BUSINESS STRATEGY

Business Strategy



Business Strategy

Introduction

Custom Snowboards Inc. is operating as a corporation in sports goods manufacturing industry. The company is publicly trading on the London Stock Exchange since past two years. The founder, Jim Swartz, retained 51% of the issued shares when the company went public four years ago. Custom Snowboards Inc. remains the largest and most dominant player in the snowboard category helped to revolutionize over the past many years. Industry competition gives no indication it will subside, but we expect Custom Snowboards Inc. to maintain its market leadership via a wide economic moat built on superior product development capabilities, globally recognized brands, tremendous economies of scale, athlete and team sponsorships that tend to be hard to unseat, and a solid foundation in several emerging markets.

Custom Snowboards Inc. have been encouraged by the recent improvement in futures orders from European market - snowboards orders scheduled to be delivered over the next five months - as well as the firm's cost-containment efforts, which should lead to operating margin expansion over the next several years. The company operates in a highly competitive business environment, with the snowboard market served by a number of well-established companies with recognized brand names (IBIS World, 2012a). Company competition is generally on the basis of quality, performance, customer service and price. New product introductions, price reductions, consignment sales, extended payment terms, and increased advertising spending by competitors continue to generate increased market competition (IBIS World, 2012b).

Question 1

Growth Strategies

While the 2008 and 2009 economic downturn bankrupted smaller firms, it also created an opportunity for healthier firms to buy distressed manufacturers at depressed prices. Over the five years to year 17, sports manufacturing industry enterprises are expected to drop 4.0% annually to 1,099 in European market (IBIS World, 2012a). The decreased number of European firms indicates manufacturing is moving abroad, where lower labour costs allow firms to operate more efficiently (IBIS World, 2012b). 

Considering the best option to expand in European market, company will penetrate in European market through licensing option. This option will increase the overall value of the company by 527,657dollars. However, gain from constructing a building plant would be only 28,437. Acquisition will provide benefit of $12,522 and merger will provide benefit of $41,350 over five years period. Therefore, licensing is the best option considering the risks associated and potential gains from pursuing the option (Brigham, 2008).

The use of licensing as an entry mode may be affected by host country policies (Lasher, 2010). Licensing is a popular mode for entering foreign markets because it involves little out-of-pocket cost (Shapiro, 2005). Custom Snowboard can opt for different types of licensing agreements that can generally be divided into the following categories:

Technology License Agreements

License agreements and franchise agreements on trademarks

License Agreements Copyright

In practice, all or some of these agreements are often part of a single agreement and that such transfers generally do not refer to a single type of intellectual property rights but to many rights (Shapiro, 2005). All these mechanisms, either separately or together, provide your SME, as a ...