Essay About European Market And B.E Unit

Baxton Technology Case Study
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BACKGROUND AND PROBLEM DEFINITIONBaxton Technologies (BT), is a pioneer in manufacturing surface automotive hydraulic hoists used by garages, service stations, car repair shops etc. Demand for such products is proportionately increasing with the rise of registered vehicles around U.S., Canada and Europe. President, Mark Baxton along with his manager Pierre Gagnon must arrive at a decision whether to expand their sales in the U.S or explore the newly found European market. Further, if they chose European market as an option they have to zero down on either of the three options license agreement, joint venture or direct investment. MARKET ANALYSISNorth America alone accounts for 49,000 hoists annually, where 30% consumers are new car dealers. Here consumers are dived into two categories- non-mechanic garage owners who have no knowledge of hoists and mechanic garage owners who knowledgeable about hoists but not about brands available in the market. Competition is high as U.S. alone has 12 companies, amongst which AHV lifts and Berne has 60 % of market share. But, BT face direct competition from AHV Lifts and Mete Lift in the Scissor Lifts category, however, both are 20% and 5% behind BT in terms of sale. BT has three types of distributers- 1) Company sales force 2) Canadian distributers 3) U.S. wholesalers. BT lifts are sold at an average retail price of $10,990. European market seems lucrative after import-export duties were done away and borders became non-existent. Less competition and steep rise in number of newly registered vehicles added to the demand of car repairing shops which sets the stage for lift sales. STRATEGY ALTERNATIVESFurther penetration into American Market:Competition is already too high, as 12 companies already fighting only in US and hardly any support from the wholesalers who are least concerned about the brand. Besides Market share of Baxton is only 46%. Besides, B.E unit is 3241 units which if compared to sales makes infeasible.European Market:Licensing – BT is known for its uncompromising quality and service. Keeping these aspects either Pierre should turn down the offer or negotiate for a better one. The profit incurred hardly makes any difference as per Exhibit 2.50:50 Joint Venture- Baxton will be entering a new market averse with risk. A partnership will bring experience on board, technical support and minimization of risk. 50-50% joint partnership is a good idea as Baxton will get the untapped German market.Direct Investment- As per Exhibit 3. The investment cost $1,836,000 is too high for an unfamiliar market. Besides B.E unit is 712 units, which when compared to European estimates of registered vehicles seems unfeasible.CONCLUSION & RECOMMENDATIONAs per the analysis above I will suggest Baxton should go with the joint venture plan for two reason:It will save huge capital costs and bring in technical and local expertise. Besides, no power sharing is compromised being 50-50% partner.Will spread and reduce the risk to a great extent.Exhibits 1:Hoists sold each year in North America = 49,000Total vehicles projected = (146+14) million = 160 million.Tapped market only= (49,000 / 160 mn) = 0.03%.Total Scissor lift sold2316BT scissor lit sold.1054Per unit contribution2578.75Total fixed costs 8,360,000.00B.E Unit3241 units