please read the case and write a CASESUMMARY , PROBLEM STATEMENT KEYPARTICIPANTS , and KEY ALTERNATIVES

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please read the case and write a "CASESUMMARY", "PROBLEM STATEMENT" KEYPARTICIPANTS", and "KEY ALTERNATIVES"

Sher-Wood Hockey Stick: Global Sourcing

In early 2011, the senior executives of Sher-Wood

Hockey (Sher-Wood), the venerable Canadian hockey

stick manufacturer, were pondering whether to move

the remaining high-end composite hockey and goalie

stick production to its suppliers in China. Sher-Wood

had been losing market share for its high-priced,

high-end, one-piece composite sticks as retail prices

continued to fall. Would outsourcing the production

of the iconic Canadian-made hockey sticks to China

help Sher-Wood to boost demand significantly? Was

there any other choice?

The History of Ice Hockey'

From the time of early civilization in places as diverse

as Rome, Scotland, Egypt and South America, the

"ball and stick" game has been played. The game has

had different names, but its basic idea has been the

same; the Irish, for instance, used the word "hockie"

to refer to the sport. Some reports trace the origins

of the game to 4,000 years ago, but it has survived

to the present.

IVIEY

RkhdIv.ykhl4RusIneu

The modem version of ice hockey emerged from

the rules laid down by two Canadians, James Creighton

and Henry Joseph, when they studied at McGill

University in the late nineteenth century. Their rules

were used in the first modem game, which was played

in Montreal, Quebec in 1875. In 1892, Canada's governor

general, Lord Stanley, introduced the game's

first national title, the "Lord Stanley's Dominion

Challenge Trophy," later simply referred to as the

Stanley Cup. In 1917, the National Hockey League

(NHL) was founded in Montreal.

Ice hockey found its way to the United States in

1893. By the early 1900s, it had also become prevalent

in Europe. Ice hockey was played as a part of

the Olympic Summer Games for the first time in

April 1920 in Antwerp, Belgium.

By the late twentieth century, ice hockey represented

an important source of national pride to Canadians,

and it had become popular in other countries

in the northern hemisphere, especially the United

States, Czech Republic, Finland, Russia and Sweden.

Ice Hockey Stick

In ice hockey, players use specialized equipment

both to facilitate their participation in the game and

for protection from injuries. The equipment can be

classified into five categories: goalie, head/face (helmet,

neck guard), protective (shoulder pads, shin

pads, elbow pads, hockey pants and gloves), sticks

and skates. "Head-to-toe equipment suppliers" typically

offered all equipment except for goalie equipment.

Among the five categories of equipment,

sticks and skates drove the industry, accounting for

almost two-thirds of global equipment sales. 3

A hockey stick is a piece of equipment used in ice

hockey to shoot, pass and carry the puck. It is cornposed

of a long, slender shaft with a fiat extension

3 2Summarized from J. L. Longe, How Products AreMade, 1999, http://

www.prohockeystuff.com, accessed on July 18, 2011; andhttp://www

.nhlhockeyice.com, accessed on July 18, 2011.

i 3http:llwww.thehockeysource.tv, accessed on July 18, 2011.

Case 1-1 Sher-Wood Hockey Sticks: Global Sourcing 17

Case i - i Sher-Wood Hockey Sticks: GlobalSourcing

Case 1-1 Sher-Wood Hockey Sticks: Global Sourcing19

the flex characteristic of their wooden counterparts

could not be derived precisely, because the sticks

were produced using a high volume production process

that yielded sticks with variable flex properties

..: Basics of Hockey Equipment Industry

According to most industry analysts, the global

hockey equipment market was showing signs of

maturity, growing at just 1 to 2 per cent per annum. 5

The global hockey equipment market in 2010 was

$555 million, with skates and sticks accountingfor

an estimated 62 per cent of industry sales.

Ice hockey equipment sales were driven primarily

by global ice hockey participation rates (registered

and unregistered). There were about 600,000 hockey

players in Canada in 2010. The number of registered

hockey players in Canada between the ages of 5

and 25 was expected to shrink by 30,000players,

or 5 per cent, over the next five years.Nevertheless,

some industry analysts believed that growth rates of

casual and unregistered hockey, participation, especially

in the United States, as well as growth rates in

Eastern Europe (particularly Russia) and women's

hockey had exceeded that of the registered segment

as a whole. Other drivers of equipment sales included

demand creation efforts, the introduction of

innovative products, a shorter product replacement

cycle, general macroeconomic conditions and the

level of consumer discretionary spending.

Relative to European football (soccer) or Amencan

baseball, all of the equipment required to participate

in organized hockey was more expensive

to purchase. Outfitting a teenager or an adult to

play recreational hockey cost approximately $600.

The equipment for younger players was less expensive.

However, nearly 40 per cent of all ice hockey

i 4Summarized from Preliminary Prospectus of Bauer PerformanceSports

Ltd. (January 27, 2011),http://www.secure.globeadvisor.comlservletl

ArticleNews/story/gamj201 10614/GIVOXBAUERMILSTEADATL,

............. accessed on July 18, 2011;http://www.sgma.com/pressI93_Sanctioned-

Team-Sports-P1ayIntheusRemajnsstongBut, accessed on July 18,

2011; andhttp://www.ehow.comlway_5i91903_ice-hockey-equipmentguide.

html, accessed on July 18, 2011.

5Source: https://secure.globeadvjsor.cojselejArtjcleNews/sto.y/

garn/201 1 0614/GIVOXBAUERMILSTEADATL, accessed on July 18,

20 1 1.

players lived in homes where the annual household

income was more than $ 100,000 per year.

The hockey sticks endorsed by professional

hockey players enjoyed a strong position in the

hockey stick market. Children and amateur players

liked to have sticks embossed with specific players'

names. Hockey stick manufacturers typically paid

NHL players to use their sticks and provided the

players with custom designed sticks.

Competitor Brands and Strategies'

Before a Montreal company began manufacturing

ice hockey sticks in the late 1880s, most players

made their own. By the early twenty-first century,

more than 20 brands of ice hockey sticks existed in

North America and Europe, and many of the smaller

equipment manufacturers had failed or been punchased

by larger competitors. The main brands were

Easton (Easton-Bell Sports), Bauer (Bauer Performance

Sports), CCM (Reebok-CCM Hockey),

Warrior (Warrior Sports), Sher-Wood (Sher-Wood

Hockey), Mission ITECH (acquired by Bauer) and

Louisville/TPS (acquired by Sher-Wood). Bauer,

CCM and Sher-Wood originated in Canada, and

Easton and Warrior originated in the United States.

Over 80 per, cent of the ice hockey equipment

market was shared by three major com

petitors: Bauer, Reebok (which owned both the

Reebok and CCM brands) and Easton, each of

which was a head-to-toe supplier offering . playens

a full range of products (skates, sticks and full

protective equipment). Moreover, Bauer and Reebok

also provided goalie equipment. The balance

of the equipment market was highly fragmented

with many smaller equipment manufacturers, such as

Warrior and Sher-Wood, offering specific products and

16 Summarized from Preliminary Prospectus of BauerPerformance

Sports Ltd., http:llwww.fundinguniverse.com, accessed on July18,

2011; http://www.eastonbellsports.com , accessed on July 18,2011;

http:llwww.bauer.com, accessed on July 18, 2011;http://www.sher-wood

.com, accessed on July 18, 2011;http://www.adidas-group.corporatepublicationcom,

accessed on July 18, 2011; http://www.warrior

.com, accessed on July 18, 2011; http:llwww.stickshack.com,accessed

on July 18, 2011; and http://www.hockeystickexpert.com ,accessed on

July 18, 2011.

Case 1-1 Sher-Wood Hockey Sticks: Global Sourcing21

Exhibit T; es, of Global Sourcing

2010 were $280 million, and its key markets were

Canada, the United States, Scandinavia and Russia.

Varrior Sports concentrated on providinglacrosse

rid ice hockey equipment, apparel and footwear.

he company was dedicated to a core set of philosohies

and strengths: technical superiority, grassroots

iarketing, original and creative youthful expression,

d strong partnerships with retailers and suppli

rs. In 2011, Warrior offered 15 types of player and

oahe sticks.

Generally, hockey companies provided one type of

Dckey sticks at three different price points—junior,

itermediate and senior. The reference retail prices of

ie five competitors' best senior composite sticks vard.

The Bauer Supreme TotalOne Composite, Easton

tealth S19 Composite and Warrior Widow Compose

Senior were all priced at $229.99. The CCM U+

razy Light Composite and Reebok ilK Sickkick III

omposite came in at $209.99, while the Sher-Wood

90 Pro Composite was priced at $139.99.

contracted or delegated to a company that may be

situated anywhere in the world. 8 Sourcing activities

can be categorized along both organizational and

locational dimensions (Exhibit 2 lists several types

of global sourcing). From an organizational perspective,

the choice between insourcing and outsourcing

involves deciding whether to keep the work within

the firm or contract it out to an independent service

provider. From a locational perspective, three

choices are available—onshoring (within the nation),

nearshoring (to a neighbouring country) and

offshoring (to a geographically distant country). To

optimize the overall benefits and hedge risks, companies

often seek to balance their global outsourcing

and insourcing activities. Exhibit 3 lists several

of the factors typically considered by manufacturers

faced with the decision of whether to onshore

insource or offshore outsource.

As early as the 1980s, western sports equipment

manufacturers, such as Nike and Reebok, started to

outsource the manufacture of sporting goods, such

as running shoes, to Asia. Nevertheless, before the

year 2000, hockey companies preferred insourcing

over outsourcing and executed this strategic

focus through organic growth, strategic acquisitions

and establishing company-owned factories in

other countries; for example, Easton and Warrior

had factories in Tijuana, Mexico. During the past

decade, the hockey industry began to outsource. In

2004, Bauer Nike Hockey shut down or downsized

three plants in Ontario and Quebec, eliminating

321 manufacturing jobs. The company outsourced

about 90 per cent of its production to other makers

, C

Global Sourcing in the Hockey

.. Equipment Industry

Similar to other industries, the hockey industry

22 Chapter 1 Expanding Abroad: Motivations, Means, andMentalities

Exhibit 3 Evalution of Global Sourcing

in Canada and the rest to international suppliers.

From 2002 to 2008, Reebok-CCM closed five

plants in Ontario and Quebec and outsourced manufacturing

to other countries, eliminating about

600 manufacturing jobs. Easton and Warrior also

outsourced part of their manufacturing to Asia

but still kept their factories in Mexico. The capacity

of Warrior's Mexican factory was estimated to

be 4,000 composite sticks per week produced by

250 employees in 2008. (Exhibit 1 lists the manufacturing

sites associated with several of the leading

hockey stick brands.)

Global manufacturing outsourcing was characterized

by some drawbacks. It separated manufacturing

activities from R&D and marketing

activities and challenged a company's ability to coordinate

initiatives between these functions, such

as product innovation, designing for manufacturability,

supply chain efficiency and quality control.

Especially in offshore outsourcing, cultural

differences caused miscommunication, technology

I 9This paragraph is summarized from MasaakiKotabe, Global Sourcing

Strategy: R&D, Manufacturing, and MarketingInterfaces (New York:

Quorum Books, 1992.)

distance necessitated extra training, and geographic

distance resulted in extra lead time or cycletime. 9

In March 2010, Bauer Hockey recalled 13 models of

junior hockey sticks, manufactured outside of Canada,

due to excessive lead levels in the sticks' paint that was

detected by public health officials in random testing.

Offshore outsourcing also threatened to negatively

impact a company's public image if it re -

duced domestic employment. In November 2008,

UNITE HERE10 launched a national campaign to

persuade Reebok to repatriate the production of its

hockey equipment and jerseys. 11

Additionally, global economic dynamics, such

as changing labour costs, raw material costs and

exchange rates, introduced new uncertainties into

global sourcing. Exhibit 4 lists a sample of comparative

labour rates prevailing in Canada, the

United States, Mexico and China. In 2011, the Boston

Consulting Group (BCG) concluded that with

Chinese wages rising and the value of the Yuan

I ' °UNITE HERE: a union representing 50,000 food service,apparel,

textile, hotel and distribution workers across Canada.

I"http://www.cbc.cafnews/story/2O1O/O3/18Jnikehockeystick-recall

html, accessed on July 18, 2011.

24 Chapter 1 Expanding Abroad: Motivations, Means, andMentalities

Reebok designed and produced a stick for him that 18 to 24months. By the end of 2010, Sher-Wood

had a graphite shaft and wooden blade, but the look provided 27types of player and goalie sticks.

of a one-piece. In November 2008, Reebok issued Thirteen of themwere wooden.

. a press release announcing that Spezza would start AlthoughSher-Wood had targeted various NHL

using their sticks, ". . . we are excited to work with playersin order to support the credibility of the

Jason, not only on marketing initiatives, but also on brand, thecompany mostly targeted junior teams,

; the research, design and development of future Ree- AAA teamsand a couple of senior leagues. Sher

bok Hockey equipment. "5 Wood only conducted a low volume ofcustom

: By May 2008, Sherwood-Drolet had filed a design for high-endplayers and mainly provided

proposal to its creditors under the Bankruptcy and customproducts from a cosmetic standpoint. For

I Insolvency Act. CBC News reported, "It has been example,personalizing the graphic or colour of the

hurt in recent years by shift from wooden hockey sticks.Sher-Wood used to need two to three weeks

sticks to composite sticks."" Richmond Hill, to producecustomized sticks for an NHL player.

Ontario-based Carpe Diem Growth Capital bought In 2010,Sher-Wood sales volume for sticksprothe

company and changed its name to Sher-Wood duced in Sherbrookedropped almost 50 per cent

Hockey Inc. compared to 2009. Its Chinese partners manufac-

In September 2008, Sher-Wood purchased the tured most of theircomposite hockey sticks. Sher

hockey novelty and licensed assets of Inglasco. In Wood's plantmanufactured the remaining high-end,

December that same year, it purchased TPS Sports one-piececomposite sticks and goalie foam sticks,

Group, a leading manufacturer and distributor of about 100,000units annually, with 33 workers in

hockey sticks and protective equipment. Sher-Wood the factoryand seven staff in the office. The return

transported TPS ' s assets from Wallaceburg and on investment ofthe fixed cost in Canada was low.

Strathroy, Ontario to Quebec, consolidated three Executivesbelieved that they needed to provide

companies and invested an additional$1 .5 million a competitive retail price toboost the demand. To

to set up the new factory. do so, they also needed to affordretailers a higher

Production

margin than their competitors did so that retailers

would help with product presentations in stores

As of March 2011,' Sher-Wood produced sticks and marketingefforts. These approaches called for

(sticks, shafts, blades), protective equipment low costproduction as well as decent quality. To

(gloves, pants, shoulder pads, elbow pads, shin reduce the costand fully utilize the facilities, they

pads), goalie gear (goalie pads, catcher, blocker, couldoutsource the remaining production to the

knee protector, arm and body protector, pants) partner based inVictoriaville and move facilities

, and other accessories (pucks, bags, puck holders, there.However, according to regulations in Que-

I mini sticks, bottles, carry cases) for ice hockey. bec,Sher-Wood did not have enough latitude to

The company also sold some equipment and acces- move or sell theequipment to their subcontractor

sories for street hockey (goalie kit, sticks, pucks, in Quebec.They also considered backshoring the

balls), as well as sports novelties for hockey fans.manufacturing out of China. They concluded that it

The company introduced new sticks twice a would be moreadvantageous to stay in China from

; year—in May/June and at the end of October. The both costreduction and R&D standpoints.

. life cycle of a product line in the market was about ChinesePartners' Condition

and Collaboration

15http://www.reebokhockey.comllabsflabs-blog/entries/2008fNov/25f

entry/jason-spezza-reebok-hockey-family/, accessed on July 18,2011. Sher-Wood's suppliers were located in Shanghai,

I '6http://www.cbc.ca/newsfbusiness/story/2008/05/05/sherwood-fihing

.html?ref=rss, accessed on July 18, 2011. Shenzhen and ZhongshanCity near Hong Kong.

I "Summarized from http:llwww.sher-wood.com, accessed on May 29,2011. They were producing tennis and badminton rackets,

developing the expertise in composite technology

and relevant sporting goods production. Sher-Wood

began to cooperate with them about 10 years ago

when it started selling composite sticks. For years,

these suppliers manufactured one-piece and twopiece

composite hockey sticks for hockey companies

around the world. Gradually, they accumulated

manufacturing capacity and R&D capability. Sher-

Wood's main supplier in Zhongshan City operated

two shifts for 10 hours a day, six days a week.

Their annual capacity was more than 1 million units.

Moreover, they possessed an R&D team with 10 to

15 engineers, which was able to produce a prototype

within one day with full information. On the contrary,

it would cost Sher-Wood four to five months

with a team of two to three engineers to produce a

similar prototype. More importantly, as a consequence

of their long-term cooperation, the main supplier

had developed a certain feeling about hockey so

that language and cultural barriers were not problems

any more. "They were becoming a partner, rather

than one section within the supply chain," said Eric

Rodrigue, Sher-Wood's marketing vice president.

Sher-Wood and its Chinese supplier partner

needed to collaborate closely. On one hand, Sher-

Wood had to send their experts to China to coach

the partner about how to produce sticks according

to their specifications. On the other hand, although

Sher-Wood and the partner had similar on-site

labs to conduct product tests, Sher-Wood mainly

focused on the feeling of the stick, that is, thereproduction

of how the slap shot, passes, reception,

etc., would feel when a player placed his or her

hands a certain way on the stick. Sher-Wood also

conducted tests on ice with professional players,

something their supplier could not do.

Moreover, with young, passionate and knowledgeable

new managers in management and marketing,

company executives thought they were ready to meet

the extra cost and effort in market collaboration between

Sher-Wood, the partner in China and retailers.

Company executives were concerned with rising

labour costs, material costs and the currency exchange

rate in China. Nevertheless, the overall cost ofmanufacturing

in China was still lower than the cost in

Case 1-1 Sher-Wood Hockey Sticks: GlobalSourcing 25

Quebec. They estimated that cost reduction was 0 to

15 per cent per unit depending on the model, with

good quality and fast turnaround time. Moreover,

some industries such as textiles had started to relocate

their manufacturing to new emerging countries, such

as Vietnam and Cambodia, for low labour and equipment

costs; however, there was no R&D advantage in

composite materials in these alternative locales.

Executives were also concerned with other issues.

First, although the main supplier was able

to produce customized sticks for an NHL player

within 24 hours, the shipping was quite expensive

from China to Quebec. Second, the main supplier

used to produce huge volumes fast but without

product personalization. Third, the game of hockey

was perceived as a Western cultural heritage sport,

so anything relevant to hockey which was made in

China had the potential to negatively influence the

market perception. However, all their competitors

had outsourced manufacturing to China for years.

. The Challenge

In early 2011, the question for Sher-Wood senior executives

was how to boost their hockey stick sales.

They believed that they should cope with this challenge

by providing sticks with better quality, better

retail price and better margin for retailers. They wondered

whether they should move the manufacturing of

the remaining high-end composite sticks to their suppliers

in China or whether there was any alternative.

If they decided to shift their remaining manufacturing

outside of the company, they needed to deal

with a variety of issues. To fully utilize the facilities in

Sherbrooke, they needed to move equipment to China,

which was difficult and time-consuming because of export

regulations. To set up the manufacturing machines

and guide the manufacturing team, they would need

to send experts there. To complete the coming hockey

season between September and April but still implement

the decision, they needed to plan every phase precisely.

They also needed to figure out what to say and

do about the 40 affected employees. Many had worked

for Sher-Wood for more than 30 years, and their average

age was 56. How could this be communicatedto

the public? They needed to make a final decision soon.

Hockey (Sher-Wood), the venerable Canadian hockey

stick manufacturer, were pondering whether to move

the remaining high-end composite hockey and goalie

stick production to its suppliers in China. Sher-Wood

had been losing market share for its high-priced,

high-end, one-piece composite sticks as retail prices

continued to fall. Would outsourcing the production

of the iconic Canadian-made hockey sticks to China

help Sher-Wood to boost demand significantly? Was

there any other choice?

The History of Ice Hockey'

From the time of early civilization in places as diverse

as Rome, Scotland, Egypt and South America, the

"ball and stick" game has been played. The game has

had different names, but its basic idea has been the

same; the Irish, for instance, used the word "hockie"

to refer to the sport. Some reports trace the origins

of the game to 4,000 years ago, but it has survived

to the present.

IVIEY

RkhdIv.ykhl4RusIneu

The modem version of ice hockey emerged from

the rules laid down by two Canadians, James Creighton

and Henry Joseph, when they studied at McGill

University in the late nineteenth century. Their rules

were used in the first modem game, which was played

in Montreal, Quebec in 1875. In 1892, Canada's governor

general, Lord Stanley, introduced the game's

first national title, the "Lord Stanley's Dominion

Challenge Trophy," later simply referred to as the

Stanley Cup. In 1917, the National Hockey League

(NHL) was founded in Montreal.

Ice hockey found its way to the United States in

1893. By the early 1900s, it had also become prevalent

in Europe. Ice hockey was played as a part of

the Olympic Summer Games for the first time in

April 1920 in Antwerp, Belgium.

By the late twentieth century, ice hockey represented

an important source of national pride to Canadians,

and it had become popular in other countries

in the northern hemisphere, especially the United

States, Czech Republic, Finland, Russia and Sweden.

Ice Hockey Stick

In ice hockey, players use specialized equipment

both to facilitate their participation in the game and

for protection from injuries. The equipment can be

classified into five categories: goalie, head/face (helmet,

neck guard), protective (shoulder pads, shin

pads, elbow pads, hockey pants and gloves), sticks

and skates. "Head-to-toe equipment suppliers" typically

offered all equipment except for goalie equipment.

Among the five categories of equipment,

sticks and skates drove the industry, accounting for

almost two-thirds of global equipment sales. 3

A hockey stick is a piece of equipment used in ice

hockey to shoot, pass and carry the puck. It is cornposed

of a long, slender shaft with a fiat extension

3 2Summarized from J. L. Longe, How Products Are Made, 1999,http://

www.prohockeystuff.com, accessed on July 18, 2011; andhttp://www

.nhlhockeyice.com, accessed on July 18, 2011.

i 3http:llwww.thehockeysource.tv, accessed on July 18, 2011.

Case 1-1 Sher-Wood Hockey Sticks: Global Sourcing 17

Case i - i Sher-Wood Hockey Sticks: Global Sourcing

Case 1-1 Sher-Wood Hockey Sticks: Global Sourcing 19

the flex characteristic of their wooden counterparts

could not be derived precisely, because the sticks

were produced using a high volume production process

that yielded sticks with variable flex properties

..: Basics of Hockey Equipment Industry

According to most industry analysts, the global

hockey equipment market was showing signs of

maturity, growing at just 1 to 2 per cent per annum. 5

The global hockey equipment market in 2010 was

$555 million, with skates and sticks accounting for

an estimated 62 per cent of industry sales.

Ice hockey equipment sales were driven primarily

by global ice hockey participation rates (registered

and unregistered). There were about 600,000 hockey

players in Canada in 2010. The number of registered

hockey players in Canada between the ages of 5

and 25 was expected to shrink by 30,000 players,

or 5 per cent, over the next five years. Nevertheless,

some industry analysts believed that growth rates of

casual and unregistered hockey, participation, especially

in the United States, as well as growth rates in

Eastern Europe (particularly Russia) and women's

hockey had exceeded that of the registered segment

as a whole. Other drivers of equipment sales included

demand creation efforts, the introduction of

innovative products, a shorter product replacement

cycle, general macroeconomic conditions and the

level of consumer discretionary spending.

Relative to European football (soccer) or Amencan

baseball, all of the equipment required to participate

in organized hockey was more expensive

to purchase. Outfitting a teenager or an adult to

play recreational hockey cost approximately $600.

The equipment for younger players was less expensive.

However, nearly 40 per cent of all ice hockey

i 4Summarized from Preliminary Prospectus of Bauer PerformanceSports

Ltd. (January 27, 2011),http://www.secure.globeadvisor.comlservletl

ArticleNews/story/gamj201 10614/GIVOXBAUERMILSTEADATL,

............. accessed on July 18, 2011;http://www.sgma.com/pressI93_Sanctioned-

Team-Sports-P1ayIntheusRemajnsstongBut, accessed on July 18,

2011; andhttp://www.ehow.comlway_5i91903_ice-hockey-equipmentguide.

html, accessed on July 18, 2011.

5Source: https://secure.globeadvjsor.cojselejArtjcleNews/sto.y/

garn/201 1 0614/GIVOXBAUERMILSTEADATL, accessed on July 18,

20 1 1.

players lived in homes where the annual household

income was more than $ 100,000 per year.

The hockey sticks endorsed by professional

hockey players enjoyed a strong position in the

hockey stick market. Children and amateur players

liked to have sticks embossed with specific players'

names. Hockey stick manufacturers typically paid

NHL players to use their sticks and provided the

players with custom designed sticks.

Competitor Brands and Strategies'

Before a Montreal company began manufacturing

ice hockey sticks in the late 1880s, most players

made their own. By the early twenty-first century,

more than 20 brands of ice hockey sticks existed in

North America and Europe, and many of the smaller

equipment manufacturers had failed or been punchased

by larger competitors. The main brands were

Easton (Easton-Bell Sports), Bauer (Bauer Performance

Sports), CCM (Reebok-CCM Hockey),

Warrior (Warrior Sports), Sher-Wood (Sher-Wood

Hockey), Mission ITECH (acquired by Bauer) and

Louisville/TPS (acquired by Sher-Wood). Bauer,

CCM and Sher-Wood originated in Canada, and

Easton and Warrior originated in the United States.

Over 80 per, cent of the ice hockey equipment

market was shared by three major com

petitors: Bauer, Reebok (which owned both the

Reebok and CCM brands) and Easton, each of

which was a head-to-toe supplier offering . playens

a full range of products (skates, sticks and full

protective equipment). Moreover, Bauer and Reebok

also provided goalie equipment. The balance

of the equipment market was highly fragmented

with many smaller equipment manufacturers, such as

Warrior and Sher-Wood, offering specific products and

16 Summarized from Preliminary Prospectus of BauerPerformance

Sports Ltd., http:llwww.fundinguniverse.com, accessed on July18,

2011; http://www.eastonbellsports.com , accessed on July 18,2011;

http:llwww.bauer.com, accessed on July 18, 2011;http://www.sher-wood

.com, accessed on July 18, 2011;http://www.adidas-group.corporatepublicationcom,

accessed on July 18, 2011; http://www.warrior

.com, accessed on July 18, 2011; http:llwww.stickshack.com,accessed

on July 18, 2011; and http://www.hockeystickexpert.com ,accessed on

July 18, 2011.

Case 1-1 Sher-Wood Hockey Sticks: Global Sourcing 21

Exhibit T; es, of Global Sourcing

2010 were $280 million, and its key markets were

Canada, the United States, Scandinavia and Russia.

Varrior Sports concentrated on providing lacrosse

rid ice hockey equipment, apparel and footwear.

he company was dedicated to a core set of philosohies

and strengths: technical superiority, grassroots

iarketing, original and creative youthful expression,

d strong partnerships with retailers and suppli

rs. In 2011, Warrior offered 15 types of player and

oahe sticks.

Generally, hockey companies provided one type of

Dckey sticks at three different price points—junior,

itermediate and senior. The reference retail prices of

ie five competitors' best senior composite sticks vard.

The Bauer Supreme TotalOne Composite, Easton

tealth S19 Composite and Warrior Widow Compose

Senior were all priced at $229.99. The CCM U+

razy Light Composite and Reebok ilK Sickkick III

omposite came in at $209.99, while the Sher-Wood

90 Pro Composite was priced at $139.99.

contracted or delegated to a company that may be

situated anywhere in the world. 8 Sourcing activities

can be categorized along both organizational and

locational dimensions (Exhibit 2 lists several types

of global sourcing). From an organizational perspective,

the choice between insourcing and outsourcing

involves deciding whether to keep the work within

the firm or contract it out to an independent service

provider. From a locational perspective, three

choices are available—onshoring (within the nation),

nearshoring (to a neighbouring country) and

offshoring (to a geographically distant country). To

optimize the overall benefits and hedge risks, companies

often seek to balance their global outsourcing

and insourcing activities. Exhibit 3 lists several

of the factors typically considered by manufacturers

faced with the decision of whether to onshore

insource or offshore outsource.

As early as the 1980s, western sports equipment

manufacturers, such as Nike and Reebok, started to

outsource the manufacture of sporting goods, such

as running shoes, to Asia. Nevertheless, before the

year 2000, hockey companies preferred insourcing

over outsourcing and executed this strategic

focus through organic growth, strategic acquisitions

and establishing company-owned factories in

other countries; for example, Easton and Warrior

had factories in Tijuana, Mexico. During the past

decade, the hockey industry began to outsource. In

2004, Bauer Nike Hockey shut down or downsized

three plants in Ontario and Quebec, eliminating

321 manufacturing jobs. The company outsourced

about 90 per cent of its production to other makers

, C

Global Sourcing in the Hockey

.. Equipment Industry

Similar to other industries, the hockey industry

22 Chapter 1 Expanding Abroad: Motivations, Means, andMentalities

Exhibit 3 Evalution of Global Sourcing

in Canada and the rest to international suppliers.

From 2002 to 2008, Reebok-CCM closed five

plants in Ontario and Quebec and outsourced manufacturing

to other countries, eliminating about

600 manufacturing jobs. Easton and Warrior also

outsourced part of their manufacturing to Asia

but still kept their factories in Mexico. The capacity

of Warrior's Mexican factory was estimated to

be 4,000 composite sticks per week produced by

250 employees in 2008. (Exhibit 1 lists the manufacturing

sites associated with several of the leading

hockey stick brands.)

Global manufacturing outsourcing was characterized

by some drawbacks. It separated manufacturing

activities from R&D and marketing

activities and challenged a company's ability to coordinate

initiatives between these functions, such

as product innovation, designing for manufacturability,

supply chain efficiency and quality control.

Especially in offshore outsourcing, cultural

differences caused miscommunication, technology

I 9This paragraph is summarized from Masaaki Kotabe, GlobalSourcing

Strategy: R&D, Manufacturing, and Marketing Interfaces (NewYork:

Quorum Books, 1992.)

distance necessitated extra training, and geographic

distance resulted in extra lead time or cycle time. 9