Baldwin Bicycle Company

a. On the basis of Michael Porter’s (1980) competitive strategies, how does Baldwin currently compete? Justify your answer. [25%]

According to Michael Porter`s competitive strategies, Baldwin bicycle company currently focus on low cost strategy.

Porter claims that there are two ways of responding to the opportunities in the external environment and developing a competitive advantage, low cost and differentiation (brand loyalty, customer service, product features, technology etc.. ).

In this case, Baldwin`s bicycles had the image of being above average in quality and price, but not a “top of the line” product. Therefore, Baldwin does not have high market share when competed within the bicycle industry. It is obviously that the company is not able to achieve high business growth rate without competitive advantages.

Explained by the BCG Matrix, Baldwin can be described as Dog that means both Market share and Business growth rate are low. And Low cost strategy is better in this situation.

b. If Baldwin took up Hi-Valu's offer, how might this change the way Baldwin competes? In particular, think about the effect on Baldwin's costs and distribution channels (i.e. the retailers). [45%]

The strategy might switch to Differentiation, if Baldwin took up Hi-Valu` offer.

Differentiation could be achieved through brand loyalty, customer service, product features, technology and so on.

1. Costs: If we accept the offer, the manufactory costs will be higher. Because Hi-Valu wanted the Challenger bike to be somewhat different in appearance from Baldwin`s other bikes, which means more raw materials, labour and time may needed. As can be seen in the case “These requirements were expected to increase Baldwin`s purchasing, inventorying, and production costs over and above the added costs that would be incurred for a comparable increase in volume for Badwin`s regular products”.

2. The distribution channel will be expanded. Their brand name and reputation will be raised...