OMM622 WEEK 6 FINAL
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RUNNING HEAD: CASE STUDY RECOMMENDATION
Case Study- Case Study Recommendation
Kenneth Brooks
The University of Arizona Global Campus
OMM622: Financial Decision-Making
Dr. Amy Hakim
September 19, 2023
CASE STUDY RECOMMENDATION
2
Executive Summary
The activities of developing, engineering, producing, and selling performance ride dynamics products are among those pursued by Fox Factory Holding Corp. The company provides motorcycles, side-by-sides, all-terrain vehicles, snowmobiles, specialist vehicles and applications, bicycles, and on-road vehicles capable of driving off-road terrain. In addition, the company sells off-road vehicles and trucks. (Fox Factory,2023) After doing research, Fox Factory came to the realization that it would be in its best interest to contract the manufacturing of its new line of electric bicycles with a third party. This technique offers the lowest initial expenses and the least amount of risk when compared to other options, such as inventing a technology for constructing the electric bicycles in-house or licensing the idea to an existing firm. While still maintaining its well-known brand image, Fox Factory is in a position to profit from the growing demand for electric bicycles in its home market.
Fox Factory Situational Assessment
The Fox Factory Holding Corporation is recognized as a pioneer in the design and manufacture of innovative suspension components for bicycles, motorcycles, and off-road vehicles, and it has the position of industry leader in both areas. The growth in PVG of 33 percent and the expansion of AAG by 26 percent drove the firm's net sales to a total of 400.1 million dollars during the third quarter of 2023. (Fox Factory. 2023) The company's gross margin reached 33.2%, an improvement over the previous year during the same period. The strong financial position of Fox Factory and its extensive expertise in producing high-
performance suspension systems provide a solid foundation for the company's e-bike subsidiary's
future. A net income of $40 million and profits per share ("EPS") of $0.94 were reported for the
CASE STUDY RECOMMENDATION
3
company. The adjusted EPS of $1.21 and the adjusted EBITDA of $79 million are higher than anticipated—strong cash flow results in a reduction of $35 million in revolver borrowings. The company has reiterated its expectation for the full year of fiscal 2023, which is at the lower end of the range of 1.67 billion to 1.70 billion in revenues. (Fox Factory,2023)
Fox Factory Options:
1. Manufacture the upgraded model of the electric bicycle in-house:
Benefits:
Complete control over all parts of the production process, including the procedures used to ensure product quality. The possibility of cutting expenses by making better use of the resources and knowledge already at hand—the control you have on the marketing plan and the recognition of your brand.
Costs:
High start-up expenses may include investments in manufacturing equipment and staff, as
well as the price of employing and training new employees. Several potential dangers are connected to the manufacturing process; some of these include quality control, production delays, and design defects—the inability to expand output to satisfy the ever-increasing demand.
2. Manufacturing might be outsourced to a different manufacturer.
Benefits:
Reduced beginning expenses may include a cut in capital investment and manpower. Capability to decrease production risks by capitalizing on the manufacturer's existing experience and infrastructure. More leeway in adjusting production levels to accommodate changing demand.
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