In the Late 1990s, the Bicycle Maker Cannondale Corp

Essay

In the late 1990s, the bicycle maker Cannondale Corp.faced a variety of key strategic issues.One was the firm's continued dependence on Shimano Inc.of Japan to supply many parts for its bikes, particularly the derailleur, brakes, and crankset.A particularly troublesome aspect of this situation was that Shimano's high-quality and highly innovative parts were relatively expensive.Cannondale wished to reduce its dependency on these outsourced parts.A second issue was the increasing competition from Trek Bicycle Corp.and Specialized Bicycle Components Inc.for bicycles in the upper-end range of the market where Cannondale competed.Cannondale had built a successful business on the basis of high quality and innovative products.Its customers were bicyclists who expected the highest quality and most advanced features.Industry analysts predicted consolidation in the industry for manufacturers that use Shimano parts but cannot differentiate their products effectively; these bicycle makers will likely be forced to compete on price.
Required:
1.Consider the use of Shimano parts as one aspect of the value chain for Cannondale.Describe Cannondale's current strategy.How should this strategy change, if at all, to compete effectively with Trek and Specialized?
2.Should Cannondale continue to outsource Shimano parts? Why or why not?