Case Study BICICLETA Ltd
Business News (The Bicycle Journal):
Change in the management and entry into foreign market supposed to secure economic success of BICICLETA Ltd.
BICICLETA Ltd was founded 30 years ago. Since then, the company has become a leader in the bicycle industry in The Netherlands. Often ahead of competitors, BICICLETA is even regarded as one of the most innovative bicycle manufacturers in Europe. Talking about BICICLETA’s success is impossible without talking about one person:
Marita Pedales. She has managed to transform a small bicycle shop into a company with 57 employees producing highly valued bicycles. However, in the currently stagnating and hard-fought cycle market, BICICLETA cannot rely on its past achievements.
In fact, the company needs to break new ground to secure future success. That is why BICICLETA must enter new markets and develop new products.
With all these new challenges for BICICLETA, it is surprising that Marita Pedales wants to step down from operating the business at the end of this year. However, she promises, she will be on hand with help and advice for the company whenever needed.
At the same time, she stresses the competence and experience of the new Managing Director, Veronica Velocista, who took over recently. She has high confidence in the new manager. From these statements it can be concluded that we can expect to hear a lot from BICICLETA Ltd soon.
At the “bikeworld” trade fair, the company presented the CITY BIKE “Cruiser” to an interested trade audience. The bike convinces with its excellent price/performance ratio and is rewarded for this with the prize of the trade fair. With this new production line, BICICLETA once again demonstrates its innovative strength in an increasingly competitive market.
Previous Fiscal Year
21,262 bicycles were sold domestically at a price of 440 EUR each. The bicycles are sold exclusively to retailers. However, the increasing number of competitors, especially from Eastern Europe and Asia, is leading to increased price pressure.
The company is currently concerned about the increasing price erosion and rising cost pressure. With high unit labour costs, the unit costs of machinery also rose last year due to age-related wear and tear of the production equipment. Politica
developments have also had a negative impact on prices in the raw materials and energy markets. In addition, market growth for the CITY BIKE has stagnated for the second year in a row.
A fundamental strategic reorientation and significant operational optimisation are therefore the order of the day and a question of survival. New markets must be found and developed. New product lines could also help to secure the location.
Research & Development (R&D)
The creative heart of our company beats in the R&Ddepartment. We work with leading sports scientists to develop new products and improve the quality of existing products. The finished products are tested intensively to ensure that they meet the high quality standards we set ourselves.
This is where all the necessary materials and supplies are purchased that are needed for the production of the bicycles and the smooth running of the business.
All administrative tasks, management, accounting and IT are combined in this area.
The assembly of frames and add-on parts for the CITY BIKE and other planned product lines takes place in the production department. Our highly qualified production staff guarantee the professional workmanship of the bicycles and a long service life.
Our sales department is the interface between the customers and the company. This is where customer requests are received, processed, and coordinated. The sales department serves as a competent point of contact for questions about our products for customers, retailers and within the company.
In addition to hiring and dismissing, our human resources department also takes care of the topics of further training and motivation.
Facility Management This includes all activities and expenses related to infrastructure.
Economic forecast for the next business year
According to analysts, economic growth will continue. Experts expect an increase in demand in almost all sectors. For the year, economic growth of over 2.5% is considered very likely. Due to inflationary tendencies, the central bank is raising interest rates significantly. Experts complain about an increasing shortage of skilled workers. The cost of temporary workers is rising to EUR 98,000 per year.
Domestic expansion opportunities seem rather limited for the future. In a strategic meeting it was decided to expand into foreign markets. The sales department then commissioned some market studies and looked for possible trading partners.
The following information on foreign markets is available: Foreign Market The trade partners are cautious about the sales that can be achieved in the short term, but they see great market potential in the medium term and expect high market dynamics.
Per competitor, sales of approx. 2,500 CityBikes are expected in the new year. The market is supplied with the same products as the domestic market, which, however, enjoys delivery priority over the foreign market. The transport costs abroad amount to 40 euros per CityBike. Pricing and invoicing for the foreign market is done in EUR. In order to be successful in the new market, local dealers should be supported.
They expect an advertising subsidy of at least 100,000 – 200,000 EUR per year.
Domestic Market Assessment
Experts expect a decline in demand of about 2% in the market for CityBikes. The price has an increasing influence on the actual demand. Biko Ltd, a wholesaler, is willing to buy up to a maximum of 500 bikes.
However, Biko Ltd only pays 325 EUR per bike for this.
In addition to the decisions on price and advertising allowance for abroad, the communication budget must generally be divided among the three elements “classic advertising”, “sales promotion” and “corporate identity”. In addition, a sales strategy must be defined that supports or brings out clear unique selling propositions of the company. If the bicycle industry as a whole invests heavily in communication, it may succeed in gaining market volume from other sectors. On the other hand, little effort by the bicycle industry as a whole can also contribute to an even more significant decline in demand.
Obviously, the previous core business is subject to an increasing decline in margins. In order to permanently counter the foreseeable trend towards commodities, “old plans” were brought out of the drawer. The previous management had forged a real innovation before leaving: The MoBike is a bicycle with hybrid drive and the following product concept:
Electric bicycle – Bicycle with auxiliary motor Whoever has chosen the bicycle as their favourite means of transport can rejoice: getting around by “bike” not only promotes fitness, bicycles are also ecologically considered to be environmentally friendly and sustainable.
• On uneven terrain alone, many a cyclist will lose the desire to ride a bike. But that doesn’t have to be the case: electric bicycles are now so technically advanced that they are a constant relief.
• For example, the “MoBike” electric bike from BICICLETA can go 50 km without pedalling – at an average speed of 20 km/h. The hub motor gives the electric bike a high degree of power and makes it easy to ride. The hub motor gives the electric bike a climbing ability of 7%, at which a range of about 11 km is still achieved. If the rider pedals hard, the range increases accordingly.
• The bicycle can be ridden very easily and with little effort when operated with the motor. This is made possible by an intelligent motor control system that activates the wheel hub motor according to power requirements.
• The electric bicycle is therefore a “hands-free”, high-quality bicycle that can also be ridden without a battery and battery box. At 7.1 kg, the easily removable battery unit represents about 1/4 of the total weight of 25 kg.
• The target group for the electric bike is anyone who likes cycling but also occasionally appreciates the convenience of a motor drive. Seen in this light, the electric bicycle contributes to a high degree of mobility – with relatively low resource consumption – and thus to an environmentally friendly way of coping with individual transport.
Unfortunately, under the leadership of the previous management, this product was not yet developed to the point of series production and only 1,248 units have been sold so far. According to one estimate, this will require another 10 person-years of development work. This work can also be spread over two years. In this case, about 5 R&D employees should be assigned to the further development of the “MoBike” in both development periods. The only decisive factor is that the MoBike is technically mature. The existing production facilities can be used to manufacture the MoBike. An estimate of the logistics and production data for the MoBike is already available.
A price in the range of 2,000 EUR (depending on quality) seems realistic at present. The market for MoBikes seems to be generally less price sensitive. A domestic demand increase of more than 15 % per year is considered possible. Abroad, the market potential is currently more difficult to assess and will be influenced above all by a successful launch campaign. The market volume is estimated at between a few hundred and several thousand units per period.
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