Case Study and Discussion Questions
Hutt, M. & Speh, T. (2014), Business Marketing Management: B2B (11th edition), South-Western Cengage Learning.
Chapter 6 – Case Study page. 171-172
Schwinn: Could the Story Have Been Different?
At its peak, Schwinn had more than 2000 U.S. employees, produced hundreds of thousands of bicycles in five factories, and held 20 percent of the market. Today, however, Schwinn no longer exists as an operating company. The firm, founded in 1895, declared bankruptcy in 1992 and closed its last factory one year later. The Schwinn name is now owned by Canada-based firm and all of the bikes are manufactured in Asia. Harold L. Sirkin, a senior vice president at Boston Consulting Group, argues that Schwinn's story could have been different. He outlines two alternative pathways that might have provided a happier ending to the Schwinn story.
Alternative Reality One: Aim High
Under this scenario, Schwinn decided to center on midrange and premium segments of the market, leaving low-end bicycles for competitors. However, the firm determined that it could substantially reduce cost by turning to low-cost partners in rapidly developing economies for labor-intensive parts. Schwinn interviewed hundreds of potential suppliers and locked the best ones into long-term contracts. Schwinn then reconfigured its operations to perform final assembly and quality inspection in the United States. Still, the changes forced Schwinn to make some painful choices- nearly 30 percent of the workforce was laid off. However, such moves allowed Schwinn to produce bikes at half the previous cost, maintain a significant position in the midrange bicycle market, and leverage its product design capabilities to build a strong position for its brand in the high-end market. As a result, Schwinn is extremely competitive in the U.S. market and is a major exporter of premium bikes to China and Europe. Because of this growth, Schwinn now employs twice as many people in the United States as it did before outsourcing began.
Alternative Reality Two: If You Can't Beat Them, Join Them
Schwinn went on the offensive and moved as moved as quickly as possible to open its own factory in China. By bringing its own manufacturing techniques and by training employees in China, Schwinn was able to achieve high quality and a much lower cost. However, the decision meant that 70 percent of Schwinn's U.S. workers would lose their jobs. But Schwinn kept expanding its China operations and soon started selling bicycles in Chinese market, not only at the low-end but also to the high-end, luxury segment, leveraging its brand name. Schwinn then extended its global operations and reach by adding new facilities in Eastern Europe and Brazil. The company has sold over 500,000 bikes in new markets.
- By facing fierce competition from low-cost rivals, many business-to-business firm in the United States and Europe face a situation today similar to Schwinn's. What lessons can draw from the Schwinn story? How can they strengthen their competitive position? Apply the theory studied in chapter 6 as well in other chapters to answer the question and also support the answer with other academic resources (500 words).
© MIT - Prepared by Dr Lakshi Perera
- How distinctive types of international strategy and the essential components of a global strategy are applied to this case study? Apply the theory studied in chapter 6 as well in other chapters to answer the question and also support the answer with other academic resources (500 words).
Hutt, M. & Speh, T. (2013), Business Marketing Management: B2B (11th edition), South-Western Cengage Learning.
Chapter 7 – Case Study page. 198
Hidden Inside: International Flavors & Fragrances, Inc
Founded in 1909 and based in New York City, International Flavors & Fragrances (IFF) manufactures flavors (46 percent of sales) and fragrances (54 percent of sales) for use in a wide array of consumer products. The Flavors segment offers components for use in consumer products such as soft drinks, candies, pharmaceuticals, snack foods and alcoholic beverages. The Fragrances segment provides functional fragrances for personal care and household products, including perfumes and colognes. The firm's customer base consists of large consumer product companies such as Pepsi, Procter & Gamble, Estee Lauder and Unilever. IFF generates over 40 percent of its sales from rapidly developing economies.
Large consumer product firms are quite reluctant to put their brands at risk, so these customers favour trusted global suppliers, like IFF, that can meet their supply needs around the world, as well as ensure the safety and quality of their products. However, IFF competes with three other large market participants - Givaudan, Danisco, and Firmenich. When a consumer product company wants to launch a new flavour or fragrances, IFF, along with each of these rivals, has been offered the opportunity to develop a scent, making it difficult to lock in customer relationships. Since the value that IFF contributes to consumer product is "hidden inside" and the IFF name is unfamiliar to end customers, some challenging questions emerge for managing the firm's brand:
- What strategies could IFF follow to differentiate its offering from those competitors and strengthen its position with its core base consumer product companies? Apply the theory studied in chapter 7 as well in other chapters to answer the question and also support the answer with other academic resources (500 words).
- Should IFF invest in a marketing communications strategy that seeks to establish its identity among end customers (i.e., its customer's customers)? Apply the theory studied in chapter 7 as well in other chapters to answer the question and also support the answer with other academic resources (500 words).