The Carbon Bike Project’s Cost-Effectiveness

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Table of Contents

Introduction
Main body
Conclusion
Recommendations
Reference List

Introduction

Located in Amsterdam, The Carbon Bike You Like is a large multinational firm specializing in manufacturing and selling bicycles for various purposes, including bikes designed for children, sports, transportation, health, and fitness, and those meant for people living with disabilities. Recently, the organization has licensed a new technology to build and sell carbon fiber bicycles using an additive manufacturing process known as 3D printing. The new technology is set to make parts of the bicycle with carbon fiber, a lighter and stronger material than metal. The innovative part of this new technology is that it can be in a less costly warehouse within the city where the company’s shop is already in existence. This approach, known as distributed manufacturing, is expected to offer an advantage in that the products can be customized in terms of shape, size, and performance to meet the needs of each consumer (Vernimmen, Quiry, and Le Fur, 2022). Moreover, the approach will eliminate most of the normal inventory stores for the products at the facility and in the multiple distribution centers worldwide. Moreover, it will eliminate the shipping costs required to move the products from the manufacturing units to retail stores (see Appendix 2). Localized custom production is also expected to make shops smaller and less expensive. In normal circumstances, one store has between 50 and 100 products on display to allow variations in terms of male and female versions of each brand in at least three sizes. However, the new approach will allow the shops to have only one copy of each model on the display, thus reducing the number of samples in each outlet.

Main body

Furthermore, the technology used for developing carbon fiber bikes is very expensive. The 3D manufacturing technology and the process are inexpensive and will allow the products to fetch prices that are way below the market price tags. Nevertheless, there are some disadvantages, such as waiting time. When a customer identifies a product and orders a bike to be customized to meet his or her needs, it will take about 3 to 5 days for the bicycle to be fabricated. The company will ensure that the bikes are developed as fast as possible to reduce the wait time to about 3 days per customer.

Strategic Planning

Strategic planning refers to creating and implementing business strategies and evaluating their results with an executive plan regarding a firm’s long-term goals and objectives (Holotiuk and Beimborn 2017). The concept focuses on integrating various parts or departs of an organization to accomplish its strategic goals (Nubert 2017). It involves strategy formulation, implementation, and evaluation (Brigham and Daves, 2018).

In quarter 1 of the project, the company owners were familiarized with the marketplace simulation. In this phase, the owners also created the brand name, mission, vision, and values (See Appendix 1). Moreover, the team designed the bikes for each segment- mountain, casual, and speed. In the second quarter of the simulation, the task involved giving the best experience to the customers through product differentiation. Quarter 3 involved going global by opening a new store in New York and Amsterdam, where the demand for bikes was higher than in other cities in the global market. In quarter 4, the team opened other stores in Delhi and Bangalore in addition to the web store for eCommerce. After getting funding of $ from [], the company had an opportunity to invest in innovation worth [] for research and development.

Product

The Carbon Bike You Like will specialize in research, design, manufacturing, and selling 3D carbon print bicycles for different market needs. Using this new technology, it is possible to design and develop lighter, more comfortable, and stronger bikes than metallic bicycles. The bikes are durable and designed to meet the needs of various customer segments, as they are customized at the warehouses where the manufacturing units are located. Four brand names were identified for the products based on their intended use- Stallion, Work Rider, Sovereign, and Thunderbolt.

Price

Theoretically and practically, customers are looking for the best quality at the most affordable price on products (Nubert 2018). The Carbon Bike You Like will use 3D carbon printing technology to design and manufacture products at a low cost. Therefore, the prices of the products will be at least 10% below the market prices for other carbon and metal bikes in the market. Prices of the products were set based on the brand and their demand (Refer to Appendix 2, Table 2. Pricing criteria)

Place

In theory, customers seek products and services as close to their localities as possible due to convenience (Arthur et al. 2018; NRCan 2019). The bikes will be developed and sold at the convenience of the customers. Specifically, the 3D carbon printing technology allows the company to make bikes in its warehouses close to the customers, which reduces shipping costs. Customers will only have to choose the type they need and submit the requirements for the bikes, which will be recorded and used to customize them (Mahat, 2019). The customers will be called to collect their bikes of choice in about three days.

Promotion

The Advertisements did not meet the requirement. The ad for work and speed target segments did not meet the ad’s minimum requirements, negatively impacting the demand (Gourieroux and Jasiak 2022). Poor design of the Ads was noted for failing to meet the requirements. As a result, Advertisements for Stallion 2 and Thunder Light were created and placed in the local media with an increase to 10 ads each for both new brands in New York and Amsterdam as opposed to 5 ads each in the same 2 cities for the other 2 work bikes.

Strategic Options

Strategic options were selected based on the SWOT analysis and the quarter 4 activities. Specifically, 50% Market Share Speed in Work was set at 30%. Recreation is 90% (A segment we did not enter). However, people were interested in our Work bike for recreation. In Market Demand, there were sales of the Carbon Bike You Like being sold in the Recreation Segment. We increased the demand projection to be sold to 1900 (190 bikes to be sold per employee). We bought 2 market research for Noram-Europe and APAC (Asia-Pacific). All brands were placed in New York and Amsterdam, the Noram-Europe region. We hired no new sales and service personnel.

Market Segmentation

Based on the Ad judgment, the company topped 3 segments which were: Youth, Work, and Recreation, which brought us to the conclusion that we needed to review the advertisements and focus on the selected segments, which were Speed and Work. We created two new brands for speed: the Stallion 2 and Thunder Light, as the first two speeds were not doing well with sales because of the features. We then made changes to features to compete with our competitors.

Bowman’s Clock Strategy Analysis

Like Porter’s five forces analysis, Bowman’s clock analysis highlights strategies to succeed in the market (Visser, Thompson, and Peroni 2019). It is a comprehensive strategy tool that provides options for brand positioning in a market based on price and value, as shown in Figure 1 (Wahlström 2019).

Justification for Competitive Advantage

The company used costs, differentiation, pricing, and marketing to achieve its competitive advantage. First, the 3D carbon printing technology is a cheap process that allows the company to make bikes at any of its warehouses, which means that production is distributed. Therefore, the shipping cost is greatly reduced, reducing the prices on the customers’ side (Isabelle et al., 2019). Secondly, marketing is based on specific customer needs, with customization being a key concept. In this case, the products can be differentiated based on specific customer needs.

Performance Analysis

Financial Performance

The company’s financial performance was evaluated after adjusting products and their prices in the simulation from quarters 5 to 8. Financial performance analysis is the evaluation of how well an organization makes profits from its businesses and value for the owners (Hudson 2019). In the adjustments, we were able to come up with financial reports for the project. The budget for the first year of operation (See Appendix 2, Table 3).

Because the business was not trading in the preceding year, the profit was a negative value of $120,000. However, at the end of the year, the value of unused financial available for new investments was $816,000. This means that there was adequate capital for additional adjustments and investments in new outlets. Therefore, the demand was projected to grow by at least 50% (See Appendix 2, table 3).

Then, the financial performance was evaluated based on the expected sales of the products per brand (See Appendix 2, table 4). Finally, a proforma profit and loss report was estimated in the simulation based on the above projections. The business was found to be a less profitable venture (See Appendix 2, table 5). Therefore, it is evident that the changes greatly improved the venture’s profitability. Noteworthy, the venture has made a net loss rather than a profit in the first seven quarters, which means that there could be certain issues that had to be addressed before the actual business was launched. In this case, the balanced scorecard was used to determine the weaknesses that should be addressed. After the adjustments were made in the first seven quarters, the cumulative financial performance showed improvement as the business made profits.

Balanced Scorecard Evaluation

A balanced scorecard is a performance metric that helps identify, improve, and control various functions and resulting business outcomes (see Appendix 2, Table 6). In this case, the identified issue was a lack of salespersons, implying that the business could not market its products vigorously. However, the scorecard also showed that the business had market effectiveness. On completion, our company held 31% of the Market share, which was the largest of all competitors, at 39% in Speed, Work at 41%, and Recreation at 34%. Topping all segments

Generated more than 10 million dollars in Sales with a Gross margin of $5,160,603.00; Cumulative Net Profit for the Division was $1,118,845.00.

Market Performance

Theoretically, a firm’s managers have the role of creating demand in their primary and secondary segments (Legner et al. 2017). Therefore, the market performance metric measures how well the managers can create these forms of demand in the market. In this case, the firm’s market share in two target segments is used to measure this demand-creation ability (Lakshmanan Roy, and Gorain 2019). The simulation found that the managers were not as effective in creating demand in their primary and secondary segments, mainly because of a lack of salespersons. Moreover, the venture is new, and managers are still learning about the market. The solution is that managers will need more training and facilitation to ensure that they can identify needs and create demand while also working with salespersons under them.

Competitor Tactics

Competitors are yet to utilize the new technology in developing carbon-based bikes. However, a few have already rolled some products in the market and have a head start advantage. The research shows that competitors greatly used comprehensive marketing strategies, especially social media, and internet-based advertising (Westerlud 2019). They targeted specific segments, such as young people, with customized and appealing bikes that meet their needs.

Functional Level Performance

The equilibrium theory states that prices of commodities affect each other such that at one point, they are set to achieve equilibrium in price and quantity. Both production processes and prices are intertwined. In this case, the prices of metal or common carbon fiber bikes are intertwined with those of the 3D print carbon fiber bicycles. When the company offers the products at lower prices, the competitors will respond by reducing their production prices, affecting the industry as an equilibrium must be achieved. As the benchmarks indicate, other related products also changed in price and production in response to the company’s launch of low-priced bikes (Qi 2020). But the success comes from the fact that the materials used to develop the products are different, as are the technologies (Deegan 2002). Metal bikes are costly because the materials are also expensive the production process takes place in other locations, and shipping costs must be included (PWC 2019). If changes were made, they would include reducing the customer waiting time and increasing the number of salespersons, so each store has at least two. The idea is to reach as many customers with information and create awareness. In this way, the business-level strategies will strengthen, given that they aim to improve on the marketing point.

Conclusion

This critical analysis has provided the team members with crucial skills necessary for managing and leading businesses. It has provided an opportunity to understand how to start new ventures through innovative strategies for entering new markets and developing effective ways of attaining competitive advantage through pricing, quality, and marketing approaches. Furthermore, it has provided an opportunity to adjust various metrics to determine the future growth and performance of the venture.

Recommendations

Based on the evaluation in this project, additional simulations should be conducted with different business approaches and considering different markets and sectors to improve the skills. Secondly, different approaches to budgets, capital funding, and forecasts should be used to determine how the projects will emerge each time and give the learners additional skills in designing and implementing budgets and financial plans.

Reference List

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