Baldwin Bicycle Case

BALDWIN BICYCLE COMPANY

• WHO?•Ms. Suzanne Leister (SL), BALDWIN

BICYCLE COMPANY (BBC)• Karl Knott (KK), HI-VALUE STORES INC.

(HVS)• WHEN?

•May 1983• WHERE?

HI-VALU

• Chain of discount department stores in the northwest.• Adding house brands.• Approached Baldwin about having

Baldwin produce bicycles.• Would bear the name

“challenger”.

HI-VALU PROPOSAL

1. Need ready access to large inventory,(HVS has difficulty in predicting sales)2. HVS would store inventory in regional

warehouses.3. Title would not pass until shipped to a

particular store.4. Upon shipment, payment will be due in

30 days.

HI-VALU PROPOSAL (contd.)

5. Title passes automatically when bicycle has been in warehouse 120 days.

6. HVS pays in 30 days.7. HVS estimated an average bicycle would

remain in the warehouse 2 months.8. HVS desired to sell Challenger bicycles at

lower prices than their name-brand bicycles. Did not want to take sales away from their name brands.

HI-VALU PROPOSAL (contd.)9. Wanted BBC to sell them at prices lower than

the wholesale prices sold through normal channels.

10.Wanted the Challenger to be different from other BBC bicycles.

11.Wanted different fenders, seats, and handlebars.

12.Wanted the Challenger name on the bicycle.13.The packing boxes would have the HVS and

Challenger names

HI-VALU PROPOSAL (contd.)

14.Ms. SL (Baldwin’s Mktg. VP) thought those requirements would increase purchasing, inventory, and production costs over and above costs of a similar increase in BBC volume.

15.Bicycle boom has flattened.

• BBC Plant at 75% capacity.• Added volume is attractive.• HVS will agree to buy house brand

bicycles exclusively from BBC for 3-year period, with automatic extension unless either party gives notice.

THE CURRENT STATUS