Mountain Bike Industry Essay, Research Paper

1. Dominant features of the mountain motorcycle industry

& # 183 ; Many houses ; being of close replacements ; demand is elastic with regard to monetary value

& # 183 ; Some important barriers to entry and issue

& # 183 ; Product distinction & A ; technological invention

& # 183 ; Large capitol investing & A ; cost advantages

2. There is a great trade of competition in this industry. Cannondale is merely involved in the high-performance section of the industry. In this peculiar industry, the strongest of Porter? s five forces of competition is menace of replacements between rivals. If a Specialized motorcycle is priced higher than a Mongoose, with no evident advantage, a consumer will hold no job buying the Mongoose. On the other terminal of the spectrum, the weakest competitory force would be menace to entry. Companies looking to come in into this industry would necessitate a significant capitol investing, every bit good as entree to worldwide distribution channels. The industry has evolved since Cannondale entered, where a? garage type? operation could thrive. Now, the demand for advanced merchandises, with a recognizable trade name name is important for success, doing it really hard for an unknown house to capture any portion of the market.

3. There are some impulsive forces that have the possible to alter the attraction of the mountain motorcycle industry. The industry has changed from a low-priced mass produced bike market into one driven by invention. It has become a popular athletics and avocation, which forces Cannondale and its competition to concentrate on technologically, advanced merchandises. The current wellness boot that our society seems to be in will besides portend good for the industry.

4. The strategic group map reveals that Cannodale has differentiated itself through invention and expenditures on R & A ; D. The competition besides imports most of their constituents from the Far East, which besides sets Cannondale apart because of their turning perpendicular integrating. Cannondale and Trek seem to hold set themselves apart from the battalion because of their domestic production installations, every bit good as their merchandise lines, although Trek leads Cannondale in that class. The strategic group diagram below shows the relationship between the industries viing houses relative to their grade of perpendicular integrating and diverseness of their merchandise line.

5. There are several cardinal factors for success in the mountain motorcycle industry. Product invention seems to be really of import. Cannondale has been such a success because they focused on their mark market, and what they demanded. Their merchandises are designed for bicyclers who want a high-performance, high-quality motorcycle. The on-going focal point on invention will distinguish one company? s motorcycle from another? s. Cannondale has successfully developed lighter, faster and more comfy motorcycles because of their committedness to R & A ; D. Price is another factor, but non every bit critical as introducing your merchandise. The top mountain motorcycle companies have certain theoretical accounts that are competitively priced. When I bought my mountain bike, I was focused on quality and the public presentation characteristics, non on the $ 15 monetary value difference.

6. Cardinal elements of Cannondale? s Scheme

& # 183 ; Product Innovation? Cannondale strives to distinguish itself through its inventions. They have made igniter, faster, stronger and more comfy motorcycles for their clients. They were the first company to present the mountain motorcycle in 1984 and led the industry in suspension systems. This is a definite competitory advantage for Cannondale.

& # 183 ; Manufacturing? The scheme here is to keep its competitory place by back uping research into farther betterments into its fabrication procedure, and reducin

g the clip required to plan and bring forth new theoretical accounts. Cannondale? s fabrication takes topographic point domestically, which is another advantage. Harmonizing to the instance, the bulk of motorcycle companies buy their theoretical accounts from the Far East, where they produce the same theoretical account for different companies, ensuing in three similar motorcycles with different trade name names.

& # 183 ; Purchasing? Cannondale? s buying scheme has shifted to utilize more domestic providers. They believe this will cut down lead times and lower their stock list degrees. Concentrating on fewer providers will besides take down costs because they can take advantage of high-volume purchase price reductions.

& # 183 ; Gross saless & A ; Distribution? This is another facet of their scheme that sets them apart from most of their competition. Cannondale sells its motorcycles through forte retail merchants. Their logical thinking behind this is simple ; their clients will acquire more attending and receive knowing aid sing proficient and public presentation concerns. They are besides committed to increasing its domestic trader base by 10-15 % per twelvemonth.

& # 183 ; R & A ; D? I believe that this may be Cannondale? s strongest facet of their scheme. Historically, they have been really committed to developing lighter, stronger and more comfy motorcycles. They have besides been responsible for get downing new tendencies in mountain biking such as forepart and rear suspensions. Besides, because of their Volvo/Cannondale racing squad, they have a reputable proving group ; this besides benefits their selling scheme.

7. S.W.O.T. Analysis of Cannondale? s Position

Strengths

Product invention ; committedness to bettering their designs and merchandises Purchasing ; most of the competition purchases their frames from foreign providers

Vertically integrated ; relies less on outside constituent provider

R & A ; D ; reputable testing processs & A ; committedness to invention

Failings

Selling and Promotions ; should take advantage of their reputable R & A ; D trials, and their Volvo/Cannondale Racing squad

Opportunities

Mass Merchandising ; Specialized created an independent line under a new name

Components ; concentrate on developing Cannondale line with same quality, advanced attack

Menaces

Currency Fluctuations? no control over, focused hedge

Mountain biking may be a craze ;

8. Cannondale? s fiscal public presentation has been steady over the last five old ages. Their net gross revenues have increased by similar borders over the last three, which is attributed to their end of spread outing the forte trader web in the US and abroad. Cannondale besides improved their gross net income border by 8.1 % from 1993 to 1995. Their entry into forward currency contracts was besides a good thought, if direction hires person who understands how to fudge against foreign currency hazards, which they did. After three old ages of losingss, Cannondale? s? net income rebounded to $ 7.6 million in 1995?

9. Suggested Actions for Mr. Montgomery

& # 183 ; Concentrate on constituents ; increase the 20 % Cannondale constituents used by continued R & A ; D

& # 183 ; Given Specialized success, see developing an independent line, under a new name, that can be distributed through mass merchants.

& # 183 ; Increase the 1.5 % of gross spent on R & A ; D ; Cannondale relies on invention should go on to endeavor to be the industry leader in technological promotion

& # 183 ; Continue with the turning perpendicular integrating scheme ; expand to constituents and accoutrements

& # 183 ; Marketing ; Cannondale has a great beginning of publicity with their racing squad ; take advantage of it and increase attempt ; I have ne’er seen an ad for a Cannondale motorcycle, but I have seen Trek ads? .