Competition Bikes, Inc.
Competition Bikes, Inc. makes bicycles for professional and other highly accomplished riders who compete in bike races, biathlons, and triathlons. Sixty percent of all race winners have been victorious using a Competition Bikes, Inc. bicycle when at least ten percent of the entrants were also using a Competition Bikes, Inc. bicycle. This extraordinary success rate consistently is a topic of conversation among racers and this word of mouth advertising has been effective in promoting sales. The company also uses these statistics to promote sales, although its advertising efforts have been quite limited.
The Main Competitor
Two Wheel Racing, Inc. is the only other manufacturer that offers a competitive product in this …show more content…
The orders are shipped from the U.S. Due to the continuing increase in the Canadian business the management of Competition Bikes, Inc. is considering a location in Canada. Expansion to Canada Market research completed in the last month has shown that there are a sufficient number of high end bicycle shops which could carry the CarbonLite product. The current U.S. sales model would be used if the Canadian market is established. A distributor network would be established to handle all orders and to act in a sales management capacity with the retail stores. The ability to provide cost effective, great customer service to the growing Canadian market is a primary concern. Other considerations include: • Qualified labor force • Cost of labor • Land cost comparisons. • Cost to construct a new manufacturing facility. • Tax incentives for chosen location. • Transportation cost and reliability for bringing in raw materials and component parts and for shipping of finished products to distributors. • Community facilities and support that will meet employees’ needs for education and health care as well as for recreational and cultural activities. • Community business attitude Management has reviewed the information and data from the completed market research, including the considerations listed above. After careful analysis, Competition Bikes, Inc. chose Toronto as a potential …show more content…
factory layouts. • Building the new facility to U.S. factory layouts specifications but then selling the structure to a leasing company with a leaseback. Data supplied in the Task 3 templates. • Finding a factory building and either lease it or buy it. • Merging with Canadian Bikes, Inc. The company has a lower cost competition bike that is based on a Titanium frame which would complement the current bike offered by Competition Bikes, Inc. • Acquiring Canadian Bikes, Inc. • Buying the Titanium frames from Canadian Bikes, Inc. for $450/frame. • Licensing the titanium technology at $200/frame The Requirements for Task 3 In this task, you will prepare a summary report that analyzes the proposed expansion. A. Prepare a summary report in which you do the following: 1. Recommend a capital structure approach that maximizes shareholder return. a. Justify your recommendation. 2. Discuss capital budget areas that raise concern. 3. Discuss how working capital can be properly obtained and managed for the expansion operation. 4. Discuss whether Competition Bikes Inc. should merge with or acquire the Canadian Biking Inc. facility. Additional Data to consider in your analysis and decision: There are various options to consider in this decision. The following data are used in the analysis. Canadian Bikes, Inc. Financial Forecasts The board of directors of
Competition Bikes, Inc. makes bicycles for professional and other highly accomplished riders who compete in bike races, biathlons, and triathlons. Sixty percent of all race winners have been victorious using a Competition Bikes, Inc. bicycle when at least ten percent of the entrants were also using a Competition Bikes, Inc. bicycle. This extraordinary success rate consistently is a topic of conversation among racers and this word of mouth advertising has been effective in promoting sales. The company also uses these statistics to promote sales, although its advertising efforts have been quite limited.
The Main Competitor
Two Wheel Racing, Inc. is the only other manufacturer that offers a competitive product in this …show more content…
The orders are shipped from the U.S. Due to the continuing increase in the Canadian business the management of Competition Bikes, Inc. is considering a location in Canada. Expansion to Canada Market research completed in the last month has shown that there are a sufficient number of high end bicycle shops which could carry the CarbonLite product. The current U.S. sales model would be used if the Canadian market is established. A distributor network would be established to handle all orders and to act in a sales management capacity with the retail stores. The ability to provide cost effective, great customer service to the growing Canadian market is a primary concern. Other considerations include: • Qualified labor force • Cost of labor • Land cost comparisons. • Cost to construct a new manufacturing facility. • Tax incentives for chosen location. • Transportation cost and reliability for bringing in raw materials and component parts and for shipping of finished products to distributors. • Community facilities and support that will meet employees’ needs for education and health care as well as for recreational and cultural activities. • Community business attitude Management has reviewed the information and data from the completed market research, including the considerations listed above. After careful analysis, Competition Bikes, Inc. chose Toronto as a potential …show more content…
factory layouts. • Building the new facility to U.S. factory layouts specifications but then selling the structure to a leasing company with a leaseback. Data supplied in the Task 3 templates. • Finding a factory building and either lease it or buy it. • Merging with Canadian Bikes, Inc. The company has a lower cost competition bike that is based on a Titanium frame which would complement the current bike offered by Competition Bikes, Inc. • Acquiring Canadian Bikes, Inc. • Buying the Titanium frames from Canadian Bikes, Inc. for $450/frame. • Licensing the titanium technology at $200/frame The Requirements for Task 3 In this task, you will prepare a summary report that analyzes the proposed expansion. A. Prepare a summary report in which you do the following: 1. Recommend a capital structure approach that maximizes shareholder return. a. Justify your recommendation. 2. Discuss capital budget areas that raise concern. 3. Discuss how working capital can be properly obtained and managed for the expansion operation. 4. Discuss whether Competition Bikes Inc. should merge with or acquire the Canadian Biking Inc. facility. Additional Data to consider in your analysis and decision: There are various options to consider in this decision. The following data are used in the analysis. Canadian Bikes, Inc. Financial Forecasts The board of directors of