Strategic Analysis for a Custom Bike Manufacturer


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Prepared by Ryan Ziemba & team for Columbia Business School

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Strategic Analysis for a Custom Bike Manufacturer

  1. 1. Ryan Ziemba | Work Sample | Sept. 19, 2013 This work sample contains excerpts from a comprehensive analysis I prepared along with my team of student colleagues at Columbia Business School. The full analysis was used by the investors and management team of a custom bicycle design and manufacturing startup. While this was in part a business school assignment, it was also a valuable consulting-style deliverable with real business implications for the recipients. In the interest of anonymity, I have replaced the name of the firm with “Bike Startup X.” Ryan Ziemba Columbia Business School Prepared Nov. 28, 2012
  2. 2. The Market: Overview U.S. Bike Sales (in millions) 21.0 18.0 15.0 20" and above 12.0 All wheel sizes 9.0 6.0 3.0 0.0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011  Units sold between 2000 and 2008 averaged 18.7 million per year  Sales have been volatile since 2009, when they dropped to 14.9 million, rising to 19.8 million in 2010, and dropping again to 15.7 million last year  On average, kids’ bikes have accounted for 30% of the total units sold per year for the past 10 years  U.S. bicycle sale revenues have had an 1.5% average growth over the past 8 years  Sales topped $6 billion in 2011, incl. retail sales, parts & accessories through all distribution channels. Source: National Bicycle Dealers Association, Industry Overview 2011, online. 2
  3. 3. The Market: Sales Distribution Channels  Specialty retailers  Mass merchants 70%  Outdoor specialty stores  Full-line sporting goods stores  Online and other retailers 70% 55% 60% Market Share 50% Share of Total Dollars Spent 27% 40% 30% 20% 18% 8% 10% 5% 0% 5% 7% Mass Merchants 2% Specialty Retailers 3% Sporting Goods Chains Outdoor Specialty Retailers Online and other There is opportunity to capture market share and customer dollars Source: National Bicycle Dealers Association, Industry Overview 2011, online. 3
  4. 4. The Market: Specialty Retailers Specialty retailers are of particular interest. Distribution Channel Market Share Mass merchants Specialty retailers Online & other Full-line sporting goods chains Outdoor specialty stores 70% 18% 7% 3% 2% % of Total Dollars Spent 27% 55% 8% 5% 5% Avgerage Price/Bike $84 $680 $380 $249 $590  Only distribution channel that maintained or increased average retail bike selling price in recent years;  Overall share and average selling price of new bike sales were up in 2011 compared to 2010;  New bicycle sales represent ≈ 41% of revenue – the rest is parts, accessories, service/repair, rentals and fitness equipment sales;  Approx. 4,100 retailers nationwide, but numbers are declining due to consolidation;  Core business strategy is differentiation: quality merchandise, added value services (e.g. bike fitting, assembly, repair, and community involvement) Source: National Bicycle Dealers Association, Industry Overview 2011, online. 4
  5. 5. The Market: Relevant Bike Use Trends Group bike programs on the rise (e.g. bike share, corporate fleets, hotel amenities), as more metro areas become more bike friendly *  Well-known bike share programs in place in: City Denver Minneapolis Chicago Washington, DC Miami Boulder Madison # Bikes # Stations 500 50 700 65 100 6 1,100 110 1,000 100 200 25 350 35 Highest Cycling to Work Share By State By City 1. Oregon 1.Portland, OR 2. Montana 2. Minneapolis 3. Idaho 3. Seattle 4. Colorado 4. San Francisco 5. Wyoming 5. Sacramento 6. California 6. Oakland 7. Hawaii 7. Washington, DC 8. Alaska 8. Tucson 9. Washington 9. Denver 10. Arizona 10. New Orleans  Some large corporations such as Google, Apple, Facebook, Genentech, and Williams-Sonoma have implemented corporate fleet programs There is room for growth in the corporate sales space * 19 of the 51 largest U.S. cities and 26 states have adopted policies requiring streets be built to accommodate bikes 5
  6. 6. Corporate Sales Strategy: Segmentation & Analysis Market segmentation is the cornerstone of an effective and efficient sales strategy Consider barriers to entry  Understand potential barriers to entry for each potential market to determine if successfully targeting a given segment is feasible and economically advantageous in both the short and long run. Understand customer behavior & preferences  It is also crucial to investigate customer needs, buying processes and behaviors, value perceptions, and channel preferences for each segment.  Find where, when and how do prospective targets make related purchases. Determine how individual target clients operate internally  Identify who influences buying decisions, who actually makes them, and who places the orders. Analyze distribution channels  Evaluate each step in the the distribution channel pipeline. Stay on top of market developments  Monitor the key trends in your market, such as market changes and the activities of competitors. 6
  7. 7. Corporate Sales Strategy: Potential Leads “In the HR world—outside of the industry—bikes are fast becoming the “cool” recruitment tool. High-tech firms in the Bay Area, including such behemoths as Apple, Google and Facebook, have invested in bikes for workers to get to various campuses, and it’s a trend that Kurt Wallace Martin says is on the rise nationwide as employers in dense urban cities feel the squeeze of congestion and limited parking.” Large Corporations Primary Commercial Benefits Marketing Collateral Co-branding Ease of transportation Exercise/health & wellness advantages Eco-friendly Stimulate purchase for personal use Additional recreational offering Google Apple Yahoo Dell Microsoft Coca-Cola Nestle P&G Unilever Colgate Recreational Parks Central Park, NY Golden Gate Park, San Francisco Rochester Park, Dallas Balboa Park, San Diego McDowell Nature Preserve, Charlotte Emma Long Park, Austin Red Mountain, Mesa, Arizona Gwynn Falls/Leakin Park, Baltimore Lincoln Park, Chicago Anacostia Park, Washington DC Hotels Ritz-Carlton Four Seasons St. Regis W Hotels Morgan's Hotel Group Conrad Hotels & Resorts Fairmont Hotels & Resorts InterContinental JW Marriott Mandarin Oriental Fashion Houses Zara H&M Gap Polo J Crew Tommy Hilfiger Kenneth Cole Michael Kors Marc Jacobs Abercrombie & Fitch Universities Stanford Harvard Yale Princeton Cornell Dartmouth UNC UVA UT, Austin Michigan Automotive Mercedes Benz BMW Audi Porsche Rolls Royce Bentley Aston Martin Ferrari Lamborghini Maserati 7
  8. 8. Competitive Analysis: Summary Competitor Retail Corporate Employee Program Branding Program √ Hotel Fleet √ √ √ √ √ √ √ √ University Campus City Bike Bike Share Share √ √ √ √ 8
  9. 9. Digital Analysis: Competitive Demographic Profiles
  10. 10. Digital Analysis: Competitive Search Volume Search volume for “Bike Startup X” was quite strong during 3 distinct time periods What happened at these spikes and can it be repeated? 100 represents peak search volume BikeStartupX BikeStartupX BikeStartupX
  11. 11. Digital Analysis: Competitive Traffic & Unique Visitor Ranking’s traffic trails most competitors although SEO recommendations should boost rankings. Villy Republic Public Workman Trek 0 17,366 63,094 100,000 90,006 107,500 117,320 163,626 200,000 300,000 268,984 400,000 380,435 Unique Visitor Rank (U.S.) 500,000 Visitors Rank (U.S.) 600,000 631,880 700,000 12,912