Global Business Environment: Mega Bikes Case Study Analysis

This case study examines Mega Bikes, a Canadian SME manufacturing high-end mountain bikes (MTBs), facing global expansion opportunities. The company, experiencing high demand from Europe, must decide whether to establish a new branch there, despite current financial constraints. The analysis applies various management theories, including the New 'New' Trade theory, Porter's Diamond theory, and the comparative advantage theory, to evaluate the strategic implications of this decision. The case highlights the importance of leveraging global exposure, considering production capacity, and managing financial resources to maximize profit. The analysis concludes that expanding into Europe is a beneficial and important decision for Mega Bikes, allowing the company to fully capitalize on global demand and secure long-term growth.

Management in global business
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GLOBAL BUSINESS ENVIRONMENT
Table of Contents
Introduction................................................................................................................................1
Analysis of the case study..........................................................................................................2
New ‘New’ Trade theory of management..............................................................................3
The ME Porter’s Diamond theory:.........................................................................................3
Comparative advantage theory of global business.................................................................4
Conclusion..................................................................................................................................4
References..................................................................................................................................6
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Introduction
A SME (Small and medium enterprise) named as Mega bikes manufactures the high end
mountain bikes referred as MTBs. The domestic market of the bikes is at the west coast of
Canada and the USA. The CEO of the company named as Bob Branch, established a new
branch of Mega Bikes in Vancouver in Canada. Although, company has a good scope to
increase its productivity in Vancouver but the company got a global exposure. The riders of
MTB are ranked in top 10 in championship. Now the company is receiving a lot of orders
from other countries like Japan, Australia and other European countries. Bob is planning to
establish a new branch in Europe. Currently company does not have sufficient financial
capacity to move its operations but the products of the company are in great demand. Now
the decision would be taken by the Bob related to the shifting of its operations to the Europe.
In this case study, we will analyse the decision making situation for Bob related to the global
business environment on the bases of various management theories.
Analysis of the case study
As discussed with the case, the high end mountain bikes (MTB’s) got a global exposure
because of the winning of sport rider with this bike. The demand of the bikes suddenly surged
up in so many countries of Europe. Although, the company already established its new
branch in its domestic market of Canada but the CEO still want to open a new branch in
Europe. Despite of having the sufficient financial resources, opening a new branch in Europe
would be definitely be the correct decision for the Bob (Global, 2018). The funds can be
arranged by taking debts or by distributing shares of the new branch to existing and
interesting shareholders. Overall, the initial fund can be managed with the help of other
financial resources including debt, equity shares and lease generation but the investment at
this stage would be prove highly beneficial for the company (Roy & Srivastava, 2017). Bob
want to take the advantage of global exposure and no doubt, already the orders of the bikes
are booked at a large scale (Tallman, 2018).
On the other hand, if the Bob will not open the new branch at Europe, he has to export the
bikes from his domestic market but because of tax policies and other factors, he would not be
able to enjoy the full profit that could be generated by the company. Moreover, the
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production capacity is limited inside the domestic market, whereas the production would be
increased if a new branch would be open at Europe. For full utilization of the global
recognition of the mountain bikes, opening a new branch will surely the perfect option (Doh,
2005).
New ‘New’ Trade theory of management:
The New ‘New’ trade theory of management by ‘Melitz’ stated that only the firms having
high production capacities will be able to make significant profit, to cover the huge fixed
costs which are required to meet the export operations (Ayumu, 2010). This theory stated that
it is always better to open a new branch in the market where the demand is realised whereas
to export the product from one country to other. Export operations need a lot of cost and this
cost will be recovered only with the help of large amount of profit (Ying, 2007).
As discussed with this case, if the company’ Mega Bikes; export its product to another
countries than they will have to bear the cost of export operations which will results in lack of
profit received by the company. Whereas, if the company extend its business in Europe,
where the demand is received at a huge level, they will be receiving a large amount of profit
with a good public image because of the special features of the mountain bike (Neary, 2009).
The ME Porter’s Diamond theory:
Decision of opening a new branch should be based on the following factors:
Chances, firm’s strategy, structure and rivalry, demand conditions, government, related and
supportive industries and other factor conditions.
As discussed with this case demand conditions are the major factor in improving the business
of the company by opening a new branch in other country. If the company extend its business
in other countries then it not only get rid from a huge tax and export duties burden but also
they will be able to take the advantage of the local resources of foreign country. The
company can enhance its productivity level with the concept of increasing return to scale by
opening new manufacturing unit in other countries. Overall, if the demand is realising at a
large scale, extending the business will definitely the right decision that should be taken by
the CEO of the company (B2U, 2018).
As discussed with this case, Bob wants to extend its business in other country but he is a little
bit cautious about the limited financial resources of the company. It is very clear that
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obligations need to be taken by the company in order to extend its business. But by reviewing
the scenario, it is found that a huge demand is received by foreign market because of the
increasing demand, the company would easily overcome from its dues and debts. They can
also take the help of resources available in other country. FDI would also be a method to cope
up with the limited financial resources of the company. Moreover, opening a new
manufacturing unit would prove beneficial for the future profit and long term growth of the
company (Marshall, et al., 2011).
Comparative advantage theory of global business
This theory is focus on the process of business in which a company want to increase its
production in order to maximise its profit with less inputs (Laursen, 2015). It stated that the
decisions of the company should be based on the receiving comparative advantage (Ricardo,
2019).
As discussed with this case, if a new branch of the company will be opened in the Europe,
definitely the production will be increased and the company will have a comparative
advantage, in selling its products in comparison of selling the same products from its
domestic market (Pflüger & Tabuchi, 2019). So with the help of this theory it is very clear
that the decision of the company ‘Mega Bikes’ should be based on the comparative advantage
for the long term profit for the company.
Conclusion
After analysing the various aspects of the decision making options, it can be said that
extending the business of ‘Mega Bikes’ would be a beneficial and important decision of the
firm which should be taken by the CEO as soon as possible. Although the company is
performing well in its domestic market but still if it wants to utilize the global demand
completely, the firm need to shift its manufacturing unit to the Europe market. The company
is receiving a massive demand for its special product of bike because of its global exposure.
This type of attractive opportunities and global exposure is hard to find in this competitive
world. Bob has to take the advantage of the situation and try to make maximum profit with
this huge demand of the product named as ‘Mountain bikes’.
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