Case Study—Baldwin Bicycles Essay Example

of $12.47 per unit and factoring in one-time added costs of $0.2 per unit, increased working capital worth $4.33 per unit, and lost margins on the sale of 3,000 lessened; there will be a net incremental effect totaling $2.72 resulting in an overall impact on net income amounting up to $68k.

Accepting Challenger's offer would generate additional revenue for Baldwin but could place financial pressure if receivables escalate with little room for investment towards new technology or rewards. Although Baldwin's current distribution channel only reaches specialty bike stores, accepting this offer means expanding reach by selling at Hi-value shops at lower prices compared with well-known bike brands like Trek.

However, accepting Hi-Value's offer to sell Baldwin's bikes at a lower price could potentially damage the company's brand image as a high-quality and high-priced bike maker leading to loss of customers and revenue while competitors may follow suit or seek new partnerships with similar retailers.Furthermore, Baldwin's projected revenues could be affected if Hi-Value decides to terminate the contract after three years for a cheaper option. This offer also presents long-term implications on Baldwin's brand image as other manufacturers may introduce new technology or add new features to differentiate themselves as top products. It is important to consider factors such as break-even point and safety margin, especially in light of poor economic conditions that brought the break-even point closer and potential revenue losses. To avoid risk of net income loss instead of profit, Baldwin should accept Hi-Value's offer while also considering cash flow and warehouse space requirements since increased production would incur further costs. Additionally, high purchase levels would continue if financed by a loan given the current debt

equity ratio and predominance of short-term loans. Therefore, before making any decision, Baldwin needs to define its strategy and assess the impact carefully. According to Miles and Snow typology, strategically speaking,Baldwin resembled more of a reactor than guardian thus requiring careful evaluation before accepting any offers since it is considered a non-innovative company that maintains its current market and product line rather than being highly innovative like explorers should be.Baldwin may have been classified as a reactor according to Mile and Snow's typology. This was likely due to Baldwin's lack of clear strategy under top direction, which resulted in only responding to macro environmental pressures like the poor economy. A reactor organization is characterized by management that does not fully establish organizational structure or processes suited for a chosen strategy, lacks focus on securing the current market with limited products or quality customer service like a defender strategy would, and maintains their current strategy-structure relationship despite overwhelming changes in environmental conditions such as the risk of losing sales or Hi-Value's offer.