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					Dirt Bikes USA
Running Case Study

 Samantha Vinciguerra

     Geric Brodt

      Jeff Fedyk

       Phil Cyr
                                     Table of Contents

Management Analysis of a Business……………………………………………………...3

Analyzing Financial Performance………………………………………………………...4

Performing a Competitive 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 of 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: Software Suites…………………………………………………………………..8

Table 5: Customer Database……………………………………………………………....9

Table 6: Internet Tools Matrix……………………………………………………….......10




                                                                                                   -2-
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 brands 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. Dirt 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 does 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. Spare 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




                                                                                        -3-
and 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 used 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


                                                                 Sales History 2001-2005


                                 12000


                                 10000
  Amount (in thousand dollars)




                                 8000


                                 6000


                                 4000


                                 2000


                                    0
                                           2001           2002                  2003       2004     2005
                                                                               Years


                                    Table 1: Dirt Bikes USA Sales History from 2001 to 2005




                                                                                                           -4-
                                                       Domestic vs. International Sales 2001-2005

                                 10000

                                 9000
  Amount (in thousand dollars)



                                 8000
                                 7000

                                 6000
                                                                                                                Domestic
                                 5000
                                                                                                                International
                                 4000

                                 3000
                                 2000

                                 1000

                                    0
                                           2001         2002            2003              2004           2005
                                                                        Years


                                    Table 2: Domestic vs. International Sales from 2001 to 2005


                                                                          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/(loss)                                                             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 expenses                                                         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
Income taxes                                                                       535               1,729         1,459
Net income/(loss)                                                                9,247               7,310       (1,444)
Net margin                                                                        15%                 11%            -2%
                                    Table 3: Statement of Income




                                                                                                                        -5-
       Dirt Bikes best selling product historically has been the Enduro 550, while the

Moto 450 has been the worst selling product. International 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 operating 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 Kawasaki. 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.




                                                                                         -6-
       Some 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 of

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 offering these

new parts, or if these parts aren’t going to benefit their current products that Dirt Bikes

offers. Also, Dirt Bikes needs to make sure they have good public relation employees in

order to deal with problems and complaints that customers may have. 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. By doing this they will be more able to

assist the customers and have a common bond with the customers. This will make the

customer feel very comfortable with the employee and it will give the customer the sense

that the employees know exactly what they are talking about. If Dirt Bikes pursues these

strategies they should end up with a very successful and profitable business.




                                                                                          -7-
Analyzing the Total Cost of Ownership (TCO) of Desktop Software Assets

                          Microsoft Office 2003    Microsoft Office XP   Sun StarOffice 8
          Price                  $ 128.00               $ 89.00              $ 69.95
    Word Processing             Word 2003              Word 2002              Writer
      Spreadsheet               Excel 2003             Excel 2002              Calc
        Database               Access 2003            Access 2002             Base
        Electronic           PowerPoint 2003        PowerPoint 2002          Impress
      Presentation
     E-mail Software           Outlook 2003           Outlook 2002            Writer
          Tools
    Software Tools to         Publisher 2003               X             Enterprise Tools
   Publish Web Pages
       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 Dirt 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 period this new desktop

productivity system will cost Dirt Bikes $1,930.




                                                                                        -8-
Redesigning the Customer Database

                                       tblCustomer
Custo    Last    First                            Stat       Phon                  Distribut
                         Street   City                  Zip       Model     Date
merID Name Name                                    e           e                        or
     5 Delgado Luis    66       Las              NM 8800 (505) Moto      10/5/2004 Ben's
                       Skyview Cruces                  3    582- 300               Cycles
                       Terrace                              4301
    12 Higgins Daniel 38 Ryder Lincoln           NE 6852 (402) Moto       6/7/2005 Lightning
                       Rd.                             6    471- 300               Cycles
                                                            6950
     3 Higgins Daniel     38 Ryder Lincoln       NE 6852 (402) Moto      7/11/2004 All-
                          Rd.                          6    471- 450               Terrain
                                                            6950                   Cycle
     4 Langan Howard 8 Belle         Flagstaff   AZ 8600 (928) Moto      1/12/2005 Cycle
                     Ave.                              2    382- 450               World
                                                            5877
    10 Lowe     Mark      95       Pomona        CA 9176 (909) Moto      12/5/2004 KB
                          Canyon                       7    869- 300               Racing
                          Dr.                               3955
    11 Mann     Dwight    23 Colby Tacoma        WA 9810 (253) Enduro 8/11/2003 J&J Cycle
                          Lane                         9    123- 550
                                                            4333
     1 Mann     Dwight    23 Colby Tacoma        WA 9810 (253) Enduro 2/12/2005 J&J Cycle
                          Lane                         9    123- 250
                                                            4333
     8 Mickel   Paul      523 Grant Norman       OK 7307 (405) Moto      4/17/2005 WX Cycle
                          St.                          2    325- 300
                                                            1971
     9 Podell   James     68 Clinton Pocatell    ID    8320 (208) Enduro 5/18/2004 Performa
                          St.        o                 2    251- 550               nce
                                                            4967                   Cycles
     2 Porter   William   3 Pinehill Logan       UT 8432 (435) Enduro 3/27/2005 WX Cycle
                          Rd.                          1    797- 250
                                                            3322
     6 Stratma Philip     722       Haywar       CA 9454 (714) Moto      3/21/2004 Don's Off
       n                  Donald    d                  1    278- 450               Road
                          Dr.                               5564
     7 Yates    Gerry     11 Buena Ventura       CA 9301 (805) Enduro 5/16/2005 Lightning
                          Vista Dr.                    2    413- 250               Cycles
                                                            7922
      Table 5: Customer Database




                                                                                        -9-
Using Internet Tools to Increase Efficiency and Productivity

  Internet Tool     Uses                Increased         Concerns
                                        Productivity?
  Instant           Easy                Yes               All internet tools can
  Messenger         Communication                         cause distractions to
                    with colleagues.                      employees and may
                    Conversations are                     require the company to
                    private and can                       monitor employee’s
                    be save for                           online activity.
                    further reference                     Monitoring employee
  Email             Eliminates costly Yes                 activity can also be
                    long distance                         controversial as some
                    phone calls.                          may feel this is an
                    Messages can be                       invasion of privacy.
                    sent to multiply
                    recipients. Able
                    to attach
                    documents and
                    multimedia files.
  Discussion        Share             Yes
  Boards            information and
                    ideas on defined
                    topics.
  VoIP              Allows            Yes
                    individuals to
                    place phone calls
                    over the internet
                    using computers
                    and microphones.
                    Much cheaper
                    than conventional
                    telephones.
      Table 6: Internet Tools Matrix

       The Sales and Marketing department would benefit 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 are 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


                                                                                     - 10 -
through handheld devices such as Blackberries, which would be valuable to sales

representatives who are frequently out of the office.




                                                                                  - 11 -

				
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