Dirt Bikes USA Running Case Study Samantha Vinciguerra - PDF document

Dirt Bikes USA Running Case Study Samantha Vinciguerra Geric Brodt Jeff Fedyk Phil Cyr - 2 - Table of Contents Management Analysis of a Business ……………………………………………………... 3 Analyzing Financial Performance ………………………………………………………... 4 Performing a Compet itive Analysis ……………………………………………………… 6 Analyzing the Total Cost of Ownership (TCO) of Desktop Software Assets …………… 8 Redesigning the Customer Database …………………………………………………… ..8 Using Internet Tools to Increase Efficiency and Productivity ………………………… ..10 Table o f Charts Table 1: Dirt Bikes USA Sales History from 2001 to 2005................................................ 4 Table 2: Domestic vs. International Sales from 2001 to 2005…………………………… 5 Table 3: Statement of Income…………………………………………………………….. 5 Table 4: Softw are Suites ………………………………………………………………… ..8 Table 5: Customer Database …………………………………………………………… ....9 Table 6: Internet Tools Matrix ……………………………………………………… .......10 - 3 - Management Analysis of a Business Dirt Bikes USA was founded in the early 90’s around the expanding dirt bike culture. The founders, Carl Schimdt and Steve McFadden, started to design dirt bike frames for off road purposes using engines from foreign companies. The goal of Dirt Bikes USA was to create dirt bikes that would rival the foreign bran ds competing in the US. Steve and Carl felt they had an advantage due to the close proximity of the dirt bike culture in the US. Dirt Bikes USA currently has 4 types of dirt bikes including: the Enduro 250, the Enduro 550, the Moto 300 and the Moto 450. D irt Bikes USA appeals to mainly Enduro rides and serious trailer riders, however they are expanding into the motocross market. Dirt Bikes USA also has a service department to deal with service warranties and customer problems with parts. Dirt Bikes USA doe s not sell directly to customers but rather uses a network of 40 distributors, based mainly out of the Western and Midwestern area of the US. There are a small percent of sales out of Europe as well; however these are done through independent retailers. Sp are parts and service warranties can only be purchased through an authorized dealer, with some exceptions to those who do not live within 50 miles of an authorized dealer. Dirt Bikes USA has expanded greatly since the early 90’s and now consists of around 120 employees. The company is still privately owned with Carl serving as CEO and Steve serving as President and COO. There is also a marketing manager who over sees five sales representatives. There are 120 employees involved in the design, engineering - 4 - an d production aspects, including three full - time designers, 3 full time engineers, four full time parts specialists, and a 10 employee service department. One of the most important information systems of Dirt Bikes would be spreadsheets. These could be use d for profit and loss, as well as inventory. Databases would also be important for Dirt Bikes when it comes to keeping track of distributors and customer warranties. Analyzing Financial Performance Table 1: Dirt Bikes USA Sales History from 2001 to 200 5 - 5 - Table 2: Domestic vs. International Sales from 2001 to 2005 Table 3: Statement of Income Consolidated Statements of Income (in thousands) 2003 2004 2005 Revenue Net sales 61,529 64,063 60,144 Cost of goods sold 41,072 43,155 45,835 Gross profit/(los s) 20,457 20,908 14,309 Gross margin 33.2% 32.6% 23.8% Operating expenses Sales and marketing 3,944 4,537 4,733 Engineering and product development 2,339 2,992 3,141 General and administrative 1,392 1,601 1,913 Total operating ex penses 7,675 9,130 9,787 Operating income/loss 12,782 11,778 4,522 Other income/expense Interest income/expense 80 175 1,747 Other income/(expense) (3,080) (2,914) (6,254) Income before provision for income taxes 9,782 9,039 15 I ncome taxes 535 1,729 1,459 Net income/(loss) 9,247 7,310 (1,444) Net margin 15% 11% - 2% - 6 - Dirt Bikes best selling product historically has been the Enduro 550, while the Moto 450 has been the worst selling product. Int ernational sales have never counted for more than 10% of the total sales, with the best year being 2003 when international sales were at 9.9%. The international sales have fallen slightly compared to the Domestic sales when, in 2005, they counted for 8.2%. The revenue for Dirt Bikes is also declining while costs are increasing. In 2005 the gross margin was at 23.8% compared to 33.2% in 2003. Operating costs have also increased through the years. In 2005 operating costs reached $97,870,000, while in 2003 ope rating costs were at $76,750,000. Dirt Bikes does have substantial debt, however their assets are great enough to cover the debt and finance the development of new products and information systems. Performing a Competitive Analysis The activities at Dirt Bikes that create the most value are the company’s parts and service business; this accounts for about fifteen percent of the company’s total revenue. Dirt Bikes is able to provide value to its customers offering service warranties and competitive pricing on products. Dirt Bikes also concentrates on using the highest quality parts for its bikes, whether these parts are foreign or domestic. Dirt Bikes main competitors are other companies that manufacture and sell off - road motorcycles such as Honda and Kawas aki . While Honda does not offer a 550 or 350 model, they do have a 250 and a 450 model. Honda’s 450 retails for $7,399 compared to Dirt Bikes 450 at $8,995, while Honda’s 250 retails for $6,599 and Dirt Bikes 250 at $3250. Kawasaki also does not offer 550 or 350 models but retails their 450 and 250 models at $6,999 and $6,099, respectively. - 7 - S ome things that could affect Dirt Bikes industry is failure to compete with the advertising campaigns of the competitors. Dirt Bikes should also maintain a high level o f education on parts and service in order to best serve the consumer . The employees need to stay updated on new parts that come out and the effect these parts will have on the bikes. This way, Dirt Bikes will know if they can better their products by offer ing these new parts, or if these parts aren’t going to benefit their current products that Dirt Bikes offers. Also, Dirt Bikes need s to make sure they have good public relation employees in order to deal with problems and complaints that customers may hav e. Dirt Bikes needs to have their own uniqueness and style so that customers can see that Dirt Bikes care about their customer’s satisfaction. The competitive strategy that Dirt Bikes should pursue is mainly advertisement. In business, advertising could make or break the company. Dirt Bikes should advertise in magazines websites that are related to the dirt bike culture, as well as dirt bike competitions. Dirt Bikes should arrange their products in a way that shows how they make different dirt bikes for all different types of weather and terrains. It would be very helpful to the business if they were to hire employees that are dirt bike enthusiasts so they have a good understanding about the products. B y doing this they will be more able to assist the cu stomers and have a common bond with the customers. This will make the customer feel very comfortable with th e employee and it will give the customer the sense that the employees know exactly what they are talking about. If Dirt Bikes pursues these strateg ies they should end up with a very successful and profitable business. - 8 - Analyzing the Total Cost of Ownership (TCO) of Desktop Software Assets Table 4: Software Suites Microsoft Office 2003 and Sun StarOffice 8 both meet Dirt Bikes’ requirements. Of the two, however, Sun StarOffice has the cheapest price. It would cost Di rt Bikes $1,310 to take on the Sun StarOffice software system with a one - time installation cost of $25 per user, one - time training cost of $100 per user, an annual technical support cost of 30% of initial purchase costs, and annual downtime cost of 15% of purchase costs. The installation would come to $200 and the cost for training would be $800. The technical support which is 30% of all initial purchase costs would cost $140 and $170 for annual downtime, which is 15% of purchase cost. Over a three year per iod this new desktop productivity system will cost Dirt Bikes $1,930. Microsoft Office 2003 Microsoft Office XP Sun StarOffice 8 Price $ 128.00 $ 89.00 $ 69.95 Word Proces sing Word 2003 Word 2002 Writer Spreadsheet Excel 2003 Excel 2002 Calc Database Access 2003 Access 2002 Base Electronic Presentation PowerPoint 2003 PowerPoint 2002 Impress E - mail Software Tools Outlook 2003 Outlook 2002 Writer Sof tware Tools to Publish Web Pages Publisher 2003 X Enterprise Tools - 9 - Redesigning the Customer Database tblCustomer Custo merID Last Name First Name Street City Stat e Zip Phon e Model Date Distribut or 5 Delgado Luis 66 Skyview Terrace Las Cruces NM 8800 3 (505) 582 - 4301 Moto 300 10/5/2004 Ben's Cycles 12 Higgins Daniel 38 Ryder Rd. Lincoln NE 6852 6 (402) 471 - 6950 Moto 300 6/7/2005 Lightning Cycles 3 Higgins Daniel 38 Ryder Rd. Lincoln NE 6852 6 (402) 471 - 6950 Moto 450 7/11/2004 All - Terrain Cycle 4 Langan Howard 8 Belle Ave. Flagstaff AZ 8600 2 (928) 382 - 5877 Moto 450 1/12/2005 Cycle World 10 Lowe Mark 95 Canyon Dr. Pomona CA 9176 7 (909) 869 - 3955 Moto 300 12/5/2004 KB Racing 11 Mann Dwight 23 Colby Lane Tacoma WA 9810 9 (253) 123 - 4333 Enduro 550 8/ 11/2003 J&J Cycle 1 Mann Dwight 23 Colby Lane Tacoma WA 9810 9 (253) 123 - 4333 Enduro 250 2/12/2005 J&J Cycle 8 Mickel Paul 523 Grant St. Norman OK 7307 2 (405) 325 - 1971 Moto 300 4/17/2005 WX Cycle 9 Podell James 68 Clinton St. Pocatell o ID 8320 2 (208) 251 - 4967 Enduro 550 5/18/2004 Performa nce Cycles 2 Porter William 3 Pinehill Rd. Logan UT 8432 1 (435) 797 - 3322 Enduro 250 3/27/2005 WX Cycle 6 Stratma n Philip 722 Donald Dr. Haywar d CA 9454 1 (714) 278 - 5564 Moto 450 3/21/2004 Don's Off Road 7 Yates Gerry 11 Buena Vista Dr. Ventura CA 9301 2 (805) 413 - 7922 Enduro 250 5/16/2005 Lightning Cycles Table 5: Customer Database - 10 - Using Internet Tools to Increase Efficiency and Productivity Internet Tool Uses Increased Productivity? Concerns Instant Messenger Easy Communication with colleagues. Conversations are private and can be save for further reference Yes All internet tools can cause distractions to employees and may require the company to monitor employee’s online activity. Monitoring employee activity can a lso be controversial as some may feel this is an invasion of privacy. Email Eliminates costly long distance phone calls. Messages can be sent to multiply recipients. Able to attach documents and multimedia files. Yes Discussion Boards Share information and ideas on defined topics. Yes VoIP Allows individuals to place phone calls over the internet using computers and microphones. Much cheaper than conventional telephones. Yes Table 6: Internet Tools Matrix The Sales and Marketing department would b enefit greatly from an Intranet. The entire department would be able to access a common private database containing information such as product costs and sales. The intranet would also contain information regarding distributors and various products that ar e in stock. With a company wide Intranet, the Dirt Bikes employees would be working off of the same database, making sure each employee accesses the same information. Intranets can also be accessed - 11 - through handheld devices such as Blackberries, which would be valuable to sales representatives who are frequently out of the office.