Business Management Assignment: Case Analysis of Mega Bikes Expansion

Question

Task: Business Management Assignment Scenario 1: Mega Bikes expansion Mega Bikes is a small to medium enterprise (SME) based in Canada, which manufactures highend mountain bikes (MTBs) for the competition and domestic markets on the west coast of Canada and the USA. Company founder and CEO, Bob Branch, was a pioneer of the British Columbia MTB scene in the 1990s and began making his own MTBs in his garage at home in the early-2000s.

Over the last 15 years, Mega Bikes has built a strong reputation for innovative bike geometry and designs, and for producing fast, high performance bikes. Various Mega Bikes models have received favourable reviews in MTB magazines and on MTB blogs, but things really began to take off for Mega Bikes last year, when two up-and-coming Canadian riders that were sponsored by the company, placed in the top 10 of the World MTB Championships. The success of these riders provided the company with significant exposure on the global stage, which has resulted in a substantial jump in visits to their website from countries such as Australia, Japan and several European countries. Mega Bikes has also received several enquiries from cycling retailers in other countries wanting to sell their bikes and they have also had a spike in online orders for their bikes to be shipped abroad.

As the company has grown, Mega Bikes shifted out of Bob’s garage and now employs 35 workers in a new factory in Vancouver. This is where they design, engineer and finish (paint and branding) their innovative frames, then assemble their bikes using components (wheels, gears, suspension, pedals etc.) sourced from a range of suppliers, and they finally package their bikes for distribution to their retailers or directly to their customers. However, while there is substantial scope to increase production from their factory, their lack of export and logistics experience has meant the international movement of their bikes is inefficient, slow and expensive.

This has not been an issue for their North America operations, but Bob is concerned this could have a substantial impact on the competitiveness of Mega Bikes' MTBs in international markets. Bob is very interested in capitalising on the interest from overseas and wants to test the European MTB market, but he is unsure of the best strategy to expand Mega Bikes into Europe.

Questions:
1. What do you see as being the main strategic options for Mega Bikes to expand their operations into Europe?
2. Justify the option you think is the best for Mega Bikes?
3. What are the potential benefits and risks for the company in adopting this approach?

Answer

Introduction
The business management assignment work has been taken into consideration with Mega Bikes operating in Canada and manufacturing high-end mountain bikes (MTBs) as the prime area of focus. The assignment focuses on understanding the best strategy that can be adopted by Bob to test the European MTB market such that its profit margin can be maximized.

Scenario 1: Mega Bikes expansion
Answer 1
Identify major strategic options for Mega Bikes to expand operations into Europe The World is experiencing a period of rapid change from environmental, social and economic context which represents both critical opportunities and challenges for undertaking business operations globally (Whelan & Carly, 2016). In this particular case of Mega Bikes, a SME in Canada, in order to fulfill the interest of Bob to capitalize marketing of high-end mountain bikes (MTBs) to European MTB market, a number of strategic options can be suggested. Such expansion is likely to prove to be of great help since it has already managed to build a strong reputation for its innovative bike geometry and designs thus giving it exposure on global stage. Some of thestrategic options that can enable it spike in online orders for their bikes to be shipped abroad are discussed as follows:

Strategic Option 1: Adoption of Joint Ventures entry mode with the Europe based organization namely Waterloo backed by adherence to the Triple Bottom Line Model can be effective. This can enable the concerned management to understand the newly targeted market in a better manner and it is likely to emerge a concern on part of the manufacturers to become not only economically but also environmentally and socially responsible while manufacturing the bikes.

Strategic Option 2: Adoption of Franchising Policy with Trek Bikes operating in Waterloo backed by Mickey Mouse model thereby giving more importance to economic upliftment thereby indicating fulfillment of Bob’s interest in capitalizing on interest from overseas. The Mickey Mouse model usually tends to encourage trade-offs in which economic objectives undertake priority over social and environmental objectives. Thereby, initiation of such Franchising Policy on this note might tend to prove beneficial with regard to using the concerned supplier’s trademark and manage to earn a greater profit margin in return of just a minimal supplier fee. Strategic Option 3: An initiative to set up wholly owned subsidiaries thereby centralizing core competencies as well as leveraging parent company competencies retained or developed at the Centre (World Economic Forum, 2020).

Answer 2
Justify the best option for Mega Bikes
It is a well-known fact that Global business is enabled by a number of critical factors. This includes:

• Globalization: It is merely an integration of technological, cultural, political and economic factors among economies particularly through movement of services or goods (Australian Trade and Investment Commission, 2021).
• Technological developments: It is transport innovations and technological breakthroughs that have duly revolutionized movement of products and goods around the world thereby driving globalization. Such breakthroughs, thereby, have improved efficiency of national, local and international freight networks dramatically. It has been throughout the 20th Century that regular developments in Information and Communication Technologies have enabled businesses to communicate and share information with increasing efficiency and speed (World Economic Forum, 2021).
• Trade Liberalization: Removal of trade barriers or formation of trading blocs and FTAs specially the Free Trade Agreement of Americans (FTAA) has largely enabled businesses to reach beyond their traditional physical or geographic boundaries almost instantaneously. This has largely been backed by Digital disruption that is reported to have shown acute impact upon the value of existing products or services offered at large.

Taking all these factors into consideration, out of all the strategic options, the first one to indulge in Joint Venture with some already existing MTBs manufacturers accompanied by adherence to the Triple Bottom Line Model can be a great way out. The model is likely to be of great help on part of Mega Bikes to enhance accountability and transparency of its operations thereby benefiting it to attract the best talent, improvise productivity levels as well as attract new consumers in turn. Such an initiative to adopt Triple Bottom Line Model through involvement in Joint Venture with Trek Bikes can prove to be effective enough on its end with regard to remaining well-acquainted not only with taste or preferences of newly targeted consumers but also with environment friendly norms and manage to hold an influential position within targeted market scenarios (Dlabay& Calvert Scott, 2011). This can be supported by referring to the fact that for almost 50 years, the United Nations is reported to have been a global leader for a more sustainable world which involves initiation of a number of programs working towards this objective. Thus, regular access to valuable information about taste or preferences of individuals residing in Europe about MTBs as a result of such partnership can be smooth enough to make the bikes reach beyond geographic boundaries of Canada.

However, the other two strategic options can hardly be an effective one. This is because setting up a wholly owned subsidiary at first instance in a newly targeted economy is likely to involve investment of huge amounts of resources at a go on one hand and a great deal of insecurity on the other (Freeman, 2014). Regardless of the fact that possession of such a subsidiary provides protection of I.P. as well as high control or coordination but coping up with the brand new market environment might often prove difficult thereby arousal of a need to bear the loss to be faced as a result all alone (Demrovsky, 2019). Similar to this, the Franchising Policy is unlikely to work well in favor of Mega Bikes as a result of involvement of low levels of control and coordination. This can duly be supported by bringing into light the fact that a formal agreement with franchisor provides little room for creativity thus restricting the areas of operation and products marketed by the concerned manufacturers.

Answer 3
Discuss the potential risks and benefits for the Company on adoption of this approach Potential risks for the Company: There might arise a great deal of problems in relation to failing to transfer meanings correctly while carrying out business operations on a partnership basis. This is because there usually exists no substitute for personal international experience and developing skill sets for translating between cultures might take time (Bergami, 2017). From the point of view of Currency risk, it might be problematic for the concerned management to work smoothly across multiple borders and currencies thereby maintaining environment-friendly norms can seem difficult as a result of availability of insufficient financial resources in hand. Besides this, as a result of indulging in joint ventures, Mega Bikes might seem to possess limited control and a bar upon knowledge sharing which can, at times, work in the way of the management continuing to carry on its business operations as per will that might work towards attainment of sustainability in long term.

Potential benefits for the Company: Adoption of this approach can enable Mega Bikes to learn another culture and learn managing it well. In this regard, building partnership with any other Company already operating in Europe can prove beneficial. This might involve development of a better understanding of complexities of the cultural background of people residing in Europe thereby formulating marketing strategies accordingly. Such understanding is important in order to enjoy the expected profit margining times to come (Zwilling, 2016). In addition to this, there is likely to remain minimal chance that such an investment upon expansion would lose value in times to come provided the partnership is strong enough and the marketing strategies are adequately implemented keeping the intensity of competition in mind and timing of entry appropriate thus eradicating operational problems (Forbes Insights, 2020). Now, establishment of appropriate partnership accompanied by optimum allocation of valuable resources focused on effectively meeting preferences of consumers can be deemed beneficial to analyze risks. This might involve a strategy of risk estimation through provision of basis for risk evaluation and decisions related to risk treatment increasing the level of revenue generated in turn.

Conclusion
Following a detailed analysis of a number of strategic options, it can be concluded that initiation of joint ventures and adherence to the Triple Bottom Line Model might make the decision of Bob to expand Mega Bikes into Europe a fruitful one.

Reference List
Dlabay, L. R., & Calvert Scott, J. (2011).Managing international business risk.In International business (4th ed., pp. 556–577). Mason, OH: South-Western/Cengage Learning.

ISBN: 9780538450423
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Australian Trade and Investment Commission (2021).Guide to exporting - Risk management. Retrieved on 3 January 2021, from Australian Trade and Investment Commission website: https://www.austrade.gov.au/Australian/Export/Guide-to-exporting/Risk-management

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Zwilling, M. (2016, April 7). 6 Key Risk Factors When Scaling A Business To Global. Retrieved 15 January 2020, from Forbes website: https://www.forbes.com/sites/martinzwilling/2016/04/07/6-key-risk-factors-when-scaling-a-business-to-global/#60eb22812a89

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Demrovsky, C. (2019, January 14). Don’t Ignore These 10 Global Business Risks In 2019. Retrieved 14 January 2020, from Forbes website: https://www.forbes.com/sites/chloedemrovsky/2019/01/14/dont-ignore-these-10-global-business-risks-in-2019/#54c0d80114c0

Forbes Insights. (2020, January 8). Video Meetings: The Default Setting For Business Communications. Retrieved 15 January 2020, from Forbes website: https://www.forbes.com/sites/insights-zoom/2020/01/08/video-meetings-the-default-setting-for-business-communications/#6290919f53eb

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