13.51 per cent in the number of children between the ages of
five and 13 years for the period between 2001 and 2011. The average number of students per classroom
was approximately 22, with a slightly lower number in the private school system.
Consumers
A U.S. study by the Gale Group identified a number of factors that influenced consumers’ buying habits
during the September back-to-school season.3 This study found that price, quality of merchandise, and
availability were the three most important factors that influenced consumers’ choice of retail outlet for
school supplies. Other factors included selection, customer service, convenience, store layout, and trust.
Once inside a store, parents looked for quality, price and whether an item was included on the school list.
Brand name was the lowest ranked reason for purchasing specific products. Discount stores and office
product stores were the most popular outlets, and buyers tended to visit more than one store as they
searched for better prices, better selection or a specific item that a child required.
In Canada, as in the United States, the back-to-school season was the second-busiest for retailers after the
end-of-year holidays. Seventy-five per cent of shoppers were parents and four per cent were grandparents.
Every year, Canadian parents spent an average of $108 on back-to-school supplies such as notebooks and
binders. In contrast to the other provinces, it was estimated that in 2004, Quebec parents spent
approximately $138 per student (excluding expenditures on accessories such as mirrors) on school
supplies. This figure was expected to grow at a compounded annual growth rate (CAGR) of 3.24 per cent.
2
In Quebec, a student progressed through the educational system as follows: preschool, primary, secondary, CEGEP and
university. CEGEP is an acronym for Collège d’enseignement général et professionnel.
3
“BTS study examines consumer motives,” October 26, 1998,
www.findarticles.com/p/articles/mi_m3092/is_1998_Oct_26/ai_53191217/print.
Page 3 9B11A037
By 2015, household spending per child was expected to be $195.98. In 2004, total Quebec sales were
estimated at $125 million annually.
Back-to-school was always a hectic period for all parties, and parents were often confused as to their
children’s school supplies requirements. Parents were also concerned about the accuracy of their
purchases and therefore spent considerable time seeking appropriate supplies for their children.
Furthermore, many schools did not have a systematic approach to crafting their supplies list and much time
was often wasted by school administrators, teachers and parents as preparations got under way for the first
day of school. Within private schools, decision-making power was shared between the school’s
administration and the parent committees. Most schools did not make major decisions without first
consulting parents, since they were significant stakeholders in the institutions. Teachers normally
generated back-to-school supply lists in the spring.
While each school had a preferred supplier for the supplies that teachers used, most schools allowed
parents to shop wherever they wished. Schools sometimes suggested outlets, especially in the case of
school uniforms, but for supplies like binders, pencils, paper, and erasers, parents normally shopped at the
outlets of their choice using the shopping list provided by the school.
THE COMPANY
Morahan and his friend Forlini had established their company, First Class Trading Corporation, in
November 2003. Through an acquaintance, they subsequently met with the director general (DG) of the
Lester B. Pearson School Board, the largest English public school board in Montreal and in Quebec. The
DG agreed to review their promotional material during the end-of-year holidays and he met with them
shortly afterwards. At this meeting, Morahan and Forlini made a presentation and demonstrated a sample
of their product embossed with the school board’s logo. They also had a letter of reference endorsing the
concept. According to Morahan, the DG was enthusiastic about the project. He subsequently requested
the various school board commissioners to follow established protocols to have the product approved at the
various schools. This school board managed 45 elementary schools and 11 high schools with a combined
enrolment of 27,814 students.4 The board managed schools on the west side of Montreal island as well as
in Hudson and St. Lazare, nearby municipalities off the island of Montreal.
Morahan and Forlini had understood that with the board’s approval, First Class would supply all the
schools in the board’s territory. In preparation for the approval, therefore, they started gearing up to supply
the schools by establishing their infrastructure and supply lines, and finalizing arrangements with dealers.
While doing this, they discovered that in the industry all the deals were worked out in March/April for
delivery in September. As a result, they had to buy early.
At the school board, the product was approved at all levels except at the level of the individual schools. At
the meeting where it was discussed with the individual schools, the principals expressed the opinion that
they did not want to be held responsible if there were any disasters. They pointed out that parents
approached principals first to complain, and targeted principals if there was a problem, and that principals
were held responsible for what happened in their schools. Waiting during the period of negotiating with
the school principals was very stressful and during that time, Forlini withdrew from the company.
4
Annual Report, Lester B. Pearson School Board, 2003-2004.
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Morahan continued the operations of the company, did presentations, and was nominated for the Quebec
Entrepreneurship Contest.5 Finally, the DG said that he could not get the backing of the individual schools.
Morahan subsequently decided to target private schools. He reasoned that private schools would be more
inclined to use his services since parents paid fees to these schools and would therefore be prepared to pay
for things that they perceived to be legitimate expenses.
Morahan, however, still felt that he needed a partner if the business was to succeed. He and Sciacca had
attended college together and they had encountered each other at various functions. At one business
function, he ran into Sciacca. At this meeting, he described the business to Sciacca and said that he was
looking for a partner. Sciacca subsequently agreed to come on board.
Morahan and Sciacca were both bilingual in English and French and had graduated from a well-known
Montreal business school. Morahan had graduated in accounting and finance and had won numerous
awards for his academic achievements and contribution to student life. He also had experience in
operations and financial management in the transport, apparel, and software industries. Sciacca, also a
graduate in accounting and finance, had participated in numerous student associations. He had experience
as an investment advisor, in conflict management, valuation and risk assessment. He also had experience in
sales.
The product, which they named K12, was a customizable, fully stocked school bag. The contents
consisted of what the teacher asked for at the beginning of the school year. Each bag contained, for
example, paper, binders, spiral notebooks, regular notebooks, crayons, erasers, and rulers. This unique
school bag catered to the needs of students, parents, teachers and schools. The product centralized the
back-to-school purchasing task and packaged all needed school supplies within a single school bag. K12
offered end-users, students enrolled in elementary and secondary schools, the benefit of having uniform
school supplies. According to Morahan and Sciacca, no student was to be at a disadvantage for lack of
materials. In addition, as with school uniforms, the standardized school bags prevented students from
identifying each other on the basis of “coolness.” All students were therefore on an equal footing.
K12 offered parents the benefit of convenience, since parents no longer had to shop around for their
children’s school supplies. Furthermore, K12 offered parents and children high-quality products at
competitive prices. Parents therefore had peace of mind knowing that their children were equipped with
appropriate school supplies.
Teachers also benefited from K12, as it ensured that all students received the required school supplies.
This, in turn, allowed teachers to demand specific products without placing the burden of store purchasing
on parents. Thus, both parent and teacher satisfaction improved. The institutions also benefited from K12,
as it helped schools instill a sense of identity among students when school bags were branded with the
school’s name and logo, thus promoting school pride and values.
Operations
Morahan and Sciacca visited the private schools in January. They had a presentation book of about eight
pages. This book gave a description of what they wanted to do and how they would go about doing it. The
book also presented a comparative study of First Class’s prices versus their closest competitors. These
5
The Quebec Entrepreneurship Contest focused on schools and on new entrepreneurs who were at the business planning
stage. It promoted entrepreneurship in Quebec by rewarding concrete initiatives throughout the province.
Page 5 9B11A037
competitors were Bureau en Gros,6 Wal-Mart, Jean Coutu Pharmacies and Pharmaprix.7 Their comparison
showed that if a parent bought all school supplies at one store, First Class was approximately 11 per cent
cheaper. Morahan explained, “We maintain a certain level of profit on every item we sell. We do not go
into selling loss-leaders. Some stores sell loose leaf sheets at $0.50 or $1.00 per packet but the cost is
$1.25, so these stores are taking a loss. We sell at $1.25 plus our mark-up, but we would not sell a
calculator at $20 if it cost us only $10. And overall we are cheaper than Wal-Mart.”
They made their pitch to the principals, and those who were interested provided the list of materials that
the classes needed. This would normally be the lists from the previous year. First Class then consolidated
the lists from the different schools. Consolidation of the lists was complicated because some of the schools
were disorganized with regards to the preparation of lists. In addition, two different Grade 6 teachers, in
the same school, could have different requirements. First Class tried to standardize the lists as much as
possible while trying to keep the teachers happy. Once approval and acceptance of the lists was received
from the school, a signed letter of intent was requested. Morahan and Sciacca then consolidated the lists
and placed the order.
The manufacturers of school supplies such as Hilroy, Crayola and Staedtler all dealt with customers who
ordered in large volumes. A small customer such as First Class was therefore directed to the established
channel of distribution, which in this case meant dealing with Corporate Express, a major international
services and distribution company, with locations worldwide. Because of size, Corporate Express was able
to purchase at a favourable discount from manufacturers and sell to retailers. It delivered at the point
designated by First Class. Corporate Express also provided very favourable terms. For orders placed in
February/March, Corporate Express allowed payment to be made only in September. Supplies were
normally received within 24 to 48 hours. At First Class, packaging the supplies required approximately
two people working for eight hours to fill 100 bags.
First Class tried to standardize the products offered to the schools. While it was prepared to offer different
sizes of school bags, the company strongly preferred standardization of colour and sizes within any one
level in the school. This put all students on the same footing, in the company’s opinion. For example,
Grades 1 and 2 had a smaller-sized bag than Grades 3 to 6. In response to the schools which said that
parents wanted differences, the company emphasized that standardized school bags played the same role as
school uniforms: they minimized differences and therefore jealousy and envy among students. In addition,
the company felt that the method of standardization was the safest way to deliver the supplies.
Some parents suggested putting the names of the students on the bags but Morahan and Sciacca argued that
that would allow strangers on the street to know the names of the students and the schools attended.
Parents, however, wanted cool bags and cool pencil cases. Some parents also did not want a new school
bag each year, while other parents were concerned about reusing supplies from previous years. Some
schools suggested providing some of the supplies in September and some in January. The business model
of First Class, however, could not accommodate these requests.
First Class’s approach to the different schools was that all the students had to buy into the program. It was
all or nothing. Sciacca explained, “It would only be worthwhile if the entire school was involved. We
could not afford to order, say, for seven students. We did not want to go through the process for even 25
students. Financially, it did not make sense.”
6
The corporate name used in Quebec by the office supplies company Staples.
7
The corporate name used in Quebec by the Canadian retailer Shoppers Drug Mart.
Page 6 9B11A037
For teachers, the purchasing process was as follows:
1. First Class supplied the checklist to teachers.

2. Teachers checked off the supplies that they wanted each student to get.
3. The completed list was returned to First Class.
4. The material was packaged in durable school bags and delivered to schools.
5. Students got the bags on the first day of school.
First Class received payment from the schools and not from individual parents. The schools were
responsible for collecting payment from the parents.
COMPETITION
First Class had a number of competitors who, while not offering the bundling service, were able to offer
identical products. Most parents, when buying school supplies, used one of these competitors, depending
on availability and their preferences. Big-box and discount stores including large corporations such as
Bureau en Gros and Wal-Mart offered convenience and competitive prices, and benefitted from mass
promotional campaigns. They also operated nationwide and offered multiple ways to shop. At Bureau en
Gros, for example, customers could shop at the retail outlets (on Montreal island it had 12 retail outlets), or
online, or order from a print catalogue. Wal-Mart had eight locations in the Montreal area offering sundry
items from apparel to toys. In the school supplies department, Wal-Mart offered a wide assortment of
school materials but had limited depth within each category. These stores did not, however, offer
customized solutions.
Drug store chains such as Jean Coutu, with 56 Montreal locations, and Pharmaprix, with 20 Montreal
locations, also offered school supply items. These chains offered convenience such as 24-hour operations,
especially useful for urgently needed supplies. As a result, they were able to command higher prices. On
the other hand, drug store chains did not stock a wide range of merchandise for back-to-school. Other
competitors included small- and medium-sized independent retailers. These offered pre-packaged school
supplies as determined by the schools but they often sent the supplies in bulk to the schools and the schools
were responsible for sorting and packaging. Their overhead costs, however, limited their price
competitiveness.
In-school bookstores were exclusive outlets that offered a focused range of products that catered to the
needs of the students in a school. They offered convenience to both students and parents since they carried
what was required by the school, but products were priced at higher price points. These stores existed in
the medium- to large-sized schools and their market was limited to the school population. Morahan and
Sciacca saw these outlets as major threats since they could easily bundle pre-packaged supplies for their
students. The majority of schools in Montreal, however, did not have in-school retail outlets.
KEYS TO SUCCESS
Both Morahan and Sciacca saw the need to clearly position their enterprise in the minds of parents,
teachers and administrators. They promised a combination of quality goods, timely service and
convenience as part of their value proposition. They wanted to offer an innovative concept and value-
added services that no other competitor could match. Goods were customized to meet the individual needs
of each school. The company had the ability to deliver quality products bundled in school bags at
competitive prices. Morahan and Sciacca identified their keys to success as follows:
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1. Clearly communicate the cost and time savings and positioning advantages of K12 to private
elementary schools.
2. Emphasize the selling tasks within the organization, as this was the key driver of revenues.
3. Secure long-term contracts through relationship-building with schools so as to ensure constant revenue
streams.
4. Obtain the approval of parents.
The two entrepreneurs also felt that they had to keep their eyes on some critical environmental issues and
react swiftly in the event of any changes. For one thing, continued government subsidization of private
schools was essential if there was to be continued enrolment growth in private schools. In addition to high-
income earners, more and more middle-income Montreal families were also sending their children to
private schools. Finally, individuals and institutions were always seeking ways to simplify their lives
given today’s fast-paced living. Thus, products and services that offered solutions to everyday issues were
often successful in the marketplace.
MARKETING STRATEGY
First Class wanted to collaborate with private schools in order to forge long-term partnerships and to
improve the buying process for educational supplies. Its marketing strategy was to emphasize the unique
benefits of K12 to the schools and the various stakeholders. The company wanted to communicate with
key decision makers and influencers such as school directors and parent committees. Private schools were
interested in providing the best solutions to students and parents, and were constantly seeking additional
ways to add value to their service offerings. They sought to differentiate themselves from their
competitors through smaller classes, newer facilities and extra-curricular activities. Both Morahan and
Sciacca wanted the company to be a partner with schools in order to simplify the buying process of parents
and provide added services to these elementary and secondary institutions.
The company also had some well-established goals. It wanted to capture at least a five per cent market
share of Quebec private elementary schools by 2008. It wanted to maintain marketing expenses at roughly
five per cent of sales and wanted out-of-Montreal sales to account for 15 per cent of total sales by 2009.
Softer goals included the forging of long-term relationships and partnerships with Montreal private
elementary schools. Financially, the company wanted to break even in 2008 (see Exhibits 4 and 5),
maintain gross margins at 30 per cent at least until 2009, and increase sales growth by 25 per cent each
year until 2009. At that time, the principals of the company felt that they should re-evaluate their goals and
objectives.
Target Market
Morahan and Sciacca decided to target two categories of buyers. The first category was the private
elementary school directors. This group consisted largely of women, aged 45 years and over. The
majority of directors worked in collaboration with parent and teacher committees. Together, both parties
took decisions regarding the purchase of new school supplies. Directors, however, were the final decision
makers with regards to new purchase decisions. Their main purchase criteria were quality, price and
overall benefit to the learning institution.
The second category of buyer was private elementary school teachers and parent-teacher committees. For
the most part, private elementary schools had parent and teacher committees that were involved in new
Page 8 9B11A037
purchase decisions. Parent committees were made up mostly of women. Their main purchase criteria
were product quality and benefit to children. They were significant influencers of school directors and
administrations. Moreover, teacher committees also had an influence on school directors. The teacher
committees were made up of male and female teachers, who were also involved in the overall
administration of institutions. They wanted quality products that enhanced learning. Initially, First Class
wanted to focus on the Montreal region. In the long run, however, the company wanted to expand its
marketing efforts to the Quebec market, focusing on key urban areas such as Quebec City and Trois
Rivières.
The Marketing Mix
First Class’s product was a fully stocked backpack as determined by teachers’ and directors’ preferences.
Pricing was determined by the cost of sales as well as by competitors’ pricing. The average cost of each
backpack was $63. Taking into consideration competitive pricing, Morahan and Sciacca decided that a
price of $90 per backpack was reasonable and provided a healthy margin. From published reports, they
knew that the average price paid by parents was $138. They therefore reasoned that at $90, their product
was quite affordable, especially since a new school bag was being offered each year. They saw this price
as a penetration price. As they gained an increasing foothold in the marketplace, they envisioned
increasing the price but intended to remain sensitive to school budgets.
In the promotional area, they considered brochures, personal selling, product samples, trade shows,
sponsorships and a website. They wanted to use brochures (see Exhibit 6) to create awareness. The
brochure outlined the benefits of the product and how the company could be contacted. Trade shows were
to be used to generate buzz about the company and its services. The benefits of trade shows included the
opportunity to network, prospect customers, create awareness and generate sales. The company also had a
website that provided information about the company, its products and services, the benefits of using K12,
and company contact information.
The entrepreneurs also wanted to launch a sponsorship program designed to provide incentives to schools
and build brand equity. Sponsorships of events such as fieldtrips and school activities would ensure
positive long-term relationships with schools and students. They estimated that the programs would cost
$1,000 in 2007, $1,500 in 2008 and $3,000 in 2009.
First Class also offered to pick up old school bags from schools to donate them to a charity which
promoted education in poor countries. The company thought that this would create good will towards First
Class and decrease the waste associated with purchasing a new school bag each year.
First Class acted as an intermediary between suppliers of school supplies and the private schools. The
company sold directly to schools via personal selling administered over the phone and face-to-face.
Morahan and Sciacca felt that this simple model was unique in the industry.
FINANCIALS
The marketing budget had been set at five per cent of forecasted sales. All promotional and sales activities
had to fit within this budget. As a result, the company forecasted a significant increase for the marketing
budget in 2009, with $20,000 allocated to this function. The idea was to cover additional costs associated
with the hiring of a new salesperson and with increased promotion.
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During 2004, its first year of operation, First Class incurred a loss of $9,543 on sales of $6,297. In 2005,
sales increased to $29,372 ($24,000 of this was a special sale of school bags to the Lester B. Pearson
School Board) but the company still had a loss of $5,991. Its gross margin dropped significantly in 2005
because of inefficiencies in the ordering process for goods. In 2006, revenues were $22,000, representing
two school contracts and 240 students. These two schools were part of a franchise that had 13 schools
altogether. The average contract size was therefore $11,000, with approximately 120 students per school
served. The company’s main capital assets were furniture and computer equipment valued at
approximately $4,177.
The company projected sales of $198,000 in 2007 (see Exhibits 4 and 5). This projection was partly based
on capturing 50 to 75 per cent of schools that operated in the franchise of 13 schools. Projections for
future years took into consideration that if First Class did a good job, schools would continue ordering in
the future years. For 2007-2008, most of the revenues were projected to come from the Montreal-area
private school market. Selling was to be the responsibility of Morahan and Sciacca. They intended to split
the task evenly. Also, they planned to hire a new salesperson in 2009 in order to generate additional sales
from the private schools outside the Greater Montreal area. These sales were projected to be 15 per cent of
overall sales in 2009. They expected that the salesperson hired in the last half of 2009 would be paid a
base salary of $15,000 plus a two per cent of sales commission.
As they sat in their office, they wondered what more they had to do to be successful. They had quality
products, a ready supply of stock, excellent value and lots of enthusiasm. They asked themselves, “Is this
plan realistic? Are major modifications to the plan necessary or should we drop the idea altogether?”
Christopher A. Ross is a professor, department of marketing, John Molson School of Business, Concordia University,
Montreal.
Page 10 9B11A037
Exhibit 1
ENROLMENT BY LEVEL IN 2005-2006 (QUEBEC)
Public Private Total

Total 1,653,456 145,780 1,799,236
Preschool 84,276 4,655 88,931
4-year-old 14,778 30 14,808
5-year-old 69,498 4,625 74,123
Elementary 479,879 30,461 510,340
Secondary 653,770 92,852 746,622
Youth Sector 402,493 86,561 489,054
Adult Sector1 251,277 6,291 257,568
College 171,289 17,812 189,101
Regular Education 148,093 11,213 159,306
Continuing Education2 23,196 6,599 29,795
University3 264,242 264,242
Note:
1
. These figures include students enrolled in literacy and postsecondary education programs in the adult sector, numbering
102,301 in full-time equivalents.
2
. The figures for continuing education exclude students enrolled in non-credit programs. It is for the fall term,2005, only.
3
. These figures include resident physicians but exclude auditors, post-doctoral fellows, and visiting students. It is for the fall
term, 2005, only.
Source: Basic Statistics on Education in 2005-2006, 2007 Edition, Ministère de l’éducation, loisir et Sport, Quebec.
Exhibit 2
NUMBER OF EDUCATIONAL INSTITUTIONS IN 2005-2006, QUEBEC
Public Private Total

Elementary Schools 1,762 128 1,890
Secondary Schools 440 160 600
Elementary/Secondary 207 58 265
Schools
Vocational Education 195 195
Centres
Adult Education 191 191
Centres
Colleges1 632 67 130
Universities and 19 19
Branches
Note:
1
One institution is counted twice (as both a secondary school and college) because it dispenses both secondary and
college education.
2.
These figures include 52 CEGEPs and campuses and eleven government-run institutions
Source: Basic Statistics on Education in 2005-2006, 2007 Edition, Ministère de l’èducation, loisir et Sport, Quebec.
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Exhibit 3
TEACHING ESTABLISHMENTS IN MONTREAL, 2005-2006
Public Schools French English French/English Total

Elementary Schools 236 80 0 316
Secondary Schools 62 42 104
Elementary/Secondary 11 12 1 24
Schools
Professional Training 11 6 12 29
Centres
Adult Education 27 9 2 38
Centres
Total Public Schools 347 149 15 511
Private Schools French English French/English Total
Elementary Schools 43 13 6 62
Secondary Schools 32 15 10 57
Elementary/Secondary 22 16 5 43
Schools
Collegial 17 3 21 41
Total Private Schools 114 47 42 203
Source: Extracted and translated from Tableau 2.1, Ministère de l’éducation du Quebec, 2007,
www.mels.gouv.qc.ca/stats/portraits-regionaux/region.asp?region=3, accessed July 8, 2009.
Exhibit 4
PROJECTED SALES AND NET INCOME
2007 ($) % 2008 ($) % 2009 ($) %

Sales Revenues 198,000 100 247,000 100 426,937 100
Cost of Sales 138,600 70 173,250 70 277,509 65
Gross Margin 59,400 30 74,250 30 149,428 35
Advertising and Promotion 9,900 5 12,375 5 21,347 5

Entrepreneurs’ Salaries 35,000 17.68 40,000 16.16 50,000 11.71
Sales Manager Salary 0 0 0 0 15,000 3.51
Warehousing 4,000 2.02 4,000 1.62 6,000 1.41
Telecommunications 3,000 1.52 3,000 1.21 3,000 0.70
Automotive Expenses 3,960 2 4,950 2 8,538 2
Office Expenses 1,980 1 2,475 1 4,269 1
Professional Fees 1,980 1 2,475 1 4,269 1
Total Operating Costs 59,820 30.21 69,275 27.99 112,423 26.33
Amortization 1,241 1,241 1,241

Interest 1,000 2,000 4,000
Earnings Before Taxes (2,661) -1.34 1,734 0.70 31,762.62 7.44
Taxes (35%) 0 607 11,117
Net Profit (2,661) -1.34 1,127 0.46 20,646 4.84
Source: Company files.
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Exhibit 5
PROJECTED CONTRIBUTION MARGINS
2007 2008 2009

Sales ($) 198,000 247,500 426,937
Direct Cost of Sales ($) 138,600 173,250 277,509
Gross Margin ($) 59,400 74,250 149,428
Gross Margin (%) 30 30 35
Marketing Expense Budget

Brochures ($) 2,632 2,977 4,972
Personal Selling ($) 0 0 1,485
School Sponsorships ($) 1,000 1,500 3,000
Trade Shows ($) 3,000 3,500 4,000
Samples ($) 2,268 2,898 4,890
Website ($) 1,000 1,500 3,000
Total Sales and Marketing 9,900 12,375 21,347
Expenses ($)
Percent of Sales (%) 0.05 0.05 0.05
Marketing Contribution ($) 49,500 61,875 128,081

Marketing Contribution (%) 25 25 30
Page 13 9B11A037
Exhibit 6
THE PROMOTIONAL BROCHURES

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FIRST CLASS TRADING CORPORATION

Copyright © 2011, Richard Ivey School of Business Foundation Version: 2011-10-13

THE SCHOOL SUPPLIES MARKET

For teachers, the purchasing process was as follows:

1. First Class supplied the checklist to teachers.

The Marketing Mix

ENROLMENT BY LEVEL IN 2005-2006 (QUEBEC)

Public Private Total

University3 264,242 264,242

NUMBER OF EDUCATIONAL INSTITUTIONS IN 2005-2006, QUEBEC

Public Private Total

TEACHING ESTABLISHMENTS IN MONTREAL, 2005-2006

Public Schools French English French/English Total

PROJECTED SALES AND NET INCOME

2007 ($) % 2008 ($) % 2009 ($) %

Advertising and Promotion 9,900 5 12,375 5 21,347 5

Amortization 1,241 1,241 1,241

Source: Company files.

PROJECTED CONTRIBUTION MARGINS

2007 2008 2009

Marketing Expense Budget

Marketing Contribution ($) 49,500 61,875 128,081

Source: Company files.

THE PROMOTIONAL BROCHURES

Source: Company files.

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