**Case Study: Pedal Power's Strategic Shift**
**Background:**
Pedal Power Company, founded 30 years ago by a passionate cyclist, is renowned for its high-
quality, handcrafted bicycles, particularly premium road and touring bikes. Despite a strong
reputation for craftsmanship and durability, the company is struggling with declining market
share due to increased competition and evolving customer preferences. Its traditional
production methods and premium pricing have led to higher costs and longer lead times,
making it difficult for Pedal Power to maintain its competitive edge.
**Challenge:**
Pedal Power needs to reassess its strategy to improve its competitive position and productivity.
The company faces several key challenges:
- **Competitive Pressure**: Increased competition from both domestic and international brands
offering a range of products, including e-bikes and hybrid bikes, at competitive prices.
- **Changing Customer Preferences**: A growing demand for modern designs, technology
features, and eco-friendly products.
- **Production Inefficiencies**: Traditional production methods leading to higher costs and
longer lead times.
**Tasks for Students:**
**1. Assess Competitiveness**
**A. SWOT Analysis:**
**Strengths:**
- **High-Quality Craftsmanship**: Pedal Power’s bicycles are recognized for their durability and
superior craftsmanship.
- **Brand Reputation**: Strong brand loyalty and recognition among cycling enthusiasts.
**Weaknesses:**
- **High Cost**: Premium pricing limits market reach and makes Pedal Power less competitive.
- **Traditional Production Methods**: Limited automation results in higher production costs and
longer lead times.
**Opportunities:**
- **Market Trends**: Growing demand for e-bikes, hybrid bikes, and customization options
presents an opportunity for product diversification.
- **Direct-to-Consumer Sales**: The rise of online retail models provides a platform to reach
new customers and reduce reliance on independent bike shops.
- **Sustainability Focus**: Increasing consumer interest in eco-friendly products offers a chance
to align with these values and differentiate from competitors.
**Threats:**
- **Intense Competition**: Rival companies like Giant Bicycles, Trek Bicycle Corporation,
Specialized Bicycle Components, and Canyon Bicycles offer competitive pricing and innovative
features.
- **Changing Preferences**: Shift towards modern designs and technology features could
further alienate Pedal Power’s traditional customer base.
**B. Competitor Analysis:**
- **Giant Bicycles**: Large Taiwanese manufacturer with a broad range of bikes at competitive
prices and a strong presence in mass-market retail.
- **Trek Bicycle Corporation**: US-based company with a diverse portfolio including high-end
road bikes and e-bikes, strong brand recognition.
- **Specialized Bicycle Components**: Known for innovative designs and high-performance
bikes with premium pricing.
- **Canyon Bicycles**: German direct-to-consumer brand offering high-quality bikes at lower
prices, disrupting traditional retail models.
- **Local and Regional Competitors**: Custom builders and smaller bike shops offering
personalized services and catering to niche markets.
**C. Market Trends and Customer Preferences:**
- **E-Bikes and Hybrid Bikes**: Increasing demand for versatile, eco-friendly transportation
options.
- **Direct-to-Consumer Models**: Rising popularity of online sales channels over traditional
retail.
- **Sustainability**: Growing focus on eco-friendly materials and sustainable production
practices.
- **Customization**: Increasing interest in personalized and customizable products.
**2. Develop a New Operations Strategy**
**A. Potential Strategies:**
1. **Lean Manufacturing:**
- **Pros**: Reduces waste, lowers costs, and improves efficiency.
- **Cons**: Requires significant changes in production processes and employee training.
2. **Adoption of New Technologies/Automation:**
- **Pros**: Enhances production capabilities, improves quality, and reduces lead times.
- **Cons**: High initial investment and potential disruption during the transition period.
3. **Product Diversification:**
- **Pros**: Expands market reach and revenue streams by introducing e-bikes, hybrid bikes,
and customizable options.
- **Cons**: Requires research and development investment and may dilute the brand’s focus
on premium road and touring bikes.
4. **Rebranding and Repositioning:**
- **Pros**: Broadens appeal to new customer segments and aligns with current market trends.
- **Cons**: May confuse existing customers and requires substantial marketing efforts.
**B. Evaluation of Strategies:**
- **Cost**: Lean manufacturing and automation involve significant initial costs but can lead to
long-term savings. Product diversification and rebranding also require substantial investment.
- **Feasibility**: Lean manufacturing and automation are technically feasible but require careful
planning. Product diversification and rebranding involve market research and strategic planning.
- **Alignment with Mission**: Lean manufacturing and automation align with the company’s
focus on quality and craftsmanship, while product diversification and rebranding may shift the
brand’s core identity.
**3. Evaluate the Impact**
**A. Key Performance Indicators (KPIs):**
- **Cost Reduction**: Measure improvements in production costs and efficiency.
- **Market Share**: Track changes in market share and competitive positioning.
- **Customer Satisfaction**: Assess customer feedback on new products and services.
- **Sales Growth**: Monitor revenue growth from new product lines and sales channels.
**B. Financial Analysis and Forecasting:**
- **Profitability**: Estimate the potential increase in profitability from reduced production costs
and expanded product offerings.
- **Market Share**: Project potential gains in market share based on competitive positioning and
new strategies.
- **Customer Satisfaction**: Evaluate potential improvements in customer satisfaction and brand
perception.
**C. Risks and Challenges:**
- **Implementation Challenges**: Transitioning to new production methods or technologies may
face resistance and require significant time and resources.
- **Market Response**: The success of product diversification and rebranding depends on
market acceptance and competitive response.
- **Financial Risk**: High initial costs and potential for lower-than-expected returns could impact
financial stability.
**Conclusion:**
Pedal Power faces a pivotal moment where strategic changes are crucial for maintaining
competitiveness and market relevance. By conducting a thorough SWOT analysis, evaluating
potential strategies, and forecasting their impacts, the company can develop a comprehensive
plan to address current challenges and leverage opportunities. Implementing effective strategies
will require careful consideration of costs, feasibility, and alignment with Pedal Power’s mission
and values, while also managing potential risks and adapting to evolving market conditions.
