Bicycle and Schwinn

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In order to once again become one of the best brands in the industry, Schwinn has to compete with the existing top companies. This means they have to create a top-line mountain bike. It appears Schwinn is doing this by targeting the low-end and high-end markets of the bicycle industry. Targeting the low-end is in line with Schwinn’s history. The company originally was known for creating quality, low-cost bicycles. This is one of their core competencies and they should capitalize on that. Creating bicycles that appeal to the retirees or individuals that know the brand will generate income so the company can focus on creating a high-tech line and change their image. In the long term this will enable the company to achieve growth.

A high-end line is essential to capture a good share of the market. Manufacturing mountain bikes made in the USA that are attractive, trendy and appealing will help the company achieve their goal since this is where the new image or trendier bikes are. This means, they must have a higher priced product. To capture that segment of the market, Schwinn must follow the trends, but leverage their competencies at the same time and that appears to be what they are doing.

While Schwinn experienced some difficulties and poor choices, the company had one very strong asset and that is a reputation for manufacturing quality products. Schwinn should build its marketing and that concept. Regardless of low or high end, the consumer will be purchasing a quality product.

To differentiate the two lines, Schwinn should create a new name for its high-end line. They should also manufacture these products in the United States in order to effectively compete with the top competitors. BREAKEVEN POINT

Market Share: 4% of 2.5B = 100M
Average Price: 1,000,000/400,000 = $250
Less Markup: $250 – 20% = $200 per bike
Profit Margin: $200 x 25% = $50
Breakeven: $50M/$50 = 1M
Payback: 1M/400,000 = 2.5 years

Zell/Chilmark obtained Schwinn’s brand,...
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