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2007 2nd Place

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2007 2nd Place Simon Fraser Universty

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2007 2nd Place

  1. 1. Sygma Consulting Shimano: On the road to growth April 23 rd 2006
  2. 2. Sygma Consulting Issues Recommendations <ul><li>Constrained growth in current market </li></ul><ul><li>Ability to sustain the dominant position in the market </li></ul><ul><li>Growth in emerging markets: China Expanding product line </li></ul><ul><li>Increasing communication among channel partners </li></ul>
  3. 3. <ul><li>Overview </li></ul><ul><li>Challenges </li></ul><ul><li>Alternatives </li></ul><ul><li>Recommendation and Action Plan </li></ul><ul><li>Conclusion </li></ul>Sygma Consulting
  4. 4. Overview
  5. 5. <ul><li>75% of company earnings are from bicycle components sales </li></ul><ul><li>25% of Shimano’s sales can be attributed to fishing tackles </li></ul>Overview 1920 Small, family-owned business founded by Shozoburo Shimano 2005 $1.6 Billion* global company 20% sales from mid-range components 80% sales from high-end components *Source: 2005 Shimano Annual Report Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  6. 6. Alternatives Industry Value Chain Raw Materials Manufacturing of Individual Components Frame and Assembly Sales and Distribution Titanium Aluminum Carbon Fiber Shimano Campognolo SRAM Giant Trek Specialized Cannondale Pacific Cycling Independent Dealers (95%) Wholesale Retailers Catalogue Sales Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  7. 7. Shimano’s Challenges
  8. 8. Shimano’s Challenges Issue #1 Issue #2 Constrained growth in current market <ul><li>Flat long term sales trend (3-5% per annum) </li></ul><ul><li>Already achieves global sales that account for 95% of net sales for the bicycle components operations </li></ul>Ability to sustain the dominant position in the market <ul><li>Long lead times with channel partners </li></ul><ul><li>Competition </li></ul><ul><ul><li>Other part manufacturers </li></ul></ul><ul><ul><li>Frame manufacturers that are moving towards backward integration </li></ul></ul>Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  9. 9. Shimano’s Challenges Issue #1 Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  10. 10. Shimano’s Challenges Achieve growth by leveraging Shimano’s strengths while entering higher potential markets Issue #1 Objective Constrained growth in current market <ul><li>Flat long term sales trend (3-5% per annum) </li></ul><ul><li>Already achieves global sales that account for 95% of net sales for the bicycle components operations </li></ul>Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  11. 11. Shimano’s Challenges Increase communication with channel partners. Maintain the leading market share position in the bicycle component market. Issue #2 Objective Ability to sustain the dominant position in the market <ul><li>Long lead times with channel partners </li></ul><ul><li>Competition </li></ul><ul><ul><li>Other part manufacturers </li></ul></ul><ul><ul><li>Frame manufacturers that are moving towards backward integration </li></ul></ul>Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  12. 12. Alternatives Situational Analysis Opportunities Strengths Threats Weakness Overcome Weakness Grow R estructure Diversify <ul><li>Able to innovate </li></ul><ul><li>Strong reputation </li></ul><ul><li>High quality </li></ul><ul><li>Strong financial position </li></ul><ul><li>Global presence </li></ul><ul><li>Technological superiority </li></ul><ul><li>High bargaining power </li></ul><ul><li>Increasing exposure </li></ul><ul><li>Adopting a product development </li></ul><ul><li>strategy </li></ul><ul><li>Market development </li></ul><ul><li>Supply chain player cooperation </li></ul><ul><li>Lag time </li></ul><ul><li>Limited innovation beyond components </li></ul><ul><li>Communication / Collaborative effects with frame manufacturers </li></ul><ul><li>Backwards integration from frame manufacturers </li></ul><ul><li>Flattening of road and mountain bike markets </li></ul><ul><li>Increasing popularity of low-end bikes in emerging markets </li></ul><ul><li>Seasonality </li></ul><ul><li>SRAM </li></ul>Alternatives Conclusion Action Plan Recommendations Challenges Overview
  13. 13. Alternatives Situational Analysis Opportunities Strengths Threats Weakness Overcome Weakness R estructure Diversify Sustain Advantage Grow Alternatives Conclusion Action Plan Recommendations Challenges Overview
  14. 14. Alternatives Situational Analysis Opportunities Strengths Threats Weakness Overcome Weakness Grow R estructure Diversify Sustain Advantage Alternatives Conclusion Action Plan Recommendations Challenges Overview
  15. 15. Alternatives Team Shimano’s Core Values Mission: To promote health and happiness through the enjoyment of nature and the world around us Quality and Precision Technical Superiority High Customer Satisfaction Protection of the Global Environment <ul><li>Enhance enjoyment and ease of use </li></ul><ul><li>Only one in industry making architectural changes </li></ul><ul><li>Industry leader in innovation </li></ul><ul><li>Send 12 employees to manufacturers and retailers for several months to gauge consumer trends </li></ul><ul><li>Green procurement standards </li></ul><ul><li>Sustainable development </li></ul>Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  16. 16. Alternatives
  17. 17. Alternatives Existing customer base to leverage Explore emerging markets (China) Target Low-End Market Diversify into cross-country ski equipment Forward Integration Evaluative Criteria Transferability of core competencies Financial Risk Growth Potential Alignment with core values Overall Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  18. 18. Recommendation and Action Plan
  19. 19. Target Market <ul><li>Extreme Precision for Extreme Enthusiasts </li></ul><ul><li>Shimano is targeting high-quality, high-precision demanding enthusiasts that enjoy the life-enhancing activities that nature can provide </li></ul>Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  20. 20. Growth in Emerging Markets Source: CIA World Factbook (https://www.cia.gov/cia/publications/factbook/geos/ch.html) <ul><li>Why China? </li></ul><ul><li>The Olympic games in China provide a window of opportunity for growth in high performance sports merchandise </li></ul><ul><li>GDP growth is 10.52% </li></ul><ul><ul><li>Over 5x the European Average </li></ul></ul><ul><li>Consumer behaviour is predominantly shifting towards health, wellness & environmental sustainability </li></ul><ul><li>Focus on Pull </li></ul><ul><li>Create awareness of Shimano’s Core Values & high-quality brand in China </li></ul><ul><li>Capitalize on the 2008 Beijing Olympic games </li></ul><ul><li>Once demand is built, make Shimano’s components available in China through existing manufacturing partners (Giant) </li></ul>Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  21. 21. Expanding Product Line <ul><li>Shimano’s Precision All Year-Round </li></ul><ul><li>Make use of Shimano’s trusted brand to move into higher potential markets through product differentiation in Europe and North America </li></ul><ul><ul><li>Introduce precision Cross-Country Ski Bindings </li></ul></ul><ul><li>Opportunity to capitalize on: </li></ul><ul><ul><li>Experience and success in snowboard industry </li></ul></ul><ul><ul><li>The trend with avid cyclists skiing during the off-season </li></ul></ul>Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  22. 22. Tribal Marketing Strategy Source: European Journal of Marketing; Cova (2001) Alternatives Conclusion Recommendation and Action Plan Challenges Overview <ul><li>Support a Community of Enthusiasts </li></ul><ul><li>Ethnomarketing </li></ul><ul><ul><li>Join tribe & support its functioning </li></ul></ul><ul><ul><li>Authentic interaction involvement with consumer </li></ul></ul><ul><li>Co-Design </li></ul><ul><ul><li>Participation of members </li></ul></ul><ul><li>Tribal Support </li></ul><ul><ul><li>Shares the tribe values </li></ul></ul><ul><ul><li>Supports the shared passion of members </li></ul></ul><ul><li>Clear Success </li></ul><ul><li>In 1995 Salomon used a “Tribal Marketing” strategy to enter the snowboarding market </li></ul><ul><li>By 1999 it became the 3 rd largest supplier in the saturated French snowboarding market </li></ul><ul><li>Using purely social marketing methods, Salomon was able to enter the market with the support of the snowboarding community </li></ul>
  23. 23. Shimano’s Tribal Marketing Strategy <ul><li>Ethnomarketing </li></ul><ul><ul><li>Sponsor Cross-Country Skiing events </li></ul></ul><ul><ul><li>Become an active member of the community </li></ul></ul><ul><ul><ul><li>-Purely Societal Anchoring </li></ul></ul></ul><ul><li>Co-Design </li></ul><ul><ul><li>Collaborate with Professional and Enthusiast Skiers when creating a new line & return to the Skiing industry with support from the Skiing community </li></ul></ul><ul><li>Tribal Support </li></ul><ul><ul><li>Avoid placing adds, rather promote the practice </li></ul></ul><ul><ul><li>Support shared passions and values of the nature enthusiast community </li></ul></ul>Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  24. 24. Timeline (China Strategy) Alternatives Conclusion Recommendation and Action Plan Challenges Overview 2.5 Billion ¥ 0 0 0 0 <ul><ul><li>Revenue </li></ul></ul>50 Million ¥ 40 Million ¥ 40 Million ¥ 35 Million ¥ 30 Million ¥ <ul><ul><li>Expenses </li></ul></ul>Offer Shimano products through current partners Build demand: Olympics in China Advertise in local magazines to create brand awareness; promote core values <ul><ul><li>Activity </li></ul></ul>China Strategy 2010 2009 2008 2007 2006
  25. 25. Timeline (Product Diversification) Alternatives Conclusion Recommendation and Action Plan Challenges Overview 1.84 Billion ¥ 1.05 Billion ¥ 524 Million ¥ 0 0 <ul><ul><li>Revenues </li></ul></ul>50 Million ¥ 60 Million ¥ 75 Million ¥ 75 Million ¥ 60 Million ¥ <ul><ul><li>Expenses </li></ul></ul>Olympics in Whistler, Canada Co-Design with consumers and launch with ski community’s support Ethno-marketing towards avid skiers <ul><ul><li>Activity </li></ul></ul>Product Diversification Strategy 2010 2009 2008 2007 2006
  26. 26. Maintaining the leading market share http://www.bikebiz.com/news/21739/Lay-off-Shimano-the-industry-structure-is-at-fault-for-shortages <ul><li>Ongoing Efforts: </li></ul><ul><ul><li>Increase cooperation between channel partners </li></ul></ul><ul><ul><ul><li>Eliminates excess capacity </li></ul></ul></ul><ul><ul><ul><li>Change OEM bicycle brand excess ordering strategy </li></ul></ul></ul><ul><ul><li>Leverage the brand strength </li></ul></ul><ul><ul><ul><li>Continue to differentiate on quality, environmental responsibility and innovation </li></ul></ul></ul>Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  27. 27. Risk Mitigation Uncertainty in high- end Chinese market Difficulty in marketing to new segment when diversifying Damage of brand or reputation <ul><li>Low investment in marketing </li></ul><ul><li>Pull strategy to gauge demand </li></ul><ul><li>Cycling enthusiasts train in off season through cross-country skiing </li></ul><ul><li>All decisions must be aligned with the core </li></ul>Risks Response Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  28. 28. <ul><li>See attached appendix </li></ul>Detailed Financial Projections Alternatives Conclusion Recommendation and Action Plan Challenges Overview
  29. 29. Alternatives Conclusion Management Preference Organization Strategy Resources Environment <ul><li>Growth in the high to mid end markets </li></ul><ul><li>Environmentally responsible. </li></ul><ul><li>2005 Quick Ratio: 3.8 </li></ul><ul><li>Debt to Equity: 0 </li></ul>Strategy shift based on Shimano’s internal capabilities and the external environment factors <ul><li>Precision manufacturing </li></ul><ul><li>Strong family culture </li></ul>Alternatives Conclusion Action Plan Recommendations Challenges Overview
  30. 30. Questions?

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