Dirt Bikes USA Running Case Study Bryan Gaine

Dirt Bikes USA
Running Case Study
Bryan Gaine
Melissa Kelly
Brad Michels
Erica Riley
Table of Contents
Management Analysis of a Business .....................................................................................4
Analyzing Financial Performance..........................................................................................5
Competitive Analysis .............................................................................................................7
Analyzing the Total Cost of Ownership (TCO) of Desktop Software Assets .......................8
New Customer Database Design ...........................................................................................9
Using Internet Tools to Increase Efficiency and Productivity ...............................................10
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Table of Charts
Table 1: Dirt Bikes USA Sales History from 2001 to 2005 .................................................. 5
Table 2: Domestic vs. International Sales from 2001 to 2005 ...............................................6
Table 3: Statement of Income ................................................................................................6
Table 4: Software Suites ........................................................................................................8
Table 5: Customer Database ..................................................................................................9
Table 6: Internet Tools Matrix ...............................................................................................10
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Management Analysis of a Business
Dirt Bikes USA is dirt bike production company based in California. This
company comes from a background of experience in the dirt bike culture and it was
founded in the early 1990’s. This was around the time when dirt biking was becoming
popular. The founder’s of this company are Carl Schmidt and Steve McFadden and they
started to design dirt bike frames for off road purposes containing engines from foreign
companies. Dirt Bikes USA’s primary goal is to produce the best quality dirt bikes to
rival other international companies. To achieve this goal, they use the highest quality
products on the market. The founders felt that coming from a dirt bike culture, as well as
the growing popularity in the U.S., they had an advantage being in the center of the
marketplace.
Dirt Bikes USA has four types of dirt bikes varying in engine size, two for trail
riding and two for racing. The names of these different types are Enduro 250, the Enduro
550, the Moto 300 and the Moto 450. The tail riding types are more popular, and the
company is expanding into the motocross market. They offer a service department that
deals with service warranties and customer problems with parts of the dirt bikes. The
company has a network of 40 distributors that they use. They are based mainly out of the
Western and Midwestern parts of the U.S. Dirt Bikes USA has authorized dealers that
provide spare parts and service warranties. Some exceptions to this are those who do not
live within 50 miles of an authorized dealer.
Carl Schmidt is the CEO of Dirt Bikes USA and Steve McFadden serves as
President and COO. The employees of this company are involved in the design,
engineering and production aspects, and include 3 full-time designers, 3 full-time
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engineers, 4 full-time parts specialist, and a 10-employee service department. There is
also a marketing manager whose job is to oversee 5 sales representatives. Overall, the
company employs 120 people and has expanded greatly since the early 1990’s.
Dirt Bikes USA relies heavily on database software such as Microsoft Excel and
Microsoft Access. This is to keep track of sales, inventory, and employee matters.
Analyzing Financial Performance
The best selling product of Dirt Bikes USA has been the Enduro 550 and the
worst selling product has been the Moto 450. In the first three years, international sales
were consistently rising, and then started to fall during the last two year. They have
never contributed more than 10% of the total sales. While costs have increased from
$76,750,000 in 2003 to $97,870,000 in 2005, the gross margin have decreased from
33.2% in 2003 to 23.8% in 2005. The company is unfortunately in debt, but they have
enough assets to cover it and will allow for the development of new products and
information systems.
Sales History 2001-2005
Amount (in thousand dollars)
12000
10000
8000
6000
4000
2000
0
2001
2002
2003
2004
2005
Years
Table 1: Dirt Bikes USA Sales History from 2001 to 2005
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Domestic vs. International Sales 2001-2005
10000
Amount (in thousand dollars)
9000
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
Cost of goods sold
Gross profit/(loss)
Gross margin
61,529
41,072
20,457
33.2%
64,063
43,155
20,908
32.6%
60,144
45,835
14,309
23.8%
Operating expenses
Sales and marketing
Engineering and product development
General and administrative
Total operating expenses
Operating income/loss
3,944
2,339
1,392
7,675
12,782
4,537
2,992
1,601
9,130
11,778
4,733
3,141
1,913
9,787
4,522
80
(3,080)
175
(2,914)
1,747
(6,254)
9,782
535
9,247
15%
9,039
1,729
7,310
11%
15
1,459
(1,444)
-2%
Other income/expense
Interest income/expense
Other income/(expense)
Income before provision for income
taxes
Income taxes
Net income/(loss)
Net margin
Table 3: Statement of Income
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Competitive Analysis
Dirt Bike’s strongest asset when it comes to value is the company’s parts and
service department. This department is responsible for about 15% of the company’s total
revenue each year. Along with a strong parts and service department, Dirt Bikes USA
retains value with their warranties and competitive prices on products. The management
has decided to focus on using the highest quality parts from around the world in each
aspect of the bike and well as concentrating on servicing those parts if they fail. Despite
using the best parts available, Dirt Bikes USA has kept their prices competitive to other
company’s prices. Honda’s 450 model costs about $7,400 and Kawasaki’s costs $7,000
where Dirt Bikes USA’s 450 model costs $9,000. The 250 model costs $6,600 at a Honda
dealer and $6,100 at a Kawasaki dealer. Dirt Bike’s 250 model is only $3,250. The extra
cost in Dirt Bike USA’s 450 model to ensure the bike’s competitiveness in the industry.
Their staff is also high trained and educated on each part, which allows better customer
service. This is where Dirt Bike’s USA exceeds its competitors because it has a better
relationship with the public due to its qualified employees.
Dirt Bike’s USA should concentrate on marketing their products throughout the
U.S. as well as the dirt biking community. Dirt Bike’s USA has staked its territory in the
Western part of the country as well as in the Middle states, but expanding to the East
coast as well as into the South will obviously help their revenue and therefore their debt
problems. Dirt Bikes USA makes a higher quality product then its competitors and should
concentrate on the fact to sell more bikes and to expand to the other sections on the
country. The firm should also provide more distributors in the less explored parts of the
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country, like the Eastern states as well as Southern states. Having more availability to
customers will promote knowledge of the company and raise sales domestically.
Analyzing the Total Cost of Ownership (TCO) of Desktop Software Assets
Price
Microsoft
Office 2003
$128.00
Microsoft
Office XP
$89.00
Sun
StarOffice 8
$69.95
Word 2003
Word 2002
Writer
Word
Processing
Spreadsheet
Excel 2003
Excel 2002
Calc
Database
Access 2003
Access 2002
Base
Electronic
Presentation
E-mail
Software
Tools
PowerPoint
2003
Outlook 2003
PowerPoint
2002
Outlook 2002
Impress
Software
Tools to
Publish Web
Pages
Publisher
2003
X
Enterprise
Tools
Writer
Additional Cost
Technical
Support
Down-time
Cost
30% of
Purchase
Cost
15% of Initial
Purchase
Cost
$140
$170
Table 4: Software Suites
The two systems that Dirt Bikes USA could use as their information systems
could be either the Microsoft Office series or Sun StarOffice 8. Both have all the tools
Dirt Bikes need to run efficiently. Our calculations point to Sun StarOffice 8 as the
cheapest system between the two. Over the next 3 years, Dirt Bikes would spend about
$2,000 on the whole system. The first installation would cost $1,310 including $25 per
user, totaling $200. The training of each user would cost $100 per user, totaling $800.
Technical support for the system is 30% of the purchase cost, which is $140 while the
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downtime would cost $170 or 15% of the initial purchase cost.
New Customer Database Design
Customer
ID
1
Last
Name
Mann
First
Name
Dwight
2
Porter
William
3
Higgins
Daniel
4
Langan
Howard
5
Delgado
Luis
6
Stratman
Philip
7
Yates
Gerry
8
Mickel
Paul
9
Podell
James
10
Lowe
Mark
11
Mann
Dwight
12
Higgins
Daniel
Street
23
Colby
Ln.
3
Pinehill
Rd.
38
Ryder
Rd.
8 Belle
Ave.
66
Skyview
Terrace
722
Donald
Dr.
11
Buena
Vista
Dr.
523
Grant
St.
68
Clinton
St.
95
Canyon
Dr.
23
Colby
Ln.
38
Ryder
Rd.
Customer Database
City
State
Zip
Phone
Model
Date
Distributor
Tacoma
WA
98109
(253)1234333
Enduro550
8/11/03
J&J Cycle
Logan
UT
84321
(435)7973322
Enduro
250
3/27/05
WX Cycle
Lincoln
NE
68526
(402)4716950
Moto 450
7/11/04
All-Terrain
Cycle
Flagstaff
AZ
86002
Moto 450
1/12/05
Cycle World
Las
Cruces
NM
88003
(928)3825877
(505)5824301
Moto 300
10/5/04
Ben’s Cycle
Hayward
CA
94541
(714)2785564
Moto 450
3/21/04
Don’s Off
Road
Ventura
CA
93012
(805)4137922
Enduro
250
5/16/05
Lightning
Cycles
Norman
OK
73072
(405)3251971
Moto 300
4/17/05
WX Cycle
Pocatello
ID
83202
(208)2514967
Enduro
550
5/18/04
Performance
Cycles
Pomona
CA
91767
(909)8693955
Moto 300
12/5/04
KB Racing
Tacoma
WA
98109
(253)1234333
Enduro
550
8/11/03
J&J Cycle
Lincoln
NE
68526
(402)4716950
Moto 300
6/7/05
Lightning
Cycles
Table 5: Customer Database
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Using Internet Tools to Increase Efficiency and Productivity
Internet
Tools
Uses
Concerns
Easy
Communication
with colleagues.
Instant
Conversations
Messenger
are private and
can be save for
further
reference
Eliminates
costly long
distance phone
All internet tools can
calls. Messages
cause distractions to
can be sent to
employees and may
Email
multiply
require the company
recipients. Able
to monitor
to attach
employee’s online
documents and
activity. Monitoring
multimedia
employee activity
files.
can also be
Share
controversial as
Discussion
information and
some may feel this is
Boards
ideas on
an invasion of
defined topics.
privacy.
Allows
individuals to
place phone
calls over the
internet using
VoIP
computers and
microphones.
Much cheaper
than
conventional
telephones.
Table 6: Internet Tools Matrix
Benefited
Employees
All
All
CEO, COO,
Designers, and
Engineers
All
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The Manufacturing and Production department is one of many company
departments that could benefit from the efficiencies of a intranet directly specified toward
their needs. For example employees could search specifications in the design of the
motorcycle and see the changes to the design and execute accordingly. Inventory is
another area in which an intranet system can help. An employee can easily access the
amount of general parts in a more time efficient manor than searching the warehouse
manually. Lastly the production team would be able to benefit by knowing what the sales
department is expecting in upcoming distributions. As soon as a sale is made, the
production team would be notified immediately allowing them to begin the building
process as soon as they are capable.
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