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The report is intended to outline details of varying factors that have influenced each years decisions for Bikes Bikes Bikes, which have resulted in both negative and positive impacts. With continuous improvement , the business is increasing at a steady rate. The firm’s goal was not only to achieve the highest SHIP in comparison to our competitors, but was also to appeal to the maximum number of potential consumers and in result achieve the highest market share within the industry.
Through our dedication, willpower, and ambition the company has successfully been able to achieve many of the goals that we had set out for ourselves. Bikes Bikes Bikes started out with a SHIP of $10. 82 and is at a current stance of $42. 37. It has also effectively acquired the highest market share of 28. 9%, surpassing he closest competitor by a significant 7%. As at the beginning of 2015, the strategy that our business had decided to implement was the specialization of producing high quality and high priced bicycles.
This strategy came to be through the extensive research conducted by the firm’s management team in which they discovered that the first set of bikes – mountain bikes, had a medium sensitivity to quality and price. As previously mentioned, our goal revolves around providing our consumers with a high quality bike. Moreover, Bikes Bikes Bikes’ management team also focused extensively on the firms brand awareness and advertising to induce ore value and provide incentive for future consumers.
After the steady development of mountain bikes, a new line of road bikes were launched in 201 8, followed by the introduction to a second segment of the road bike in 2019, and lastly a line to appeal to the youth community in 2020. The team critically analyzed multiple strategies and made decisions over the course of the past six years with plans that looked upon maximizing aspects such as SHIP, market share, quality and efficiency indexes and minimizing aspects that could be of potential harm such as debt, wastage, and unnecessary expenses.
Although the firm incurred challenges at times, he company was able to encounter an incline at a constant rate in which was a direct result of carefully planned meetings that occurred twice a week.. Moreover, Bikes Bikes Bikes management team created and maintained OF 26 strong relationships with the market by providing generous support distribution. A detailed elaboration on the various decisions made by my team and will be elaborated on in the following report.
Sincerely, Wayne Hang president & CEO of Bikes Bikes Bikes AFFIRMATION STATEMENT Please read the following items after the completion of your assignment Once you have verified these points, please complete the statement. All team members have referenced and footnoted all ideas, words or other intellectual property from sources, other than the data provided in the multi- player version of Mike’s Bikes, used in the completion of this assignment. 2.
A proper bibliography has been included, which includes acknowledgement of all sources used to complete this assignment other than data provided in the multi-player version of Mike’s Bikes. 3. This is the first time that any member of the team has submitted this assignment (either partially or entirely) for academic evaluation. 4. Each member of the team has read the full content of the submission and is assured that the content is free of violations of academic integrity. Team discussions regarding the importance of academic integrity have taken place. . Each student has identified his or her individual contribution to the work submitted such that if violation of academic integrity are suspected, then the student primarily responsible for the violations may be identified. Note that in this case the remainder of the team may also be subject to disciplinary action. The listed team members listed below have participated in the preparation of this assignment and no other individuals have contributed to this assignment except as acknowledged.
Name : Wayne Hang 20574871 Section contributed : Title Page, Letter to the Board of Directors, Introduction to 2018-2020, Strategies and Tactics, Every Years Summary Conclusion, Financing Template Name : Seems El-Bach 20583252 Section contributed : Table of Contents, Introduction to 2017, Strategies and Tactics, Key Performance Indicators, SOOT Analysis, Closing Recommendations, Accounting Template Name : Christina Aka Way Chain 20577525 Section contributed : Annual Performance Analysis for 2015-2020, Introduction to 2016 and 201 9, Marketing Template Name: Honoring Chin 20550322
Section contributed: Introduction to 201 5, Strategies and Tactics Date : Friday, November 28th, 2014 TA: Susan Wang World: S 002 croup 004 Team 8 TABLE OF CONTENTS Strategies, Results, and Analysis: 2015 Marketing, Operational, and Financial Strategies Firm Results and Analysis Summary Conclusions Strategies, Results, and Analysis: 2016 6 Strategies, Results, and Analysis: 2017 11 Strategies, Results, and Analysis: 2018 15 Us Mary Conclusions Strategies, Results, and Analysis: 201 9 20 Marketing Operational, and Financial Strategies Strategies, Results, and Analysis: 2020 24 us Mary conclusions: 2015-2020 28
Performance Indicators SOOT Analysis Recommendations to Board Appendix 33 STRATEGIES, RESULTS AND ANALYSIS: 2015 In 201 5, the firm had introduced a brand new management team in hopes of approaching the business from a new and differentiated perspective. They constructed and proposed multiple strategies the firm could potentially implement to achieve outstanding results. At the point of entry, the firm had established a SHIP of $10. 82, on par with other competitors in the market. Many of the offered strategies revolved around the important central goal that involved maximizing SHIP.
To do so, a consensus was reached to adopt a gig quality strategy for the firm’s existing mountain bikes. Reaching this goal involved steps such as setting the price of the bike, Dave, above market average. However, by natural economics, an increase in price causes a decrease in demand, and thus the company planned to increase spending in areas like advertising and PR. In 2015, Bikes Bikes Bikes faced fierce competition with competitors who adopted similar strategies and fell slightly behind from the extra emphasis placed PR expense, which the mountain bike is minimally affected by.
However, the firm did incur an increase in sales, SHIP, ND market share, despite the fact that it didn’t reach the initial goals set out. The proceeding analysis will provide more depth as to why the company could not reach the goals set out to the highest extent. With regards to the marketing strategy, the firms priority was to raise product awareness and develop a high quality image for the mountain bike that it currently offers. This resulted in an increased expense in areas of advertising and PR.
Although a heavy investment, the future benefits that it is to propose; such as increased sales will outweigh the money invested, and will eventually bring back profit. Often, quality is correlated with price. Goods that are priced higher than similar substitutes are often to assumed to have a characteristic that bring upon the distinction, in which it is often quality. Therefore, the firm decided to increase the price of the bike to $750. The increase in expenditures with respect to advertising and PR can also be justified by the price markup.
It is more difficult to sell higher priced goods and therefore an extra effort should be taken to minimize loss of sales. At this point in time, the management team did not have the clearance level to make decisions revolving around operations. However, based on reports, seniors believed that it would be best to maintain a constant production level, slightly differing from the 18, 100 units produced in the prior year. Although the production remained consistent, the ending inventory at the end of the year had increased by 58%, forcing the firm to incur expenses associated with inventory storage.
At this time, this is all that can be reported with respect to operations. Once again, the financial decisions for 201 5 were made by higher up management. The firm had began with a debt to equity ratio of 30%, in which it was incapable of paying this year due to lack of funding. However, the increase in retained earnings resulted in an increase in shareholder’s equity, immediately decreasing the debt percentage by 9%, to 210/6. Although no action was taken during this period, the management team is placing emphasis on the repayment of the debt as soon as possible as it will limit our expenses, with specific regards to interest.
Firm Results and Analysis For the firm’s sole product line of mountain bikes, Bikes Bikes Bikes decided to increase the price from 5700 to $750 following its decision to implement a high price, low volume strategy to increase our sales revenue by 10%. Thus, he company’s bikes are sold at the third highest price overall (second to two firms with a set price of 5770). Comparing the prices implemented this year to the common price of $700 last year, it appears that most firms also imposed a high price strategy.
With a higher price, product demand was expected to decrease, so the firm invested more money towards advertising (of $1 million) and PR (of $700,000) to raise demand for the company’s products in the market. Compared to the competitors, the firm had the third highest advertising budget and the highest for PR (at $1 00,000 more than the next leading firm). The objective here was to increase demand enough to generate more revenue by selling more bikes at a relatively higher price than all the other firms.
Since the mountain bike is highly influenced by advertising opposed to PR, by spending more than most competitors in PR but not for advertising expense, the firm did not gain as much sales and market share as originally expected. From the overall decrease in demand, demand forecast accuracy also fell from 100% to 97%. In 2015, there was a total sales of $8,635,575. Similarly, cost of goods sold and gross margin fell to $4, 1 96,650 and $4,438,925 respectively. Coupled with the expenses of $2,334,931, the result was a net income of $1 ,373,478 ($94,452 less than 2014), which showed room for improvement in sales and expense management.
This year, the firm placed fifth in net income in the industry, and the fourth highest in sales and cost of goods sold, but the highest in selling and distribution expenses. This lead to more cash being expended than earned as revenue, which impacted the firm’s profitability and placed the firm at the fourth highest in cash balance overall at $3,748,711. With a current asset value of $3,832,575, this signifies that the majority of the rim’s current assets is comprised of cash.
Therefore, the firm is in a very good position to meet its short term obligations, as a current ratio of 6. 51 means having over 6 times more assets than liabilities due within the coming year. This is a significant Increase in liquidity from the current ratio of 3. 87 in 2014, as a result of $1 ,674,770 increase in current assets with only a $31 , 292 increase in current liabilities. Despite the overall decrease in net income this year, the firm’s return on sales, return on equity and gross margin percentage ratios increased from 2014 (by 0. 01%, 1. 83% and 2. 1% respectively).
This means that the amount of generated income from each dollar of equity and sales is now greater, as well as a higher amount of revenue retained as gross profit this year. Out of all the firms, Bikes Bikes Bikes has the fourth highest value for each of the profitability ratios. This means that although our firm experienced more profitability this year, there is still much more to be done to keep the firm at a competitive advantage. Based on the company’s overall performance, Bikes Bikes Bikes experienced an increase in SHIP of $1. 97, as well as an increase in earnings per share of 7 cents.
The firm has the fifth highest increase in both categories out of the world (with even the next highest having growth of $1. 02 and 73 cents respectively). However, this signifies a relatively stale growth in comparison to all other competitors and a need to increase efforts in hopes of improving company performance. This year, our production remained at constant levels from 2014 (at 45% production, 15% wastage and 40% idle time). In the market, the firm had the fourth highest in production and subsequently the second highest in idle time percentage.
As the wastage percentage is also linked to production, our firm as the second lowest wastage percentage out Of all the firms as well. Thus, we began with 150 units in inventory, produced 1 7,918 additional bike for sales and resulting with an ending inventory of 354 units. The firm’s inventory turnover ratio decreased from 71. 63 to 70. 2, which means the time needed to sell our inventory increased. Moreover, though carrying costs were forecasted at $4,306,804, the firm ended up with only $4,1 96,650 in the end.
For all our operations and decisions this year, we decided to use cash as the only source of financing due to our objective of minimizing debt-to-equity Asia. Currently, due to the existing long term debt of SSL the debt to equity ratio was 0. 21 in 2015. In 2014, the firm’s debt-to-equity ratio was 0. 3, showing progress due to increased revenue. In comparison, most competitors have a lower debt-to-equity ratio at 0. 19, so it is important to further increase sales and decrease incurred debt in order to catch up with other firms.
The company’s main source of cash activity involved operating activities, including sales revenue, advertising, PR, salaries and other operating expenses. Our budgeted performance for 201 5 was an inflow of 1 ,884,943, though in actuality, our cash inflow from operations only amounted to $1 As expenditures Were controlled based on management decisions, one of the primary underlying reasons for the shortfall would be due to less revenue generated during the period than forecasted. Though no cash investing activities involving property, plant and equipment occurred, cash movement was present in financing activities.
From the existing long term debt of $1 an interest expense of $80,000 was incurred. Coupled with the bank interest earned from cash, a final cash outflow of 321 ,873 occurred. To increase the amount of cash available to insane our operations, the firm should reduce cash outflow from debt and interest. Summary Conclusion TO restate, Bikes Bikes Bikes goal for the year of 2015 was to obtain a increase in sales. The strategy implemented to achieve this goal was correlated with the process of increasing advertising expenditures and production.
After a thorough analysis, it was determined that Bikes Bikes Bikes was unsuccessful in achieving this goal because it did not meet the targeted sales revenue. It was specified that we would be able to achieve the goal if our sales had increased from $8,1 90,000 to $ 9,009,000. However, Bikes Bikes Bikes sales for the year had only reached $8,625,575. Moreover, in comparison to competitors, we placed 4th in sales ranking. Since the firm was incapable of living up to the goals, Bikes Bikes Bikes plans to improve this performance by carefully analyzing our information again and appropriately making decisions that will help the firm grow.
STRATEGIES, RESULTS AND ANALYSIS: 2016 Following a year of steady performance in 2016, Bikes Bikes Bikes identified a need to further improve its operations in order to better compete within the market. The firm was unable to meet its goal of increasing revenue by 1 0%, ailing short by $383,425. Moreover, the firm ranked fourth in revenue and fifth highest out of all firms for SHIP at SSL 2,79 per share. To better the performance of the company while maximizing SHIP and market share, Bikes Bikes Bikes aims to increase the price of bikes as well as the branding budget in order to generate a higher level of sales.
Moreover, by reducing unneeded expenditures like PR expense and excess production costs, the firm plans to maximize net earnings to put the company in a far more competitive and profitable position in the market in the future. Marketing, Operational, and Financial Strategies After critical analysis of 2015, the management team had strong evidence that competing firms had adopted similar high price strategies and that the 50$ increase was not enough. Therefore, a 5$ increase was implemented to be able to compete within the market. Also, the enticed investment in advertising was outshone by the larger investment of other firms.
With respect to PR, Our firm incurred a useless expense as it became evident that mountain bikes have a low response rate. As a result, an increase in advertising was prominent and the immediate reduction of PR to O was implemented. This year the team had the opportunity to increase investment in branding. Since one of the firm’s main goals revolves around raising awareness, expenditures on branding are to have a significant impact, and therefore funds were allocated towards this expense. With consistency to maintaining a high quality image, Bikes Bikes Bikes focuses its strategies on having Sports and Bike stores stock our products.
Sports and Bikes stores are often correlated with selling high priced quality bikes such as mountain and road bikes. With future plans to expand into the road bike segment, the team determined that it would be of present day and true value to offer support to these stores, in hopes of providing extra incentive to stock our bike line, and lines in the future. However, a malfunction occurred within the systems just as we were submitting the amounts and instead of transferring $75,000 and $300,000 to Bike Shops and Sports Stores respectively, the amounts submitted were 575 and $300.
However, the firm plans to make a complete 360 and administer the accurate amounts in the coming days. Bikes Bikes Bikes decided to continue providing stores with 35% retailer margin as it provides them with higher incentive to stock our bike line. Again this year, the management team did not have the access needed to make financial decisions and therefore could not implement any strategies at this point in time. However, as shareholders’ equity continues to increase over the years, and the company’s decision to not take out a loan has decreased the debt to equity ratio by 6%, bringing it down to 15% for this year.
This year the firm experienced a significant increase in cash of 61 % from the 2015 balance, placing Bikes Bikes Bikes at an advantage since it acquires the second highest value. For the single bike line, Bikes Bikes Bikes decided to further increase the price o $755 in compliance with a high price, low volume strategy. Thus, the firm’s bikes now have the second highest price in the market. As a result, demand and sales volume for the firm’s bikes decreased further, from 17,714 units last year to 1 7,376 units.
Our Performa sales amount was 18,148 units, so the actual result did not achieve the intended level and our demand forecast accuracy fell by 2%. In regards to advertising and PR, a decision was made to decrease the budgets to $950,000 and SO respectively. For advertising, this decrease caused the firm to now spend the second least in advertising. As a mountain bike’s demand is minimally influenced by PR ratings, it was concluded that there would be no gain in allocating funds towards PR expense. Thus, the firm has an awareness rating increased from 0. 2 to 0. 22 (the fourth highest overall) and a PR rating of 0. 6, a 0. 04 drop from last year (now at fourth place in the industry). Regarding distribution, retailer margins were maintained at a 35-75 split of revenue with retailers (while other firms varied between sharing 25% or 40% with retailers). In terms of extra support, the firm decided to focus more on supporting sports stores, the most popular Handel to sell mountain bikes (at a support amount of $305 compared to $75 for bike stores and $50 for discount stores). Aside from one firm that chose to give SO of extra support, we provided the lowest amount of extra support.
Overall, our firm provided the second most distribution support to retailer at $202,365, second only to the firm who spent $290,771 in total. Thus, the company now has a distribution rating of 0. 4 (which doubled from 201 5) and now has the second highest rating in the industry (only 0. 05 less than the leading firm). For sports stores in particular, 319 stores now stocking he company’s bikes (14 more than 201 5) which is the third highest number overall. For bike and discount stores, the amount of stores stocking the firm’s products reached 76 and 201 stores respectively, the second highest amount of stores stocking for both.
This year, production level was decreased from 17,918 units to 17,370 units to reduce expenses, ending inventory and carrying costs. The result was the firm having the fifth highest production percentage (at 43%, with the highest in the industry at 54%), the lowest wastage (at 14%, a 1% decrease from 201 6) and the highest idle time (at 42%). In the end, 348 units of ending inventory, and carrying costs of $4,1 17,843 were recorded, but no lost sales occurred (keeping the firm’s delivery rating at 1. 0 like all other firms). Inventory turnover ratio fell from 49. 57 to 5. This year, showing a far longer period of time to sell inventory’, achieve sales and generate revenue (compared to 2015). By continuing to aim for a minimal debt-to-equity ratio, the firm only used cash to finance its operations this year as well. Overall, the firm experienced a increase in cash inflow from operations to $2,295,274 no activity in cash flow room investing and a decrease in cash outflow from financing of $4,746 compared to 2015. This was due to increased sales revenue, reduced expenses as well as increased cash balance earning interest in the bank exceeding the interest expense from long term debt.
In 201 6, the debt-to- equity ratio decreased from 0. 21 to 0. 15, which is relatively the second highest debt-to-equity ratio overall (the lowest being O. 13). In 201 6, the firm generated a net income of $1 from $8,527,272 in revenue, $4,117,843 in cost of goods sold, and $1,649,915 in expenses. Comparatively, this is the fifth highest revenue and cost of goods sold values of all firms (the highest with $1 1 in revenue and 54,71 6,443 in cost of goods sold). By reducing expenses on areas like PR by $685,026 in total, Bikes Bikes Bikes now has the lowest amount of expenses overall.
The company’s cash balance this year was $6,061 12, signifying an increase of $2,31 2,401 in cash from 2015. Thus, Bikes Bikes Bikes now has the second highest amount of cash in all. With a current assets balance of $6,143,583, this means that over 98% of the firm’s current assets is comprised of cash that can be used to pay off obligations and finance our operations. Despite an increase of $1 81 , 359 in current liabilities, the firm’s current ratio increased from 6. 51 to 7. 8 in 201 6, representing that the company is in an even better position to meet current obligations for the year while continuing its operations. This year, the firm’s return on sales and gross margin percentage increased by 3. 85% and O. 19% respectively. Incidentally, our return on equity ratio decreased by 5. 99%. As a result, the firm now has the third highest return on sales, gross margin percentage and return on equity ratios. This shows considerable room for improvement. The firm’s earnings per share increased from $1. 37 to $1. 86, which is now the third highest in the world.