A Marketing Case Study of Giant Bicycles

Topics: Bicycle, Retailing, Harvard Business School Pages: 5 (1199 words) Published: December 3, 2010
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Top of Form
A yellow jersey in manufacturing
Giant Manufacturing has become the world’s largest bicycle manufacturer. Professor Willy Shih (Harvard) looks at its climb to the top and its recent foray into all-women’s bike stores. The world’s largest bicycle manufacturer was born thanks, in part, to a typhoon. That typhoon destroyed King Liu’s eel farming business. Turning to something completely different, the Taiwanese engineer assembled eight partners to create Giant, a bicycle manufacturing business located outside Taichung, Taiwan.

The initial strategy was to to manufactures bikes that were designed and sold abroad under different brands (or as an OEM, Original Equipment Manufacturer). King Liu would be responsible for the operations side while Anthony Lo (the current CEO) would handle the marketing side. Giant’s first American customer was West Coast Cycle (now Raleigh Cycles) but the main goal was to become a supplier for America’s top brand, Schwinn. Thanks to attractive pricing, Giant was able to land its first Schwinn contract in 1977. In 1980 American labor relations enabled Giant to take a leap forward. A strike organized by the UAW closed down Schwinn’s Chicago plant and Giant jumped in to fill the production shortfall. The Chicago plant was closed down three years later and Giant’s supply share kept rising. Giant was able to manufacture and ship bikes at a cost lower than the raw materials cost of a Chicago bike. By 1984 it was supplying approximately two thirds of Schwinn’s bikes or 500,000 units a year. In 1985, only seven years after the initial contract, Tony Lo proposed a joint venture to Schwinn. The Schwinn management was split on whether to marry Giant or to seek a greater range of suppliers. Ultimately, the CEO, Ed Schwinn, Jr., opted for diversification by entering into an agreement with China Bicycles Company, a Shenzhen-based supplier. In retaliation, Giant  decided to start selling under its own brand in the US (it had already started doing so in Taiwan in 1981). Giant’s US branch, headed by a former Schwinn executive, offered dealers lower retail prices as well as higher profit margins (36% as opposed to 34%). Seven years later, in 1992, Schwinn filed for bankruptcy; at that point Giant was already selling 300,000 bicycles in the US or more than half of Schwinn’s sales of 534,000 units. By the end of the twentieth century Giant had justified its name and become the world’s largest bike manufacturer. In 2008, it had nine factories producing 6.4 million bikes sold in 10,000 retail outlets; its six Chinese factories accounted for over 80% of its production

A large part of Giant’s success was due to acute awareness of segmentation. Everything from design to retail store layout was predicated on segmentation. Two variables took precedence: terrain (on-road, off-road or across-the-road) and cyclist type (lifestyle, performance, sport). But one area where Giant was not attaining the success...
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