Dirt Bikes USA Running Case Study Samantha Vinciguerra

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
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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
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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
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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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.
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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.
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Analyzing the Total Cost of Ownership (TCO) of Desktop Software Assets
Price
Word Processing
Spreadsheet
Database
Electronic
Presentation
E-mail Software
Tools
Software Tools to
Publish Web Pages
Microsoft Office 2003
Microsoft Office XP
Sun StarOffice 8
$ 128.00
Word 2003
Excel 2003
Access 2003
PowerPoint 2003
$ 89.00
Word 2002
Excel 2002
Access 2002
PowerPoint 2002
$ 69.95
Writer
Calc
Base
Impress
Outlook 2003
Outlook 2002
Writer
Publisher 2003
X
Enterprise Tools
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.
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Redesigning the Customer Database
tblCustomer
Custo
Last
First
Street
City
merID Name Name
5 Delgado Luis
66
Las
Skyview Cruces
Terrace
12 Higgins Daniel 38 Ryder Lincoln
Rd.
3 Higgins Daniel
38 Ryder Lincoln
Rd.
4 Langan Howard 8 Belle
Ave.
Flagstaff
10 Lowe
Mark
11 Mann
Dwight
1 Mann
Dwight
23 Colby Tacoma
Lane
8 Mickel
Paul
523 Grant Norman
St.
9 Podell
James
68 Clinton Pocatell
St.
o
2 Porter
William
3 Pinehill Logan
Rd.
6 Stratma Philip
n
7 Yates
Gerry
95
Pomona
Canyon
Dr.
23 Colby Tacoma
Lane
722
Haywar
Donald
d
Dr.
11 Buena Ventura
Vista Dr.
Stat
Phon
Distribut
Zip
Model
Date
e
e
or
NM 8800 (505) Moto
10/5/2004 Ben's
3
582- 300
Cycles
4301
NE 6852 (402) Moto
6/7/2005 Lightning
6
471- 300
Cycles
6950
NE 6852 (402) Moto
7/11/2004 All6
471- 450
Terrain
6950
Cycle
AZ 8600 (928) Moto
1/12/2005 Cycle
2
382- 450
World
5877
CA 9176 (909) Moto
12/5/2004 KB
7
869- 300
Racing
3955
WA 9810 (253) Enduro 8/11/2003 J&J Cycle
9
123- 550
4333
WA 9810 (253) Enduro 2/12/2005 J&J Cycle
9
123- 250
4333
OK 7307 (405) Moto
4/17/2005 WX Cycle
2
325- 300
1971
ID
8320 (208) Enduro 5/18/2004 Performa
2
251- 550
nce
4967
Cycles
UT 8432 (435) Enduro 3/27/2005 WX Cycle
1
797- 250
3322
CA 9454 (714) Moto
3/21/2004 Don's Off
1
278- 450
Road
5564
CA 9301 (805) Enduro 5/16/2005 Lightning
2
413- 250
Cycles
7922
Table 5: Customer Database
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Using Internet Tools to Increase Efficiency and Productivity
Internet Tool
Instant
Messenger
Uses
Increased
Productivity?
Yes
Easy
Communication
with colleagues.
Conversations are
private and can
be save for
further reference
Email
Eliminates costly Yes
long distance
phone calls.
Messages can be
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
Concerns
All internet tools can
cause distractions to
employees and may
require the company to
monitor employee’s
online activity.
Monitoring employee
activity can also be
controversial as some
may feel this is an
invasion of privacy.
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
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through handheld devices such as Blackberries, which would be valuable to sales
representatives who are frequently out of the office.
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