Breakaway Bicycle Company Analysis - Case Study Example

CASE STUDY Breakaway Bicycle Company Analysis Chun-Ping Lu 11132340 MC 600 Business Policy 2006,Winter Executive Summary Breakaway Bicycle Company (BBC) is a professional design and customized bicycle frames company. BCC enjoys good reputation because its products help competitive cyclists to win the races. Mountain bike racing became popular since its debut as an Olympic medal event in 1996 Summer Olympics in Atlanta; and these competitive cycling activities increase the demand in this market. Therefore, Breakaway would not miss this opportunity to expand its business to either U.S. or European market. Breakaway is confident that sales would increase but still needs financing support to add new workstations and hire additional designer-builders. Analyze the company’s business strategy 1. Internet- Mr. Giro, the Managing director of Breakaway, realized that a home page could attract potential customers to BBC. It would be easier for customers to know the background, philosophy and the specifications of Breakaway’s bike frames. As expected, the result of internet marketing strategy indicates that Breakaway has reached the goal they hoped and obtained additional 5 percent in sales and revenues with its online advertising. Internet being a part of daily necessities is available 24 hours for 365 days and can be used by anyone, anywhere. This gives the customers sufficient time to assess and decide on the product based on the bike specifications available online. 2. Magazine Advertising- Although Breakaway needs to spend $3,125 each month for magazine advertising, it expects to attract more customers interested in bicycle. It has already received favorable ratings from these magazines and Breakaway would include these reviews in its magazine ads. Magazines allow an advertiser to reach a particular target audience with a high-quality presentation, and also offer a wide variety of benefits to advertisers. 3. Sponsoring mountain bike racing events both in the U.S. and in Europe- Undeniably, being a sponsor of racing events is the best way to promote Breakaways’ products. The huge signboards offer conspicuous appeal to the race events while generating curiosity in Breakaway’s products. It is a direct way to enter Europe’s market because Breakaway would get exposure through these signboards. Develop SWOT analysis Strengths- Breakaway enjoys good reputation with professional road and mountain bikers in the U.S. which implies that BBC’s situation is not really perfect but at least stable because it is easy to expand its business. Moreover, it makes unceasing attempts at new welding methods and uses different materials for the best innovative products. Being a small organization it need not waste time in consultations and disorderly discussions and meetings. Weaknesses- Although Breakaway builds good reputation in bicycle market, it is not very well known among the non-professional cyclists. The market has great potential as is evident from that fact the people between the ages of 24-45, with some college education and having a median income of $40,000 prefer custom built bike frames. Due to insufficient capital BBC is unable to produce more custom designed bikes for the non-professional group. Besides, Breakaway faces the loyalty problem with strong competitors existing in the European market. Opportunities- Breakaway can make a breakthgrough in the European market only if obtains the necessary resources from patronage of bank or even other investments. Both road bikes and mountain bikes are becoming popular. Besides, professional riders have test ridden Breakaway frames and found them superior to the European custom built frames. Demand is expected to rise at a very fast pace, and if it receives the necessary finance it would be able to avail of this opportunity. Threats- Breakaway could sustain the industry downturn in early nineties but despite having a significant presence in the European mountain biking, international competitors have moved into the market. Threat is posed by some high-end bike companies who are retooling their facilities in order to pursue market share in the U.S. and abroad. In other words, if Breakaway does not step up its production of custom bikes to meet the demand of potential customers, the increasing number of competitors would fill in this rapidly growing demand in the Europe and the U.S. market. Identify the critical problems The main problem is that Breakaway needs resources to step up production and launch its products ahead of competitors in the European market. Also, Breakaway want to introduce products for the non-professional cyclist as well. Evaluate the options of possible solutions There are 3 possible solutions that can be suggested: 1. Bank Loan The SWOT analysis and the cash flow worksheet indicate that Breakaway can make profits gradually through either in the U.S or European market. Breakaway has a bright future even though 3 additional designer-builders need to be hired and non-owner labor costs will increase by 7% every year. Therefore, it is possible to acquire a loan from the bank if BBC can offer more details on how to still make profits from competition and business environment for its business plan. 2. Partnering with other traders Partnering with other traders in foreign market is also workable in Breakaway’s situation. It is an efficient and fast way to solve resource problem by partnering with locally influential bicycle industry so that Breakaway’s capital equipment purchases and maintenance and labor costs are taken care of. However, the distinctive design innovation and unique welding technology would have to be revealed to the partners. Moreover, it is also possible lose the original flexibility without the mini work team. 3. Becoming a public free trading market on the stock market. Having a good reputation is not enough to be successful in business. The possibility of entering the public free trading market on the stock market is workable only if Breakaway’s can convince the investors of its prospects. There is no doubt that public stock is the fast and efficient way to collect money. However, it is also possible to lose the advantages of entering European market because the company would need time to reorganize the structure of company with new trade. Recommend solutions and action plan I would recommend the first one to be the solution for Breakaway. Under the reality condition of the market, the faster way is acquire a loan from the bank. Whether Breakaway can acquire the loan or not depends on: 1. Be realistic- The report of SWOT analysis and cash flow worksheet show that critical problems can be overcome with sense of realism and practicality. 2. Document the claims- Breakaways gives a lot of evidence that the assumptions are based as closely as possible on facts. 3. Create a unique selling advantage- The innovative design and unique welding ethnology might be an edge that will raise the chances and persuasively identify Breakaway as separate from other competitors. In short, it seems with Breakaway’s business plan it is possible to attract bank or investors to participate with its business. Most importantly, Breakaway can produce more custom design bikes for non-professional bikers. Moreover, Breakaway finally can carry out moving the administrative offices out of the current workshop and leasing office space that they scheduled in its business plan. Making double-win situation is the final goal of Breakaway and bank. Read More