Challenges Aplenty in Rationalizing the Combined Quad/Graphics and Worldcolor
Perhaps this analogy is not a total exaggeration. At DRUPA 90, I recall my family-held German printer clients discussing excitedly how they were going to bootstrap their East German printer relatives (many were literally family enterprises before WWII) into the modern era now that the Communist wall came down only months earlier in 1989. While the work ethic and intelligence of the East Germans were never at issue, the printing technology upgrades (40 years worth) and skill bootstrapping took more than a decade for the Eastern block firms to reach efficiency parity.
RR Donnelley’s Reaction
Some talk has suggested that RR Donnelley will be nervous at this new competitor as Quad has always been a competitive nemesis and now they are even bigger. I could not disagree more. I expect RRD to be thrilled for the following reasons:
Worldcolor has been reported to be the rotten apple in the barrel for years for creating pricing wars.
Quad will never allow that to continue as it (1) knows its costs, (2) hs a disciplined sales and marketing approach that does not allow entrepreneurial salesman to sling loose prices around, and (3) has known and understood the value of the services it provides well before it was the latest consultant’s buzzword.
Angelson attempted to put the skids on low prices when he took over as CEO at Worldcolor. While he is reported to have had some success, he found the free-fall to be difficult to arrest. Many contracts at little more than variable costs still had years to run.
Quad’s management team will be so focused on eating this elephant that new product development initiatives and other competitive moves to thwart RRD would be expected to be back burner priorities.
RRD is aware of the fact that the rest of the developed world is bouncing back from their economic recession much more quickly than the United States is. Quad’s attention will overwhelmingly be stateside for the next 24-36 months, which will allow RRD free reign on the more attractive global growth stages.