CASE STUDY

Case Study: The Fraud Investigation Detective Agency

Case Study: The Fraud Investigation Detective Agency

The Fraud Investigation Detective Agency presents the problems faced by Ken and Barbara Wilson as they established their new business and, after achieving an initial success, the issues that the Wilsons faced as they attempted to expand the business. This case deals with the importance of creating competitive advantages as a strategy in starting a new venture. The case continues as the owners recognize the effects of their competitive advantages on the successful launch of the company. Finally, the case deals with strategies to expand market share by utilizing these competitive advantages. Financial data from the actual company are included.

In January 1992, Ken and Barbara Wilson, owners of the Fraud Investigation Detective Agency (FIDA), sipped hot chocolate at an outdoor table on the deck of a restaurant atop Aspen Mountain. Their ski vacation was the first long break from work since their graduations from college 15 years earlier. Ken and Barbara had worked hard, putting in long hours, and felt reasonably satisfied with FIDA's success since its 1987 founding. In spite of making a strenuous effort to increase the number of cases worked, though, FIDA's revenues and net profits had leveled off over the past 4 years.

The Wilsons agreed that they had developed a very efficient process for managing FIDA's business. If they were back in their Florida offices, Barbara would be opening the mail, assigning cases to private investigators, and processing case records. She was responsible for FIDA's administration. Ken would be working in the field, either on surveillance to gather evidence of a suspect's fraud, training an agent, or meeting with clients to report on current cases and obtain new ones.

FIDA is organized as a C corporation, and the stock was owned equally between Ken and Barbara. As with most small businesses, the owners tried to maximize the benefits to themselves as owners. Barbara decided that it would be prudent to understand the actual costs of operating the business and paid Ken a salary for his role as manager of field operations and paid herself as administrative manager. In addition, Ken and Barbara also received separate compensation for their roles as officers of the company.

The aim of their conversation in the cool, pine-scented air was to discuss how Ken and Barbara could improve their company's performance (Exhibit 1 provides FIDA's financial statements to date). They agreed ...