The Concept of a Race to the Bottom - Case Study Example

Full Super-sized Cycles (A capstone management case study) 24 November Introduction Globalization is an on-going trend these days and many firms have to compete with big and small companies which are located either just nearby within the country or located in a far-away country halfway around the world. Many things have conspired to make this trend a reality, primary of which is the constant push for globalization from liberal political theories that a “rising tide lifts all boats” as famously uttered by former president John F. Kennedy in one of his speeches. Another is rapid technology, especially in the areas of information and communications technologies (ICT) in which both geographic distance and time zone differentials had been shortened or compressed, in what is now called as a “flat world” where people produce goods and services continuously on a twenty-four hour basis. A very frequent theme of globalization critics is the concept of a “race to the bottom” in which manufacturers try to get the cheapest products made abroad at the lowest labor costs possible. These issues are the main concerns in this management case study regarding bicycle manufacturing. Discussion Super Sized Cycles is a little niche maker of custom-built bicycles intended for big (obese or fat) people who are too big or heavy for ordinary and conventional bicycles. It is owned by Ms. Denizot and is in existence for barely five years already and operates out of the Burlington city in Vermont State in the United States of America. Her bikes are certainly not cheap, as these costs range from $699 up to $3,395 in price but these are built sturdier to carry overweight people and not collapse under a heavy load; the wheels, tires, seats, and steel frames are built much stronger than ordinary bikes. Sales last year was around $104,000 only. Mission Statement – Big Bikes for Big People at an affordable price of high quality Target Market – the obvious target market for this small niche-market manufacturer of big bikes are people who are obese or overweight which ordinary bicycles cannot carry as their big weight cause these ordinary bikes to either collapse or suffer a flat tire. There is now a sizable number of people who belong to this category of overweight people as there is an on-going obesity epidemic in the United States of America due to changing lifestyle patterns, primarily the lack of any adequate physical exercise to burn off excess calories and the habits of many people to consume a lot of junk foods such as fast-food which are low in nutrients but high in bad cholesterol. In fact, this obesity epidemic is now so bad it is estimated that one out of every three adult Americans is considered overweight based on the body mass index or BMI which is the easiest way to measure if a person is obese or not (The Economist para. 3). Even children today are also markedly obese compared to kids two or three decades ago. Economists have considered imposing a so-called “fat tax” to discourage the people from eating too much junk food these days. However, there is another more positive approach to changing people behaviors through an activist approach which is to encourage obese people to be more physically active through exercise. One of the healthier and more fun ways to do so is through biking and Super Sized Cycles has wonderfully found this viable alternative by offering to overweight people the chance to own a bike that is suitable for their size. There is a clear customer need for big bikes for big people who often cannot find the right bike. A generic business-level strategy for this small company for big bikers is to market exclusively to people who are considered obese based on their individual BMI. This is a type of focused strategy which means the company should sell big bikes only and nothing else that will dilute its strategy and make it lose its marketing focus. Examples are the two models that the owner had developed by herself (named as “A New Leaf” and “Time of Your Life”). Two options – Ms. Denizot can either manufacturer her bikes entirely in the U.S.A. or decide to go overseas and sub-contract Asian manufacturers at lower costs by outsourcing. If she makes bikes in the U.S.A. she has better control on the quality aspects of manufacturing wherein she can easily respond to customer complaints and suggestions (Grossmann para. 17) by a customized response to individual customers. She also helps her local community by the provision of skilled jobs and even apprenticeships to deserving people. On the other hand, the alternative of outsourcing will give her an edge on competition by lowering her cost and price as her bikes cost a lot at current levels. It will also allow her to increase bike production. The drawback for going abroad is she will lose some degree of management control in production. The ethical dilemma facing Ms. Joan Denizot is whether to outsource production of her bikes or not; if she stays in the U.S.A. her costs cannot go down but she provides skilled or well-paying jobs to American citizens but she exposes her company to fierce competition. Most firms go overseas to cut costs and lower their prices if they use a pricing strategy to cut down their competitors in the same industry. Business ethics is important in the formulation of a business strategy because it will determine the overall direction of the company, as in this case, whether to stay in the U.S.A. and risk bankruptcy and failure or go overseas instead. So the choice for Ms. Denizot is what is more important for her values, profits or survival? Conclusion There is no chance for this type of big bike in Taiwan as there are fewer people who are obese in Taiwan, and secondly, the bike makers there can easily copy this concept. On the other issues, perhaps it is more important for Ms. Joan Benizot to keep certain tasks such as the sales, marketing, distribution, warehousing, after-sales support, and telephone queries to be done within the United States to provide badly-needed jobs but the manufacturing aspects can be outsourced overseas to maintain a competitive edge on price and ensure expansion. Works Cited Grossmann, John. “Case study: Make bikes in the U.S., or go abroad to cut costs?” The New York Times, 02 June 2010. Web. 23 Nov. 2013. . The Economist. “Waist Banned: Does a Tax on Junk Food Make Sense?” The Economist, 30 July 2009. Web. 24 Nov. 2013. . Read More