Baldwin Bicycle Company Case Essay Example

increase sales volume.

The on-time added cost will be increased around $5,000 when Ms. Leister accepts all the requirements (i. e. The mud-guards, seats, and handlebars need to be somewhere different to Baldwin model except the frame and mechanical and the tyres have to have the name logo onto them) expected by Hi-value. To meet these requirements Baldwin bicycle company have to increase Baldwin’s purchasing, inventorying, and production cost over and above the added costs compare to Baldwin’s regular products. Also, fixed manufacturing overhead will be increased to $1470,000. From the cost volume profit analysis, the contribution margin after tax is $12. 47 after accepting all the requirements by Hi-value and it is profitable.

However, there are some costs increase during producing Challenger bike for Hi-value such as on-time added costs($0. 20 per units), increased working capital $4. 33 and margin on lost sales ($5. 22), finally totally incremental effect at $2. 72, still profitable. If Baldwin accepts this agreement, Baldwin need to produce more than 87908 units in order to make profit from it for the next three years. For the next three year, this agreement will increase Baldwin’s profit by 26. 7% when Hi-value estimate they will need 25,000 bikes. c. Using Miles and Snow typology, speculate on Baldwin Bicycle Company’s strategic positioning.

According to Miles and snow typology, Baldwin Bicycle Company ‘s strategic would be positioning on “Analyzer organization” which share characteristics prospector and defender organization and thus they face entrepreneurial problems of how to maintain their shares in existing market and how to find and exploit new market and product opportunities. In this case, Baldwin Bicycle Company needs to

maintain their own business such sell their products through speciality bicycle shops. On the other side, the “bicycle boom” had flatted out and plus poor economy had caused Baldwin’s volume to fall in the past two years.

Therefore, it is important for Baldwin to find and exploit a new market such as distributed its products through department store chain to increase the sales volume at lower price. Furthermore, organization need to maintain the efficiency of establish product and services while remaining flexible enough to pursue new business activities. Consequently, organization needs to seek technology development and technical efficiency to maintain at lower costs. For the administrative problem is how to manage these two aspects—products production for themselves and distributed enough production to Hi-Value.