Statement of the Problem 3. Alternative Courses of Action 5.
In retrospect, I would add a time-phased implementation plan. Cheung Student Professor D. Cheung Robinson St. At first glance, this proposal seems to provide attractive incremental revenues and earnings. Payment would then be Net 30 days. Should you decide to investigate further forming distribution alliances with other retail chains, please do not hesitate to contact me.
Distributed exclusively through independently-owned retailers and a specialty bicycle shops, BBC bicycles are known for their above-average C quality.
This would result in expected cannibalization of an estimated 3, units but incremental sales of 25, units. Although BBC distributes its bicycles through several independent retailers and sporting goods stores, it has not a penetrated the discount retail chain segment.
The congruency model, developed by Nadler and Tushmanattempts to consider a g. Hi-Valu would hold the units on consignment in its Baldwin bicycle company warehouses and withhold payment until delivery to a specific R store; 2.
A bicycle would be paid within 30 days once a bicycle was shipped to: Variable Costs are Linear This decision model assumes that variable costs, such as materials and labour, are linear over the relevant range; that is, there are no volume discounts on material, and that addition of more labour does not incur further costs.
Although Hi-Valu is a discount chain and would likely have a higher inventory turnover than BBC, which sells only through sporting goods and specialized bicycle he stores, Knott himself stated that Hi-Valu did have difficulties forecasting bicycle sales.
Sales Levels are Consistent Average sales price is approximated as the sales revenues distributed over 98, units: Baldwin bicycle company the BBC line comprises 10 diverse models, the average price was used in calculations.
R FFinancial inancial An An alysis: Costs and revenues are considered relevant only if they apply to the scenario being considered and not otherwise.
Appendix 4 outlines the relevant cost analysis. Although it can be argued that this 3, unit decline in sales may happen even if BBC rejects the deal and a deal is struck with another bicycle manufacturer, it differs from the base scenario, which assumes that sales will remain in line with levels; therefore, the loss of sales is relevant.
The current terms allow Hi-Valu to distribute most of its business risk to BBC, while BBC must bear the brunt of whatever drops in sales it would experience as a result of cannibalization. These terms are clearly unacceptable.
Its debt-equity ratio of 1. Huffy Corporation had a debt-equity ratio of 0.
If BBC does not accept the proposed challenger program, it expects to see stagnant sales ofunits for the next three years, resulting in a net income of Baldwin Bicycle Company Strategic A Strategic nalysis Analysis Market Segmentation BBC has not clearly segmented its market; further, it has yet to determine which segments it wishes to target, or how to position itself to its target markets.
It appears that BBC is trying to cater to all customers by offering a full product line in the mid-range segment. Its manufacturing efficiency is relatively low un considering its return on equity is relatively low. It produces 10 models from beginner models to deluxe speed models.
But it does not he possess patentable technologies or processes that confer competitive advantage above its competitors. Further, BBC does not seem to have defined key success factors for its business model. It should first define its strategic orientation clearly, then define key success factors for its business model.
It can then develop competitive advantages aligned with these factors. C Without doing this, however, BBC is destined to remain a medial performer.
Incremental revenues resulting from this deal would be beneficial, and since the plant can take on the incremental production without incurring additional fixed costs, the proposal would result in significant earnings increases for BBC.
Since BBC does not have sufficient cash to finance the initial outlay, it should seek tp credit terms from its suppliers to share some of the initial risks and defray some of the initial costs until it begins to receive some ht payments from Hi-Valu. Because BBC already has a high debt-equity ratio, it is unlikely it will be able to secure bank financing; however, it may seek equity financing from its owners.
Currently, BBC distributes above-average bicycles through independent Baldwin Bicycle Company retailers and specialized bicycle stores. By accepting Hi-Valu as a discount distributor, its now- under-priced bicycles would comprise a significant proportion of its total operations, necessitating a restructuring of its operations.
BBC lacks the economies of scale that are enjoyed by manufacturers with operations in lower-wage countries. It would not be feasible for BBC to change its orientation to compete in the discount bicycle segment unless it were to set up operations in a low-wage country. This is not a feasible option with its current resources.
BBC has no such way to hedge its risks. It could seek out credit financing from its suppliers, but it is extremely un unlikely it would be able to secure terms as liberal as those Hi- Valu proposes. The fact that Hi-Valu seems to be able to impose such terms on BBC hints that it has proposals he with other bicycle manufacturers lined up in case BBC rejects the proposal.
Now that the bicycle market is at a low point, it is likely that if BBC passes up the offer, other manufacturers would appreciate the incremental revenues.The CEO of a bicycle manufacturing company is considering outsourcing the production of one of the company's lines to a low-cost manufacturer.
Students must analyze the relevant costs and. Baldwin Bicycle Company B ackground Background Company Analysis Established in the s, Baldwin Bicycle Company (BBC) was a manufacturer of upper mid-range bicycles.
Its product line comprised 10 models, from beginner’s models to deluxe speed models. The CEO of a bicycle manufacturing company is considering outsourcing the production of one of the company's lines to a low-cost manufacturer.
Students must analyze the relevant costs and. BALDWIN BICYCLE COMPANY Baldwin Bicycle Company has been a bicycle manufacturer who produced various high quality models. Due to competition in , the firm's sales revenues significantly dropped in the following two consecutive years.
Baldwin Bicycle Company has been in the cycle manufacturing business for last 40 Years. Mrs. Suzanne Leister is the Vice President(Marketing) of the company. In , Company has 10 models ranging from a small beginner's model with training wheels to a deluxe speed adults' model.
Baldwin Bicycle Company Case Solution,Baldwin Bicycle Company Case Analysis, Baldwin Bicycle Company Case Study Solution, CEO of bicycle manufacturing considering outsourcing the production of one of the lines of the company's low-cost producer.
Students must analyze the costs.