Sean Abdrew, operation vice president for The Eldora Company, the largest and the most profitable manufacturer of mountain bicycles in the United States, was struggling to clear up the accumulation of messages, correspondence, and reports that had accumulated during his recent trip to an Asian bicycle industry fair. The president of the company, the head of marketing, and he had returning the previous Sunday; next Saturday the three of them would be gathering “off campus” to review what Eldora should do. All three of them were convinced that Eldora had to o something significant, but what? Whatever they did, Sean needed to have a clear idea what sort of role operations needed to play, what might be some of the pitfalls, and what capabilities would they have to develop to carry it off. Out of those considerations, he would need to have a point of vie about what he thought would be best for the company.
Eldora’s strategy had been to copy the features of the most expensive mountain bikes that aficionados rode into bikes that it sold to mass merchandisers for between $100 and $200. Sean believed Eldora’s strengths lay in its “ reverse engineering” abilities as well as its logistical and production capabilities. The design of ever lighter and more rigid frames was essential. Furthermore, mass merchandisers demanded reliable delivery, and Eldora’s lean systems of production and logistics, developed at considerable effort over the pas five years, led him to believe that Eldora’s customer service was second to none. Eldora’s proprietary technology was in the fabrication of frames, and recent innovation included shock absorbers both for the front and rear wheels. Excellent logistical skills were required for the outside purchase of hardware, such as derailleurs and freewheels, which they bought primarily from Taiwan and assemble on the frames.
Eldora had also done well with high end bikes retailing between $400 and $700. It acquired these bikes through a joint venture with an Italian company, Rinaldi, and sold them to specialty bike dealers under the private label name of “Summit”. In turn, Rinaldi marketed Eldora bikes in Europe. Export constituted 20 per cent of sales, and this European connection provided Eldora with valuable intelligence on design and product trends in Europe.
1 This case was written by Albert Trostel of the Unversity of St. Thomas. It was adapted from a cas by Andrew D. Bartmess entitled “ The Plant Location Puzzle”, pulished in the Harvard Businees Revier, March –Aril 1994 edition. The alternatives that the Eldora Company was considering were developed by a panel contributing consultants and academics as their solution to the puzzle. The original case was composite of situations with which Bartmess, a consultant, was familiar and your author has modified the focus and clarified several points to fit the pedagogical needs of a course in operation management. (February, 1998)
Whereas the larger companies had moved manufacturing to take advantage of lower labor costs, Eldora had stuck with a domestic strategy, keeping its manufacturing, marketing, and product development on one campus in Boulder, Colorado, a center for mountain bike enthusiasts. That close proximity of all the functions as well as the community of aficionados facilitated cooperation between marketing, engineering, and manufacturing, and provided quick feedback on any contemplated design change. That quick deign capability plus the lean, flexible manufacturing system resulted in very short lead times compared to the completion.
Unfortunately, the growth of the US market had settled down to around 2 per cent per year, while the Asian markets for the same kind of bikes were doubling annually. Furthermore, Eldora’s competitors were moving their facilities to Asia, where they would enjoy only labor cost advantage, but distribution cost advantage as well.
All three members of the management group were convinced that Eldora needed a significant response to this changing environment. They were extremely enthusiastic about the potential the massive Asian markets presents, but they were unsure how they should Asian markets presented. As they had examines all the displays at the approach them. As they had examined all the displays at the meeting and listened to what people were saying, their excitement was increasing, but so were their questions. On the flight home they had made a list of the alternatives that had surfaced from the fair.
- Capture both the advantage of lower labor costs and proximity to Boulder by locating assembly in Mexico.
- Open a small office in China staffed with one of their people to collect information about the Chinese market, distribution channels, locals conditions and laws, as well as identify potential joint venture partners. In that way the management group could be more clear on how they should proceed.
- Establish a joint venture whereby Eldora would provide the product and process knowledge and the joint venturer would manage both the manufacturing and distribution capabilities.
- Forge an alliance with an Asian company and establish a final assembly plant. Keep frame production (the high tech end of Eldora’s operation) close to home. Located the assembly plant near the strongest completion and count on the joint venture partners for the distribution network and knowledge of the Chinese and Indian markets.
- Create a wholly owned replica of the Eldora campus in some Asian mecca for bicycle making.
- Some other alternative.
Eldora Company has been rated the biggest and the most flourishing bicycle manufactures in the whole of the United Nations. Being able to capture approximately 30% of the total bicycle production in the continent it then turns out to be the most successful company in the mountain bike manufacturing sector (Detroit & Mitch, 2002). The venture is under a strong management and hence is deemed to do even better. One of the key leaders is company’s vice president Mr. Sean Abdrew. To…
Having been able to dominate the whole of the America, the venture is planning to gain a significant market share in Asia market where the annual demand for the bicycles is almost doubling every year. This will have the advantage of increasing profits which is a prime goal of every other firm in the world (Detroit & Mitch, 2002). Given that the mountain bike market is a newly emerging market in the Asian continent, the company stands a better chance of taking the full advantage of the available opportunity. Eldora is now set to put up proper means to avoid any difficulties in the achievement of the objective. A part from taking advantage of the Asian market the venture also has a plan of reducing production costs as well as upholding its major competencies such as reverse engineering potential and sustaining its fabrication and logistic capacity. This will be made possible when the company establish itself in Asia because labor and distribution costs are generally low in the continent as compared with United States. The fact that labor cost carries a significant part of production ….
To accomplish these objectives the company will be forced to set up production department in the new production region. This will enhance efficiency as well as putting the company at a better position of making maximum use of the vast benefits available for them. However to be on the safer side the company will have to maintain the product development department in America to avoid taking too much risk of a new venture. The move will be costly in the initial stages of the establishment but in the long run the venture will be beneficial. The other part of operation that needs to be established is sales and marketing department to create awareness of the firm’s products availability. It should be noted that the two continents share absolutely different cultures and hence marketing strategies need to be modified in a different ways from those one used in America (Farok, 2001). In general, establishment ….
The activities that any company is able to do excellently are the core competence of that given company (John, Robert, Brian & Bardi 2010). Eldora’s core competencies that give them a competitive edge include perfection in production of lightweight frames which are both firm and high quality frames. This makes their products most preferred by their customers. A part from that important achievement the company’s customer services are also superb especially delivery …
There exist alternatives that need considerations such as one, maintaining the whole assembly operations in United States of America by establishing an assembly point in Mexico. This being near the boulder will help them take advantage of low labor costs and transport costs. Two, they can establish an office in China soil with most china staffs and one of their representatives to help gather information concerning the new venture then move on with execution of the mission according to the findings given. Three, set up a joint venture in which Eldora will be sole producer and knowledge processer while the joint venture will do management part of both production and distribution potentials. This is risky because of the limited involvement of Eldora Company in the vital part of management. Four, maintaining a part of the assembly functions home and the final operations to be done in Asia. This will have two advantages, one they will be able to utilize part of their experience staffs and at the same time be able to maintain their high standards of performance (Farok, 2001). Five, they can establish a whole firm in Asia and everything to be based there. This idea will have ignored the fact that the two continents have different methods of conducting business and therefore if they fail to conduct detailed analysis of the alternative it might have grave consequences. The fourth alternative is the best but it needs modifications to meet the set objectives. To start with the Eldora is supposed to establish a final assembling center in Asia and maintain part of the management and assembly in America. This can be made …
In conclusion the management of the company is supposed to realize that maintaining the good performance is the key thing. They should not be over ambitious to an extent of compromising the quality of its products as well as its services. Due care needs to be taken to ensure that ….
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