Baxton Case

Name: Simar Pal Singh Roll No: BLP016

Background and Decision

Baxton technologies was founded by Mark, with the help of a venture capital firm he started manufacturing as well as marketing. It is a small to medium sized scissors type surface automotive hoists (used in servicing, repair and speciality shops) manufacturing company which is operating is USA as well as Canada. Baxton lift was considered to be a leader in automotive lift safety. The organization wants to either increase its sales in US by opening a sales office or to get an idea as to which is the most viable option to enter into the EU market. He had basically 3 options and he wanted to know as to which option is best one. The options basically were:

• 5% Royalty on total sales

• 50%-50% partnership venture

• Setting up of a new manufacturing unit.

Market and Industry Analysis

Approximately 49,000 hoists were sold each year in North America out of which 30% were purchased by new car dealers. The industry is worth $150 million. There were a total of 16 companies competing in the market, 4 Canadian and 12 U.S. firms. The major players in this market are AHV lifts and Berne manufacturing which hold approx 60% of the sales. The distribution system in the industry mainly consisted of 1. Direct sales force and 2.A combination of wholesale dealers and company sales force. Baxton has a market share of 2.1% (exhibit 1) by volumes and 6% (exhibit 1) by sales in comparison to the total hoists manufactured in the USA. The distribution system present reflected the need to engage in the intensive personal selling since only 25% of sales was through company sales force

Evaluation of Alternative Courses of Action

1. Increase in US sales by setting up sales office: In order to setup a sales office in US we need to increase our sales by 1428698 in order to reach the breakeven. If we analyse we shall find that it is 1/4th of the total sales

Pros: 1) It can help to increase its market share. 2) Increase of brand image.

Cons: 1) The wholesalers might demand higher margins than 22% as of date. 2) Since the cost of production per unit is $7931.68 and the amount it receives is $8572(Exhibit 5), so the margin is roughly $640. So it has to decide as to how much to decrease the profit margin to keep the wholesalers happy.

European Markets

Baxton also wanted to enter the European market which was not yet captured by any big firm. Assuming that the market scenario is the same in both North America and Europe (Exhibit 1) we can consider that the total sales and marketing strategies will also be the same for both the markets. This is shown in