Baldwin Bicycle Company Background of the Study - 784 Words

BA-561 MAC Abdulgaffur G. Deki Oscar M. Inocencio Chester V. Lagutin Felomena C. Baal Edsel Cariz J. Tiu 12 October 2012 â€Å"Baldwin Bicycle Company† Background of the Study: Baldwin Bicycle Company (BBC) is a full-line bicycle manufacturing company with 40 years of experience. In 1982, BBC has revenue of over $10M for 98,791 units produced. BBC exclusively distributes through independently-owned retailers, their bicycles are known for their above-average quality. In May 1983, a rapid-growing Northwestern discount retail chain, Hi-Valu, Suzanne Leister, VP Marketing, proposed a private-label agreement. Under this program, BBC would manufacture the Challenger line of bicycles exclusively for Hi-Valu. The Challenger line was†¦show more content†¦Its BBC’s first time to deal such client. 7. Hi-Valu wanted to purchase bikes from BBC at lower prices that the wholesale prices of comparable bikes sold through Baldwin usual channels. 8. If the proposal will pursue BBC requirement for purchasing, inventory and production cost will increased. 9. Hi-Valu would hold the units on consignment in its own warehouses and withhold payment until delivery to a specific store. 10. A bicycle would be paid within 30 days once a bicycle was shipped to a specific store or 120 days had elapsed in the regional warehouse. Alternative courses of action: 1. Reject proposal RISKS: a.) BBC may face continually declining sales due to a poor economy. b.) BBC will continue to produce at only 75% production capacity. c.) Another disadvantage is that the offer price of Hi-Valu was lower than the regular selling price. d.) There is an additional cost involved in producing additional units from Hi-Valu the $5,000 additional cost plus the asset related cost. e.) The possibility that the current dealers of BBC might drop-out line if they find that BBC is making bikes for Hi-Valu. f.) 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