Avalanche Case

1

Avalanche Logistics

January 2013

In March 2008, Tom Lafontaine, CEO of Avalanche Logistics Inc., a trucking company, was evaluating a new proposal that would require substantial investment. This project was of particular importance as it would represent a new source of revenue – one that is badly needed. The investment involves branching out into a new business. Lafontaine, therefore, had to decide whether his company should immediately start the project.

From trucking to shipping

Avalanche Logistics owned a huge fleet of trucks that deliver valuable goods across the UK and Europe. Founded in 1923, the company had grown substantially. In the mid-fifties, it was one of the largest trucking companies in the UK. However, in the 1970s, after the oil crisis when petrol prices skyrocketed, Avalanche Logistics has been on the decline. Severe competition almost drove the company into bankruptcy. Various CEOs had been appointed to revive the company but without much success. But that was until Tom Lafontaine. He joined the company as the CFO in 1999, having spent his earlier career at one of the largest investment banks. In 2003, he was made the CEO and tasked with restoring the former glory of the company.

Having saved the ailing Avalanche Logistics and turned it into one of the most profitable companies within the trucking industry, Lafontaine ought to have many reasons to be happy. Yet, he was not. This was because he knew that the profit margin for the trucking company would become increasingly razor thin as other non-trucking firms had been entering the market. This worried him. At a meeting with the senior management of the company in November 2007, he put forward such concerns and asked the senior executives to come up with new ways to ensure that Avalanche Logistics could remain profitable.

Avalanche Shipping

In the follow-up senior management meeting that took place in January 2008, Evans Engel, a newly recruited business development executive from a...