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Case #1 BUSN 119 F14 10Marks

Analyze the following case based on the Case Analysis Package instructions. Must be submitted through the Dropbox for this course by midnight Thursday, October 2nd.

GUNNING FOR GROWTH

FOR WINNIPEG BASED FXR RACING, BIG AMBITION AND A WILLINGNESS TO CHANGE COURSE HAVE FUELLED THE CREATION OF A THRIVING INTERNATIONAL BRAND

Milt Reimer, founder of a $45-million-a-year snowmobile and motocross clothing empire, is an entrepreneur who believes in mechanics. He is not talking about the workaday mechanics of running a company with operations on three continents. Rather, Reimer likes to surround himself with people who know their way around a grumpy engine. In his view, they’re intuitive problem solvers. “My broad base of lateral thinking comes from being a mechanic, ‘ says Reimer, whose Winnipeg firm, FXR Racing Inc., has more than doubled its sales in the last five years, earning it a spot on the 2014 PROFIT 500.

It’s not difficult to understand why he places so much faith in this approach to business. Over 20 years, Reimer parlayed a job in the repair bay of a tiny rural snowmobile dealership into a well-recognized international brand that’s become de rigueur in the power-sports world of snowmobiling and motocross.

The path from one business to the other is every bit as winding and bumpy as an open-country snowmobile trail. Reimer spent a few years with the dealership and eventually bought it, figuring he’d run the company for a few years to finance his college studies. Soon, however, he found himself intrigued by gaps in the snowmobile apparel market. A racer himself, he couldn’t find warm, lightweight gear, so he began looking at designing products suitable for riders during long cross country races. As he researched the apparel industry, Reimer discovered a small Winnipeg firm called Modern Headwear, which made heavy jackets, mainly for corporate customers. Reimer proposed a deal: He’d hire Modern Headwear to sew his designs, and he’d place the products in snowmobile dealerships. “That’s where FXR was born.”

Reimer had big ambitions from the start. He didn’t want to limit FXR to Canada; while the Great White North is about as ideal a market as anyone plying snowmobile wear could hope for, it’s still a small one. So, as Reimer was building the business here, he was also working to establish the brand in the northern U.S., where, as he knew from his own experience as a racer, there were large and well-established snowcross associations. In the early 2000’s, with the Canadian dollar trading at record lows, Reimer’s designs, which were produced here, easily found customers in snowbelt states like Minnesota. “For that first five years, people thought we were an American company.”

Word spread, and within a few years Reimer was able to set up a co-branding arrangement with Yamaha’s snowmobile division. That amped up foreign sales considerably, as Yamaha pumped the apparel through its extensive dealership network around the world and soon formed and exclusive relationship with FXR. Reimer was also getting interest from Scandanavia, where a Norwegian snowmobile racer was importing FXR’s gear for resale. “We got good momentum, and I knew we were on the right track,” Reimer says.

Here’s where lateral thinking enters the picture again. By the mid-2000s, with the dollar rising sharply, Reimer realized he’d have to move production offshore, to South Korea, to avoid bankruptcy. He also saw that his exclusive relationship with Yamaha, stood in the way of extending the brand. Reimer became increasingly interested in the Scandinavian market, which he felt had too much growth potential for one Norwegian racer to capitalize on.

These factors led to a series of bold moves in 2009. First, Reimer severed his exclusive relationships with both Yamaha and the Norwegian importer. Second, he hired Yamaha’s former European sales manager, Jorn Madsen, to build a larger presence there and in Russia. Reimer believes snapping up Madsen was a coup: “He’s a very rare commodity, he’s an eagle.”

The revamped FXR was thus equipped to focus intensely on expanding sales throughout northern Europe, which it initiated by sponsoring well-known racers in the region – a tried and true promotional strategy in the sports gear sector. But the focus on northern Europe meant the company had to make a big shift in logistics. Since FXR started manufacturing offshore, it had simply shipped product directly from the factory in Asia to dealers. It quickly became clear that this approach wouldn’t meet the high standards of the Scandinavian clientele. Scandinavians, Reimer found, don’t mess around when it comes to getting the latest equipment for the winter sports about which they are so passionate. Even more than the Americans, “they expect high quality and high performance,” Reimer explains, “and they like their products on time.” So Reimer decided to update his supply chain and contract out Scandinavian warehousing and distribution operations so dealers could access to merchandise more easily.

Reimer found a third-party warehouse in Norway to handle distribution and deal with customs clearance. But the seemingly ideal arrangement soured when he began getting complaints from customers who weren’t receiving their shipments. After probing more closely, Reimer discovered that the Norwegian company was facing government fines because it had failed to complete mandatory paperwork relating to the imports. “It was such an ugly, ugly mess,” he says, and a great lesson in the importance of vetting foreign suppliers.

Utilizing the case analysis template, in the Case Analysis Package of your Course Shell, as a guideline, determine what Reimer should do next.

Loring, John, Canadian Business, October 24, volume 87, issue 10, pages 17 and 18 Page 2