Erehwon’s Real Cool Cycle Case Study

Introduction

Real Cool Cycle is a leading bike manufacturing company in Erehwon. The company manufactures bikes for the local market. The main brands manufactured by this company are RGE bike and RC_ROCKHOPPER.

The company was established by the government and its only competitor is MTC. Government policies and support has enabled this company penetrate the local market. The high population and income create a large market for Real Cool Cycle bikes.

Mission goals and current strategies

The mission for this company is to produce quality bikes that satisfy their customers.

The company’s main goals are:

• To manufacture quality bikes that will satisfy their esteemed customers
• To attract and retain customers
• To ensure that employees are satisfied and well motivated

The main strategies adopted by the company include:

• Just in time (JIT) principle
• Employee satisfaction
• Production of quality products

Internal factors

Management

• The company has good management staff and policies. This is a major strength with a rating of 3.4. A good management team is imperative to the success of any organization.
• The company has a CEO who has wide knowledge on bikes and this is an added advantage to the firm. This is a minor strength with a rating of 2.4

Finance

• The gross profits margin is 59%. The high profits obtained indicate that the company has good financial health. This factor has rating of 3.4 and a weighting of 0.12. The firm has no short or long term debts. Sound financial health means that the company can attract investors and also expand due to the available resources.
• The firm has not diversified and has only two products. This is a major weakness as MTC; the only competitor offers the same products.

Marketing and Service

• Real Cool Cycle has a well managed marketing department. This is a major strength with a rating of 3.6 and weighting of 0.13. The company advertising expenditure is $ 1,450,000 while the public relations costs are $1100, 000. This means that the company spends a lot of money in creating awareness to the consumers.

Production and Operations

• The production efficiency for this firm is very high (90%). The firm also uses just in time principles (JIT) which reduces inventory costs. This factor has a rating of 3.6 and a weighting of 0.14 as high production efficiency and reduced inventory results to the production of high quality products. This is a major strength for this firm.
• The quality of the manufactured bike is very high. This is a major strength with a rating of 3.7 and weighting 0.14. Quality products increase sales and consumer satisfaction.
• There is no product differentiation. This is a major weakness as the company brands cannot be effectively marketed. MTC and Real Cool Cycle bikes are similar meaning that product differentiation is impossible. This factor has a rating of 1.2 and a weighting of 0.14.

Human Resource Management

• The company has a well established Human resource department. The staff motivation index is expected to be 0.75 for the year 2014. This is a major strength as employee satisfaction plays a key role in the success of any organization. The rating for this factor is 3.8 and a weighting of 0.8. The employee turnover ratio is very low (0.01). This means that very few workers leave the firm for other better opportunities.

Research and Development

• The company invests some of its funds in research and development. This is a major strength with a rating of 3.2. The weighting for this factor is 0.6 as the strategy cannot be implemented immediately. New products often take many years to develop.

External factors

Competition and Industry

• The low level of competition in this industry is a great opportunity for Real Cool Cycles. This has a rating of 3.2 and weighting of 0.7 as low competition means increased opportunities for the firm.
• The importation of cheap leisure bikes has been banned by the government. This factor has a rating of 3.2 and weighting of 0.6 since the ban on cheap bikes increases the demand for locally produced bicycles.
• Future plans to replace MTC chief executive would be a minor threat to the Real Cool Cycles. If MTC manufactured more advanced bikes and used better marketing strategies, this would be a significant threat to the firm.

Economic

• The residents of Erehwon country have high discretionary income. This is a major opportunity for the firm and has a rating of 3.7and weighting of 0.12 as the high income means that the residents can afford any type of bike. An Increase in price of these bikes would not affect the demand.
• Government price regulation is a threat to the industry as they cannot maximize on their profits. This has a rating of 2.3 as it is a minor threat to the firm.

Social & Cultural

• The residents of Erehwon country are aware of the importance of sports such as bike riding to their health. The rating for this factor is 3.4 and weighting of 0.6 as health related issues makes the residents motivated to buy the bikes.

Demographic

• The country has a population of 15 million people. This creates a big opportunity for Real Cool Cycle. The rating for this factor is 3.6 and a weighting 0.13 of as the large population creates a big market for the company.

Conclusion

Real Cool Cycle has many internal strengths and few weakness. In addition, there are many opportunities such as the large markets created by consumers who have high income and demand for these bikes. Also, the government ban on imported bicycles increases the demand for locally manufactured products. The company should therefore use their internal strength to increase the sales volume and profit margins.