1. A Race to The
Finish
Paul Price & Mitch Coughlin
HSS 357-01
25 March 2014
TABLE OF CONTENTS
OVERVIEW……………………………………......
1
SUMMARY OF INDUSTRY
TRENDS…................2
SUMMARY OF COMPANY
3. future-forward company with a distinctive approach” (Business Wire). Therefore, my associate
and I wanted this project to reflect the future vision of Marsh Brand Partners. Ultimately, we
chose a distinctive approach of our own when conducting research. Mitch and I chose to examine
two sample groups. The first group contained the two of the largest bicycle companies, Giant and
Trek. The second sample group consisted of four smaller companies: as AeroCat, Cannondale,
Cervelo, Specialized.
Throughout our research, we examined the structure, size, history, target market,
financial resources, quality of management, opportunity for growth, and competitive advantage
of each company. Each company was also given a S.W.O.T. analysis, which according to one
professor is: “a basic, straightforward model that provides direction and serves as a basis for the
development of marketing plans. It accomplishes this by assessing an organization's strengths
and weaknesses, in addition to opportunities and threats (Ferrell).
Another aspect analyzed was the goals and objectives of each company. These will be
discussed, directly and indirectly, within the industry and company trends, which were derived
from past and present articles. These trends were measured from 2009-2014. At the conclusion
of this report one will find a final recommendation, which will serve as a suggestion for Marsh
Brand Partners to consider. One will also find an appendix containing all relevant graphs, charts,
and a list of credible sources.
Summary of Industry Trends
Among the most prominent trends we were able to glean from our research and data collection
were the introduction of electric and folding bikes, the increase in popularity amongst road bikes
(especially in comparison to mountain bikes), the domination in the market share of foreign companies
over domestic companies (especially China), and the decrease in the number of specialty biking stores but
4. increase in store size.
The introduction of electric and folding bikes has not taken off entirely in terms of sales numbers;
however, societal and economic factors have led to a greater awarenessin secondary forms of
transportation with these bike models looking to take advantage. Human-powered transportation has a
great opportunity to increase in popularity as gas prices have risen steadily over the years and there has
been a strong push in favor of environmental sustainability (green movement) and increased emphasis on
exercise to combat health issues. As a result, the federal government has allocated more money for the
construction of biker-friendly facilities such as bike paths and road repairs/expansions. Bike companies
have responded by resorting to electric and folding bikes to create a more efficient and environmentally
beneficial mode of transportation.
In addition to electric and folding bikes entering the market, road bikes have also seen a
significant boost in popularity, especially in relation to mountain bikes which have dominated the market
throughout the years. The increase in demand for road bikes has resulted from a higher interest in exercise
and fitness, competitive sport, and larger charity events (typically promoting fitness to combat health
issues). Biking companies have placed a strong emphasis on progressing the technologies of road bikes to
improve the comfort, make lighter bikes that are more easily transportable, and introduce electronic
components (such as shifters) that make the bikes a better ride as a whole. The improvements made on the
bikes, as well as the changing environmental factors,have helped lead the expanding market for road
bikes. As Katie Sue Gruener states:“a lot of people are coming to road biking from mountain biking, and
that experience makes the transfer easy.” (Forbes,2013).
Another major trend in the bicycling market is the expanding market share of foreign companies
over domestic companies. In particular, China has experienced a huge share of the United States market
share for bicycles; it was estimated that 93% of bicycle sales in 2011 were from Chinese imports.
Numerous companies, such as Dynacraft,Huffy Corporation, and Dorel import their products from
China. Even though imported bicycles make up almost the entirety of the U.S. market, it was
approximated that 56,000 bicycle units were produced domestically in 2011. These companies that
5. produced their bicycles domestically usually operated on a smaller scale of business.
The final major trend we conducted research on was the decrease in the number of specialty
biking stores but increase in store size. Sales have experienced a fairly steady increase since 2005, while
the number of specialty bicycle retail locations has steadily declined since 2000. The explanation for this
occurrence is that the stores are minimizing their locations (few dealers had more than one location) while
greatly increasing their store size. The average store size of a bicycle retail company was 5,000 square
feet (NBDA). This allows for a wide volume of bicycles and bicycle brands to display and sell to
consumers, which has allowed for an increase in sales.
Summary of Company Trends
We found that certain data gathered could instantly disqualify some of the six bicycle companies.
We chose to immediately remove Giant, Trek, and Specialized for severalreasons. For instance, Giant
Manufacturing and Trek were removed due to their sheer size, already established market share (domestic
and global), financial resources,and the current status of their brand.
Giant and Trek are extremely well established companies with a grasp on the global market,
specifically China. According to one source, “Giant has approximately 2,500 exclusive franchise stores in
China, dwarfing most of its competitors” (Bicycle Retailer). More notably so, Giant strives to increase its
numbers to 4,000 retail stores,by the end of 2015, ultimately increasing production by half a million
units. One article even states that Giant has just reported “revenue of NT$8.25 billion (US$272.01
million) from January through last month, up from NT$8.11 billion a year ago” (TaiPei Times). Trek, on
the other hand, is much smaller than Giant Manufacturing.
6. As of 2012, Trek had approximately 192 locations in China. However,that did not automatically
disqualify this company. In 2013, Trek had a recall of their popular bicycle model, Madone. According to
an official Trek press release,the company had nearly 16,000 units recalled (Trek). But, the recalls don’t
stop there. Within the past 20 years, Trek has had 14 major recalls. Therefore,the risk of partnering with
Trek is higher than other companies; it is for these reasons we must disqualify Trek.
Specialized can be closely related to Trek, where by Specialized already has established a
significant market share,domestically and in China. And despite a recent lawsuit, Specialized maintains
its strong brand and continues to expand. However,Specialized has also had major recall problems,
citing: “The recalled bikes are 2008 and 2009 models, sold from July 2007 through July of this year.
Consumers are being advised to stop using the bikes immediately” (Bicycle Retailer). Once again, the
yield from this partnership does not outweigh the risk.
The final three companies remain; however, this time my associate and I had to dig further to
figure out which company was the best fit for Marsh Brand Partners. Although it was a close race,we had
to eliminate Cannondale because of its established market share,and relationship with other major house
brands such as, Schwinn, GT, Mongoose, and Caloi. Cannondale could most similarly be compared to
Specialized. In fact,Cannondale had just broken into the Chinese market, as of May, 2012. According to
the Cannondale website, the company garners nearly $55 billion in retail each year. This company, like
Giant, Trek, and Specialized, are nearly too large and already have established their share of the market.
There is little opportunity for growth.
7. S.W.O.T. Analysis
TREK
S:
-Established name (#1 performance bike brand)
-International market share
-Decreased production cost based on relationship with Giant Manufacturing Co.
-USP: exclusivity with brand name
W:
-Relationship with Giant Manufacturing Co. eliminates total control over production
-Highly priced products unattainable to large portion of market
-14 recalls in last 20 years (each recall affects 20,000 units)
-Ineffective warranty (customer dissatisfaction)
O:
-International market (especially in China)
-Physically disabled market (Wounded Warrior Champion)
-Overpower smaller companies
-Electra Bicycle Company
T:
-Struggling economy (in relation to high priced products)
-Quality in products due to cuts in production budget
-Giant’s established market share in China
-Staying competitive in American market amongst plethora of companies implementing
low cost manufacturing
8. GIANT
Goals and objectives: continue to expand into international markets & increase domestic sales
Strengths
● Immense Capital
● Tested better than Specialized
● Global market share (China, Taiwan, South Korea, Australia)
● Increased sales in asian market
○ Giant Manufacturing runs nine plants in China and Taiwan, and is also Trek's
primary supplier
Weakness
● U.S. sales decreasing
● Too little experience with aero road cycles
● Expensive?
● Too little marketing
○ "We've kind of been the good-guy quiet company going about the business of
producing class-leading product but not talking much about it," said Patrick
VanHorn, Giant's corporate communications manager.
Opportunity
● Social media use
Threats
● Change in sociocultural lifestyle
● Change in economics
AEROCAT
9. S:
-Niche market
-Domestic in relation to Marsh Brands HQ
-Passionate outdoorsmen/bicyclists as owners
-Successful entrepreneurs
-Stable volatility (result of niche market)
-USP: strong customer service and relations (personable, family)
W:
-Lack of an established brand name
-Limited products (ten road bikes, one mountain bike)
-Limited capital
O:
-Basic web page that allows for more marketing opportunities
-Under the radar name with a lot of potential
-Collegiate sponsorship (six cycling teams, two triathlon clubs)
-Trend in mountain bikers to road cyclists
-“End in Mind” approach according to company’s passion, beliefs, and values
T:
-Competitive rivalry (especially with established brands)
-”Going under” experienced by new businesses
-Change in competitor’s focus could cause AeroCat progress to decline/yield
Recommendation & Rationale
After extensive research and data collection, my partner and I believe that AeroCat High
Performance Bicycles is the most compatible bicycle company for Marsh Brand Partners.
Therefore, we recommend the partnering of the two companies to mutually benefit one another.
Our rationale for the compatibility of the two companies is based off of the criteria given to us
10. from Pete Costanzo, Patrick Sutherland, and Taylor Knowles as well as the collective research
conducted on Trek, Giant, and Aerocat. The criteria given to us included high performance bikes,
opportunity for growth, domestic, “under the radar”, niche market, and narrow volatility. After
collecting data from numerous sources, we deduced that Giant was limited to high performance
bikes and opportunity for growth; Trek was limited to high performance bikes, opportunity for
growth, and domestic; and Aerocat included all of the aforementioned criteria.
Aerocat is a domestic company based out of Portland, Indiana which is a mere two hour
drive from Marsh Brand Partners’ headquarters in Cincinnati, Ohio. This proximity creates
numerous opportunities for additional contact between the two companies to build a strong,
effective, and efficient relationship. In addition to the proximity, Aerocat is new to the bicycle
industry as co-founders, Dave Poole and Tim Poole, established the company in 2005. Being a
new business does benefit Aerocat in the sense that it has yet to reach a large enough market to
experience increased levels of volatility. However, Marsh Brand Partners should perceive the
youth of Aerocat as an opportunity to help expand the brand name through its credible marketing
strategies. For instance, Aerocat has a rather bland website in comparison to prominent brands,
Trek and Giant. Additionally, Aerocat’s budget and lack of history limits the company to serving
a niche market (local universities, charity events, and a select few national cyclists). Thus, Marsh
Brand Partners has a great opportunity to assist in the promotion of Aerocat through enhancing
the website and reaching out to a more vast market. Aerocat specifically states company values,
beliefs, and missions to provide the highest quality bikes/products and to eventually reach
international status. My partner and I both believe that Marsh Brand Partners could be the vital
assistance in helping Aerocat fulfill its company goals.
![TRENDS………..….3
SWOT ANALYSIS
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Trek………………………………………...….4
-
Giant…………...………………………………5
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AeroCat………….…………………..................
6
RECOMMENDATION…...…..……………………
7
APPENDIX…………………………………………
8
SOURCES..…………………………………………
9
Overview
In 2012, Marsh Inc. experienced a wonderful transformation. With some surprise, Marsh
Inc. became Marsh Brand Partners. And according to CEO, Alan Roth, “[the company’s]
capabilities have broadened and deepened, and we have rebranded to reflect a stronger, more](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)