Posted: 13 Mar 2012
Date Written: February 28, 2011
The co-founder of an Italian, design based bicycle manufacturer evaluates if reducing costs by outsourcing would impact its brand. The company was founded in 2005 in Italy by three friends and in its first five years, it had enjoyed steady growth and built a strong reputation for producing high-quality city bicycles, appreciated for their retro-look and style. Its country of origin had probably helped them exporting their products as their bicycles were 100% made in Italy and the Made in Italy label had a reputation of high quality, craftsmanship and creativity. Yet their profit margins were relatively low as their manufacturing costs were very high. Should they outsource their production? If so, to China or to Eastern Europe? Was there some other way to improve the profitability of the company?
Learning Objective: To help students understand the importance of country of origin in export markets, and the challenges of reducing costs by outsourcing and the impact it might have on a brand. It also asks them to identify other ways to improve the profitability of a company.
Suggested Citation: Suggested Citation