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Schwinn Bicyles Essay

667 words - 3 pages

Case #20: Schwinn Bicycles
Schwinn has many strengths in the retail bike market. On strength is the experience in the biking market, having been in business for over 100 years. Another strength of Schwinn is the quality and durability of the bikes. Schwinn is known to have sturdy bikes that can be relied on. The new management team is also a strength of the company. The brand name is also very well known, which is a strength, but the image of the brand may actually be a weakness. Schwinn has their work cut out for them. The brand image and reputation as the bikes their parents rode is a key weakness. A major part of their target market is kids and kids don’t want to ride something their parent did. Another weakness is that a lot of their manufacturing is done overseas and they are trying to sell themselves as an American company.
There are also many opportunities and threats out there for ...view middle of the document...

Companies like Trek have gotten ahead in the mountain biking industry and it may be hard to catch up. There is also the threat of people not wanting to buy the mountain bike that are claimed to be made in America, but have most of the production done in Asia. With a small market share the competition has the threat of knocking Schwinn out of the market.
Mountain biking is a US sport so it is very important for the bikes to be made in America. If the people you are selling to are American it definitely helps to market a product that is made in the country. While a foreign made product can be cheaper to make and will still sell, it is very good PR to sell the American angle with the mountain bikes. If Schwinn hopes to turn themselves around they need to market the mountain bikes as American made.
Schwinn’s strategy to sell bike with a price range of $100 -$2,500 range should be very effective. They have set themselves up to the entire biking market by having various prices on different types of bikes. This strategy also is influenced by the competition as many of the competitors of Schwinn sell various types of bikes at different prices. Price elasticity of bikes is also pretty elastic and customers are sensitive to price, so having various ranges of prices will give them a chance to sell more bikes.
For the $50 million Zell/Chilmark got the Schwinn brand and the opportunity to make an average of $52 per bike at the current market share. With the current market it would take about two years and 960,062 bikes sold for the group to breakeven on the purchase of Schwinn. However if Zell/Chilmark is able to strengthen the brand and sell more bikes to the bike market then they could be in a position to be profitable. While it may not be a quick turnaround Schwinn can still make money. Below shows how the breakeven point was calculated.
Bike Sold in US – 12,000,000 bikes at $2,500,000,000 = $208.33 per bike
Schwinn market share= 480,000 (.04*12,000,000)
Schwinn Profit Margin- 208.33* .25= $52.08 per bike
Cost per bike = $156.25
BE Point – 50,000,000/ 52.08= 960,062 bikes sold
Payback period – 960,062 bikes to break-even/ 480,000 bikes per year = ~2 years

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