LeMar Outdoor Play Products, Ltd.: An Outsourcing Decision to India

Abstract

This case, based on general business experience, casts students in the role of analyzing the financial effects of a possible outsourcing decision. Lee and Marcia Mills, owners of LeMar Outdoor Play Products, Ltd. (LOPP), a Canadian company that designs, manufactures, and installs outdoor play equipment, are faced with a decision pertaining to whether LOPP should outsource the company's back-office information technology enabled services (IT-ES) functions. Lee engages with an outside advisory firm specializing in matching companies with suitable outsourcing partners in India, and eventually a contract is presented. From just a financial perspective, students must ascertain whether Lee and Marcia should accept the outsourcing offer. Excerpt UVA-C-2440 Jun. 18, 2020 LeMar Outdoor Play Products, Ltd.: An Outsourcing Decision to India Even though their ages were beginning to show, Lee and Marcia Mills were young at heart. For the past 15 years, they had tirelessly worked to build their business, LeMar Outdoor Play Products, Ltd. (LOPP), into a western Canadian industry leader. Of late, their reputation for novel, safe, and well-built products had produced inquiries from potential new customers in the US East Coast and several family-oriented resorts in Latin America. The company designed, built, and installed all types of outdoor play equipment suitable for school-age children. Marcia was the whimsical, creative force behind the company's unique product designs. She was also in charge of the company's marketing, sales, and promotion activities, which were web-based, brochure-based, and via targeted direct mail. Lee, on the other hand, was the primary business manager—overseeing the production operations, product transport and installation, as well as back-office information technology-enabled services (IT-ES) such as accounting, website expansion/maintenance, and personnel payroll/benefits. Late one Sunday afternoon, during a rare moment while relaxing on one of their perpetual self-pushing swing sets, they had agreed on two things that set a number of wheels in motion. First, they agreed that they were both too busy—they were, as the saying goes, “burning the candle at both ends” at an unsustainable level. Second, they wanted to grow the business, taking on the new clients that were calling from more distant locations. Perhaps they would become the world's leader of outdoor play systems, or be presented with a buyout option too good to refuse from an established company already in the recreational equipment industry. Maybe a company like Nike or North Face might want to expand their product offerings and would be interested in acquiring LOPP's. The first of their shared realizations presented an immediate, follow-on task for Lee that he looked forward to addressing. He needed to find a business affiliate that could take on the company's back-office operations (e.g., accounting, employee benefits, and payroll administration) and promotional communications (both hardcopy and web-based), freeing him to focus on the production and installation aspects of the business. Regarding the promotions-related activity, Marcia would still create and design the promotions materials and strategies while the hoped-for outsourcing company would print all pertinent hardcopy brochures and execute all her web-based campaigns. Lee started his research the next morning. . . .