. The case was originally set in the early 1980's. Can you estimate the incremental return on investment for the Challenger deal? Also, the bicycles would have to be packed in boxes printed with the Hi-Valu and Challenger names. . The contract is renewable unless either of the party express his will to discontinue. On the other side, in case of Hi-Value, if the company makes the deal with Baldwin, then it can grab the sports bicycle market in a better way.
Operational Risk As the 22,000 25,000 less 3,000 lost additional units will push Baldwin to over 90% capacity, the company may face the risk of over-capacity if the regular business recovers in the future. Baldwin may go for raising more capital by issuing shares, or raising debt in order to continue this Challenger deal. Knott estimated that on average, a bike would remain in a Hi-Valu regional warehouse for two months. International Journal of Business and Management, 11 4 , p. Skateboards and other human-powered devices are gaining Cpopularity exponentially. Inventory Costs yearly monthly P. However, the case is silent about the manner of inventory title passage but I assume that another stipulation will be made by both parties stating the procedures and terms of payment.
. To make an informed decision, the company should exam a blending of financial, marketing, and strategic implications of the Challenger deal. How would you describe Baldwin's financial situation including operating b. Knott, Hi-Valu's buyer for sporting goods, had approached Ms. . However, Hi-Valu would agree to take title to any bicycle that had been in one of its warehouses for four months, again paying for it within 30 days.
Arrange external funding Unless Baldwin can arrange sufficient funding, all the efforts for the new business will be in vain. The annual return on sales of 2. Based on the average per unit costs of the Challenger, as discussed in Exhibit 2, Item 1 and the fact that the accountant says that about 40% of the overhead costs of the new brand would be variable, how much are the per unit variable manufacturing costs of the new bike? By 1982 volume was back up to 10 million units, still well below the peak years. Eliminates exposure to risk caused by the poor economy. How would you describe Baldwin's financial situation at the end of 1982? Additionally, impact on the overall profit and various financial returns has also been measured. At that point, Hi-Valu would regard the bicycle as having been purchased from Baldwin, and pay for it within 30 days. Journal of Financial Economics,116 1 , pp.
She had written on a pad the information she had gathered to use in her initial analysis; this information is shown in Exhibit 2. Knott estimated that on average, a bike would remain in a Hi-Valu regional warehouse for two months. Its debt-equity ratio of 1. Hi-Valu product specifications entails higher production cost, purchasing cost and inventorying cost. Hi-Valu wanted to carry these inventories in its regional warehouses, but did not want title on a bicycle to pass from Baldwin to Hi-Valu until the bicycle was shipped from one of its regional warehouses to a specific Hi-Valu store.
Marketing Risk Taking the Challenger offer, Baldwin may offend existing dealers and retailers because the company charges a lower margin from Hi-Value. Analysis of the problem requires a blending of financial, marketing and strategic considerations. Also, our direct customers local shop owners, etc. Baldwin had been a bicycle manufacturer for almost 40 years. New consumer acquisition has… 1608 Words 7 Pages Read through the Baldwin Bicycle Case materials and answer the following questions. To make an informed decision, the company should exam a blending of financial, marketing, and strategic implications of the Challenger deal. Baldwin had never before distributed its products through department store chains of any type.
Appendix 4 outlines the relevant cost analysis. Management Science, 38 3 , pp. Arrange external funding Unless Baldwin can arrange sufficient funding, all the efforts for the new business will be in vain. Suzanne Leister realized she needed to do some preliminary financial analysis of this proposal before having any further discussions with Karl Knott. Also, the bicycles would have to be packed in boxes printed with the High-Valu and Challenger names. Furthermore, the company is facing a high risk of insolvency in the future due to its highly leveraged financing.
Also known as the Golden Age of Italian Cinema, Italian…. International Journal of Economics and Business Research,11 1 , pp. It should first define its strategic orientation clearly, then define key success factorsfor its business model. Impact on our regular sales: Some customers comparison shop for bikes, and many of them are likely to recognize a Challenger bike as good value when compared with a similar bike either ours or a competitor's at a higher price in a nonchain toy or bicycle store. Suzanne Leister, marketing vice president of Baldwin Bicycle Company, is considering whether or not to accept this proposal.